Australian security agencies believe China is behind the cyber raids on all levels of government, although the Morrison government has chosen not to name the country involved.
Under the plan, Australia's chief cyber defence agency will be given $31 million to build new offensive capabilities to go after cyber attackers offshore and disrupt their activities before they have the chance to strike at Australian governments and businesses.
There will also be a new $25 million cyber threat-sharing platform, allowing industry and government to share intelligence about malicious cyber activity and block emerging threats in near real-time.
The ASD will be given new capabilities to allow the agency and Australia's major telcos to prevent malicious cyber attacks ever reaching millions of Australians by blocking known malicious websites and computer viruses more quickly.
The cyber body - which is part of the Department of Defence - will also be given $118 million to expand its data science and intelligence capabilities to identify emerging cyber threats to Australia over the next 10 years.
Prime Minister Scott Morrison said malicious cyber attacks against Australia were increasing in frequency, scale and sophistication.
"The federal government's top priority is protecting our nation's economy, national security and sovereignty. Malicious cyber activity undermines that," Mr Morrison said.
"My government's record investment in our nation's cyber security will help ensure we have the tools and capabilities we need to fight back and keep Australians safe."
The added capabilities for the ASD will form part of Australia's new four-year cyber security strategy, which will be released in the next few months.
There is still more than $500 million out of the $1.35 billion funding injection yet to be announced, which is expected to be detailed in the new strategy.
The NSW government was a major target of the cyber attacks carried out in recent months, which alarmed Australian security agencies and sparked Mr Morrison to publicly warn Australians about the rise in attacks against the nation's critical infrastructure - but he stopped short of naming Beijing.
China has denied it was behind the wave of cyber attacks in Australia, saying the claims were "baseless".
The Morrison government has previously warned power stations, transport systems and industrial plants are likely to be the target of cyber attacks from state-sponsored hackers and criminal networks.
The government has recruited former US secretary of homeland security Kirstjen Nielsen to help prepare the cyber security strategy.
Defence Minister Linda Reynolds said the funding injection would have a real impact on the cyber security of all Australians.
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"The package will put our nation on the front foot in combating cyber threats and our investment in a cyber security workforce will help ensure we have the people we need to meet future cyber challenges," she said.
"For example, this package will enable ASD and Australia's major telecommunications providers to prevent malicious cyber activity from reaching millions of Australians by blocking known malicious websites and computer viruses at speed."
The ASD recruitment drive will come at a cost of $470 million over the next decade.
The nation's cyber resilience agency, the Australian Cyber Security Centre - which is a branch of the ASD - will also share in the funding.
Anthony is foreign affairs and national security correspondent for The Sydney Morning Herald and The Age.
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