Prime Minister Scott Morrison has announced that South Australia (SA) will be the home of the nation's first-ever space agency.

Adelaide, capital of SA, beat strong competition from other states and territories to be chosen as the headquarters.

The agency will be based at the former site of the Royal Adelaide Hospital (RAH), with Morrison committing to an initial investment of 41 million Australian dollars (29.56 million U.S. dollars) "to open doors for local businesses and Australian access to the 345 billion USD global space industry."

"Australia's space industry is set to hit new heights," Morrison told reporters on Wednesday.

"Our government's 41 million AUD (29.56 million USD) investment into the agency will act as a launching pad to triple Australia's space economy to 12 billion AUD (8.65 billion USD) and create up to 20,000 jobs by 2030."

South Australia has campaigned relentlessly to be the home of the space agency, enlisting homegrown National Aeronautics and Space Administration (NASA) astronaut Andy Thomas to help with its campaign.

Steven Marshall, the premier of SA, said that the agency would significantly boost Adelaide's liveability.

"South Australia is the ideal location for the Australian Space Agency with a range of local space industry businesses already established here as well as a rapidly growing defence industry sector," he said.

"I look forward to working with the Federal Government, industry and our education sector to capitalise on this incredible opportunity for our state."

A number of space start-ups have already established bases in Adelaide, employing more than 800 people in the sector.

Karen Andrews, the Minister for Industry, Science and Technology, said that the agency would provide a job boom for SA.

"Having the space agency headquartered here in Adelaide means that South Australia will certainly have a great opportunity to be a major contributor," she told Australian Broadcasting Corporation (ABC) radio.

"We're intending to grow jobs nationally and South Australia, it will certainly have every opportunity to grow more jobs for our young people (and) people who are potentially transitioning from other industries.

"Nothing inspires people like space does," she said.

"We want to encourage our young people to study science and maths at school, we want to be able to demonstrate to them ... that there are jobs in the space sector and South Australia is now leading the charge."

Andrews said that Adelaide was chosen over strong bids from New South Wales, Queensland and Canberra, Australia's capital city, due to the city's existing space industry and its rich history.

"This decision builds on the very strong technology and defense presence in the state," she said.

"The Australian space sector actually started its journey right here in South Australia.

"Our very first satellite was launched into space from Woomera just over half a century ago, so South Australia has demonstrated a very long history in space."

The national space agency, which was established in July 2017, is headed by Megan Clark, the former chief executive of Australia's peak scientific body, the Commonwealth Scientific and Industrial Research Organisation (CSIRO). It will move into the RAH site in 2019.