The decision to hold off on the anticipated 70-plane purchase will save Canberra $1.6 billion over the next four years, according to reports in the Australian press.
That delay will create a fighter gap in the Australian air force, according to Smith. Military officials plan fill that gap with additional buys of Boeing's F/A-18 Super Hornet.
Buying the F/A-18 is the "logical option" given the Australian air force consists mostly older models of the American-built fighter, according to Smith.
Canaberra's decision on the JSF comes less than a month after another key U.S. ally on the program was forced to throttle back their involvement on the F-35.
In April, Canadian Prime Minister Stephen Harper has blocked the Ministry of Defense from spending any more money on the country's version of the fighter.
Harper has also revoked the MOD's authority to buy any other weapon systems until government officials complete their inquiry over the Canadian military's handling of the F-35 program.
A damning report issued by Canada's Auditor-General that month alleged that defense officials failed to inform top government decision makers "of the problems and associated risks" of buying the F-35.
Defense leaders also intentionally sugar-coated cost analysis of the fighter, which is slated to replace Canada's fleet of F-18 fighters, according to the report.
Canada had planned to buy 65 new F-35s over the course of the next several years. Canada, Australia and the United Kingdom have all been seen as the strongest members of the nine-country JSF international consortium.
Italy, the Netherlands, Turkey, Denmark and Norway round out the nine-member coalition. Israel and Singapore also plan to buy the F-35, but are not considered part of the original nine.
Severe defense spending cuts in the United Kingdom already have London throttling back its planned purchases of the F-35.
The current fiscal crisis sweeping over the European Union has only added more doubt as to whether the JSF coalition can remain intact.
But Air Force Secretary Michael Donley told reporters on April 5 that the JSF international remained strong, despite recent events.
Dealing with the ongoing fiscal issues within the coalition, while trying to get the U.S. fleet of F-35s flying is just "part of what managing an international program is all about," Donley said at the time.