Adelaide will become the heart of the Australian naval shipbuilding industry and the naval dockyard at Williamstown in Melbourne will be closed under an industry shake-up being discussed by the federal Government. Defence Minister John Moore has been pushing for the Australian Submarine Corporation's shipyard at Osborne in suburban Adelaide to become the main naval shipbuilder. This would lead to the closure of Williamstown when the Anzac frigate contract ends in 2004.

The navy has also floated long-term plans to move repair and maintenance work from Garden Island in Sydney to Newcastle. When current projects are completed in the next four years – the Collins class submarines, the Anzac frigates and the Newcastle mine hunters – there will be too little work to sustain all of the yards. The two main naval shipbuilders, Tenix and ADI, are in broad agreement with the Government on the need for consolidation of the industry, although neither will admit to having plans to close shipyards.

The intended sale next year of the ASC, now wholly owned by the Government, is seen as the key to reshaping the industry. Potential bidders are expected to ensure that the ASC's Osborne shipyard is built up to cater for surface ships as well as submarines. But the US has complicated the sale. It is insisting, if Australia wants to lift cooperation with the US submarine force, that European interests not have a major stake in the ASC. This may rule out ADI, half-owned by French defence giant Thomson, from building a dominant stake and could also rule out a large holding by British-owned BAE Systems.

The Australian defence white paper promises several major new shipbuilding projects. The largest is for three air-warfare destroyers, with building to begin about 2005.