Prime Minister Anthony Albanese says French submarine maker Naval Group has agreed to a "fair and an equitable settlement" for Australia, ending a decade-old multi-billion-dollar submarine contract.

Albanese says it is essential that Australia and France once again unite to defend their
Albanese says it is essential that Australia and France once again unite to defend their "shared principles and interests". (AFP Archive)

Australia's new Labor-led government has reached a $583.58 million settlement over a controversial decision to scrap a French submarine deal.

Australia Prime Minister Anthony Albanese said in a news conference in Sydney on Saturday that his government had reached a "fair and equitable" settlement with French military shipyard Naval Group.

Canberra hopes the move will help repair ties with Paris — after a rift triggered by last year's cancellation of the multi-billion-dollar order for submarines with Naval Group.

Soon after Albanese's announcement, France said the settlement allowed Paris and Canberra to "look to the future".

The cancellation of Canberra's order for a new conventional submarine fleet with Naval Group — valued at $40 billion in 2016 and reckoned to cost much more today — came after the previous government signed a security partnership with the US and Britain.

The trilateral deal was for a fleet of nuclear-powered submarines with US and British technology.

But the decision enraged Paris and triggered an unprecedented diplomatic crisis. It also infuriated China, the major rising power in the Indo-Pacific region.

READ MORE: France says US torpedoed its submarine deal with Australia

'Shared principles and interests'

Albanese said the settlement would allow Australia to move forward in its relationship with France.

"Given the gravity of the challenges that we face both in the region and globally, it is essential that Australia and France once again unite to defend our shared principles and interests," Albanese said in a separate statement.

Australia, the United States, France and its partners have all expressed concern about China's growing influence in the Pacific, a region that has traditionally been under their sway.

Their concerns increased after China and the Solomon Islands signed a security pact earlier in the year.

"We deeply respect France’s role and active engagement in the Indo-Pacific," Albanese said. He added he was looking forward to taking up French President Emmanuel Macron's invitation to visit Paris.

Since coming to office, Albanese has rushed to fix strained relations with France, New Zealand and Pacific Island nations, who objected to the previous conservative government's foot dragging on climate change.

France's defence minister Sebastien Lecornu welcomed the compensation deal.

"This agreement is important because it permits us to turn a page in our bilateral relations with Australia and look to the future," Lecornu told journalists in Singapore.

READ MORE: France, Australia agree submarines dispute won’t derail free trade deal

Source: TRTWorld and agencies