Shipbuilders will need to perform: Andrews

Australian shipbuilders will benefit from the government's $40 billion shipbuilding plan, but Defence Minister Kevin Andrews says they will need to perform far better than in other recent projects.

The government plans a program of continuously constructing new corvettes, starting in 2018, and new frigates, starting in 2020.

In an address to the American Chamber of Commerce in Canberra, Mr Andrews said the plan would transform Australia's naval shipbuilding industry.

It will end the boom-bust cycle that has led to the current "valley of death", in which hundreds of skilled shipyard workers will be laid off at the end of current contracts.

However, he said Australia can't afford a shipbuilding industry at any price.

"In return for our confidence, the government has an expectation that, and the Australian Defence Force has a critical need for, the shipbuilding industry to become productive and cost-effective," he said.

"We simply cannot accept an unaffordable domestic build premium."

Mr Andrews said the defence force could not accept lower levels of equipment capability than could be acquired overseas.

Neither could they suffer delays and cost overruns that had plagued recent Australian warship projects, including the air warfare destroyer.

He said the program of continuous construction of new ships would mean unparalleled reform of the industry, with improved levels of productivity.

"The strategy we are committing to now will ensure that Australia has a sustainable naval shipbuilding industry that delivers the navy the right capability at the right time for the right price," he said.

Mr Andrews said this new way of doing business would require industry to step up.

"Value for money will always remain a critical factor," he said.