The government has unveiled a $40 billion plan that will cement South Australia as Australia's shipbuilding hub.
But the bid to mollify political damage in South Australia risks a fight with other ship building states - Western Australia and Victoria.
Prime Minister Tony Abbott on Tuesday announced $40 billion to build future frigates and corvettes in Adelaide, plus an additional $49 billion to fund a submarine fleet that could still be built offshore. 
Cabinet signed off on the package on Tuesday morning, with the government promoting its plan as the first "continuous ship build" announced by any federal government in Australian history.
Mr Abbott declared "an historic day" at an Adelaide press conference.
"The people of Australia, the people of South Australia, can be confident that this really is a fundamental new beginning for naval ship-building here in Australia," he said.
The Prime Minister said construction of the corvettes from 2018 and frigates from 2020 would secure 2500 jobs, largely in Adelaide.
"I think this is a very good announcement for our national security, it's a very good announcement for our economic security, it's a very good announcement for jobs," Mr Abbott said.
The government has been on a mission to restore its political fortunes in South Australia after the collapse of the state's manufacturing base and the government's mishandling of an announcement to find an international company to build the next fleet of submarines.
Key seats held by the government, including Education Minister Christopher Pyne's seat of Sturt, are considered vulnerable at the next election.
But Mr Abbott repeatedly refused to answer questions about whether Tuesday's announcement was a bid to resurrect the government's standing with South Australian voters, as criticism began from other ship-building states.
Victorian Premier Daniel Andrews said his state's shipbuilders had been let down.
"I do fear that Mr Abbott is far more concerned with Mr Pyne's job than he is with the jobs of hundreds of Victorian shipbuilders, and that is an absolute disgrace if that is what is going on here."
Asked if it was a "pork-barrelling" exercise, the Prime Minister said: "Every Australian regardless of whether he or she is living in Cape York or in the Pilbara, is interested in the defence of Australia."
When pressed on the government's lagging approval ratings in South Australia, Mr Abbott said "I am trying to focus on the actual decision rather than get dragged down into sort of day-to-day political considerations"
The government also said on Tuesday it was not ruling out work for South Australians in building a new submarine fleet.
Mr Abbott said the countries in line for the contract - Germany, France and Japan - had been asked to submit options for a local build, a hybrid build and construction entirely offshore.
"What we have announced today does not preclude any of the options in respect of submarines," he said.
The Victorian government has been lobbying the federal government to place an order to ensure work could continue at BAE shipyards in Williamstown.
The Andrews government says Mr Abbott's announcement is purely political and has no regard for Victorian jobs.
"Tony Abbott has been prepared to sacrifice 1000 jobs at the Williamstown dock yards in order to save the job of Christopher  Pyne. This is an absolute disgrace," Industry Minister Lily D'Ambrosio said.
BAE has warned that without an order for new ships, the Williamstown dockyard will shed hundreds of jobs and lose valuable skills.
With Richard Willingham
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