Australia is beefing up its navy with a fleet of advanced destroyers and warships. But this latest expenditure, amounting to nearly $10 billion, has caused neighbouring countries to warn of a regional arms race.

The new fleet, consisting of three F100 Air Warfare Destroyers and two amphibious landing ships, will be built by Australian defence contractors in partnership with the Spanish company Navantia.

The F100 ships will be used for everything from defence and escort duties to peacetime diplomatic missions and natural disaster response.

"The Royal Australian Navy will undergo a quantum leap in its air warfare capability when the F100 enters service," the Defence Department said in a statement.

The first F100 will be delivered in 2014, with the other two following in 2016 and 2017.

The purchases will transform Australia's navy into one of the most powerful in the Asian region, with two amphibious carriers able to land more than 2,000 troops, 16 attack and transport helicopters and up to 23 Abrams tanks.

"They are very significant decisions for the future combat capability of the Royal Australian Navy," Prime Minister John Howard said. "They represent a very long-term investment in the future defence capability of this country."

He said the ships "will enhance our capability for years into the future, particularly — but not only — in our part of the world."

Instability sparks buildup

The new fleet is the latest expenditure in Australia's recent defence spending boost. The country has already started a wider $42-billion defence procurement program amid concerns of growing instability in the Asia-Pacific.

Several nations, including Thailand and Indonesia, have warned Australia's move could spark off a regional arms race.

The Australian government said the program is a sign of the country's defence commitment to the region.

Foreign Minister Alexander Downer said Australia needs a strong defence force and the ability to deploy overseas quickly.

"It's not that we have hostile intent towards anybody," Downer told local television.

He says Australia sets an example in the region by being open about its defence plans.

"Our view is that defence policy should be transparent, and so we are happy to talk to countries in the region about what our defence plans, in particular our defence equipment plans, actually are," Downer said.

With files from the Australian Broadcasting Corporation