CANBERRA, Australia (AP) — Australia needs to spend more money on defence, make its own munitions and develop the ability to strike longer-range targets as China’s military buildup challenges regional security, according to a government-commissioned report released Monday.

The Defense Strategic Review supports the so-called AUKUS partnership among Australia, the United States (US) and Britain, which in March announced an agreement to create an Australian fleet of eight submarines powered by US nuclear technology.

Prime Minister Anthony Albanese said his government commissioned the review to assess whether Australia has the necessary defence capability, posture and preparedness to defend itself in the current strategic environment.

“We support the strategic direction and key findings set out in the review, which will strengthen our national security and ensure our readiness for future challenges,” Albanese said.

He said the review was Australia’s most significant since World War II and was comprehensive in scope. “It demonstrates that in a world where challenges to our national security are always evolving, we cannot fall back on old assumptions,” Albanese said.

The public version of the classified review recommended that Australia’s government spend more on defence than the current expenditure of two per cent of gross domestic product, improve the Australian Defense Force’s ability to precisely strike targets at longer ranges and make munitions domestically.

Other recommendations include improving the force’s ability to operate from Australia’s northern bases and to deepen defence partnerships with key countries in the Indo-Pacific region including India and Japan.

China’s military buildup “is now the largest and most ambitious of any country” since the end of World War II, the review said. It “is occurring without transparency or reassurance to the Indo-Pacific region of China’s strategic intent,” it said.

The strategic circumstances during the current review were “radically different” than those in the past, said the report, authored by former Australian Defense Force Chief Angus Houston and former Defense Minister Stephen Smith.

The US, Australia’s most important defence treaty partner, was “no longer the unipolar leader of the Indo-Pacific,” a region that has seen the return of major-power strategic competition, it said.

“As a consequence, for the first time in 80 years, we must go back to fundamentals, to take a first-principles approach as to how we manage and seek to avoid the highest level of strategic risk we now face as a nation: the prospect of major conflict in the region that directly threatens our national interest,” the review said.

The government immediately plans to delay or abandon 7.8 billion Australian dollars ($5.2 billion) in defence spending to reflect new priorities.

Defense Industry Minister Pat Conroy said as part of the new priorities, an order for infantry fighting vehicles has been reduced from 450 to 129. The savings from those vehicles and the cancellation of a second regiment of self-propelled howitzers will fund the acceleration of the acquisition of US HIMARS rocket systems that are proving effective in the Ukraine war.

The maximum range of the army’s weapons will be extended from 40 kilometres (25 miles) to over 300 kilometres (185 miles) and, with the acquisition of precision-strike missiles, over 500 kilometres (310 miles), Conroy said.

“This is about giving the Australian army the fire power and mobility it needs into the future to face whatever it needs to face,” Conroy said.

Questioned about Australia’s new military direction, Chinese Foreign Ministry spokesperson Mao Ning said Beijing’s military buildup policy is “defensive in nature.”

“We are committed to maintaining peace and stability in the Asia-Pacific and the whole world,” she said. “We do not pose any challenge to any country. We hope relevant countries will not hype up the so-called China threat narrative.”

For the past five decades, Australia’s defence policy has been aimed at deterring and responding to potential low-level threats from small- or middle-power neighbours. “This approach is no longer fit for purpose,” the review said.

Australia’s army, air force and navy need to focus on “delivering timely and relevant capability” and abandon its “pursuit of the perfect solution or process” in its procurements, it said.