Defence Minister David Johnston says the government has no money for new naval vessels and has to "rob Peter to pay Paul" to keep shipbuilders in work.
Senator Johnston said the government faced a deficit of $123 billion and there was no money for shipbuilding projects.
"We have got to rob Peter to pay Paul that keeps people in work and that is precisely what we are seeking to do," he told a Senate estimates committee hearing on Wednesday.
"We have a clean sheet of paper to try and resource any of those programs to keep (defence contractors) BAE, Forgacs and ASC workers in place."
This stems from the so-called "valley of death", the period between the end of current shipbuilding projects and the start of new projects, when companies will have to lay off skilled workers.
Speaking in Canberra on Wednesday, Forgacs chief executive Lindsay Stratton warned the company would have to lay off 900 skilled workers by the end of next year as their work on the air warfare destroyer project concluded.
Senator Johnston said it would not be a problem if the former Labor government had brought forward shipbuilding projects.
The government was now considering what it could do for shipbuilders in the new Defence White Paper and Defence Capability Plan, to be launched in early 2015.
Senator Johnston said the government's promise of lifting defence spending to two per cent of gross domestic product in 10 years gave some semblance of hope.
But defence was no orphan in these tough times.
There were a host of other portfolios where the financial base had been eroded or where expenditure far exceeded the capacity of government to resource them, Senator Johnston said.
