Govt wants warships built in Australia

The federal government is pushing for Australia's next multi-billion dollar warship project to be built locally in a move that could save up to 5000 jobs, according to reports.

Fairfax Media reports Defence Minister David Johnston is giving the local shipbuilding industry his support for the project, due to be announced in the next three months, despite fears its cost could blow out by hundreds of millions of dollars.

"We need a naval shipbuilding industry and the reason we need a naval shipbuilding industry is because we cannot allow the strategic and tactical systems we use to become public knowledge," Senator Johnston told The Australian Financial Review on Friday.

Major players in the shipbuilding industry say up to 5000 local jobs may be lost if the warships aren't built in Australia - including up to 1100 jobs at BAE Systems in Melbourne and 900 at Forgacs in Newcastle, in NSW.

Some MPs have questioned the viability of Australia building warships given the pressures on the budget.

Under Senator Johnston's plan, up to $2 billion could be spent on either a fourth destroyer, a fast mid-size warship, new refuelling ships, or patrol boats.