A strategic Sydney naval base is to be used to dock large cruise liners, Australian Prime Minister Julia Gillard said Sunday, just months after the government advised against it on security grounds.

Sydney is running out of space to accommodate an explosion of cruise ships wanting to dock while some of the new superliners, such as Queen Mary 2, can not fit under the city's Harbour Bridge.

Some 214 cruise ships arrived in Sydney last year, up from 150 the previous year. They currently dock at the Overseas Passenger Terminal in Circular Quay or on the other side of the bridge at Barangaroo.

Rather than turn down docking requests, the New South Wales state government earlier this year asked if the Garden Island navy base in Woolloomooloo, near the heart of the city, could be used as well.

The national government announced a review and in March concluded it was "essentially incompatible" with the future needs of the navy, saying Australia's national security should outweigh commercial considerations.

"It's difficult if not impossible to envisage greater access in the short term," Defence Minister Stephen Smith said in March.

But Gillard has had a change of mind.

In an address to the NSW Labor conference in Sydney, she said the visit of Queen Mary 2 in March brought 2,500 visitors.

"With a guarantee of expanded capacity, we could see a visit of that kind every month in summer," she said.

"Better use of Garden Island as a new gateway for international visitors to Sydney Harbour will pump millions of dollars into the local economy and create valuable tourism jobs."