The Federal Government has detailed its plans to build $40 billion worth of new surface ships for the Navy in South Australia but the Prime Minister would not be drawn on where the service's next generation of submarines will be built.

Tony Abbott announced the new surface ships would be built at Osborne in Adelaide on Tuesday.

The Government will build a fleet of frigates at the ASC shipbuilding yard from 2020, and a further fleet of Offshore Combatant Vessels (OCV) from 2018, with the start dates for both projects brought forward.

Defence Minister Kevin Andrews said total acquisition costs were in the order of $89 billion.

This includes $50 billion that is expected to be spent on submarines, with France, Germany and Japan all competing for the contract.

Navy surface ships replaced Australia has eight Anzac Class frigates, which are smaller than Air Warfare Destroyers but larger than patrol boats

Australia has eight Anzac Class frigates, which are smaller than Air Warfare Destroyers but larger than patrol boats They are to be replaced with a new fleet designed with an emphasis on submarine detection and response

They are to be replaced with a new fleet designed with an emphasis on submarine detection and response The future frigates will be designed to support both combat helicopters and unmanned aerial vehicles, or drones

The future frigates will be designed to support both combat helicopters and unmanned aerial vehicles, or drones The ANZAC Class ships will continue to be maintained and upgraded until they are no longer required

The ANZAC Class ships will continue to be maintained and upgraded until they are no longer required The 2009 defence white paper (DWP) planned for up to 20 new Offshore Combatant Vessels (OCV), or patrol boats

The 2009 defence white paper (DWP) planned for up to 20 new Offshore Combatant Vessels (OCV), or patrol boats They will replace the Navy's fleet of four different types of modular patrol boats into a single multi-role class

They will replace the Navy's fleet of four different types of modular patrol boats into a single multi-role class They are expected to be be larger than the current Armidale Class patrol boats and weigh up to 2,000 tonnes

They are expected to be be larger than the current Armidale Class patrol boats and weigh up to 2,000 tonnes The DWP said the OCVs will be used for "warfighting roles", border protection, and long range counter-terrorism and counter-piracy operations

Mr Abbott said it was a "historic announcement".

"What we are announcing today is basically a fleet build here in Australia, centred on SA, because we have confidence that a restructured domestic surface naval ship-building industry can be competitive, can give us the best possible ships at the best possible price, maximising the local build," he said.

Mr Abbott said there would be a "separate process" with regard to a fleet of 12 submarines that the Government promised to build in SA prior to the election, but subsequently threatened to send offshore once in power.

He said a RAND Corporation report stated surface vessels could be "effectively built in SA".

"The Rand Report was less confident about submarines," Mr Abbott said.

"We will have a build-up to about 2,500 workers employed continuously in surface naval ship-building here in Australia."

Mr Abbott said the "vast bulk of the work" would be done in Adelaide, "because this is where the infrastructure is".

Earlier in the day Prime Minister said the project should not be seen as a second prize for South Australia should the Federal Government opt for a foreign build of the future submarines.

South Australian Premier Jay Weatherill welcomed the announcement, but pushed that ASC also had a proven record in building submarines.

"The logic associated with this particular decision can be applied to the submarine building contract and we believe that we have a strong case for advancing the future submarines being built in this state," Mr Weatherill said.

PM focused on saving 'his own job'

The 2009 Defence White Paper outlined plans to build eight new frigates and up to 20 OCVs. The number of ships to be built has not yet been confirmed.

Earlier in the day, Federal Opposition Leader Bill Shorten accused the Prime Minister of using the Adelaide naval shipbuilding contract to "save his own job".

"I think as all Australians know, Mr Abbott views these multi-billion-dollar, multi-thousand-job contracts as political prizes aimed at just saving his own job," Mr Shorten said.

The Prime Minister's Cabinet is in Adelaide for a three-day visit where local polling has suggested the Federal Liberal party is out of favour as the state suffers with the highest unemployment rate in the country.

Victoria's Industry Minister Lily D'Ambrosio said the Prime Minister's announcement was a blow for shipbuilding in Melbourne, where work was drying up.

"This is an absolute disgrace. This is a kick in the guts for the highly skilled workers and their families," she said.

Hundreds of jobs are on the line at BAE Systems in Williamstown, because without new orders, the defence contractor expects existing projects to wind up in early 2016.

BAE decided not to tender for a project to build new patrol boats in June because the Federal Government did not fast-track the process.

Ms D'Ambrosio said Melbourne's shipbuilders needed an order now because they could not afford to wait until 2018 or 2020 for more work.

"These dates are meaningless for Williamstown dockyard," she said.

"Williamstown and the 600 workers and their families actually need certainty now, they need jobs now and they need an order right now," she said.

Ms D'Ambrosio said Mr Abbott was sacrificing shipbuilding jobs in Melbourne to protect Federal Education Minister Christopher Pyne's seat in South Australia.

"It absolutely smacks of a cynical exercise to keep seats in Parliament. Tony Abbott cares nothing for these workers and their jobs," she said.

BAE Systems Australia acting chief executive Glynn Phillips said the company had advocated for a continuous build program for years.

"We look forward to engaging with the Federal Government so we can better understand the implications this will have for our shipbuilding operations in Australia and the contribution we can potentially make as this country's leading naval shipbuilding prime contractor," he said.

"BAE Systems has world-class designs for frigates and Offshore Patrol Vessels and has experience in building both of these classes of warships in Australia.''

Navy Vice Admiral Tim Barrett said the announcement provided "certainty" for naval shipbuilding and planning within the Australian Defence Force.

"Principally the frigates will be used as the workhorses of the Navy over the next couple of decades," he said.

Concerns about Government's plans for submarines

The shipbuilding announcement has been welcomed by many groups but concern remains about the Government's plans for its submarine building program.

Independent senator Nick Xenophon said the project was two election cycles away, which was "an eternity".

"How is this promise – to build the future frigates in SA – any different from the Coalition's 2013 promise to build 12 submarines in SA?" he said.

"The Government cannot expect Australians to believe it on the frigates until it delivers on its promise to build the $50 billion submarines in South Australia."

Defence Teaming Centre chief executive Chris Burns described the plans as a step in the right direction after six years of uncertainty.

"In the 1990s we built Collins Submarines, Anzac Frigates and Huon Minehunters simultaneously in Australia. We've done it before and we can do it again," Mr Burns said.

"Yet, after today's announcement it is still unclear to the Australian community whether those submarines will be built on our shores.

"Out of the $89 billion committed in this announcement, a potential $50 billion could be sent offshore if there is no commitment to a local build."

Business SA director of policy Rick Cairney said he hoped the shipbuilding announcement would give business a confidence boost.

"With the highest unemployment rate of all states and territories, the South Australian jobs supported through the future frigate project are critical and certainly well received," Mr Cairney said.

State Liberal leader Steven Marshall said the party would continue to lobby for the state to build the submarines.

"It shows confidence in the ASC's defence-building capabilities and workforce, which are second to none," Mr Marshall said.

"We remain of the firm view that the future submarines for the Royal Australian Navy should be built at Osborne."