Prime Minister Malcolm Turnbull said the new strategy is part of a "massive" $200 billion defence investment over the next 10 years - the highest level of investment in defence forces since war time, according to the government.
Australia now is ranked 20th in arms exports with a 0.3 percent share of the global market, according to a widely-cited 2017 report from the Stockholm International Peace Research Institute.
"Defence Industry Minister Christopher Pyne said prospective buyers would face stringent checks to ensure "[we] don't get into markets where we don't want to be".
The Australian government will also seek to boost sales to Europe and to Asia and the Middle East, where countries are rapidly building up arms caches.
The country's defense industry has struggled to obtain finance from traditional lenders that have been unwilling to fund the arms industry, so it has created the loan scheme for companies seeking finance to export military equipment.
Two weeks ago, Mr Turnbull was in Tokyo, showing off the Australian Bushmaster troop-carrier trucks to Japanese Prime Minister Shinzo Abe.
Mr Pyne said Australia also exported parts for the new Joint Strike Fighter planes and life rafts for ships, but there was potential to sell many more defence products on the worldwide market.
The government will also establish separate agencies to better co-ordinate and promote industry exports.
The Turnbull government has back-pedalled on suggestions China is a threat to Australia's national security.
She said the strategy sets out an opportunity for a "sovereign defence industry" in Australia.
Russian Federation and China pose no military threat to Australia's national security, Australian Foreign Minister Julie Bishop said on Monday, TASS reproted.
However, Mr Turnbull said nations could not forgo defence spending because the "price of liberty is eternal vigilance".
Mr Pyne said the focus would be on increasing exports to countries including the US, Canada, UK and New Zealand, to "build up the global military capability of countries like ourselves".
Despite being a major spender on defence, Australia falls about 20th, achieving about $1.5 billion to $2.5 billion in defence exports a year.
"This isn't about providing weapons or arms to rogue regimes or anything like that", Ciobo told Nine Network television.