Australia's new air warfare destroyers could be equipped to shoot down ballistic missiles threatening the Australian mainland or deployed troops.
That would require a government decision to acquire this politically controversial capability, which could then be retro-fitted to the three vessels.
The 2016 Defence White Paper says the threat of missile attack on Australia is low.
But more nations, such as North Korea, are acquiring ballistic and cruise missiles and that increases the risk of attack on Australian territory or on deployed forces.
Most concerning, such missiles could carry nuclear or chemical warheads.
The white paper says Australia and the US have established a working group to examine options for possible acquisition of a missile defence capability.
In the meantime, existing air defence surveillance systems will be upgraded to serve as a foundation for development of missile defence capabilities, should future strategic circumstances require it.
Australia's three air warfare destroyers are equipped with the Aegis combat system, which in conjunction with the ship's advanced SPY-1D radar, will allow them to defend against air threats out for hundreds of kilometres.
The first AWD, HMAS Hobart, starts sea trials later this year.
With some modification, Aegis can be configured for ballistic missile defence (BDM).
This emerged from US president Ronald Reagan's "Star Wars" missile defence program of the 1980s.
Technical challenges were once so immense that a viable system seemed to be the stuff of science fiction.
However, ship-born BMD based around the Aegis combat system has demonstrated considerable success in trials, although it's yet to be used in actual conflict.
"Literally we are hitting a bullet with a bullet," says Mary Keifer, who heads the international Aegis and warships combat system division of US defence company Lockheed Martin.
Both the US and Japan field a ballistic missile defence capability on some warships. North Korea is Japan's specific concern.
In order for Australia to head down this path, AWD Aegis combat systems would need to be upgraded from the current Baseline-8 to the latest Baseline-9C, which combines BMD and air defence in a single integrated package.
Lockheed Martin says that upgrade path isn't too difficult, considering our warships are brand new.
Older US Aegis warships are being upgraded to Baseline-9 but in a version without BMD. New-built US Navy Aegis warships get the full BMD capability.
In order to shoot down incoming warheads, Australia would need new missiles and here's where it starts getting expensive.
Each SM-3 missile, able to obliterate ballistic missiles as they travel outside the earth's atmosphere, costs in excess of US$10 million ($A13 million). The SM-6, which can destroy hostile aircraft and also missiles in their terminal phase, costs around $US4 million ($A5.2 million).
(Defence correspondent Max Blenkin travelled to the US as a guest of Lockheed Martin)
