Prime Minister Scott Morrison has announced Adelaide will be the home of Australia's new space agency.

Key points: Australia's space agency will be located at the former Royal Adelaide Hospital site

Australia's space agency will be located at the former Royal Adelaide Hospital site South Australia was selected after putting forward the strongest case

South Australia was selected after putting forward the strongest case Scott Morrison said it would create up to 20,000 jobs by 2030

South Australia beat strong competition from other states to secure the headquarters, after enlisting homegrown NASA astronaut Andy Thomas to help with its campaign.

The agency will be based at Lot Fourteen, the former Royal Adelaide Hospital site, which is being transformed into an innovation precinct.

The Prime Minister said South Australia was an ideal home for the new agency and was already a key hub for the space and technology industry.

"Australia's space industry is set to hit new heights," Mr Morrison said.

"This agency is going to open doors for local businesses and Australian access to the $US345 billion global space industry.

"Our Government's $41 million investment into the agency will act as a launching pad to triple Australia's space economy to $12 billion and create up to 20,000 jobs by 2030."

The Prime Minister said the agency was part of the Government's plan to generate a stronger economy in South Australia with more long-term, high-wage, high-skilled jobs.

Premier Steven Marshall said the space agency would help enhance the city's liveability and would take the state's defence sectors to the next level.

"South Australia is the ideal location for the Australian Space Agency with a range of local space industry businesses already established here as well as a rapidly growing defence industry sector," he said.

"I look forward to working with the Federal Government, industry and our education sector to capitalise on this incredible opportunity for our state."

A number of space start-ups have already based themselves in Adelaide, including Fleet Space Technologies, which plans to launch 100 satellites.

Nano-satellite company Myriota has also raised almost $20 million in funding for its work.

'Jobs boom' expected in South Australia

Federal Minister for Industry, Science and Technology Karen Andrews said Adelaide was selected because it put forward the strongest case.

She also said the state had played a big part in the development of the country's space sector.

"The Australian space sector actually started its journey right here in South Australia," she told the ABC.

"Our very first satellite was launched into space from Woomera just over half a century ago, so South Australia has demonstrated a very long history in space.

Former NASA astronaut Andy Thomas was enlisted to spruik the state's space industry credentials. ( Reuters:Joe Skipper )

"Having the space agency headquartered here in Adelaide means that South Australia will certainly have a great opportunity to be a major contributor."

She expects South Australia will benefit from a "jobs boom". The state is already home to more than 60 organisations which employ about 800 people in the space sector.

"We're intending to grow jobs nationally and South Australia, it will certainly have every opportunity to grow more jobs for our young people [and] people who are potentially transitioning from other industries," she said.

"Particularly with the agency headquartered here in South Australia, we are well on target to triple the sector in the next 12 years."

She also hoped the news would encourage young people to pursue a job in the sector in the future.

"Nothing inspires people like space does," she said.

"We want to encourage our young people to study science and maths at school, we want to be able to demonstrate to them … that there are jobs in the space sector and South Australia is now leading the charge."

Aeronautical engineer Matthew Tetlow, who is based in Adelaide, echoed the Government's excitement and said the agency would take the Australian space sector to the next level.

"We've been wanting a space agency for so many years and finally we've got it," he told the ABC.

"It's really important being very close to the decision-makers … it makes a big difference to the opportunities that you get.

"We're already a very tight-knit and collaborative ecosystem and I think this will just accelerate that and bring it to the next level."

WA, ACT and NSW 'disappointed' by Adelaide's win

Not everyone is happy the centre will be based in Adelaide.

This morning WA Premier Mark McGowan said he found out about the decision on Twitter.

"I don't think that's the way to conduct the federation," he said before the COAG meeting.

"Western Australia has the experience with the deep space stations of the European Space Agency… plus the wide open spaces required and the industry backing and background.

"I find it disappointing. Just because we've received a better share of the GST doesn't mean that Western Australia should be forgotten or ignored.

"South Australia received the submarine contract and the future frigate contract — nearly $100 million worth of Government spend. I think it's time other states got their fair share.

"I would urge the Commonwealth in future to treat other states — particularly those with a better claim — a bit better."

Gladys Berejiklian said her state was still the "nation's space industry capital". ( ABC News: Tony Hill )

NSW Premier Gladys Berejiklian also said she was "disappointed" by the decision.

"But the facts are New South Wales is the nation's space industry capital," she said.

"We already have 18 major operatives in New South Wales and we know there's genuine interest to expand those operations."

ACT chief minister Andrew Barr also criticised the decision by saying Canberra was "the logical home" of the space agency.

The agency will be located at Lot Fourteen by mid-2019, and will employ 20 people.