Prime Minister Kevin Rudd said the government intended to work closely with the Football Federation of Australia (FFA) to give Australia the best chance of hosting the soccer tournament.
"Today's announcement sends a clear message to the football world that Australia is serious about hosting the 2018 FIFA World Cup," Rudd said in a statement.
Australia faces stiff opposition to win the right to host the tournament against rival bidders from Europe, the Americas and Asia.
Belgium and the Netherlands, who are preparing a joint bid, have already formally announced their intentions while the United States, Mexico, England, Spain and China have all expressed their interest.
England, which hosted the World Cup in 1966, is widely regarded as the early favourite with most corporate bookmakers.
Although Australia has succesfully hosted the Olympics on two occassions and a string of other international events, the country has never previously bid for the World Cup and only played in the finals on two occassions.
"This is not an impossible dream. It is very achievable," FFA Chairman Frank Lowy said.
"While I understand that there is a view emanating from Europe that it may well be the turn of Europe to be the hosts in 2018, the fact is football is a world game.
"Europe has unquestionably been the focus of football growth and development for much of the past 80 years, but the future of football is in the 'new world' -- that is, the developing and growing regions of the world such as Asia."
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The official bidding process begins next year with FIFA, the sport's world governing body, expected to announce the successful candidate by December 2010.
FIFA President Sepp Blatter has also flagged the possibility of running a dual nomination so the 2022 host can be decided at the same time.
The executive board will decide on his proposal at their next meeting at Tokyo later this month.
Australia's proposed bid has already received strong support from the head of the Asian Football Confederation and Lowy was recently invited to sit on the organising committee for the 2010 World Cup in South Africa, giving the billionaire businessman direct access to some of the 24 people who will decide the 2018 host.
"We are delighted the government has given us this sum and I can assure you that it will be spent wisely, there will be no lunches and dinners, it will be used for professional services," Lowy said.
"We will hire from Australia and overseas the very best people to show that Australia can do this job properly.
"We have had two Olympics, two rugby world cups and Australia's strength in this field is unquestionable.
"The progress we have made in football has also made a big impact on the world and I think we have the sympathies of the executives of FIFA and the football world."
