Australian Defence Minister Stephen Smith defended Canberra's military spending as "far greater" than its regional neighbours Thursday after an Aus$5.5 (US$5.55) billion budget cut.

Smith said Australia would spend Aus$103.3 billion on defence over the next four years, maintaining "Australia's status in the top 15 nations in terms of world defence expenditure".

"In real dollar terms, we spend far greater than any of our regional neighbours," he said.

The remarks were made as Smith announced the Aus$1.4 billion purchase of 10 Italian Alenia C-27J Spartan Battlefield Airlift aircraft to replace Australia's ageing Caribou fleet, which were retired from service in 2009.

He said it demonstrated the government's commitment to a strong airforce capability — "a critical element of our national security capability even in times of fiscal difficulty".

Defence was the major target of aggressive government spending cuts worth some $33.6 billion unveiled in this week's budget, with the deferral of 12 F-35 Joint Strike Fighter jets and 35 self-propelled howitzer artillery pieces.

Other projects were also delayed or cancelled and 1,000 civilian staff sacked, just weeks after the first of 2,500 US Marines to be stationed in northern Australia under a new military pact began their posting.

US President Barack Obama and Australian leader Julia Gillard unveiled the major expansion of military ties late last year, in a move designed to bolster Washington's presence in the region, which irked Beijing.

Smith said the C-27J had missile-warning systems, electronic self-protection, secure communications and battlefield armour allowing it to operate in "high-threat" environments.

It was selected ahead of the Airbus Military C295 and could undertake a "wide range of missions from delivering ammunition to front line troops to undertaking aero-medical evacuation of casualties", said Smith.

The first deliveries would be taken in 2015 through a foreign military sales agreement with the US, with a separate contract to be struck with Alenia for the operation, maintenance and modification of the fleet.