Last year Australian Prime Minister Scott Morrison tore up a submarine deal with France's Naval Group, instead opting for nuclear-powered alternatives as part of a landmark security agreement with Washington and London.

On Friday, under questioning from an opposition senator, defence officials revealed the scuppered French deal came with a hefty price tag.

"So taxpayers will be up for $5.5 billion in submarines that don't exist?" senator Penny Wong asked at a hearing in Canberra.

"The final negotiated settlement will be within that price," Defence Department deputy secretary Tony Dalton replied.

Dalton said the exact amount was still unclear as negotiations with Naval Group were ongoing.

Finance Minister Simon Birmingham defended the decision to ditch the French deal as "necessary for decades to come".

"There's no shying away from the fact that we knew there were serious consequences," Birmingham said.

"The changed strategic environment in the region meant that the option that had previously been chosen was not going to meet the best needs for Australia in the future."

Morrison previously said the decision to opt for nuclear-powered submarines was driven by changing dynamics in the Asia-Pacific region, where China is increasingly asserting its claims to almost the entire South China Sea.

The switch caused fury in Paris, with French President Emmanuel Macron accusing the Australian leader of lying about the future of the contract initially worth Aus$50 billion.

In December, a study released by the Australian Strategic Policy Institute said the nuclear-powered submarine programme would cost more than US$80 billion and take decades to complete.

al/axn

NAVAL GROUP