Australia will announce a substantial increase in defence spending and focus on projecting military power across the Indo-Pacific amid escalating tensions with China, in a major policy speech to be delivered Wednesday by Prime Minister Scott Morrison.

The address, seen by AFP, will set out Australia's defence policy for the next ten years and earmark Aus$270 billion ($185 billion) for new and upgraded defence capabilities.

"We must face the reality that we have moved into a new and less benign strategic era," Morrison will warn, eyeing the end of unquestioned US hegemony and the rise of an increasingly assertive China.

"Even as we stare down the COVID pandemic at home, we need to also prepare for a post-COVID world that is poorer, more dangerous and more disorderly."

Australia's government is committing to spending two percent of GDP on defence -- as US President Donald Trump has angrily demanded of allies -- and spending almost 40 percent more over the last defence review in 2016.

The country will acquire more powerful strike capabilities, including the United States' AGM-158C Long Range Anti-Ship Missile, as well as invest in hypersonic weapons research.

While acknowledging the nation of 25 million people cannot match its rivals in the region -- China officially plans to spend $178 billion on defence in 2020 alone -- Morrison framed Australia as a regional power committed to an "open, sovereign Indo-Pacific, free from coercion and hegemony".

Though Morrison says Australia remains prepared to send troops further afield "where it is in our national interest to do so", that cannot come at the cost of its ability to respond to threats from and in its own backyard, he will say.

Australian Prime Minister Scott Morrison will announce a rise in defence spending as China's influence grows in the Indo-Pacific region
Australian Prime Minister Scott Morrison will announce a rise in defence spending as China's influence grows in the Indo-Pacific region POOL / Gary Ramage

The Australian Defence Force will focus on building "stronger deterrence capabilities" to raise the cost for any would-be aggressor and concentrate on the immediate region over operations further afield.

Australia has fought alongside the United States in every major war of the last century, sometimes in areas far from its shores or outside its immediate interests.

The announcement marks a significant shift in Australia's defence posture that will be widely seen as an effort to counter Beijing's growing influence in the region.

It also follows Morrison's "Pacific Step-Up" policy -- announced in 2018 to rebuild support among regional allies drifting toward Beijing -- which has seen his government ramp up diplomatic engagement and offer greater financial aid to its developing neighbours.

"We want a region where all countries, large and small, can engage freely with each other, guided by international rules and norms," he will say.

He will also pinpoint cybersecurity as key to Australia's defence strategy, a day after announcing the "largest-ever" boost in cybersecurity spending -- a roughly 10 percent hike that takes the budget for the next decade to Aus$15 billion.

The government says Australia has been targeted in a wave of state-sponsored attacks, which are suspected to have been carried out by China.

Beijing has clashed repeatedly with Canberra as it looks to increase the cost for Australia of speaking out against Communist Party interests.

Most recently, Australia enraged China by calling for an investigation into the origins of the coronavirus pandemic.

Canberra has also pushed back against what it describes as China's economic "coercion", covert influence campaigns and the use of technology companies like Huawei as a tool for intelligence gathering and geopolitical leverage.

China has warned its students and tourists against going to Australia, slapped trade sanctions on Australian goods and sentenced an Australian citizen to death for drug trafficking.