The 2015 World Cup in Canada attracted an audience of over 760 million people, providing Australia strong economic incentives to host the game.
Prime Minister Malcolm Turnbull says the opportunity to host the event is significant, not just for the economic and tourist benefits but for what it can do for women's sport.
"Wouldn't it be fantastic, to have the Matildas contesting a Womens World Cup on home soil here in Australia? And I'm excited to announce that the government will be backing the FFA's bid to for Australia to host the 2023 Womens World Cup. We set the bar at the highest level when hosting great, global sporting events."
With investigations into FIFA's bribery and corruption scandals ongoing, the federal government says a further $4 million may be provided if the bidding process remains transparent.
Federal Sports Minister Greg Hunt says the bidding for the event is being done in two stages.
"We've done the bidding in two stages because we are aware of the history and I think it is very important we are honest about that history. We want to make sure there is a million dollars available now and another $4 million available next year, subject to good prospects and good probity."
The Matildas have demonstrated success on the international field, currently ranking 8 and previously reaching as high as 5.
Football Federation Australia Chairman Steven Lowy says this is a dream that will inspire thousands of women and girls over the next few years.
"The Matildas have made the quarter-finals of the last three World Cups and of course the Olympics last year. And who can forget that agonising penalty shoot-out in Rio last year? When and if we win the fight to host the tournament we can seriously challenge for the trophy."
Twenty-four nations will compete in 52 matches for the trophy.
Matildas defender Clare Polkinghorne is excited at the prospect the event could be hosted in Australia.
"Any time you get to play in a World Cup is very special and to have the opportunity of playing in your home country and in front of your home fans and your family and friends would be something that is just incredible."
Host cities are expected to include Sydney, Melbourne, Brisbane and Perth, if Australia is successful.
Formal bids are due in late 2018 and the host will be selected in 2019.
