The Royal Australian Navy will arm itself with dozens of the home-developed, cutting-edge autonomous drones, with the first entering service in January, it said.

Australia is in the midst of a major military restructure, equipping its navy with long-range strike capabilities in an effort to balance China's expanding military might in the Pacific.

The government said it had signed a Aus$1.7 billion (US$1.1 billion) five-year contract with Anduril Australia to build, maintain and develop the extra-large, uncrewed undersea vehicles, creating 150 jobs.

"This is the highest tech capability in the world," Defence Minister Richard Marles told a news conference, saying it would have a "very long range" as well as stealth capabilities.

"Australia is leading the world in terms of autonomous underwater military capabilities and Ghost Shark is capable of engaging in intelligence, surveillance, reconnaissance and strike," he said.

- 'Threatening' landscape -

The drones, which can be launched from shore or warships, will complement Australia's strategic enhancements to its submarine and surface fleets, the minister said, declining to provide the exact number to be built.

"Australia faces the most complex, in some ways the most threatening strategic landscape that we have had since the end of the Second World War," Marles said.

"All that we are doing in terms of building a much more capable Defence Force is to deter conflict and to provide for the peace and stability of the region in which we live."

Australia aims to acquire stealthy, nuclear-powered submarines in a multi-decade 2021 AUKUS agreement with Britain and the United States.

In the United States, however, critics have questioned why Washington would sell nuclear-powered submarines to Australia without stocking its own military first.

US President Donald Trump's administration has put AUKUS under review to ensure it aligns with his "America First agenda".

Marles said he was confident that the "Ghost Shark" drones and future nuclear-powered submarines would provide a "fundamentally critical" military capability.

Last month, Australia said it would also upgrade its navy with 11 Mogami-class frigates built by Japan's Mitsubishi Heavy Industries, first entering service by 2030.

Billed as one of Japan's biggest defence export deals since World War II, Australia has agreed to pay US$6 billion over the next 10 years to acquire the fleet of stealth frigates.

Mogami-class warships -- advanced stealth frigates equipped with a potent array of weapons -- are to replace Australia's ageing fleet of Anzac-class vessels.

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