Grant Hehir tells inquiry non-publication order meant he was unable to advise whether Thales contract was worth it

Auditor-general says suppression order left him unable to say whether arms deal was cost-effective

The unprecedented decision to suppress an auditor-general’s criticism of a $1.3bn arms deal left him unable to tell taxpayers or parliament whether the contract was value for money, an inquiry has heard.

The auditor-general, Grant Hehir, has also insisted he had no intention whatsoever of publishing sensitive or restricted information, and took great care to go through the material with the department of defence.

French multinational defence contractor Thales successfully lobbied the federal attorney-general Christian Porter this year to suppress parts of an auditor-general’s report critical of a deal to provide Australia with 1,100 locally built Hawkei light protected vehicles.

Questions have now been raised about the use of extraordinary ministerial powers to make the suppressions.

On Friday, an inquiry into the affair by the joint committee of public accounts and audit heard that the suppressions left the auditor-general still unable to tell parliament whether the Hawkei contract was cost-effective.

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“The advice that I have on that is that [the non-publication order] also prevents me from making any commentary which could lead to the disclosure of that subject matter,” Hehir said.

Hehir says the case has now prompted a series of other agencies – not the defence department - to flag similar objections to his work on similar grounds.

“For the first time, people are starting to flag this as a course of action early in processes. So that’s one issue that has concerned me since this time,” he said.

The Labor MP and committee deputy chair Julian Hill said the chain of events leading to the gag order raised serious questions.

Thales first asked Porter to suppress parts of the auditor-general’s report on the grounds that the company’s commercial interests would be threatened. Porter later went further, saying the report was a risk to national security. That was despite the auditor-general having worked through the material with defence.

Hill said that meant defence either missed sensitive information in the report or the national security part had been added later to help protect Thales.

“You can understand why that raises concerns that either there was a conspiracy and a cover-up, or you weren’t doing your job properly as the defence department in properly picking up serious information which was about to be published,” he said.

“I can’t understand that there’s any other possibility and neither of them are good.”

Hehir also said he and his office were not planning to publish sensitive material. He said the use of the attorney-general’s powers lacked any real transparency and accountability.

“I’ve been concerned to make it clear that the audit office and myself were in no way, in the course of this audit, were publishing any material that had security classification around it,” Hehir said.

“We’re very careful on our deliberations with agencies to make sure we deal with security and matters that could prejudice security and defence issues.”

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Meanwhile, Labor has said it would “carefully consider” reforms to protect the independence of the auditor-general in future.

Hill told Guardian Australia on Wednesday: “These are very serious matters and I can confirm that Labor will carefully consider the need for legislative changes to the auditor-general’s act once the public accounts and audit committee has completed its inquiry.

“The independence of the auditor-general … is absolutely central to any claim of credibility of parliamentary control over the executive in a Westminster system.

“It’s really fundamental in a parliamentary democracy that the auditor-general has full independence. Having read the submissions and the auditor-general’s submission, it’s a very strong a detailed submission, it does raise serious questions about the attorney’s unprecedented decision to gag the auditor-general.”

Porter has previously said he considered all available information before making a decision to suppress parts of the report. He said describing the process as censorship “misunderstands or mischaracterises the provisions of the Auditor General Act itself”.

He said he consulted with the defence and defence industry ministers, and the auditor-general.

“Following careful consideration of all of the information provided to me … it was ultimately determined, that to publish certain information contained in the ANAO’s [Australian National Audit Office’s] audit report would be contrary to section 37 of the Act,” he said.

Thales took serious steps to thwart the release of the auditor-general’s report. It launched legal action in the federal court about the same time as it asked Porter to intervene.

It then dropped the legal action two weeks after Porter exercised his power to suppress parts of the report.

Senator Rex Patrick said the legal action raised serious questions about whether a breach of privileges had occurred. He said that if the court action inappropriately fettered the operation of the parliament, it should be investigated.

He also questioned whether the legal action “had influence over the attorney-general’s thinking”.

“I think there’s a very strong case here for a referral to the privileges committee in respect of the manner in which this initial court application has … potentially led to a breach of parliamentary privilege by the applicant and perhaps the legal team that was representing their client,” Patrick said.

“I just wonder whether or not the attorney has in some way been influenced by the fact that there’s a court matter going on that involves a complexity, involves issues of privilege, involves these sorts of issues of whether or not the court is fettering the parliament in its processes.”