Prime Minister Julia Gillard has commissioned a new Defence white paper to be released next year, one year earlier than expected, as the government guaranteed that Australian soldiers would not be hit by cuts to the budget.
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This morning Defence Minister Stephen Smith said the Joint Strike Fighter project would be delayed by two years, at a saving of $1.6 billion. A self-propelled artillery project would also be scrapped, saving a further $25 million.
Mr Smith said Defence would see more cuts when the budget was handed down next week.
''Defence will make a contribution to the budget bottom line,'' he told reporters in Canberra. ''So yes, there will be more in the budget.''
Despite the Defence cuts, this morning Ms Gillard and Mr Smith announced the government would spend $214 million for the next stage of the Future Submarine project.
In the nation's largest capital works project, Australia will buy 12 new submarines to be built in South Australia. Overall the project is slated to cost around $40 billion.
Ms Gillard said the government's multi-billion dollar spend on the submarines - which are difficult to locate and hard to destroy - was justified because of Australia's geography.
"For an island continent, maritime capability is critical," she said.
Mr Smith said that the government was proceeding slowly with the new submarines, particularly due to lessons learnt over the embattled Collins Class subs.
"We are being absolutely methodical about that and make no apology for it".
Defence Material Minister Jason Clare said that the new submarines would create jobs and build skills in Australia.
"To build the new submarines we need to build a new industry," he said, noting that some overseas expertise will be needed but that a lot of the work will be "home-grown".
In announcing the cuts, Ms Gillard was quick to give assurances that soldiers and Australia's operations in Afghanistan would not be hurt by the spending decisions.
''The budget will protect the men and women on the front line,'' she said.
The Prime Minister also said there would be no impact on Australian Defence Force numbers and other overseas operations, such as in East Timor.
Mr Smith said that delaying the Joint Strike Fighter plan would put Australia in line with the United States, which has also recently delayed its schedule.
"We are now essentially on the same timetable," he said.
The self-propelled artillery project - reccommended by the last white paper - had had some "difficulties", according to Mr Smith.
In announcing a new white paper, Ms Gillard said Australia needed to bring the strategic review forward to accommodate the continuing global shift to the Asia-Pacific region and Australia's planned transition out of Afghanistan.
Ms Gillard also noted that the last Defence white paper in 2009 had been completed during the global financial crisis. ''We need to take stock of those impacts.''
Mr Smith said that because Defence had produced its last white paper so recently, the department would be ''well placed'' to report back in just 12 months.
The Defence Minister said the release today of the Defence Posture Review would also help the white paper.
The review, commissioned in June last year, looked at how well the ADF's facilities matched up with Australia's security and strategic challenges.
It found that most bases was appropriate but that significant investments are needed in northern and western Australia.
The review, conducted by Defence experts Allan Hawke and Rick Smith, said that permanent Navy bases in the North West are not operationally necessary but recommended that Defence look at options to enhance bases in Broome, Darwin and Cairns.
It also found that some air bases in Northern Australia have significant logistical constraints.
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