This article is more than 1 year old

This article is more than 1 year old

The Coalition’s unprecedented suppression of parts of a report by the auditor general has prompted fears that future criticism of Australia’s massive submarine and naval shipbuilding projects may be suppressed, an inquiry has heard.

Parliament on Wednesday continued to investigate attorney general Christian Porter’s decision earlier this year to suppress parts of an audit report into Australia’s new combat vehicle fleet, produced locally by the French arms manufacturer Thales.

The suppressions prevented the auditor general, Grant Hehir, from telling parliament Australia could have saved hundreds of millions of dollars if it bought the vehicles through a United States program.

Porter was acting on a request by Thales to suppress parts of the report and justified his intervention by saying it was needed to protect Australia’s national security and save Thales’ commercial interests from unfair prejudice.

Hehir has previously warned the decision to suppress his work may set a precedent. Both the home affairs department and Australian Criminal Intelligence Commission have since foreshadowed asking for similar suppressions.

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An inquiry into the matter by the joint committee of public accounts and audit on Wednesday heard the decision could conceivably prevent the auditor general from fully scrutinising the construction of Australia’s new submarine fleet or its naval shipbuilding program.

Taxpayers are spending $90bn on 12 French-designed submarines and other new naval capabilities through Australia’s naval shipbuilding plan, which was released last year. The auditor has previously warned the plan faces a “high to extreme” risk of cost blowouts.

The Labor MP Julian Hill, the committee’s deputy chair, warned the Thales suppressions could easily be replicated in the submarine and naval shipbuilding projects.

“Through this audit, unprecedented in the history of the office of auditor general, the auditor general has been unable to express a view in relation to value for money … It’s pretty clear what’s gone on even though you guys can’t admit it,” Hill said.

“I think the auditor general has been gagged from expressing a value for money conclusion because of this perceived impact on sovereign defence capability.

“But if that precedent stands then it is exactly replicable to the submarines, to the ships and to tens of billions of dollars of taxpayer money. That’s my concern.”

Proponents of the combat vehicles, known as the Hawkeis, say there are significant benefits in producing them locally, and that the auditor general was misguided in comparing them to a completely different product in the US. But it’s the decision to suppress the auditor – one of the only independent federal government watchdogs – that has caused deep concern among the opposition and crossbenchers.

The defence department agreed to the inquiry that the commonwealth’s own commercial interests may have been impacted by the audit report, because it received royalties for the sale of the Hawkei. But correspondence between the defence minister and the attorney general about the matter has not yet been released, despite requests from the inquiry.

The crossbench senator Rex Patrick said it would be of significant concern if the defence minister had asked for the suppressions to protect those royalties.

“Defence refused to confirm or deny whether royalties to the commonwealth were a factor in the defence minister’s submission to the attorney general,” Patrick told Guardian Australia.

“It would be highly inappropriate for the defence minister to recommend to the attorney that the auditor general be directed to withhold information from the parliament on the basis of loss of profit to the crown, and it would also be inappropriate for the auditor to include profit in his decision to issue the certificate.”

The inquiry also heard the defence department had been shown Hehir’s audit report early on in the process, as is normal practice, and addressed any concerns about sensitive national security information. But defence admitted they had subsequently found more sensitive information four months later, which had been initially missed.

Defence told the inquiry it was a “matter of regret” that it had initially missed some sensitive information. It said it advised the auditor general and he took that additional information out.

The inquiry is ongoing.