In his first full year as Australian prime minister, Anthony Albanese will have to contend with a China-Australia relationship that has changed profoundly in recent years. From Beijing’s new outreach to Australia’s Pacific island neighbors, to its increasingly militarized approach to the South China Sea, to its economic coercion tactics targeting Australian industries, Canberra has come to expect a more contentious relationship in the years ahead.

One of the biggest strategic questions confronting Australian policymakers is to determine how — and from whom — it will acquire nuclear submarines after signing the AUKUS security pact with the U.S. and U.K. in 2021. Andrew Hastie, Australia’s shadow minister of defense, wants his country’s first nuclear submarine to be built in Connecticut because it would take “too long” and involve “too much risk” to build the submarines domestically. However, American shipbuilding capacity is already straining to meet America’s domestic submarine needs.

Last December, Senate Armed Services Committee Chairman Jack Reed, D-R.I., and then-ranking member James Inhofe, R-Okla., wrote President Joe Biden to warn that U.S. submarine-building capacity may hit a “breaking point” if the U.S. also took on building Australia’s nuclear-powered subs. Since that letter was leaked, Sen. Reed has publicly softened his concerns.

Another possible shipbuilder is the U.K., which is developing a next-generation class of nuclear submarines. However, production is years away. British delivery timelines would likely be longer than U.S. options like the Virginia-class submarine.

The Albanese government also has to manage a complex and contentious economic relationship with China. During the World Economic Forum’s annual meeting in Davos, Assistant Minister for Trade Tim Ayres met with his Chinese counterpart Wang Shouwen to discuss their troubled economic ties. While China remains a major export market for Australian goods, in recent years Beijing weaponized those ties in an attempt to punish Australia for having the audacity to call for an independent investigation into COVID-19′s origins.

The previous Australian government was willing to incur significant economic costs to resist Chinese coercion tactics. Most famously, China sent a humiliating list of 14 grievances against Australia that it demanded be resolved for relations to improve. Despite boycotts and tariffs on barley, wine and energy exports, Australia didn’t budge. The Albanese government must show similar resolve if confronted with similar economic intimidation tactics.

Finally, Australia is attempting to reestablish itself as the preferred ally of Pacific island nations. Last March, Australia — and the entire Indo-Pacific — received a wakeup call when the Solomon Islands announced a policing deal and draft security agreement with China.

Australian Prime Minister Anthony Albanese, left, walks after inspecting an honor guard upon his arrival in Papua New Guinea's capital Port Moresby on Jan. 12, 2023. (Andrew Kutan/AFP via Getty Images)

The possibility of People’s Liberation Army Navy vessels carrying out “logistical replenishments” in the Pacific islands quickly prompted discussion about the possibility of a future Chinese military base near Australia. Australia immediately dispatched officials for discussions with the Solomon Islands and “accelerated construction of a $65 million high commission and $120 million logistics building.”

Future battles for access and influence in the Solomon Islands and its surrounding neighbors are likely to intensify. Fortunately, Australia is already working to shore up relations with other Pacific neighbors.

In January, the prime ministers of Australia and Papua New Guinea released a joint statement announcing the development of a bilateral security treaty. Also that month, Fiji Prime Minister Sitiveni Rabuka, noting that Fiji’s “system of democracy and justice” is different than China’s system, terminated its policing agreement with China.

Furthermore, after Nauru rejected a Chinese proposal to build an undersea fiber-optic cable, Australia successfully led multilateral efforts to fund the construction of an undersea cable for the Federated States of Micronesia, Kiribati and Nauru.

Australia is beginning to build momentum in the region with this new outreach, and the U.S. should support its efforts in the Pacific islands.

Andrew J. Harding is a researcher with the Heritage Foundation’s Asian Studies Center.

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