The federal government will build eight new warships in Adelaide at a cost of $10 billion, according to reports.
According to NewsCorp, Prime Minister Tony Abbott is set to announce that government-owned contractor ASC, which employs 2000 in Adelaide and Western Australia, will be awarded the work.
It has also been reported that there is also a possibility that some construction work for the next generation of submarines will be done at Osborne in Port Adelaide.
South Australia Defence Minister Martin Hamilton-Smith was not convinced by the reports.
"It's more positive speculation than we've had in recent times about the submarines, which has been very, very negative, but it is just speculation," he said.
"No money, no firm decisions, no program of work. So we still don't know what's going to happen with naval ship-building, either surface ships or submarines while we have workers losing their jobs right now and naval ship-building companies struggling to cope.
"At least it's positive speculation which is partly helpful."
It is now seen as a near certainty that the submarine project will be done overseas. While many nations have expressed interest in the project, Japan is seen as the most likely candidate.
According to Hamilton-Smith, the local ship building industry needs both the frigate contract and the submarine work to survive.
"Unless we are building both surface ships and submarines there will not be enough work to maintain our shipyard in Adelaide, our shipyard in Melbourne and their supporting shipyards in Newcastle and Perth,” he said.
According to AAP, Australian Manufacturing Workers' Union assistant national secretary Glenn Thompson said in a statement, "It is vital for maintaining Australian high-value skilled shipbuilding jobs that the $10 billion project go to an Australian shipyard."