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Australia's Balancing Act: Navigating China's Influence in the Indo-Pacific Region

  • Published
  • By COL Eloy Martinez

The United States and Australia share a robust partnership founded on democratic values, mutual interests, and cultural ties. Their alliance began as early as World War I and continues strengthening today via Formal alliances, force posture agreements, military exercises, and partnerships, e.g., the 1951 ANZUS Treaty, the U.S.-Australia Posture Agreement, and the AUKUS Partnership, respectively. China's rapid military and economic rise altered Australia's strategic environment and continues to influence its security interests.  The evolving landscape in the Indo-Pacific region requires Australia to balance its military preparedness and economic considerations.  The ensuing balancing act presents Australia with new perspectives and opportunities to counter China’s mounting influence within the Oceania region, affecting US security priorities. As a key ally, the United States must actively support Australia as it navigates these new waters and balances new imperatives (as seen from Washington DC) with economic growth opportunities (emanating from Beijing). The U.S. and Australia can effectively address China’s expanding influence while empowering Australia and other middle-power countries in Oceania.

The Strategic Environment

Australia is a liberal democracy and a middle power whose strategic landscape has changed over the past two decades due to China’s military and economic ascension. Rapid military and economic growth have emboldened Beijing’s assertiveness to disrupt the current global order and reshape the Indo-Pacific. The new strategic environment has forced Canberra to stop insisting that it will never have to choose between its old ally (the US) and its leading trade partner (China).[1] Militarily, China invested heavily in naval, missile, and cyber warfare capabilities over the past two decades, creating the world’s largest armed forces. As a result, Beijing possesses a louder voice in international security and defense matters. It has increased tensions with neighboring countries (e.g., Japan, Taiwan, the Philippines, and Indonesia) in the East and South China Seas. Chinese belligerence, military rhetoric, and territorial disputes have forced other countries to recalibrate their defense strategies, alliances, and partnerships to counter Beijing’s assertiveness. Australia finds itself in the same position and seeks significant opportunities within the international community to modernize its defense force and achieve economic security.

The government of Prime Minister Anthony Albanese reviewed the Australian Defense Force (ADF) and agreed that the ADF was not ready for the changes in the new strategic landscape. The defense review highlighted that Australia must manage and seek to avoid major regional conflict that threatens its national interests. Continental positioning and geographic isolationism significantly reduce the physical threat of invasion from an adversary; however, threats of military force or coercion against Australia do not require an invasion of the continent. Australia has two competing strategies with which it must contend. First is the Defense of Australia Doctrine, which follows a traditional model focused on low-level conflict between small and middle powers in the region. The second is an emergent doctrine labeled as Australian National Defense.[2] This ideology insists on Australia’s preparedness for potential threats resulting from the return of great power competition between the US and China. The ADF must prepare to compete and focus on the nation’s defense, deterrence through denial by power projection from the northern territories, protection of the nation’s economic connections to the region and the world, engagement in collective security of the Indo-Pacific; and maintenance of the international rules-based order. [3]

Economically, China’s assertive foreign policies accompanied its ascendence as an economic powerhouse. Trade expansion and integration into global supply chains and consumer markets bolstered China’s position in the Asian and global markets. Beijing has not been shy about levying sanctions and tariffs against countries that are unfriendly toward China. Australia was the recipient of such sanctions and tariffs when China imposed sanctions on wine, beef, barley, and other products for echoing the sentiment of the US calling for an independent inquiry into the origins of the coronavirus. Additionally, the Belt and Road Initiative (BRI) is a prime example of Beijing’s efforts to enhance connectivity through infrastructure projects that impact regional trade routes and economic dependencies in Beijing’s favor. BRI projects have bolstered Beijing’s soft power and influence across multiple regions. The continued trade disputes and unfair practices reflect more profound geopolitical disturbances and challenges in the Indo-Pacific, raising concerns about China’s adherence to the spirit of the agreements and obligations under the World Trade Organization (WTO).[4]

