South Australian senator Simon Birmingham made the announcement at the 68th International Astronautical Congress in Adelaide, just days after South Australia launched the South Australian Space Industry Centre (SASIC).
Acting Minister for Industry, Innovation and Science Michaelia Cash released a statement saying the future agency will address a crucial need for Australia to grow in the international space industry.
"The global space industry is growing rapidly and it’s crucial that Australia is part of this growth,” said Minister Cash.
"A national space agency will ensure we have a strategic long-term plan that supports the development and application of space technologies and grows our domestic space industry.
"The agency will be the anchor for our domestic co-ordination and the front door for our international engagement.”
The federal government's announcement follows months of lobbying by the Space Industry Association of Australia, the South Australian government and key industry figures.
Since then, SA Premier Jay Weatherill and ACT Chief Minister Andrew Barr signed a five-year agreement on behalf of their governments, signalling an intent to work together towards the creation of a Canberra-based space agency with a prominent presence in Adelaide.
While the federal government has not committed to a location for the national space agency, Birmingham said South Australia will be at the forefront of the industry.
"I am confident that with our unique geography, South Australia will naturally be at the forefront of an increased Australian engagement in space industries," the senator said.
“Space is too large, too complex, too important for any one country to seek to do it alone, and this congress presents yet another outstanding opportunity to share insights into the future of the global space industry."
South Australian Minister for Defence and Space Industries Martin Hamilton-Smith told Defence Connect the state's increased focus on space will be pivotal to the future economy.
"South Australia sees five areas of science being the future of the state economy," explained the minister.
"One of them is advanced manufacturing through defence, the submarine and frigate programs and AIR programs are spearheading that movement from traditional manufacturing to advanced manufacturing.
"Another area is space. Keeping in mind that it's not about rockets alone, it's satellite communications, it's meteorology, it's air photography, it's all of the communications aspects of space, it's all of the peripherals that go around the launching of satellites and other things into space, that we see as the big opportunity. A lot of it's software related and niche engineering."