I can't imagine how you can justify 7 bil for a diesel sub.
Is it possible that France though that Aus had no alternative and ran the price up?
Both of those are wrong.
> Is it possible that France though that Aus had no alternative and ran the price up?
No, there was an official procedure with multiple candidates ( France, Japan and a third one I can't recall). Australia chose the French option, even though it required significant modifications to a nuclear design to make it diesel electric.
> I can't imagine how you can justify 7 bil for a diesel sub
Furthermore, the contract included significant know-how transfers and construction in Australia, so whatever the price per sub turned out to be, it wouldn't be for the subs alone.
As for why the 4 bil per sub is wrong - they haven't decided anything. They don't know the design, upon what it will be based ( the smaller UK Astute class or the bigger US Virginias), etc. Lots of infrastructure needs to be built, and people have to be trained since Australia has no nuclear sector to speak of. So any price projection as of today is purely theoretical.
Oh and the first subs under the new contract should be available in 2040, so probably a decade later. That's a long time.
As a deterrent against nation states, it's questionable how a billion dollar submarine would handle a swarm of thousands of suicidal drones, at a fraction of the cost of the submarine. The submarine takes years to build, a no-name Chinese factory can pump out thousands of drones in a day.
Imho, the approach of the PLA, betting more on unmanned drones backed by China's industrial capacity, is a more logical evolution of warfare.
Some links: https://www.thedrive.com/the-war-zone/37062/china-conducts-t...
https://www.thedrive.com/the-war-zone/13284/americas-gaping-...
It's unclear if modern tech can "reveal" where the subs are, rendering them useless.
I agree on your point regarding surface ships, they are walking dead, they can't defend against drone/missile swarming.