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Controversially, the Defence White Paper, released in Canberra today, opens the way for defence to acquire armed drone aircraft, such as the US Reaper or Predator, and a ballistic missile capability aboard the navy's three new air warfare destroyers.
The government has also committed to a permanent shipbuilding industry featuring rolling construction of 12 new submarines, nine new frigates to replace the eight Anzac-class frigates from 2020 and 12 new offshore patrol vessels from 2018.
There will be new advanced missiles for the air force and a new land-based anti-ship missile system.
The army will be re-equipped with a new tactical anti-aircraft missile.
The defence force itself will be expanded to around 62,400 over the next decade, taking it to its largest size since 1993.
This will cost a great deal of money, with the government committing to lifting defence funding to two per cent of gross domestic product by 2020/21 - three years earlier than originally planned when this was announced by former prime minister Tony Abbott in 2013.
As a result, defence spending will rise from its present level of $32.1 billion in last year's budget to $42.4 billion in 2020/21.
An extra $29.9 billion will be spent on defence over the next decade.
The white paper warns Australia faces a number of strategic challenges out to 2035, with the US-China relationship continuing to be the most strategically important factor in the Indo-Pacific region.
The US will remain the pre-eminent global power over the next two decades.
While a major conflict between the US and China is unlikely, there are a number of points of friction, including the East China and South China Seas, their airspace and the cyber domain.
The white paper warns Australians will continue to be threatened by terrorists at home and abroad.
"In the period to 2035, Australia will have greater opportunities for prosperity and development but it will also face greater uncertainty.
"We need to be prepared," Defence Minister Marise Payne said in a statement.