Australia is looking for partners to help it build about a dozen diesel-electric submarines to replace its aging Collins Class fleet.
As the country’s Department of Defence announced on Monday, the submarines could possibly be built overseas, opening way for a partnership with Japan, which recently announced relaxing its strict policy on military technology exports.
Forming the core of Australia’s maritime defence strategy over the next twenty years, the proposed A$40bn (£22bn) fleet of submarines will help the country extend its maritime surveillance capabilities deep into the Indian Ocean.
The announcement that the submarines could be built elsewhere comes as a surprise as previous governments maintained the project would be carried out domestically, promising a boost to Australia’s struggling manufacturing sector. A decision to move construction of the submarine fleet overseas would likely cause a backlash from working class voters.
The Department of Defence's 50-page Defence Issues Paper 2014, issued on Monday, is part of a public consultation process on a major strategic forces assessment due out next year.
"There is significant debate emerging about the future submarine and whether it should be built in Australia. This debate must consider the cost, risk and schedule as well as the benefits of the different options," the department said in the paper.
"What other military capability might be forgone if monies are committed to industries that do not meet international benchmarks?"
Prime Minister Tony Abbott has struck a tough stance towards struggling industries, declining to bail out anaemic auto manufacturers in a move that deepened acrimony between his government and trade unions.
Japan is considered one of the most likely beneficiaries if Australia does change its stance.
This month, Abbott and Japanese Prime Minister Shinzo Abe signed an agreement on military equipment and technology transfers.
Mirroring a partnership concluded with Britain a year ago, it establishes a framework for industrial cooperation that could pave the way for a submarine deal with Australia.
It is also possible that Australia could purchase submarine hulls from Germany or Sweden and then opt to buy Japanese drive trains for the vessels.
Participants in a joint-development deal could include Britain's BAE Systems and state-owned Australian Submarine Corp, which maintains the nation's current fleet.