The federal government will spend $2 billion on highly advanced surface to air missiles for the Australian Navy to protect against anti-ship missile threats.
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The Evolved Sea Sparrow Missile uses advanced active radar to defeat anti-ship missiles.
It has a range of over 50km and can be used on the Anzac Class frigates and Hobart Class destroyers.
The funds will directly support Australian jobs and allow components for the missiles to be supplied by Australia for international production, Defence Minister Peter Dutton said on Thursday.
"Australian industry will continue to support increasing rates of missile production, and further opportunities for Australian industry involvement are being pursued in missile component manufacture and integration," Mr Dutton said in a statement.
The production of the missiles is facilitated by the NATO Sea Sparrow consortium, which provides Australia with access to technical information and shares development costs.
The government is also pursuing robotic undersea vehicles for the Navy to complement its submarine and surface fleet.
The Extra Large Autonomous Undersea Vehicles are cutting-edge, unmanned vessels that are able to carry various military payloads over long distances.
The stealth vehicles are typically between 10 to 30 metres long.
Mr Dutton said the underwater capability would potentially be used to maintain peace and stability in the Indo-Pacific region.
They can also be used to bolster Australia's defensive capabilities by "presenting a disruptive and difficult undersea problem for any adversary".
Three prototypes will be developed over the next three years.
Australian Associated Press
