German contractor Rheinmetall is set to build the 211 light armoured vehicles at a new facility in Ipswich, west of Brisbane.
The Federal Government estimates the acquisition will create 330 jobs in Queensland, along with 170 roles in Victoria and 140 in New South Wales.
"Australian businesses will be big winners in Victoria and in Queensland, but also in other states," Defence Industry Minister Christopher Pyne said.
"And of course, most importantly, we're providing the capability the Defence Force needs to be a modern army meeting the challenges that we may face at some stage in the future."
"The Army will get a very lethal and protected vehicle to look after our soldiers."Announcing the contract at the Enoggera Army Barracks in Brisbane this morning, Prime Minister Malcolm Turnbull said it was the single-largest acquisition made for the Australian Army.
"As one of the troopers said to me just a moment ago, this is about lethality and survivability. This is about capability and protection," he said.
"This is about Australia's security. But it's not simply or solely about capability in a military sense.
"It is about ensuring that we have, for the first time, a fully integrated national sovereign defence industry."
Boxer wins in battle with BAE SystemsMr Pyne said the Defence Department recommended Rheinmetall's Boxer CRV following a three-year tender and testing process.
Federal Cabinet also considered a bid from BAE Systems, which was set to build the light armoured vehicles in Victoria.
Defence Minister Marise Payne, who joined the Prime Minister and Defence Industry Minister to announce the deal, said the chosen armoured vehicles had been through rigorous testing.
"We've put them in the heat. We've put them in the cold. We put them in the wet. We put them in the dry. We shot at them, we tried to blow them up," she said."The outcome of that assessment is that this has the capability to provide the mobility, the lethality and the protection that will support the men and women of the ADF in doing the job that we ask them to do every day."
Buying and maintaining the vehicles is expected to cost $15.7 billion.
The Government said this was a record purchase for the Army, and would create 1,450 jobs across Australia.
"In years gone by, we would have bought the vehicles from overseas and imported them into the country," Mr Pyne said.
"Because of the Turnbull Government's policy, 54 per cent of the acquisition will be value to our economy here and 70 per cent of the whole project, out of $15.7 billion.
"So it means jobs supporting our steel industry here and growing the capabilities of the workforce here and the skills."
Defence expects the vehicles will have a 30-year life, and will be equipped for peacekeeping and high-threat operations.
The acquisition will also see upgrades to military facilities at Puckapunyal, Bandiana, Adelaide, Townsville, and Enoggera.
Despite an intense lobbying campaign for the vehicles to be built in Queensland, Mr Pyne said "politics played absolutely no part" in the decision.
"The Rheinmetall bid was assessed by Defence as being the successful tenderer," he said.
"These decisions are taken very seriously by the Government and of course by the Department of Defence."
Queensland's State Development Minister, Cameron Dick, said the acquisition was great news for the state.
"It is a new beginning for manufacturing in Queensland," he said.
"Rheinmetall designed the best vehicle and our Government helped bring it to Queensland.
"We've been working with Rheinmetall for three years to secure this contract and I'm delighted that we'll now be able to deliver over 600 jobs for Queenslanders over a decade.
"This contract will result in a $1 billion benefit directly to the Queensland economy and it's not just building this equipment, it's about building a manufacturing base for Queensland so we can win more contracts in the future, including more export-orientated contracts."
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