The future of South Australia's submarine industry will not be known until next year, when the Coalition reveals its policy for replacing its ageing fleet of Collins Class submarines.

Addressing the Australian Strategic Policy Institute's conference in Canberra today, Defence Minister David Johnston reaffirmed the Government's support for building the new submarines in South Australia - as long as the project was cost effective and met international benchmarks.

However, he also confirmed he had no idea how much it would cost to replace the existing fleet of submarines.

The former Labor government promised to build 12 new submarines over the next three decades, but the Coalition says it is re-examining the number needed.

Senator Johnston told the conference the Government was "up against the wall" in finding a replacement design.

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"I still do not know what the potential costs of a new designed submarine or an evolved Collins submarine will be and I am very concerned about that," he said.

"The Japanese design is the nearest design that comes to what our requirements are.

"There's no other diesel electric sub of that size and dimension, it's extremely impressive that they can get a boat of that size - 4,200 tonnes - through the water with diesel electric power."

Time running out to fix submarine capability gap: Johnston

Senator Johnston says he is still examining options but has warned Australia is fast running out of time to fix its submarine capability gap.

It was anticipated Senator Johnston would reveal a significant downgrade in plans to build the 12 submarines in Adelaide to replace the Collins Class submarines.

The plan for 12 new submarines was expected to cost between $40 billion and $50 billion, and critics have argued the plan had tied up the policy process, stymied debate and distorted the Defence budget.

Senior analyst with the Australian Strategic Policy Institute Andrew Davies says the Government has budgetary issues which may put pressure on the industry, including replacing the Navy's frigates over the next 10 years.

"It's a question of balancing the cost against the benefit you get from it and if the submarines end up costing so much you have significant holes elsewhere in the Defence Force," Mr Davies said.

"Then you might choose not to do that. I think it's going to be a matter of balancing numbers and cost and risk against what we want them to do.

"And if 12 submarines end up costing so much that you have to have significant holes elsewhere in the defence force, then you might choose not to do that."

However, South Australian Premier Jay Weatherill says he retains confidence in the industry's future.

"We think that our future is secure in the manufacture of submarines, of course when you hear language like this from the Federal Government it is a cause of concern," he said.

The Coalition says it will not outline its policy until next year.