Key issues
- Australia’s
strategic environment is in flux as dissatisfied states seek to revise the
post-1945 liberal order. The precise contours of what will replace this order
is unclear, but it is unlikely to be as benign as that which preceded it.
- China
is at the centre of Australia’s threat perceptions. Australia seeks to use
all elements of national power to deter China and constrain its efforts to
build influence in the Pacific.
- Australia has long relied on its security guarantor, the United States; however, navigating this relationship may become more challenging in light of policy developments in the US.
- Australia’s
favourable strategic geography may insulate it from the extreme American
demands made of other countries; however, Australia’s limited defence
capabilities may leave it with little room to manoeuvre if the US makes
ongoing security guarantees contingent upon making a greater contribution to
meeting the challenge posed by China.
- To
address this increasingly unpredictable environment, Australia is responding
by reaching agreements with other states, pursuing public diplomacy and
employing economic power to broaden and strengthen partnerships with allies
and friendly states, particularly in the Pacific.
- Looking
ahead over the course of the new parliament, greater demands are likely to be
made upon Australia to support the liberal order, particularly if the US
continues to retreat from the central role it has historically played.
Navigating a world
more prone to conflict
Australia’s deteriorating strategic environment
Australia’s strategic environment is in flux as dissatisfied
states seek to revise the post-1945 liberal order that has been the cornerstone
of an unprecedented – albeit imperfect – period of peace and prosperity.
Whatever replaces this order is highly unlikely to be as stable as the one that
has passed. On the contrary, it will likely be characterised by instability and
a higher probability of conflict as great powers are emboldened to attempt to
re-order the world according to their preferences with little concern for the
consequences for weaker states. It may prove to be a historical irony that the liberal
order facilitated the rise of states that now seek to undermine it.
The impact of revisionist states on the
international order
A key example of how revisionist states – those that seek to
revise the prevailing order – are changing Australia’s strategic environment is
the collaboration among Russia, China, Iran and North Korea to support Russia’s
invasion of Ukraine.
As NATO observes,
China is ‘a decisive enabler of Russia’s war against Ukraine through its
so-called “no limits” partnership and its large-scale support for Russia’s
defence industrial base’. Iran also supports Russia’s invasion, most notably
through the provision
of lethal drones. North Korea has provided artillery
shells and ballistic
missiles, and deployed
combat troops to Ukraine.
Members of this grouping also cooperate
with each other on a bilateral basis, highlighted by, for example, Russia
and North Korea’s mutual
defence pact and China and Iran’s 25-year
comprehensive cooperation agreement.
Australia’s Director-General of National Intelligence,
Andrew Shearer, has
identified this axis as a ‘profoundly troubling strategic development … one
of the strategic challenges of our time’. Indeed, growing collaboration between
members of this axis and their connection of the Indo-Pacific, Middle Eastern
and European theatres has led some analysts to
muse about the prospect of a global conflict.
However, though members of this axis are united
by a common interest in undermining the prevailing international system,
their collaboration will likely be constrained by conflicting agendas and
limited trust. For example, despite their ‘no-limits
partnership’, there is a history
of distrust between Russia and China, and China must balance its support
for Russia with managing
a backlash from Europe. Further, Russia’s
recent security pact with North Korea can be interpreted as an attempt to reduce
Moscow’s reliance on China and show that it has not
ceded its role in Asia to Beijing. North Korea, which
also distrusts China, similarly seeks to diversify its partnerships and
avoid giving China too much leverage.
The US, under President Trump, is also undermining the
prevailing order. US Secretary of State Rubio summarised the US view of the
liberal order in February 2025, stating it is ‘not
just obsolete; it is now a weapon being used against us’. In implementing
this worldview, the Trump administration appears to be realising the worst
fears of its pre-election critics. At home, for example, it risks undermining
American democracy by obstructing
independent oversight, seeking to abolish USAID while lacking the authority
to do so (which
lies with Congress), and arguing that the presidency is beyond the
reach of the law, threatening
a constitutional crisis. While challenging the tenets of liberal democracy
at home, it has also begun to
negotiate directly with Russia, excluding Ukraine and Europe, to end the
Ukraine war, while amplifying
Kremlin disinformation. At the time of writing, the US appears to be conceding
to Russia’s terms without gaining anything in return. US
Defence Secretary Hegseth has stated that Russia will likely retain
Ukrainian territory it has seized and that Ukrainian membership of NATO is
unrealistic.
Furthermore, Hegseth has raised
questions about ongoing US support for NATO, and about the US role in providing
for Europe’s security, while, at the recent Munich Security Conference, Vice
President Vance accused Europe of impinging on free speech and criticised
German liberal-democratic parties for refusing to cooperate with the far-right.
He later met
with the leader of Germany’s far-right AfD party.
