Scott Morrison is adopting a more diplomatic line than his defence minister on potential Australian involvement in any conflict over China and Taiwan.
The prime minister did not directly refer to Taiwan when asked on Thursday whether he agreed with Peter Dutton's view that it was inconceivable Australia would not support US action to defend the island nation.
"We want to ensure there is an appropriate balance in the region to ensure that we don't move down the path that those types of events would realise," Mr Morrison told reporters in western Sydney.
"Australia has always been working with our partners and allies to ensure a free and open Indo-Pacific."
Mr Dutton warns there are worrying signs from China, but insists Australia will not be bullied or surrender sovereignty to the communist regime.
"China does not play by the international rules," he told 2GB on Thursday.
"China has very significant responsibilities as one of the world's great powers to (follow) international laws."
Chinese media has said it was unimaginable its forces would not attack Australian soldiers and military facilities if they supported US troops in a conflict over Taiwan.
A report into US-China relations presented to the US Congress overnight praised Australia for resisting Chinese economic coercion.
It also warned China now has, or is close to having, the capability to invade Taiwan while "deterring, delaying, or defeating US military intervention".
"Chinese leaders likely set 2020 as a key milestone for the (military) to develop the capabilities needed to invade Taiwan," the report said.
"To achieve this goal, for nearly two decades the (military) has systematically planned, trained, and built the forces it believes are required to invade the island."
Nuclear escalation arising from a conflict in the Indo-Pacific also remains a risk as China continues to increase its nuclear arsenal and is on track to reach parity with the US after building hundreds of missile silos.
Australia-China relations remain at an all-time low following the announcement of a new trilateral security arrangement with the United States and Britain through AUKUS and Canberra's plan to acquire nuclear-powered submarines.
Former prime minister Paul Keating has cautioned the government about being drawn into a military conflict over Taiwan.
The fate of what China believes is a renegade province was "not a vital Australian interest", he said.
Australian Associated Press
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