A re-elected Labor government would stockpile large amounts of mining products and rare earth materials, the prime minister said while campaigning in Western Australia, where the economy is heavily propped up by the resources sector.
The strategic reserve would generate money for Australia through the sale of minerals on global markets to allies while stockpiles of the minerals would be set aside from commercial projects through contracts.
Australia has some of the world's largest critical mineral deposits which are used for products like batteries, electric vehicles and renewable energy technology.
Labor has promised to spend $1.2 billion on setting up the reserve through voluntary contracts with commercial projects or by establishing an option to purchase minerals at a given price.
But it is expected "these will be modest and time-limited in most cases", Labor said in a statement.
A critical minerals reserve had been floated as potential leverage in negotiations with the US administration after President Donald Trump imposed 10 per cent tariffs on Australian imports.
Local officials were unsuccessful in an initial bid to stave off the tariffs when diplomats scrambled to respond to the expected introduction of the levies.
The reserve would help provide national stability by allowing Australia to weather trade and market disruptions as it could "call on an internationally significant quantity of resources in global demand", Mr Albanese said.
"In a time of global uncertainty, Australia will be stronger and safer by developing our critical national assets to create economic opportunity and resilience," he said.
The minerals will be made available to domestic industry and key international partners.
But coalition resources spokeswoman Susan McDonald criticised Labor for not taking advantage of its vast critical mineral stockpiles by failing to invest more in mining.
Senator McDonald pledged to turbocharge investment in the resources sector and expand critical mineral access to bolster Australia's national security credentials with partner nations in the Quad, AUKUS and Five Eyes alliances.
China has banned domestic companies from dealing with a continually lengthening list of American companies, including military contractors, and rare-earth supplies for military contractors have become a concern.
As such, there will be a renewed focus on minerals needed in the defence industry, Senator McDonald said.
"The increasing demand from the US and its allies for access to abundant and secure sources of critical minerals, such as antimony, is an opportunity for Australia to cement our defence credentials," she told AAP.
The coalition has ruled out a strategic reserve but will classify a slate of minerals as critical, questioning why Labor hadn't included several already.
Labor and the coalition are tussling for critical seats in the west after the Liberals lost six in 2022 that they need to win back to have any hope of securing minority government.
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