The MRH-90 Taipan went down late Friday night in sub-tropical waters off Hamilton Island, Queensland, while taking part in the 30,000-strong Talisman Sabre drills.

"As we speak to you now, the four aircrew are yet to be found" Marles said after a nearly 12 hour overnight search, which is set to continue Saturday.

"The families of the four aircrew have been notified of this incident and our hopes and thoughts are very much with the aircrew and their families," he added.

"We desperately hope for better news during the course of this day."

Defence officials announced a pause in the Talisman Sabre exercise, which also includes soldiers from Japan, France, Germany, and South Korea.

The exercise had been entering its second week and was testing large-scale logistics, land combat, amphibious landings and air operations.

Australia is currently embarking on a major overhaul of its armed forces, pivoting towards long-range strike capabilities in an effort to keep would-be foes such as China at arm's length.