Ex-top security official Mike Pezzullo warns Australia must brace for potential conflict with China within two years as AUKUS planning intensifies

Sky News AU

25-07-2025

Australia must prepare for the real possibility of war with China within the next two years, former Home Affairs Secretary Mike Pezzullo has warned, calling the chances of conflict in the Indo-Pacific region a '10 to 20 per cent' risk.
Speaking in an exclusive interview with Sky News Australia, Pezzullo laid out a sobering assessment of Australia's strategic position, saying the country's current three-pronged approach to foreign policy - balancing trade with China, security ties with the US, and regional independence - is a 'calculated risk' that may not hold.
'I think the government's approach is to take a calculated risk that two of those tracks won't collide,' he told Sky News.
'So, you can keep trading with China, you can gain prosperity, and you can keep your security relationship with the Americans going. As long as those two tracks don't collide, I think there is balance in our policy approach.
'But the problem is, as we've often talked about, it's fine until it's not.'
According to Pezzullo, the so-called 'collision' between trade and security policy could unfold in two main ways.
'I think they collide in one of two ways,' he said. 'One way is if that planning and that preparation for collective defence irritates China or draws a negative response.
'And the other way, obviously, is if there's a preparatory phase in a crisis leading to a potential conflict, which is, I think, in the realm of a 10 to 20 per cent chance over the next few years.'
This comes following the news that over 30,000 military personnel from 19 nations are participating in Exercise Talisman Sabre 2025, the largest-ever joint military drills held across Australia, focusing on multi-domain operations including land, sea, air, space, and cyber warfare.
Exercise Talisman Sabre is conducted across a number of locations across Australia and offshore, using both Defence and non-Defence training areas. These locations provide a realistic rehearsal of how a large military force would flow into a broad area of operations.
Pezzullo's comments come amid an ongoing AUKUS review and rising scrutiny of Australia's submarine programme and broader defence planning.
He pointed to the US Defence Department's increasing focus on contingency planning and strategic alignment as a sign that Washington is preparing for a scenario where diplomacy fails.
'If that doesn't work and it comes to a clash, we need to have done the preparatory work, the collective security work, the contingency planning to get ready for. If you like - Plan B,' he said.
'The main way in which you deter conflict is to convince the other party that if it comes to a fight, you will prevail.'
Pezzullo argued the current US-led AUKUS review is 'very targeted, very deliberate' and not the routine policy reassessment that some in government have claimed.
In his most direct remarks, Pezzullo warned that President Xi Jinping's long-stated goal of 'reunifying' Taiwan with mainland China remains the central driver of potential conflict.
'I think we just have to take President Xi at his word. He's determined. The reunification of Taiwan back into China is his number one strategic priority,' he said.
'It is a hangover from what he considers to be the century of humiliation, when China was humiliated by imperial powers, and Taiwan, one way or another, is coming back.'
Pezzullo outlined scenarios that could escalate into open conflict, ranging from political coercion to a blockade or even a full-scale invasion.
But the true test, he said, will be how the United States responds.
'Will America fight?' he asked. 'Now, if America doesn't fight and Taiwan is reclaimed through an invasion, a broader Pacific war is then avoided.'
But that uncertainty, particularly under the second Trump administration, leaves Australia in a precarious position.
'That's actually the most important question in Australian foreign and strategic policy at the moment; what would the Americans do?' Pezzullo said.
'Not because we're going to follow them blindly, we'll make our own choices, but that is the big variable. We know what President Xi is likely to do. What we need to know is what is President Trump and his administration likely to do.'