The national auditor has revealed his work scrutinising costly government projects faces a threat as agencies begin flagging they will move to have parts of his reports redacted.
Head of the national audit office Grant Hehir told parliament on Friday of a new challenge as departments signalled they would ask the attorney-general to issue certificates forcing him to redact information - and potentially criticism - used by parliament and the public to monitor government spending.
The revelation came at the end of a hearing into Attorney-General Christian Porter's decision to use such a certificate to remove significant parts of an audit criticising a $1.3 billion military deal after the company involved complained the information would unfairly harm its commercial interests.
Restrictions imposed on Mr Hehir and his office stopped him from advising MPs whether the contract with French defence company Thales was value for money, a judgment in the report blocked from publication.
After Thales raised its complaint with Mr Porter late last year, the attorney-general found the information would threaten Australia's national security and defence if published.
Defence Minister Marise Payne reached the same conclusion but Mr Hehir said her department had no outstanding national security concerns about the audit's publication after he consulted with its officials.
The Defence Department was unable to confirm this to MPs on Friday, taking the matter on notice, despite Mr Hehir saying it had not raised any outstanding national security or defence concerns with him in the three months after Mr Porter intervened in January.
Labor MP and committee deputy chair Julian Hill raised two possibilities: the apparent about-face from the Coalition government was either an effort to disguise Thales' commercial interests as a national security matter, or Defence officials had been incompetent in failing to flag the problems earlier with the auditor.
"It was only after a commercial interest was asserted that magically the department decided there were defence and security issues. Now that's curious to say the least and it raises a couple of questions - cover up or incompetence," he said.
"I can't understand that there's any other possibility and neither of them are good.
"Any suggestion that it's been cloaked in national security to cover that action is appalling from the point of view of the parliament and sets an absolutely unsustainable precedent."
The unprecedented move to redact analysis and information from the audit of Australia's purchase of Hawkei light-protected vehicles from Thales raises questions about the independence and mandate of the Australian National Audit Office in probing billions of dollars in government projects.
It is the first time the government has issued the certificate blocking the publication of parts of a report under the legislation overseeing the office, although the Attorney-General's Department said a similar certificate was issued in 1987 under previous laws.
Mr Hehir moved to dispel any ideas that the Thales case was unique, telling the committee as the hearing closed agencies were for the first time raising the possibility of applying for more certificates from the attorney-general to remove parts of audit reports.
"One of my concerns around some of the issues and processes here is that for the first time with us people are starting to flag this as a course of action," he said.
Defence officials said they had later advised Senator Payne the information should be removed from Mr Hehir's report, and that they had held those views during the audit. The department took on notice what outstanding concerns it had about the report as it was finalised.
Mr Porter has previously denied his decision amounted to censorship and his department told committee members the redaction was based on the law governing the auditor-general's work and preventing his reports from revealing information contrary to national security or commercial interests.
The auditor-general told MPs he had not expected the attorney-general to interpret the law so broadly to remove analysis from the report, and that the sections redacted had not been different in nature to information published in his previous audits. No security classification restricted him from publishing the redacted sections, he said.
Attorney-General's Department officials said it had not considered questions of parliamentary scrutiny of the Defence spend, if the auditor-general wasn't allowed to make a public finding about value for money.