Three American marines have been killed in a horror crash during a military exercise off the coast of the Northern Territory.

The Marine Rotational Force Darwin confirmed three of their personnel had died, while another five were flown to Royal Darwin Hospital in serious condition following an Osprey crash over the Tiwi Islands at 9.43am, Sunday.

He said the aircraft, with 23 personnel on board went down while transporting troops during a routine training exercise, known as Predators Run, near Pickataramoor, Melville Island, 80km north of Darwin.

“Recovery efforts are ongoing,” a MRF spokesman said.

The cause of the incident is under investigation.

Australia’s navy is set to be armed more than 200 Tomahawk missiles amid concerns over China’s growing military presence in the region.

Defence Industry Minister Pat Conroy will on Monday announce a $1.7bn investment in new, hi-tech missiles to expand the strike power of the Australian Defence Force.

The purchase comes off the back of the recommendations made in the defence strategic review to urgently beef-up the ADF’s medium-range advanced and high-speed missile defence capabilities.

The Tomahawk Land Attack Missiles are long-range guided missiles and have a range of up to 1500km.

A new US Air Force will build a "mission planning" and operations centre in Darwin, as part of $630 million in American spending across the top end over the next two to three years.

The "Squadron Operations Facility" in Darwin will add to its growing array of military assets in the north, raising fears Australia may be locked into any future military conflict between China and the USA.

The tender documents say the Squadron Operations facility in Darwin will be used for maintenance, mission planning, intelligence and crew briefings — it is budgeted to cost $US26 million ($40 million).

“Being able to organise and deploy forces outside of the dense missile attacks that China is likely to use against places like Guam and Okinawa is part of the strategic logic,”

The central question now is whether the US build-up is transforming Australia into a base for offensive US operations into Asia.

A greater presence of American forces brings with it the “need for mutual respect of rights and obligations”. It will be for Canberra now to outline how freedom of policy manoeuvre is not constrained. This is no straw man argument. It cuts to the very core of Australia’s ability to act independently, particularly if at some future point US and Australian interests do not align.

The change from the mid-1990s has been nothing short of staggering.

British soldiers based in Australia could be part of the next step to bringing the two military forces closer together.

UK Armed Forces Minister James Heappey said stationing British troops in Darwin, where US marines have a presence, was "not impossible" as his nation looked to expand its influence in the Pacific.

"It comes up quite regularly in conversation about what the Aussies and the US are doing up there and whether we should be there too," he said.

The minister said the UK was still in a discovery phase in the Pacific and military deployments to Australia were a better option than basing British troops on more contested territories in the region. He said the UK was working careful to expand its presence in the Pacific with concerns moving too fast or being too heavy handed might do more harm than good by alienating partner nations.