The evidence to date suggests that, under the Trump
administration, the US is hostile to the liberal order and, as demonstrated by
its stance on the Ukraine War, may in fact align
with those who wish to overturn it. This is unprecedented and raises
uncomfortable questions for Australia concerning the reliability of the US as
an ally, a
point Beijing is ready to amplify.
Australia and
the US will likely continue to share an interest in deterring
Chinese aggression and Australia’s favourable
strategic geography may provide it with leverage to help it to deter Trump
from making
outrageous demands. However, Australia’s limited defence capability may
leave little room to manoeuvre if Trump makes US security guarantees contingent
upon Australia
making a greater contribution to addressing the challenge posed by China,
such as increasing
the Australian defence budget, accommodating more
US military personnel and equipment or placing restrictions
on Chinese electric vehicles. Regardless of specific US demands, Trump’s
approach to governance may ultimately impinge upon the social
licence needed to sustain AUKUS and the ANZUS alliance.
How Australia is navigating a world more prone to
conflict
Some commentators have criticised
the lack of alacrity and seriousness with which they believe Australia is addressing
its deteriorating
strategic environment, while others argue that Australia is in the midst of
an unnecessary
‘China panic’ promoted by the media,
intelligence agencies and hawkish politicians.
However, the government clearly believes that Australia’s
strategic environment has deteriorated: Prime
Minister Albanese has stated the country is ‘confront[ing] the most
challenging strategic circumstances since the Second World War, both in our
region and indeed around the world’. At the centre
of Australia’s threat perception is China.
Supporters of this perspective point to Chinese Government
actions, including decades of significant annual defence spending increases (officially,
China increased
defence spending by 7.2% in 2025); rejecting
international legal rulings about maritime territory it claims; increasing use
of the People’s Liberation Army (PLA) to intimidate Taiwan; regular
offensive cyber operations, including
those aimed at Australia; ongoing
interference in Australia and unprofessional
military behaviour that has endangered the lives of Australian Defence Force
personnel. Perhaps of greatest concern is Xi Jinping’s reported instruction
that the PLA be ready
to invade Taiwan by 2027 if so ordered, a step that could precipitate a
great-power war.
To position itself in this challenging strategic
environment, Australia is pursuing a variety of approaches in the diplomatic,
information and economic domains. For information about Australia’s
military strategy, see the Issues & insights article, ‘Australia’s
defence strategy adjusts to an increasingly volatile regional environment’.
Diplomatic
Australia has sought to stabilise relations with China,
which reached a nadir following
Australia’s call for an international inquiry into the origins of COVID.
China has lifted
trade restrictions on Australian goods and restarted
official meetings between the 2 countries; however, ‘tensions
and suspicions remain’. Some analysts have warned that China’s
objectives have not changed and that it will continue its ‘deliberately
destabilising behaviour in the East China Sea, Taiwan Strait and South China
Sea and across its land borders with India and Bhutan’.
Recognising this, Australia has pursued diplomacy with other
countries. For example, Australia has concluded agreements with Pacific Island
Countries (PIC) to constrain
Chinese influence and reduce the probability that China will be able to establish
a military presence close to Australia.
For example:
These agreements
do not conclude the struggle for influence. The Lowy Institute’s Sam Roggeveen
has suggested the
contest will continue and that ‘$140 million [the value of assistance
outlined in the deal with Nauru] doesn’t scratch the surface of what it takes
to compete’. These relationships will require constant attention to sustain
them and Australia will likely find that Pacific
perceptions of Australia’s response to climate change as being inadequate will remain an irritant in its relationships with PICs, and an opportunity China will
exploit.
Australia has
enhanced its relationship with Southeast Asian partners. For example, in March
2024, Australia and Vietnam elevated their relationship to the status of a comprehensive
strategic partnership. In August 2024, Australia signed a Defence
Cooperation Agreement with Indonesia to enhance practical cooperation and
interoperability between their militaries.
Australia works
through the Quad (alongside India, Japan and the US) to provide public
goods in areas such as health, maritime
domain awareness, cybersecurity and climate
change, and a recent
statement by Quad foreign ministers hints
that the group may adopt
a more overt focus on security cooperation.
As noted above,
Chinese, Iranian, North Korean and Russian collaboration connects a number of
theatres. In recognition of this, Australia, as part of the Indo-Pacific Four
(IP4), alongside Japan, South Korea and New Zealand, is pursuing closer
collaboration with NATO. At a 2024 NATO meeting, Defence Minister Richard
Marles noted
the importance of Australian engagement with NATO, highlighting that
Australia has a stake in the outcome of the Ukraine War, and hinting that,
should China perceive that Russia is ultimately successful, it may be emboldened
to attack Taiwan.