Australia’s Military-Economic Nexus

Defense and security are public goods, and Australia’s emergent National Defense doctrine expects Canberra’s readiness to meet the requirements for its military preparedness. Australia’s National Defense doctrine requires the ADF to focus on deterrence through denial via power projection from the northern territories. The Albanese government still looks to the US as its security partner of choice and reaffirmed its commitment to the Unbreakable Alliance with the US during the 2023 Australia-U.S. Ministerial Consultations (AUSMIN). Canberra committed to upgrades at Australian bases in the northern territories, including RAAF bases Darwin, Tindal, Scherger, and Curtin.  Other requests included more regular and longer expeditionary visits of US submarines in preparations for submarine and US Army watercraft rotational forces, establishing an interim location for the Combined Logistics, Sustainment, and Maintenance Enterprise, and enhancing space coordination as part of their new Force Posture Initiative.[5] The ADF determined its objectives, capabilities, and force structure requirements for its military preparedness. Canberra must enact stronger domestic laws and regulations and diversify markets to establish an economic counterbalance.

Australia is refining its statecraft and seeking strategic trade agreements to enhance its economic ties and safeguard its national interests. Australia should consider developing its lithium refining and battery production capabilities to reduce its economic dependency on China, joining the US, Japan, South Korea, and Europe. Doing so will complete a vital military-economic link that provides economic protection for Australia’s national security interests.[6] These actions will likely raise Beijing’s ire; however, the Albanese government’s foreign policy insight and competence give room for restrained optimism that Canberra and Beijing can weather diplomatic storms. Furthermore, the Albanese government can leverage economic maneuvers while testing the diplomatic waters and storm-worthiness of its Australia-Chinese relations via an unfavorable decision on China’s bid for membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) or a favorable one for Taiwan’s bid.[7] Irrespective of the military and economic paths Australia chooses to follow, Canberra has a unique opportunity to assume a significant role as a Washington-Beijing moderator and increase its status among middle powers in the Indo-Pacific.

The time has come. Australia must seize the opportunity to play a more prominent role in the Indo-Pacific region and bolster its diplomatic clout by creating a network of middle-power countries to reinforce the rules-based order and push back against China when necessary. Australia’s potential role as a regional moderator in the Indo-Pacific region can leverage its ties with the US and China to create an environment where regional nations do not have to choose between the two superpowers. Instead, all parties can engage in regional/global trade and secure investment opportunities that benefit each nation. Michael Keating, former Secretary of the Department of Prime Minister and Cabinet, acknowledges the need to work with other nations at the ministerial level to address issues with Beijing that offend Australian values. [8]  Having Australia as a regional moderator can provide a collective forum for each nation to address issues ranging from human rights matters to pressing for religious freedoms for all parties.

Potential Security Risks for the U.S. 

Australia built a well-trained, technologically advanced military, but its size is relatively small compared to the US armed forces. The size of the ADF limits its power projection range independently from its old ally – the US. Any major regional crisis could require Australia to conduct sustained power projection operations far from its northern territory, creating a potential strain on US resources and generating security issues for both countries, regional partners, and allies.  These threats can be offset by developing complementary capabilities within the ADF, e.g., cyber defense, special forces operations, and maritime security, to relieve US forces for other priorities.[9] Australian hard power depends on US military equipment, intelligence sharing, and close integration for planning and operations. The same is true for other regional Indo-Pacific states, especially with Japan and increasingly for India. The commonality of US military equipment makes Australia an attractive regional defense partner. A robust, latticed defense network built upon the interoperability of US military commonality could serve as an effective mitigation strategy for resiliency throughout the Indo-Pacific region.

