The Australian government’s campaign to ‘stabilise’ the relationship with China appears to be bearing some fruit. A few channels of communication are being revived and access to the Chinese market is being restored for some Australian exports. Chinese diplomats have halted their ‘wolf warrior’ tactics and are signalling that more progress may be possible if both sides exercise ‘mutual respect’. But more smiles and the partial return to a normal trading relationship shouldn’t disguise the reality that Beijing hasn’t given ground on any substantive political or security issues and regional tensions remain high.

Indeed, in recent months Beijing has reinforced its aggressive operations in the Taiwan Strait and the South China Sea and announced a steep 7.2% rise in official military spending. Party secretary Xi Jinping has repeated his promise to the Chinese people that Taiwan ‘must’ and ‘definitely will’ be reunified with the ‘motherland’.

On the other side of the Pacific, President Joe Biden has said four times since his election that if Taiwan is attacked, American forces will be deployed immediately to defend the island. And the State Department has declared that the US commitment to the security of Taiwan is ‘rock solid’.

In consequence, the risk of major war in the Indo-Pacific is now very high; probably higher than at any time since World War II. Australians need to look beyond the ‘smile diplomacy’ and focus on preparing for the serious crisis that may lie ahead. We need to prepare now for the ‘dangerous storms’ and the ‘worst-case and extreme scenarios’ that Xi recently said were driving China’s planning and preparations.

Allied concerns about the risk of major war in the Indo-Pacific are not new. Senior American military commanders have repeatedly warned that the risk of a Chinese assault on Taiwan is high. According to CIA Director William Burns, Xi has ordered ^[1] his military to be ready to assault Taiwan by 2027. In a recent Atlantic Council poll, 70% ^[2] of the foreign policy experts consulted stated their belief that China would launch a military assault to seize Taiwan within 10 years. So, while war is not inevitable, it is a very serious risk. And it’s a risk that we can’t ignore.

Key questions we need to address include: What would a China–US war be like? How much notice would we have? How would Australia be affected? How long would such a war last? And what do we need to do now to prepare?

A Chinese attack on Taiwan could be launched with little or no notice. A surprise air, sea and cyber assault would likely aim to seize priority targets before US forces could intervene. But as soon as American forces are committed, China would probably launch intense missile, cyber and sabotage attacks on US, Japanese, Australian and South Korean military bases and other strategic targets across the Indo-Pacific.

Australia would then be fighting a major war alongside its allies that is unlikely to end quickly. The two sides have strong interests at stake and extensive capacities to sustain operations for several years. Neither is likely to collapse quickly. China is making extensive political, military, economic, infrastructure and other preparations to fight a long war and we must be similarly prepared.

The stakes would be very high. Taiwan is located in a strategically vital part of the Western Pacific. A successful Chinese invasion would punch a huge hole in the allies’ island chain defences, seriously undermining the defence of Japan, South Korea, the Philippines, the rest of maritime Southeast Asia and America’s own territories in the region.

An allied failure to effectively defend Taiwan would do huge damage to US and allied credibility and could precipitate an effective American withdrawal from much of the Western Pacific. That type of outcome would gravely damage Australia’s security.

What do we need to do to prevent such a catastrophe from occurring? How can we exert powerful deterrence and dissuasion power? And if we are forced to fight, what should we do to ensure that we and our allies win?

There are many things that need early attention but, in this article, I’ll focus on just four of the highest priorities.

First, on the military front, Australia needs to ensure that it possesses strong capabilities that can reach out a long way and give even the most powerful opponent good reasons to desist. Our military forces need to be dispersed and their supporting bases and infrastructure protected to ensure they can’t be destroyed in pre-emptive strikes.

The recent defence strategic review contains encouraging words on these issues, but it is distressing to see that the May budget adds little to already planned defence expenditure. Indeed, the government plans to cut spending on defence equipment and facilities (capital) during the coming three years. Ministers are clearly not seized by a sense of urgency.

But the military challenges are only part of the story. Another need is to find better ways of protecting our media, key agencies, businesses and the broader Australian community from Chinese influence, coercion, cyber and broader political warfare operations. We are currently very vulnerable to the types of disruption and dis-integration operations Chinese agencies are refining. Some technical fixes can help, but a whole-of-nation effort is required that includes major public education programs.

A third priority is to reconfigure the country’s international supply chains of critical goods and services. There’s an urgent need to shift production of everything from fuels to pharmaceuticals, processed metals and key manufactured goods to Australia, our allies and other trusted partners. We cannot rely on supplies coming from potentially hostile states in an emergency.

Fourth, we and our allies must face up to the fact that during the past two decades China’s manufacturing output has surged past that of the United States. America no longer possesses the overwhelming industrial capacities that contributed so much to the allied victories in both world wars. For the allies to retain their strong deterrence and defensive power, their longstanding dominance of global manufacturing must be restored and Australia has a key role to play.

Giving the Australian economy the flexibility to rapidly adapt to the demands of a major conflict will require a marked reordering of our priorities. We will need to rebuild many of the manufacturing capacities we have exported during the past 50 years, primarily to China. In 1960 manufacturing generated 28% of Australia’s GDP, but it now contributes only 6%. This has made us very vulnerable to external pressures. We need to urgently rebuild domestic and trusted international production of priority supplies.

That can be done, but it will require serious industrial reforms, a dramatic rise in productivity in all parts of the economy and new levels of business cooperation between the allies and other trusted partners.

Higher levels of economic competitiveness and societal resilience and endurance cannot be achieved by the government heavily subsidizing a few boutique manufacturing operations. The heavy lifting will need to be done by industry and Australia’s broader community. For that to happen, incentive structures will need to change. Businesses must be able to see viable economic opportunities that justify their investments. Government overheads at all three levels of government need to be reduced and unnecessary regulatory burdens abolished.

The country needs to be gripped by the pressing security challenges and a new mindset championed that embraces substantial productivity reform. We must pursue every avenue to make Australia an attractive destination for manufacturing and advanced technology investment once again.

Proper exploitation of our rich resource base with world-leading processing of highly competitive minerals should play a key role. We need once more to offer the world’s cheapest and most reliable energy supplies, highly efficient infrastructure and a very skilled and flexible workforce.

If we don’t embrace reform, we will become a backwater mining and tourist economy with low prosperity and little international influence. Worse still, Australia will be highly dependent on others for security and extremely vulnerable in future crises and wars.

The US, Japan, Taiwan and South Korea appreciate the risk of major war and are already taking big steps to bring strategic manufacturing home or transfer it to fully trusted security partners. If Australians want to maintain their security and independence, we need to move quickly to do the same.