The AUKUS
agreement with the US and UK – described
in a joint leaders statement as a ‘new security partnership that will
promote a free and open Indo-Pacific that is secure and stable’ –will help
Australia to contribute to a favourable military balance that could deter such
an attack. Should the agreement proceed as planned, it will enable Australia to
acquire nuclear-powered submarines and promote collaboration on cutting-edge
military technologies between the 3 partners.
However, some
critics, such as the Australian Greens, argue that AUKUS endangers Australian
security and that its funding should be redirected towards domestic
initiatives, such as expanded health care
and affordable housing. They advocate Australian withdrawal from AUKUS,
citing fears that Australia’s foreign policy will be ‘set
or dictated to us by the United States of America’, and concerns about President
Trump’s leadership.
Australia
appears hesitant to address US actions that undermine the liberal order.
Australia will struggle to balance its values with its interests, as perceived
criticism of the US may risk alienating the Trump administration upon which
Australia relies for its security.
Information
In the
information domain, characterised by public diplomacy and communication,
Australia has advocated for the kind of rules-based order – governed by liberal
norms – in which middle-power countries can safely operate without being
threatened or coerced by powerful states.
For example, in
an April 2023 speech, Foreign Minister Penny Wong addressed
the National Press Club to explain ‘how we contribute to the regional
balance of power that keeps the peace by shaping the region we want’. She set
out the importance of ensuring that strategic space is preserved in which
non-great powers can exercise agency, live according to their own laws and
values, and make their own choices.
In short,
Senator Wong explained, Australia favours a region that is open, stable,
prosperous, and predictable, that operates by agreed rules and where ‘no
country dominates, and no country is dominated’.
Australia has
also sought to promote the rules-based order by stating its support for the
International Criminal Court (ICC) after the ICC was criticised for issuing
arrest warrants for Israel’s prime minister, Benjamin Netanyahu, and its former
defence chief, Yoav Gallant, (alongside Hamas’s military leader Mohammed Deif)
in relation to Israel’s attacks on Gaza.
Senator
Wong noted that Australia ‘respects the independence of the ICC and its
important role in upholding international law’ and that ‘all parties to the
conflict must comply with international humanitarian law’. Senator Wong has
also indicated that Australia would fulfil its obligations as an ICC signatory,
which would mean arresting
Netanyahu and Gallant should they enter Australia’s jurisdiction, noting
that any decision ‘will be informed by international law, not by politics’.
Such statements also serve a diplomatic purpose by
addressing criticisms made by the Global
South, which perceives hypocrisy in calls to uphold the rules-based order
and believes that international
law is applied selectively:
Many in the developing world have
long seen a double standard in the West condemning an illegal occupation in
Ukraine while also standing staunchly behind Israel, which has occupied the
West Bank and Gaza Strip since 1967 and maintains settlements in the former –
moves that are considered illegal by most of the international community.
However, Australia’s
absence from a joint statement in support of the ICC, following the imposition
of US sanctions on the court, is further evidence that Australia will be
torn between its values and its interests.
Finally, Australia has also released
statements to highlight dangerous actions by the Chinese military,
dispelling disinformation and pressuring the PLA to operate responsibly when it
encounters Australian and other foreign militaries.
Economic
Australia uses its economic power to pursue its goals. For
example, it increasingly
invests its aid budget in initiatives that promote security (pp. 102–107).
This occurs most clearly in the Pacific, where Australia uses aid to constrain
Chinese influence and promote its own. As has been reported of the
2023–24 aid budget:
… most of the Pacific package is made
up of $1.4 billion for security measures, with Defence reprioritising $923
million from its own budget for increased maritime surveillance, giving patrol
boats and other vessels, and infrastructure upgrades such as wharves. DFAT will
provide “cyber resilience” including crisis response teams when a Pacific
nation suffers a cyberattack.
In addition, Australian aid to Ukraine, in the form of military,
financial and in-kind support, can be seen as supporting the liberal order
by helping to obstruct Russia from subjugating a sovereign state. This may also deter
China from attempting to invade and conquer Taiwan.
Finally, the government is
working with business to advance Australian interests. For example:
Conclusion
As a middle power, Australia is limited in terms of the
contribution it can make to upholding the liberal order. It is therefore likely
to seek to cooperate with other like-minded states to maximise the influence it
can exert.
However, greater demands will almost certainly be made upon
it, particularly if the US continues to retreat from the central role it has
historically played in providing public goods such as security, aid and
diplomatic support for liberal norms. These demands will likely be substantial
– as Sam Roggeveen highlighted, the kind of sums Australia has invested to
secure agreements with small states will not scratch the surface in terms of
what it takes to compete in a more contested world.
Australia will almost certainly face demands to
significantly increase
spending on aid as major
aid contributors slash their spending. However, the most challenging
demands may be more abstract as Australia’s deteriorating strategic situation
compels it to think strategically about how best to adapt to a rapidly changing
environment and how it can best marshal its resources, likely in concert with
others, to achieve its goals.