The $71.4 million Australian Satellite Manufacturing Hub will function out of the South Jerrabomberra site, as well as the UTS Tech Lab in Botany, part of a collaboration between Electro Optic Systems, Nova Systems, UTS Tech Lab, Gilmour Space and the federal and NSW governments.

The federal government has committed $23.6 million to the facility, which will be the first manufacturing hub for larger Earth Observation satellites weighing up to 500kg.

Federal Minister for Industry, Energy and Emissions Reduction Angus Taylor said the hub would position Australia be at the "cutting edge" of the space industry.

"The goal here of course, is to have sovereign manufacturing capability for satellites ... [and] to have satellites produced within five years so this is short timeframes, doing it deliberately in a way that can be done quickly," he said.

"This is hugely important now, not just for defence but for so many other industries across Australia."

Chief executive of Electro Optic Systems Glen Tindall said satellites could be key in climate science and the agriculture sector as well as defence.

Conscious of labour shortages in the Canberra and Queanbeyan regions, Mr Tindall said the partnership with the UTS Tech Lab would serve as an incubator for workers who could then be convinced to move out of the city after a few years.

"We've taken deliberate steps of establishing a facility here in Eden-Monaro, as well as another one in the UTS Tech Lab in the Sydney basin," he said.

"The Sydney basin has about four or five large universities churning out fantastic graduates, but they may not immediately wish to come and live in Queanbeyan.

"We want to find a way where we can capture that talent and encourage them to move and really start to build lives in regional Australia and get away from the pressures of perhaps the Sydney basin and really develop jobs in the region."

Mr Tindall said the space industry was growing, and "if we're not careful we will suffer labour shortages".