The federal government has signed the head contract for construction in Adelaide of the navy's new fleet of nine Hunter class frigates.
Defence Minister Christopher Pyne says the government has delivered on a promise to have the deal finalised before the end of the year.
"The $35 billion program will provide the navy with a world-class anti-submarine warfare capability, create thousands of jobs and contribute billions of dollars to the national economy," Mr Pyne said.
The frigates will be built by ASC Shipbuilding as a subsidiary of BAE Systems Australia.
The program will create 5000 direct jobs nationally, and 10,000 indirectly through a national supply chain.
The frigates will begin entering service in the late 2020s, replacing the ageing Anzac-class ships.
The design will be based on BAE's Type 26 frigate which the company is constructing in Glasgow for the British Royal Navy.
So far about 700 Australian businesses have pre-qualified for a slice of the Hunter class work with the local steel industry a particular beneficiary, supplying 48,000 thousand tonnes.
"BAE Systems, through ASC Shipbuilding, will establish a sovereign naval shipbuilding capability which will enhance and strengthen our economy," Finance Minister Mathias Cormann said.
"BAE Systems will invest human resources, intellectual property, know-how and information technology in ASC Shipbuilding, creating over the life of the build program a sovereign, world-class naval ship designer and builder."
On Friday, Mr Pyne also watched the first steel raised at the site of a new naval shipbuilding yard in Adelaide, where the frigates will be assembled.
Construction of the $535 million yard will create about 600 jobs.
