A new $150 million Australian research centre is being set up to target space junk in Earth's orbit.

The Cooperative Research Centre (CRC) for Space Environment Management, based at Mt Stromlo Observatory near Canberra, will bring together work by researchers and industry groups from Australia and overseas.

The centre will develop ways to track and remove more than 300,000 pieces of space debris in orbit.

CRC chief executive Dr Ben Greene says debris is a real problem for satellites and spacecraft.

"A catastrophic avalanche of collisions that would quickly destroy all satellites is now possible," he said.

"In the worst case, two satellites would collide and the debris from those satellites would be directly in the path of more satellites in a very short space of time.

Sorry, this video has expired Space junk a threat to satellites

"They would then generate more debris and very quickly the avalanche would grow until everything was colliding with everything and space would become uninhabitable for satellites for hundreds of years."

Dr Greene says there is a "realistic threat" that, at current rates, there is a chance all satellites could be destroyed in a catastrophic event.

He says finding a way to accurately track orbiting material is the first challenge researchers will face.

"It's a realistic threat. We are exactly on the curve that we predicted 10 years ago for the number of satellites we would lose in a year," he said.

"If those losses are at a level two or three times [the current rate], we could [see an] avalanche effect where we lose everything."

The CRC will use high-powered telescopes to identify space debris. It will then bounce specialised lasers off the objects to identify their range and plot their orbits.

"Our initial aim is to reduce the rate of debris proliferation due to new collisions," Dr Greene said.

"There is now so much debris that it is colliding with itself, making an already big problem even bigger."

Collisions between satellites, space debris 'regular'

CRC lead researcher Professor Craig Smith says collisions between satellites and space debris are not unusual.

Sorry, this video has expired 730 ACT: Cleaning up space junk

"We've managed to pollute space kind of like the way we've polluted oceans and rivers. It's an environmental problem," he said.

"There are actually regular collisions - one to two a year between active space satellites and more collisions between space debris.

"At the moment, they are random acts of God because no-one can do anything about them.

"Part of the CRC's plan is to predict and to manoeuvre satellites around the space debris and ultimately to push space debris to stop collisions happening."

Dr Greene says the CRC currently tracks 10 per cent of known space debris and hopes to cover 50 per cent within the next five years.

"We're trying to look after some serious assets and we're trying to take care of a problem that until quite recently was considered unmanageable," he said.

There are more than 6,000 active satellites in orbital space worth an estimated $1 trillion.

Researchers hope lasers will be used to destroy debris

The Australian National University's Research School of Astronomy and Astrophysics will also be involved in the project.

Simulation: telescopes at Mount Stromlo scan the night skies for space junk. ( EOS Space Systems )

ANU Professor Matthew Colless says the centre hopes to find strategies for dealing with space junk like those seen in the Oscar-winning film Gravity.

Professor Colless says he hopes lasers will eventually be used to remove smaller pieces of space debris.

"If we increase the power of the lasers that we have to actually gently push small bits of space junk, that makes them fall back to Earth more rapidly and burn up harmlessly in the atmosphere," he said.

The multi-million-dollar centre is funded by a range of local and international organisations from the telecommunications, military and space industries, as well as the Australian Government.

The research will be largely focused at Mt Stromlo Observatory, where a series of Australian government, university and industry-led programs have resulted in major breakthroughs in space debris tracking over the past decade.

CRC chief operating officer Rod Drury says there have been strenuous efforts in many countries to develop space debris mitigation technology.

"The CRC brings together, for the first time, leading debris mitigation programs from around the world to create a team with the required critical mass of researchers, technology, funding and equipment," he said.

The centre's work is due to begin in mid-2014.