SYDNEY (Reuters) - Australia signed a A$280 million (S$284.45 million) contract with naval shipbuilder Austal Ships Pty on Thursday (May 5) for 21 patrol boats, the first stage of its military expansion, the government said.

Naval shipbuilding is an important part of a plan unveiled in February to boost defence spending by nearly A$30 billion over the next 10 years.

Building of the 21 vessels will begin in mid-2017, the government said in a statement, with the first boat set to come into operation in 2018.

In April, Austal Ships was named as the preferred bidder to build a separate 12 offshore patrol vessels, worth A$3 billion, alongside three private companies - Dutch-based Damen Shipyards and German firms Fassmer and Lürssen.

Separately, BAE Systems, Fincantieri and Navantia have been shortlisted as preferred bidders for the construction of nine frigates, the government said.

Contract negotiations are going on for the offshore patrol vessels and frigates.

As well as expanding its surface fleet, Australia last week said French state-owned naval contractor DCNS Group will build its 12 submarines - a contract worth A$50 billion, one the world's most lucrative defence contracts.

All the maritime building will be done within Australia, a boost for the Prime Minister Malcolm Turnbull's election prospects ahead of a general election on July 2.

The government is running neck and neck with the opposition Labor Party, latest opinion polls showed, but the shipbuilding will boost employment in key election battlegrounds.