Defence Minister David Johnston has warned he would not trust the Government-owned defence builder, the Australian Submarine Corporation (ASC), to build a canoe.

Senator Johnston launched the scathing attack on the ASC in the Senate during a debate about where Australia's next submarine fleet should be built.

The Government is under pressure to build Australia's next fleet of submarines locally, rather than opt for an overseas design.

Prime Minister Tony Abbott has since released a statement saying the ASC plays a vital role in supporting the Royal Australian Navy.

But the ASC does not have the confidence of Senator Johnston.

"You wonder why I'm worried about ASC and what they're delivering to the Australian taxpayer, you wonder why I wouldn't trust them to build a canoe?" he said.

Senator Johnston said the ASC was at least $350 million over budget in building three air warfare destroyer ships.

"I'm being conservative, it's probably more than $600 million, but because the data is bad, I can't tell you," he said.

"ASC was delivering no submarines in 2009 for $1 billion."

Mr Abbott's statement said the ASC had changed its submarine maintenance program and had exceeded the Navy's target for submarine readiness over the past year.

"This has improved the availability of our Collins Class fleet to defend our national interests," the statement said.

"Whilst ASC has had challenges meeting the Government’s cost and schedule expectations of the Air Warfare Destroyer programme, we are working closely with ASC on a reform strategy to improve shipyard performance and productivity.

"It is early days, but the Government is confident that ASC and its partners will successfully turn the corner on this important build."

Australian Submarine Corporation worker 'disgusted' by comments

An ASC worker said he was disgusted by Senator Johnston's comments.

Pipe fitter Andrew Daniels said the Adelaide workers would never compromise on safety.

"We're being trashed. When I go home to my family and this guy is telling me I'm useless ... I don't feel useless and that's pretty gutting to 3,000 workers in South Australia and Western Australia," he said.

"It's not a great feeling to have your Defence Minister, you're out there doing your best job for the country and he's trashing you."

SA Defence Industries Minister Martin Hamilton-Smith said Senator Johnston's comments made clear the Federal Government was planning to break its promise to build the next generation of submarines in Adelaide.

"We are outraged as a State Government and I think it is a clear signal that the promise to build 12 submarines in South Australia was disingenuous at best, some would say a lie," he said.

Earlier this month ASC general manager Stuart Wiley said it would cost between $18 billion and $24 billion to build 12 submarines in Adelaide.

The Federal Government had suggested it would cost up to $80 billion.

The Coalition's Commission of Audit recommended it consider privatising the ASC.