4. Our assessment of the risk of war is based on President Xi Jinping’s aggressive stance and rapid military build-up. China has growing capability and sense of entitlement. The balance of military power is moving in China’s favour. President Xi has been clear about his ambitions. Beijing’s actions in the South China Sea and Hong Kong are examples of its revisionism. The new threat assessment by Japan and the doubling of its defence budget is an example of how other countries see the risk rising.

5. We assess the likelihood of war within three years because a tipping point is about to be reached. Beijing will have military superiority over the US in the Taiwan Strait because China has focused on strengthening its offence and defence in this theatre for several decades,and partly because the US and other countries need to rebuild their stocks ofmunitions dispatched to Ukraine. Xi judges China to have greater political will than the US and its allies. Yet Xi must fear that this advantage could be temporary as China’s population shrinks and its economy slows. This window of opportunity will not be open for long. Xi may be tempted to strike at the moment of greatest opportunity. Aweakening China is no less dangerous.

6.Beijing covets Taiwan. With each passing year Beijing intensifies its military intimidation of the island. Any attack on Taiwan is neither a marginal matter nor a local one. If successful,it would strike at the heart of global norms that have underpinned international security and prosperity. Global autocracy would be strengthened and liberty wounded. Japan would be in direct threat,the US military at risk of direct attack at its bases in the region. South-East Asia and the Pacific island states could then be dominated by Beijing. Australia’s commercial and security lifelines to the world would operate only at Beijing’s pleasure. Australia would be highly vulnerable to economic coercion,military intrusion or both. Its sovereignty would be conditional on Xi’s policies towards a subject power.

7. An attack on Taiwan is the subject of most speculation but not the only scenario which would threaten Australia’s security and prosperity. Australia must not prepare itself for a single scenario. Instead,it must put a priority on flexibility to deal with many contingencies. Democracies rarely predict their next war,and the next war is guaranteed not to be like the last.

8. Australia must prepare itself. Most important of all is a psychological shift. Urgency must replace complacency. The recent decades of tranquillity were not the norm in human affairs but an aberration. Australia’s holiday from history is over. Australians should not feel afraid but be alert to the threats we face,the tough decisions we must make and know that they have agency. This mobilisation of mindset is the essential prerequisite to any successful confrontation of China.

9. Australia has many vulnerabilities. It has long and exposed connections to the rest of the world – sea,air and undersea – yet is incapable of protecting them. So its dependency on imports of essentials – including fuel,pharmaceuticals,electronics and weaponry – could be a fatal weakness in a crisis. This was exposed in World War II yet remains unaddressed. Some critical infrastructure,including the electricity grid,isvulnerable to cyberattack. Australia’s military bases are unprotected and could be disabled quickly.Australia has no long-range military strike power to protect its approaches or hold an enemy at a distance. Overarching all else,it has no national security policy to deal with these vulnerabilities.

10. Australia has many strengths,some unique. It is much more than a “middle power”. Its diffidence constrains its potential. Its advantages outstrip its ambitions. Uniquely in command of an entire continent and unthreatened by any immediate neighbour,it has great wealth of every variety. It is a global superpower in production of food and energy. Its people are among the most educated and capable on Earth. We are inventive and enterprising. Australia has a robust democratic system and rule of law. It has living standards among the very highest anywhere,at any time in human history. Uniquely,it combines the oldest surviving culture on Earth,the liberties bestowed by its British-derived system of government and the richness of the most multicultural population of any developed nation. It is intensely networked with other countries at the family,community,commercial,professional and strategic levels,including its military alliance with the US and its growing cooperation withJapan,Britain,India and NATO,among others. Australia has agency and can use its power to influence events – to deter some Chinese Communist Party (CCP) behaviours,to support allies,to shape some regional institutions and events,to defend itself and to strike the enemy where necessary.

11. However,it has no national strategy to build on these strengths. Australia must equip itself for the age of crisis. It should plan for war in the near,medium and long term,understanding that a stronger Australia would help deter conflict by raising the risks and costs of war for the CCP. The key to avoiding conflict is deterrence.

12. For the near term,the priority must be on building strength and resilience with utmost speed.Cyber systems,satellites and global supply lines are the likely first victims of any crisis. Australia’s cyber defences need urgent attention,not a 10-year rollout. Supply lines and systems designed for a finely tuned world of just-in-time delivery are obsolete. Domestic manufacture and inventory may be more costly,yet are the price of resilience. Military bases must be hardened.

