NSW Deputy Premier John Barilaro forewent the traditional shovel and instead used an excavator to turn the first sod at the aerolab site.

Mr Barilaro, also the Minister for Regional NSW, Industry and Trade, said he was proud to see the $11.7 million grant he signed off on last year to begin development of Astra Aerolab "start to be realised".

"The infrastructure we have funded will allow aviation companies to quickly establish themselves within the precinct and get on with the job of supporting RAAF combat aircraft, including the F-35A JSF," he said.

"By funding the Astra Aerolab precinct, we are helping to create jobs for aerospace engineers, aviation, IT and avionics specialists and attracting workers to the Hunter region."

It is anticipated that the defence and aerospace precinct, to be established near the Williamtown airport, will deliver 5500 jobs to the region.

The sod turning coincided with Newcastle Airport chief Dr Peter Cock signing an agreement with Defence contractor BAE Systems Australia to lease land within the 76-hectare areolab precinct.

Dr Cock said the agreement signified an exciting milestone for Astra Aerolab.

"BAE Systems Australia is the nation's largest defence and security company, so the importance of this signing cannot be overestimated. BAE's presence will not only attract further jobs and investment, but help ensure we develop the world-class defence and aerospace precinct that our region deserves," he said.

Andrew Gresham, a BAE managing director, said Tuesday's milestone was "incredibly important for our business" and would "facilitate the redevelopment of our existing Williamtown site ahead of our work supporting the F-35 JSF".

The aerolab is a joint $19.66 million project funded by the NSW Government, City of Newcastle and Port Stephens Council.

Port Stephens Mayor Ryan Palmer and state MP Kate Washington attended the sod turning ceremony on Tuesday.

Both expressed their excitement at seeing the ground break on the aerloab.

"It's good for our local economy and for local jobs," Ms Washington said of the project. "The progress on this site means there's greater opportunity for the next generation to get jobs right here on their own doorstep."

Cr Palmer shared the same sentiments as Ms Washington.

"It's wonderful to see it [project] progress to the development stage," he said. "Port Stephens Council has always been supportive of the airport but in particular this development, which will impact generations not even born yet."

After Dr Cock and Andrew Chapman, the aircraft sustainment general manager at BAE Systems Australia, signed the land lease agreement Mr Barilaro jumped in the excavator and turned the first sod.

He undertook a safety induction and practised in the excavator earlier in the morning.

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