Prime Minister Scott Morrison has flagged spending on defence will ‘only increase’ in the future. 

Mr Morrison says the world has entered a “new era” of international relations, with “new challenges” for Australia and its partners.

His comments come after a landmark trilateral security pact with the US and UK was announced this morning, along with a new fleet of nuclear-powered submarines.

Australia will also enhance its long-range strike capability to “deter and respond to potential security challenges during the transition to a fleet of nuclear-powered submarines”.

Finance Minister Simon Birmingham told Clinton Maynard as the world’s thirteenth largest economy in a highly competitive region, defence spending is a necessity.

“We are very much a maritime nation, being an island continent.

“Ultimately these investments are ones that we believe the country can’t afford not to make.”

Amid the newly-announced trilateral partnership, Australia has scrapped its $90 billion French submarine program.

Backing out of the French deal will carry a cost with $2.4 billion already spent, but Mr Birmingham insisted “not all of that is lost”.

“The skills, the knowledge, the capability, some of the infrastructure … will help us be able to start this venture with the UK and the US with more momentum behind it.”

Press PLAY below to hear the Finance Minister’s response in full

Image: Nine News, Getty