Defence Minister Kevin Andrews has voiced Australia's concern over any military build-up on artificial islands in the South China Sea - just days after a US spy plane made a show of buzzing close to a Chinese base in the disputed territory.
Warning of a "more challenging" security environment in the years ahead, Mr Andrews said the US-China relationship was a key consideration in the government's forthcoming strategic blueprint for Australia's defence, to be released in July or August.
But he also sounded a note of optimism, telling an audience in Melbourne on Friday the increasingly sophisticated armed forces in the region could find it easier to work closely together.
Mr Andrews also rejected concerns Australia was isolating China by getting too close to the US and Japan.
"We'd like to be best friends with all our neighbours in the region, including China and Japan, because if we can achieve that we'll live in a peaceful region and we'll all thrive," Mr Andrews said.
Security analysts regard the South China Sea as a potential flashpoint, with China dredging sand onto shallow reefs to create new islands for building runways and radar stations prompting fears of military confrontation in the region.
The US air force allowed a CNN television crew onto a surveillance flight over a group of the reclaimed islands on Wednesday, showing an apparent warning from the Chinese navy that the plane was "approaching our military alert zone".
Mr Andrews said Australia opposed any "coercive or unilateral actions" in the South or East China Seas.
China, Japan and south-east Asian countries each have disputed territorial claims.
Mr Andrews said almost half of Australia's trade flows pass on ships through the South China Sea, and the government urged the freedom of all countries to sail ships or fly planes through the area.
He said the region had seen a 37 per cent increase in arms imports between 2010 and 2014 compared to the previous five years
He said while tension was inevitable, "both China and the United States have a clear interest in preserving regional stability and security", not least because of close economic ties.
