Defence Industry Minister Pat Conroy announced a deal to develop naval and air-launched Joint Strike Missiles (JSM) at a plant north of Sydney.

The factory will break ground later this year, producing anti-ship cruise missiles and JSMs that can be fitted to state-of-the-art F-35A aircraft.

"This is about investing in our advanced, high-tech manufacturing industry and developing our sovereign defence industrial base," said Conroy.

A defence official told AFP the factory would begin production in 2027 and would be capable of producing 100 missiles a year.

Both missiles were developed by Norway's Kongsberg.

Concerns about China's massive defence spending and Russia's invasion of Ukraine have led many US allies to voice concern about a shortfall in munitions manufacturing capabilities.

Australia is among several Asia-Pacific nations dramatically increasing defence spending.

Asian defence spending reached a record US$510 billion in 2023, according to the International Institute for Strategic Studies, a London-based think tank.

Australia has launched a string of ambitious defence projects, including the development of a fleet of nuclear-powered submarines.