The federal government has revealed it will spend almost a decade choosing a location for an east coast submarine base.
Scott Morrison identified Brisbane, Newcastle and Port Kembla last year as the three options for the home of an Australian nuclear submarine fleet as part of the AUKUS agreement.
The ABC understands Illawarra harbour was strongly favoured by the Department of Defence and industry figures.
In a recent briefing with Illawarra industry, community and business leaders, Assistant Defence Minister Matt Thistlethwaite said other locations would be considered.
"Everything is on the table," he said.
"There are a number of factors — deepwater ports are essential, ensuring that there is a domestic industry base that can service a base like that, ensuring there is a skilled work force.
"We will consult with industry partners, but importantly we will consult with local communities before we make a decision."
In its response to the Defence Strategic Review release last month, the government said it would make a decision about an east coast base later this decade.
Mr Thistlethwaite said the focus was on the first two stages of establishing Australia's nuclear submarine industry, including preparing for the arrival of the Virginia-class subs in Western Australia and improving the Osborne shipyards in South Australia.
"We know we have got a bit of time before we make a decision on that, so we want to do our due diligence and make sure that we get that decision right," he said.
"We are looking at close to a decade before that decision is made."
Other locations 'hot potatoes'
The announcement opens the door for defence to reconsider the Garden Island naval base in Sydney and Jervis Bay on the NSW south coast.
The sites were among the top locations identified by Defence in a 2011 report obtained by former South Australian Senator and submariner Rex Patrick under freedom of information laws.
"I think the other sites are political hot potatoes and the government is seeking to diffuse those aspects of this particular AUKUS program," Mr Patrick said.
"Garden Island in Sydney is a significant population site surrounded by the residents of Sydney who simply will be uncomfortable with the stationing of a nuclear submarine in the harbour.
"While it has all the right facilities, it is a good choice it simply won't cut it when it comes to the politics."
He said winning community support for a base in Jervis Bay would also be a difficult proposition due to the environmental sensitivity of the site.
"There have been many campaigns over the years to stop the navy conducting activities in Jervis Bay, even though it is a pretty good environmental tenant," he said.
"I can see huge problems with government trying to impose a nuclear base in that pristine environment."
'The air has to be cleared'
The government is also facing a challenge at Port Kembla, where the Illawarra community also has a long history of opposing nuclear projects and has already begun rallying opposition to a base.
NSW Ports, which operates the harbour, has released plans for an off-shore wind turbine assembly facility at Outer Harbour, a site which is already being scouted by Defence.
There are also fears any delay in identifying the site for the east coast base could impact businesses already using the busy commercial port.
"Uncertainty and indecision is bad news for investment, bad news for business and bad news for jobs," South Coast Labor Council secretary Arthur Rorris said.
"The air has to be cleared.
"And it can only be done one way, with a given government and that is to rule it out."
He said it was a civiliarn port.
"The priority here is the economy, it is those jobs, it is those energy jobs of the future and our existing jobs in steel and cars," he said.