As with all nations, economic strains can limit Australia’s military spending, impacting the ability to equip and train personnel and weaken deterrence activities. Trade, investment, resource extraction, and China’s economic strength shape Australia’s interests.  China is Australia’s number one trade partner, yet it stands out as the most unpredictable, volatile, and assertive among them. Other countries who share the same desire to preserve a rules-based order must continue investing in the existing international institutions to further the regional architecture for institutional order, e.g., the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or TPP-11.[10] Maintaining and strengthening the rules-based international order will increase the region’s comparative advantage over Beijing’s covetous and poorly communicated version of regional order, stabilize and strengthen regional stability, and ensure economic prosperity.[11] Providing regional stability via a rules-based order permits Australia to leverage its trade, investment, and resource extraction efforts to increase its economy and close the gap in its military preparedness. A strong Australian economy strengthens regional security and reduces risk for the US and Indo-Pacific nations. Conversely, economic or military strains on Australia can create additional challenges for the U.S. and the region.


China’s military and economic growth has transformed the strategic environment in the Indo-Pacific region, exacerbating tensions, igniting territorial disputes with neighboring countries, and undermining the current global order. The United States, a critical ally, must support Australia as it grapples with balancing military readiness to deter potential aggression and the need to safeguard regional and global economic considerations. Australia's emergent national security doctrine prioritizes the development of the ADF's capability to project power from its northern territories to deter potential threats. Concomitantly, the doctrine underscores the importance of ensuring economic prosperity and security amid Chia’s assertiveness.

Australia's response to its new strategic landscape explicitly emphasizes fortifying its military security guarantee with the United States. The Albanese government solidified its commitment by increasing the frequency and duration of US submarines and Army watercraft port visits. Additionally, Australia is actively modernizing its military capabilities and restructuring its force composition to achieve the goals outlined in its military preparedness. These objectives bolster Australia's deterrence capabilities and significantly enhance its ability to sustain and maintain combined military operations within its territory and beyond its borders. The United States can increase its support by expanding military sales and financing programs for US-made equipment. Increased military assistance strengthens Australia's military and fosters greater interoperability between ally and partner forces in the Indo-Pacific. Standardizing military equipment across partner nations creates a robust, latticed defense network that facilitates cooperation and security efforts.

Australia recognizes the inherent vulnerabilities of an overreliance on a single economic partner and has prioritized the diversification of its export markets. The Albanese government should align itself with the United States, Japan, South Korea, and Europe and develop its lithium refining and battery production capabilities. This strategic shift would bolster Australia's economic security and foster a crucial nexus between its economic and military interests. Australia could mitigate potential supply chain disruptions for critical military technologies and leverage its ability as a key supplier to regional allies. Lastly, failing to create this nexus or assuming a moderator role risks Australia becoming increasingly entangled in the US-China rivalry, with limited strategic or economic options. It is time for Canberra to assume a strategic moderator role to foster dialogue and promote peaceful conflict resolution mechanisms across the region, permitting countries not to choose sides in an intensifying US-China rivalry.  

This research was conducted as part of the Air War College Regional Security Studies Seminar and Field Study

Colonel Martinez is an Army Logistics Officer who recently completed a Master of Strategic Studies at the Air War College in Montgomery, Alabama. Colonel Martinez holds a Bachelor of Science in Business from Troy University and a Master of Science in Business with a concentration in Supply Chain Management from The University of Kansas. Previous positions include J-4 for the Combined Special Operations Joint Task Force – Levant, Battalion Commander of the 833d Transportation Battalion (SDDC), Instructor at the Army Command and General Staff College, and numerous positions in special operations and conventional formations.  

[2] Sam Roggeveen, Video conference with RSS OCEANIA Seminar. 2024. Review of Lowy Institute: National Defense of Australia, February 28, 2024.

[5] “United States Force Posture Initiative,” Australian Government, Defence, Accessed February 28, 2024.

[6]  Best, Chris “Beef” to Eloy Martinez and James Long. 2024. Economic Considerations/Options for ADF and Canberra. Personal Conversation.

[7] Corey Lee Bell, "What Risks Upsetting The Australia-China Détente in 2024?",  The Diplomat, December 29, 2023.

[8] Michael Keating, “Australia’s International Strategy between the US and China,” East Asia Forum, July 11, 2023.

[11] Arzan Tarapore, "New Security Challenges: Tests for the U.S.-Australia Alliance", The National Bureau of Asian Research, June 17, 2019.

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