The level of spending is "appropriate and in current circumstances sustainable," Australian Prime Minister Julia Gillard said during her presentation of the 2013 Defense White Paper.
The government also will buy 12 new Boeing EA-18 Growler electronic attack aircraft from the United States -- 10 more than planned -- as a stopgap until the Lockheed Martin JSF is operational, Gillard said.
Under changes in procurement strategy, there will be a move away from off-the-shelf purchases for 12 submarines being designed.
Gillard also said $25.5 million has been set aside for "enhanced mental health programs for serving, ex-service personnel and their families."
The document, published sooner than scheduled, details defense challenges and plans for the next four years. It backs up the government's Australia in the Asian Century White Paper and Australia's national security strategy.
Gillard said the government decided last year to bring forward by a year release of the defense white paper because of "very significant developments internationally and domestically" since the 2009 white paper.
"These developments include the accelerated shift of economic and strategic weight to our region of the world, the U.S. rebalance, the Australian (military) drawdowns in Afghanistan, East Timor and the Solomon Islands and the global financial crisis which the full effects of weren't clear in 2009," she said.
Australia has to manage peacefully strategic changes in its "Indo-specific region given the decreased competition and increased cooperation between the United States and China," Gillard said.
"The white paper reaffirms the central and enduring importance of our alliance relationship with the United States and the contribution this makes to regional stability and to Australia's security."
The white paper also "commits the government to deeper defense partnerships in our region including with China, our long-standing partner New Zealand and with countries such as Indonesia, India, Singapore, Japan, the Republic of Korea and Malaysia."
Australia's commitments in the 2009 white paper to boost maritime capability and "to fifth generation fighter aircraft and as strategic strike capability" are intact.
This includes Joint Strike Fighters, new amphibious ships, submarines and air-warfare destroyers.
The government will continue with its Future Submarine construction program to replace the six Collins class boats with 12 conventionally powered attack submarines, but there will be a different tact.
"As a result of the detailed design analysis, (the government) is suspending further work on military off-the-shelf or modified options," Gillard said. "Our assessment is these are unlikely to meet the future requirement for the Future Submarine."
Instead, "an evolved Collins class or an entirely new design" is the preferred submarine option.
Gillard said despite problems with the F-35 program, Australia will go ahead with the purchase of the fighter aircraft.
"While the Joint Strike Fighter has suffered cost overruns and delays, the government remains committed to the JSF as our principle Australian defense force strike capability and confident of its delivery."
Gillard said three operational squadrons of the JSF will enter service beginning around 2020.
In the meantime, the government will buy 12 new-build Growler aircraft -- the electronic warfare variant of the Super Hornet -- for around $1.5 billion over the next four years.
The Growler purchase means Australia's 24 Super Hornets will continue in their current combat configuration.
The F-35s will replace the country's fleet of F/A-18F Super Hornet fighters.
The government also said it has decided its 24 F/A-18F Super Hornets in their current air combat and strike capability configuration instead of converting 12 of them to Growlers.
The Australian government approved the purchase of the first 14 JSF aircraft in 2009 but so far is contractually committed to two.
The government is also committed to maintaining an indigenous defense production industry.
In a statement after the release of the white paper, Lockheed Martin, in a statement, said it was "honored by the trust and confidence" the Australian government showed in the F-35.
"Along with the first two Australian jets in production, which will deliver in mid-2014, we will work closely with the government to support their purchase of their remaining 100 F-35 aircraft.
"Additionally, we will work with Australian industry supporting their participation in the production of components and subassemblies for the more than 3,000 F-35s to be built during the life of the program.
"The projected $5.5 billion of industrial participation will bring long-term economic benefits to Australia for decades," Lockheed said.
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