STABILIZING CHINA TRADE AND SEEKING INDO-PACIFIC BALANCE

Australia has peeled back China trade coercion as it ramps-up the alliance with the United States to balance China. The Labor government, elected in May 2022, claims a diplomatic thaw with China as a key achievement. The major defense step was agreeing for Australia to get nuclear submarines under the AUKUS agreement with Britain and the United States. The government's 2023 National Defense Statement describes "an intense contest of values" in the Indo-Pacific, with growing "risks of military escalation or miscalculation." Because of the worsening strategic environment, the Australian Defense Force is judged "not fully fit for purpose" as the government seeks greater long-range strike capability. The era of alliance integration will see more US troops, planes, and ships in Australia, and the creation of a US-Australia combined intelligence center in Canberra. The contest with China in the South Pacific frames a new Australian aid policy and a greater US role in the islands.