Defence Minister Robert Hill and Prime Minister John Howard announced the government had chosen the Eurocopter MRH-90 troop transport ahead of an updated American Sikorsky Black Hawk as the military's new multi-role helicopter.
Their main advantage is the ability to carry 18 fully equipped troops,against 11 on the Black Hawk.
Labor criticised the decision as two years late and $400 million over budget.
The helicopters will be supplied by Australian Aerospace,the local subsidiary of Eurocopter which is wholly owned by the European Aeronautic Defence and Space Company,Europe's largest aerospace and defence company.
Australian Aerospace is assembling the army's new Eurocopter Tiger attack helicopters in Brisbane,and Senator Hill said he hoped the new ones would also be assembled there.
Mr Howard and Senator Hill said the first of the new helicopters would arrive in 2007 and the squadron would be based in Townsville with the army's 3rd Brigade.
That will allow a squadron of Black Hawk helicopters to be transferred to Holsworthy,outside Sydney,for use by the army's commando battalion,4RAR,and by the counter terrorist Tactical Assault Group East.
"It's been estimated that the new squadron will increase the army's troop lift capability by more than one half,"Mr Howard said.
Senator Hill said the new Eurocopters were state of the art.
They are being acquired under Defence procurement project Air 9000 which aims to rationalise the defence helicopter fleet which now numbers eight different types,each with its own specific maintenance,training and operational requirements.
The new Eurocopters will allow the Army to retire the last of its Vietnam-era Iroquois and are likely to replace the Navy's ageing Sea Kings.
Senator Hill said the government considered replacing the army's entire fleet of 35 Black Hawks.
"But in the end we were persuaded that each of the two helicopter types have particular strengths and characteristics that we require at this time,"he said.
"The Army particularly sees the counter-terrorism capabilities of the Black Hawks as important and the European helicopter ahead in the amphibious role."
Army chief Lieutenant General Peter Leahy said the new Eurocopters would significantly lift army capabilities,particularly moving troops from ship to shore.
Labor's defence spokesman Kim Beazley and defence procurement spokesman Chris Evans said the decision was good news for the Army,but the helicopters would be delivered two years behind the schedule announced by Mr Howard after the Bali massacre in 2002.
They said the project had blown out by $400 million because Senator Hill failed to check whether the budget included the cost of equipping the helicopters so they could operate at sea.