And a draft of next year's defence white paper, obtained by The Australian, also warns that technological advances have reduced the warning time Australia would have against an enemy. "Despite the defensive advantages of our geography, the proliferation of long-range strike and power projection capabilities in the Indo-Pacific region, and emerging capabilities in areas such as cyber, increases the risk of a potential aggressor being able to directly attack Australia with little or no warning time," it says.
The 150-page draft blueprint, valid at December 11, makes no firm commitment for more defence spending, warning that future constraints on military spending will be "sustained and serious". It says Australia does not have to choose between the US and China, but that their relationship will determine Australia's strategic environment for generations. "The US-China relationship is critical," it says. "This relationship, more than anything else, will determine our strategic environment in the coming decades.
"Over the next three decades, Australia's relative strategic weight will be challenged as the major economies grow rapidly and modernise their militaries."
GRAPHIC: Defence white paper (6.7Mb)
The government has promised to release a final version of the white paper before the next election, saying the rise of China and India coupled with the wind-down of military operations in Afghanistan and East Timor require a reappraisal of defence posture.
The draft document, which Defence claims is incomplete and undergoing substantial changes, makes no firm commitment to increasing defence spending, which was slashed in the May budget by 10 per cent, reducing it to 1.56 per cent of gross domestic product, the lowest proportion since 1938.
Instead, it warns that the global economic crisis will continue to have a "sustained and serious" impact on Australia's defence budget. It proposes placing a yet to be confirmed floor on defence spending of "1.5 per cent (to be announced) of gross domestic product" with an aspiration to lift it to 2 per cent of GDP as "fiscal circumstances allow".
While the draft paper says Australia welcomes a rising China, it also says its military modernisation is a game-changer for Australia. "China's expanding military capabilities are changing the balance of military power in the Western Pacific," it says.
"Its official defence spending is delivering significant capabilities . . . including the deployment of modern submarines, anti-ship ballistic missiles and cyber capabilities, and the development of two prototype fifth-generation fighters, carrier-based air power, counter-space system and improved anti-submarine warfare capabilities."
The white paper draft sticks to the promise to build 12 new submarines, but unlike the 2009 white paper, it keeps its options open for future warships, saying only that Defence "will continue to investigate options" for the navy's surface fleet.
By declining to place firm numbers on new ships, the government gives itself wriggle room to scale down the size of its force in line with budget constraints.
It also reaffirms Australia's commitment to purchase the Joint Strike Fighter, which has been plagued by development delays, but makes no mention of numbers - an omission that suggests the final number is likely to be far fewer that the 100 mooted in the 2009 white paper.
A spokeswoman for Defence Minister Stephen Smith said the document obtained by The Australian was an "early, incomplete departmental working draft that has neither been presented to government nor circulated to other relevant agencies". Defence claimed the draft had "already changed substantially" despite it being just over a week old. The final white paper will be published "in the first half of 2013".
The tone of the draft paper indicates that Australia's military ambitions are in retreat after a decade of war in Iraq and Afghanistan. It reweights the strategic focus back to the immediate region and the direct defence of Australia.
The document commits Australia to a continued military presence in Afghanistan after troops are withdrawn next year. And it lays out four key strategic priorities for Australia: the direct defence of Australia; the security of the South Pacific and Timor; to help military contingencies in the Indo-Pacific; and to contribute to global security.
The Australian
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