13. Australia’s failure to arm itself with long-range strike missiles and provide robust missile and drone defence should be corrected as a high priority. It should emphasise quick and nimble supply of capability over big and yearslong programs. Drones for delivering explosives,for instance.

14. Even if the US were to agree to supply more weapons to Australia in a crisis,they would likely take at least six months to arrive. But if the US is occupied with the same crisis,it might not have any surplus to supply. Australia needs to stockpile weapons and systems accordingly. Australia urgently needs a plan to protect the dozen or so undersea fibre-optic cables that connect it to the global internet and communications systems and to invest in fallbacks such as hardened satellite communications.

15. Instead of using defence procurement as industry policy by another name,Australia needs a careful rethinking. In an urgent crisis,survival must take priority over domestic industry. For our most urgent needs,we should not be “Australianising” gear bought overseas to create jobs. To procure weapons and systems needed urgently,an off-the-shelf import usually will be better than a slower,custom-made local equivalent. And an off-the-shelf import will always be better than Australianised products that achieve Australian requirements at the expense of other capabilities in the original product. Domestic manufacture can be suitable to supply medium and longer-term needs. We need to be disciplined about telling the difference.

16. For the medium term,the priorities should be strengthening international influence through partnerships,building more durable resilience,developing technological and industrial capacity,and creating extra scale and lethality of military power. Australia has shown that it can develop technological leadership in medical research and clean energy;it should translate the systems for doing so into military and dual-use fields. Its universities are a source of fundamental research and should be encouraged. In addition,the federal government should create an Australian version of the US Defence Advanced Research Projects Agency (DARPA),incubator of the internet,among other inventions.Promised by the Albanese government,such an agency has yet to materialise. It should be located outside Canberra.

17. Australia should exploit the technological promise of theAUKUS agreement. While the submarines are its better known part,Pillar Two is the more timely – it brings the US,UK and Australia together to develop for military use quantum computing,quantum communication,artificial intelligence,hypersonics and autonomous vehicles.

18. The national defence effort,as measured by defence spending,likely needs to be doubled to accomplish the necessary upgrades. It currently sits around the equivalent of 2 per cent of GDP and probably will need to be increased to the equivalent of 4 per cent. This is not expensive if it equips Australia to remain sovereign and free. Australia spent as much as 40 per cent of GDP equivalent in World War II.

19. In the long term,the AUKUS agreement’s Pillar One – for the US and UK to help Australia acquire nuclear-powered submarines – could prove useful. The submarines are intended to give Australia the ability to threaten China’s territory directly,increasing Australian coercive power and thus strengthening deterrence. However,its long gestation makes it irrelevant to near-term war. It should not be factored into any assessment of Australia’s ability to deter or coerce China in the high-risk phase of the next three years. There is always the risk that anti-submarine technologies in the future will render nuclear-propelled submarines less useful,However,based on reasonable and foreseeable trends,these submarines will be of enormous strategic value in the longer term.

20. Australia should be prepared to break political taboos to survive a confrontation with an aggressive great power. Other countries have introduced,or reintroduced,compulsory national service to boost the people’s preparedness. This can be civil or military,or both,and it can be voluntary or mandatory. It need not be limited to young people. Australia should consider some variety of this option,using the strength and energy of Australians to build national resilience in our economy,society and critical infrastructure. Another option,only to be considered in the most extreme circumstances,would be basing US long-range missiles armed with nuclear weapons on Australian territory if the US were interested in doing so. Such a policy of nuclear weapons “sharing” is a standard part of the NATO alliance. Such a decision would violate Australia’s existing treaty commitments – and so should not be made lightly – but it would provide a compelling deterrence against attack.

21. In addressing the threat from China,Australia must distinguish rigorously between the Chinese Communist Party and the Chinese-Australian people. The CCP is Australia’s strategic rival and greatest threat;the Chinese-Australian people are fellow Australians and valued citizens.

22. We are,as a nation,running out of time. As government and defence leaders have pronounced over the past two years,the old ten-year warning time for Australia being involved in a conflict in our region no longer exists. Reaching back to our World War II experience,we must now think like we are in 1938,not 1930. There is much we can do as a nation in the realms of alliance diplomacy,economics,information,intelligence and the military. But,this will take a more integrated and less risk-averse approach from our government and our national security community. It also involves our leaders being honest with the Australian people about the real deterioration of our security environment. The clock is ticking. It is time to get to work.

Lesley Seebeck,Alan Finkel,Mick Ryan,Lavina Lee and Peter Jennings
Sydney,February,2023

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