Aid groups have criticised the Federal Government's plan to dramatically ramp up defence exports, accusing the Coalition of contributing to a global arms race.

Key points: Current defence exports are worth around $2b per year

Current defence exports are worth around $2b per year Aid groups say the Government's plan undermines its claim to be in favour of peace building

Aid groups say the Government's plan undermines its claim to be in favour of peace building The Coalition is eyeing growing arms markets in the Middle East and Asia

The Government has declared it wants Australia to be one of the world's top 10 exporters, unveiling a new loan scheme for defence companies which want to sell their products overseas.

Australia's defence exports are worth about $2 billion a year — but Defence Industry Minister Christopher Pyne said he wants that figure to be higher.

"We sell a veritable welter of [defence] products, but we haven't really taken it to the next level, which is to seriously compete in the world for a part of what is a $1.5 trillion part of the world economy," he told the ABC's AM program.

"We have a high reputation for quality and capability — we need to turn that into products and services."

But Marc Purcell from the Australian Council for International Development said the announcement undermined the Government's claim that it champions international peace and stability.

"In a very uncertain international environment where conflict is much more likely, we should be using our diplomatic efforts to build peace," Mr Purcell said.

"We should not be getting into the game of marketing weapons which kill, maim, and bring great sorrow and destruction to communities around the world."

Mr Pyne rejected the criticisms by emphasising Australia would focus on boosting exports to our closest allies, including New Zealand, Canada, the United States and the United Kingdom.

And he insisted the current export controls on arms would not be diluted.

"Obviously, no equipment or platforms will be sold to any country unless the most stringent requirements are put in place through the permits process," he said.

"The defence export strategy is not designed to get into markets where we don't want to be.

"It is designed to maximise the markets where we perhaps haven't been making the most of our opportunities."

The Coalition is also eyeing growing arms markets in the Middle East and Asia, which Mr Purcell said was particularly concerning.

"The Middle East is a hotspot for conflict and violence. We do not need Australian weapons being sold there," he said.

Amnesty International's Diana Sayed said Mr Pyne had already flagged that the Government wanted to boost sales to the United Arab Emirates.

"We are seriously concerned about indications that the Australian Government intends to become a major arms exporter to volatile regions that have appalling human rights records," she said.

$3.8b loan scheme to close international market gaps

Under the plan, the Government will establish a $3.8 billion loan scheme for defence companies seeking finance to sell weapons and equipment to other countries.

Australia's export credit agency EFIC already helps defence companies access bank loans.

But Mr Pyne said many banks were "very risk averse" and the Government should be willing to step in and provide credit when companies needed help to boost exports.

"There are certain characteristics of the defence industry — particularly in markets like the Middle East and Asia — where banks are not as enthusiastic to have loan facilities," he said.

"Sometimes banks won't even go near such an industry, whereas there's no reason why EFIC can't have its facilities available for defence exports."

The Coalition is also creating a Australian defence export office to work with Defence and Austrade to create a central point to implement the strategy.

A new Australian Defence Export Advocate will help coordinate the push.

The Opposition's defence spokesman Richard Marles dismissed the new strategy as "window dressing".

"Today's announcement is playing catch-up footy, having done so much on the part of the Coalition to damage the defence industry in this country, and to damage industry more generally," he said.

The Stockholm International Peace Research Institute estimates Australia was the world's 20th-largest arms exporter in 2012-16.