Scott Morrison has warned the security environment Australia operates in is changing and requires more defence spending, but insists his government remains committed to pursuing peace.
Australian military bases are being upgraded to facilitate "war gaming" exercises with the United States and other allies.
Four training areas in the Northern Territory will be transformed through the $750 million package.
Weapons firing ranges and support facilities at Robertson Barracks, Kangaroo Flats, Mount Bundey and Bradshaw Field will be updated.
The airstrip at Bradfield will also be lengthened and strengthened to support heavier aircraft.
The spending comes as Home Affairs secretary Mike Pezzullo warned the "drums of war" were beating and Australia must be prepared to send its soldiers into battle.
The prime minister, who visited Darwin for the announcement on Wednesday, said the environment in which Australia operates has been changing, but the focus continues to be pursuing peace.
"Our objective here is to ensure a peaceful region and that is something that we share very deeply with our American friends and allies," he said.
"It's an investment that keeps Australians safe and advances and protects our national interests in what is a very uncertain world and can be a very uncertain region - a region in which there are many pressures."
He said an "appropriate balance" was needed.
The spending is tied to a previously announced partnership between Australia and the US to upgrade defence sites in the NT.
Labor has questioned why the announcement has come more two years after the upgrades were first confirmed, and why the contract has blown out by half a billion dollars.
The proposed upgrades will cost up to $447 million more than initial estimates.
Labor argues the latest project continues a trend of blowouts and delays on major defence procurements, including the country's beleaguered submarine and frigate contracts.
Opposition Leader Anthony Albanese said Labor supported increased spending on the ADF.
"But the government needs to just stop re-announcing the same things over and over again," he told reporters in Darwin.
"Once again we see a re-announcement, but with an inflated price, to hide the fact this government doesn't deliver.
"That's the one thing you can set your watch by - that there'll be announcements from this government on a regular basis. What I want to see is some actual delivery."