Aust'n PM Turnbull defends 40-bln-U.S. dollar submarine contract

Australia's Prime Minister Malcolm Turnbull on Friday defended his government's decision to spend 40 billion U.S. dollars on the nation's 12 next-generation naval submarines.

Criticism surfaced about the contract after it was revealed the government could have saved billions of dollars building the submarines offshore, but Turnbull said it was crucial to have the subs built locally as it would in-turn benefit the local economy.

"My belief is, so far as we can, we should spend every dollar we can in Australia because it drives our economy," Turnbull told 3AW radio.

"This defence investment is at the cutting edge of technology, so everything you do (in Adelaide where the subs are to be built) advances the economy overall."

Turnbull also dismissed claims that submarines were unnecessary in today's military environment. He told 3AW that, as a nation surrounded by water in the developing Asian region, submarines were crucial to Australia's maritime security.

"We've got to spend the money to have the means to defend Australia," Turnbull said.

"There has been a long period of peace and harmony but there is always the possibility of tensions and conflict and you have to be prepared."

Earlier this week, French company DCNS was chosen by the government to build the navy's 12 new submarines, which are set to replace the aging Collins class submarines currently in service.

The French company beat out a bid from German shipbuilder TKMS and the Japanese government to build the "world-class" subs. Endit