Australia will spend A$89bn (£42bn) on ships and submarines for its navy over the next 20 years, the government has announced.
Prime Minister Tony Abbot said that two naval shipbuilding programmes - the A$20bn Future Frigate project and the Offshore Patrol Vessels project - will be brought forward to guarantee continuous domestic construction of surface warships.
However, elements of his own Liberal Party, alongside state officials and labour unions, are pressuring his administration to ensure that a A$50bn stealth submarine programme is also built domestically.
Germany's ThyssenKrupp (TKMS), France's state-controlled naval contractor DCNS and a Japanese government consortium of Mitsubishi Heavy Industries and Kawasaki Heavy Industries are all bidding for the submarine bid - one of the most lucrative defence contracts in the world.
However, the powerful Australian Manufacturing Workers' Union (AMWU) has signalled that it plans to hold Abbott to a pledge he made ahead of elections in September 2013, stating that the submarines would be built in Australia.
"A promise is a promise is a promise and we will be holding them to honour the submarine promise right up until the next election," AMWU Assistant National Secretary Glenn Thompson said in a press release.
A Japanese government team is in talks with Britain's Babcock International Group and BAE Systems in response to Australia's desire to have as much domestic participation in the project as possible and TKMS is trying to convince members of the government of the economic and political benefits of its proposal.
Growing concerns over the potential political repercussions of awarding the contract to an overseas bidder will have been heightened by criticism from South Australia state's minister for defence industries Martin Hamilton-Smith.
The state has traditionally been a naval and automotive manufacturing hub, but it is struggling with the nation's highest unemployment rate. The frigates will be built in the state under Abbot's plans, but Hamilton-Smith questioned why the submarines could not also be built there.