Australia will spend more than 70 billion US dollars boosting its defences over the next 20 years in response to a regional military build-up and global shifts in power, the government said.
A long-term strategic blueprint for the future of Australia's armed forces warned that war could be possible in the Asia-Pacific region in the next two decades, as emerging powers such as China flexed their military might.
The United States would continue its military dominance and be an "indispensable" ally for Australia, the defence white paper said.
But as emerging or resurgent powers such as China, India and Russia tested US primacy, the paper said there was "a small but still concerning possibility of growing confrontation between some of these powers."
"China will be the strongest Asian military power, by a considerable margin," the paper said. "A major power of China's stature can be expected to develop a globally significant military capability befitting its size.
"But the pace, scope and structure of China's military modernisation have the potential to give its neighbours cause for concern if not carefully explained, and if China does not reach out to others to build confidence regarding its military plans," it said.
If it did not take these steps, the paper said, there would be "a question in the minds of regional states about the long-term strategic purpose of its force development plans, particularly as the modernisation appears potentially to be beyond the scope of what would be required for a conflict over Taiwan.
"China will have even more interest in convincing regional countries that its rise will not diminish their sovereignty," the paper said.
Greater engagement with Beijing was essential for encouraging transparency about Chinese military capabilities and intentions, and securing greater cooperation in areas of shared interest, the paper said.
China's Premier Wen Jiabao in March vowed to modernise his nation's military across the board, asking legislators for a 15.3 percent increase in defence spending for 2009 to 472.9 billion yuan (69 billion dollars) -- double 2006 funding levels.
The global financial crisis was likely to accelerate a shift of power to the Asia-Pacific, and regional security would pivot on how strategic dynamics were managed between the US, China and Japan, the blueprint said.
A major conflict on the Korean peninsula remained a possibility, and the paper said the collapse of North Korea could not be ruled out, while Myanmar remained a "serious challenge."
An escalation in tensions between India and Pakistan was also of "significant concern," and the paper said Islamist extremism would pose a direct threat to Australia and its interests.
The paper reiterated Canberra's commitment to the conflict in Afghanistan, which it said could endure another decade or longer.
|Australian Army blackhawk helicopters.|
Canberra will acquire long-range cruise missiles, double its submarine fleet to 12 and buy 100 F-35 Joint Strike Fighter jets and eight new warships under the plan, titled "Force 2030."
"Force 2030 will mean the best fighter jets, the most versatile armoured vehicles and the most sophisticated submarines available to defend Australia?s national security," said Prime Minister Kevin Rudd at the report's Sydney launch.
The Sino-focused strategy, which was widely leaked to the press, was met with unease in Beijing, where it was reportedly perceived by some as Australia aligning itself with the United States against China.
"China definitely will not accept Australia adopting the so-called 'China threat' thesis," Beijing professor Shi Yinhong told the Sydney Morning Herald newspaper on Friday.
"(China) will have to publicly criticise (the paper)," added Yinhong, international relations specialist from the People's University.