SYDNEY - Australia will set up a A$2 billion ($1.5 billion) loan facility to help finance critical minerals projects in the country and get them off the ground, Prime Minister Scott Morrison said on Tuesday.

Critical minerals including lithium and rare earths are essential to smart technology and clean energy but tricky to mine, process and market, which can make it difficult for new developers to line up funding.

"The commercial dimensions of the critical minerals market mean it is a difficult place to get established," Morrison said in a statement, adding that the projects will be strategic for their role in the future energy economy.

"We want to ensure that Australia's resources producers do get established so they can link up with others in our supply chains in a free and open Indo-Pacific."

Australia is a major supplier of critical minerals, such as nickel, copper and cobalt that are used in satellites, lasers and electric-vehicle batteries, and is the world's biggest supplier of rare earths outside of China.

Western governments have been keen to diversify procurement of critical minerals amid trade and political tensions with Beijing.

Morrison, who visited the United States for a Quad nations meeting last week, said on Saturday the group would work to improve the security of supply chains for critical technologies such as clean energy and ease a global chip shortage. 

($1 = 1.3778 Australian dollars)

(Reporting by Renju Jose; Editing by Tom Hogue and Ramakrishnan M.) ((renju.jose@thomsonreuters.com; +61 29171 7126;))