The federal government is bringing forward two major warship projects, saving around 1000 shipbuilding jobs and shoring up its electoral prospects in South Australia.
Construction of new offshore patrol vessels will start in 2018 - two years earlier than scheduled - and work on new frigates will start three years early in 2020.
These projects, worth some $39 billion, will be centred in South Australia where polling suggested the coalition could lose seats in an electoral backlash if it opted to build new submarines overseas rather than in Adelaide.
Prime Minister Tony Abbott said creation of a permanent naval shipbuilding industry saved a substantial number of jobs which would otherwise be lost in the "valley of death".
The "valley" refers to the years between the end of current projects - to build air warfare destroyers and landing ships - and the start of new projects, when shipbuilders have to lay off many of their skilled workers.
Mr Abbott said the government couldn't save all those jobs.
"It should mean that at no stage does the total number of jobs in naval shipbuilding in Australia drop below about 1000 so that when we do start building up again to 2500 from 2020 it's not the cold start that would otherwise be the case," he told reporters in Adelaide.
The government is proposing a program of continuous ship construction, turning out a new frigate about every two years.
That will end the boom-bust cycle which has always afflicted Australian shipbuilding, driving up costs and giving little long-term certainty to companies or their workers.
This was good news for South Australia.
Premier Jay Weatherill said it strengthened the case to build the new submarines in his state.
"We've always said that it's necessary to have both surface ships and submarines as part of a naval shipbuilding program which creates the continuity and jobs that workers here in this state and around the nation want," he said.
Government-owned shipbuilder ASC, formerly the Australian Submarine Corporation, said it was pleased SA's shipbuilding capability had been recognised.
"ASC has long been an advocate for a continuous build of naval warships to minimise the effects of the stop-start nature of the industry," the company said in a statement.
Michael Ward, managing director of defence company Raytheon Australia said this provided much-needed clarity for the defence industry and would allow greater certainty for investment.
Less pleased was Victorian Industry Minister Lily D'Ambrosio who said it would be too late to save 400 jobs already lost at the BAE Systems yard at Williamstown.
"The fact remains is that without orders placed, BAE Systems and the highly skilled workforce that has been here for many, many years are at risk. Come the first quarter of next year there will be absolutely no work," she told reporters in Melbourne.
Opposition Leader Bill Shorten said both warships and submarines should be built in Australia.
"If he can do this for the frigates, then Mr Abbott can keep his promise to Australians, help maintain our national security and the jobs of thousands of skilled workers and many small businesses by building the submarines in Australia," he said.
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