A clear idea of where your next serve of fish and chips or scallops comes from has moved a step closer, with the federal government locking in $1.6 million for mandatory labelling of seafood products.

Australian seafood producers say plans to extend country of origin labelling to include domestic restaurants and food service outlets will be "profoundly positive" for the industry.

Country of origin laws were introduced in 2018 and required information about where a product was fished or farmed to be included on the labelling of food sold for retail sale in Australia, including supermarkets.

But the food service trade has been exempt from the rules, which has meant eateries have not been required to include where fish is caught on their menus and special boards.

The Albanese's first budget, released on Tuesday night, allocated $1.6 million over two years to introduce mandatory labelling for seafood products.

'Profoundly positive'

It is a move welcomed by Barramundi Group, which operates international fish farms in Singapore and Brunei, as well as Cone Bay off WA's Kimberley coast.

The company is planning a major expansion of its Kimberley operations on the back of growing demand for locally produced barramundi. 

General manager of its Australian business, Alastair Smart, said the move to expand country of origin labelling was "profoundly positive" because it would ensure producers were rewarded for the higher costs and standards required to farm fish in Australia.

"There's an understanding that we've grown that product and produced it under fairly strict regulations that ensure a level of safety, which is appreciated by Australian consumers," Mr Smart said.

"Product coming in, we know is not under those same checks and balances … It's often developing-nation produced, which is why it's cheaper.

According to industry, about 70 per cent of seafood consumed in Australia is imported from overseas.

Customers 'fooled' by cheap imports

The WA Fishing Industry council has long lobbied for the exemption afforded to the food service trade since 2018 to be removed.

Its chief executive Darryl Hockey said seafood labelling in hospitality was muddy, and people were often mistakenly buying imported products believing it was Australian.

Mr Hockey said white-fleshed fish was vulnerable to product confusion, and products were sold with names consumers associate with Australia, including whiting or emperor.

"We think it's King George or yellowtail. Quite often, it's blue whiting that's brought in from New Zealand, which is a completely different product," he said.

"They bring in quite a lot of assorted snapper species, which come in from the tropics, quite often caught unsustainably, and that's substituted and called local snapper.

"Unfortunately, it is rife."

Transparency a 'benefit'

Mr Hockey said expanding country of origin labelling to the food service trade would ensure consumers would be able to make an informed choice.

Seafood Industry Australia chief executive Veronica Papacosta said she hoped to have an agreement around mandatory seafood labelling in place within six to 12 months.

"The food service industry will need some time to implement [the changes]," she said.

"We're willing to be patient in terms of the implementation, but I think six to 12 months in terms of coming to an agreement about how this rolls out is reasonable."