Australian Defense Minister Robert Hill said he discussed the project with his US counterpart, Donald Rumsfeld, during a security conference in Singapore over the weekend and an agreement could be signed as early as next month.

Under the plan, first mooted last year, Washington would spend tens of millions of dollars upgrading a military base in Queensland or the Northern Territory for joint land, air and sea exercises with Australian forces, Hill said.

"It's to enhance mutual capability, ensure inter-operability and to assist a critically important ally," Hill said on Australian Broadcasting Corporation radio.

Hill said an agreement in principle on setting up the training facility could be reached at annual bilateral defense talks to be held in Washington next month.

Australia has long been one of Washington's closest military allies, fighting alongside US troops in both World Wars, Vietnam and more recently Afghanistan and Iraq.

The decision by Prime Minister John Howard to contribute troops to the US-led invasion and occupation of Iraq has become a controversial issue ahead of national elections due later this year.

The leader of the main opposition Labor Party, Mark Latham, has vowed to pull the troops out of Iraq and follow a foreign policy more independent of the United States if he wins the election.

A major enhancement of the US military presence in Australia could also upset neighboring states like Indonesia, which has in the past bristled at suggestions Australia serves as Washington's "deputy sheriff" in the region.

Hill stressed that in the training proposal currently under consideration, no US forces or military equipment would be permanently based in Australia.

"The confusion in Australia has been that people have therefore assumed that the Americans would want to be basing forces in Australia," he said.

"But we are not actually very conveniently located for any potential theatre," he said.

Hill said that new military capabilities meant "the options for power projection have vastly increased".

"You don't need the same level of forward deployment that you once needed," he said.

Rumsfeld also sought to allay concerns that the United States, which is seeking to redeploy forces from its major Pacific base in Okinawa, wants to station troops in Australia.

"We don't want to be in a static defence mode. We want to be in a more agile arrangement," he told ABC radio.

WAR.WIRE