South Australian premier Jay Weatherill has predicted the coalition will suffer big federal election losses if new submarines are built overseas.
But he believes all three bidders for the contract would be prepared to build the boats down under.
The Labor premier said there were now ever-changing signals from the Abbott government on whether new submarines replacing the ageing Collins boats would be built in Australia, as both parties promised before the 2013 election.
Federal Labor has accused Prime Minister Tony Abbott of a secret deal with the Japanese government for the new boats to be built in Japan.
Mr Weatherill told the National Press Club on Wednesday that two of the three bidders, French firm DCNS and German company TKMS, were prepared to build in Australia.
He understood Japan would also propose to build in Australia.
Mr Weatherill said this was not a close political issue.
"It's like a 90-10 issue. There is almost nobody that thinks it's a good idea to spend $50 billion approximately in somebody else's country," he said.
"The federal government not only will suffer dramatic losses in South Australia if they don't keep their promise on this, I think it will actually become a national economic issue."
He predicted the "hot button issue" would become central to the next federal election campaign.
The government is now considering proposals for the new contract, with a decision to be made by the end of the year.
Mr Weatherill, fresh from a trip to France to inspect DCNS shipyard facilities, had no preference among the three contenders.
It was entirely up to the federal government to choose the best submarine for Australia's requirements, he said.
"But all else being equal, there are important national economic development imperatives which should also be taken into account," he said.
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