The Aus$1.2 billion (US$770 million) National Space Mission for Earth Observation was unveiled just last year and hailed as a key plank in developing an Australian space industry.

The programme's aim was to design, build and operate four satellites to be launched between 2028 and 2033 to gather Earth observation data.

The data helps authorities forecast the weather, respond to natural disasters and manage the environment.

But the country's centre-left government said the plan will be scrapped for "budget repair" reasons, leaving Australia reliant on earth data from overseas partners.

Industry and Science Minister Ed Husic told public broadcaster ABC on Friday that prioritising "broader environmental things" while fighting inflation had meant "making tough calls".

"If I don't cut a billion there, I've got to find it somewhere else in the portfolio," he said.

"There are other ways we can build capability -- we're certainly interested in doing that. We just have to make the call on this."

Australia's government has promised to balance the budget this year, despite slow growth and a steady increase in defence spending.

The Space Industry Association of Australia said the decision to cancel the satellite programme was "shortsighted".

"It will undermine the Albanese government's agenda on climate, defence, STEM, advanced manufacturing and building tech jobs," the lobby group for Australia's space industry said.

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