The secretary of the Defence department, Dennis Richardson, has expressed Australia’s strong concern about China’s recent land reclamation in the South China Sea area.

The speed and scale of the reclamation on disputed reefs and other features raised the question of China’s intent and purpose, Richardson said in very pointed comments, noting that if it were for military purposes this would be particularly worrying.

Delivering the Blamey Oration, Richardson said that looking out over the next two decades, the relationship between the United States, China, Japan and India would provide the backdrop and centrepoint to much of what unfolded in East Asia and beyond – just as the Cold War had done in the second half of last century.

“The US-China relationship sits at the centre. And this invariably opens up the question of just where and how Australia positions itself,” Richardson said.

“Expressed in its most simple and basic terms, our relationship with China and the United States can be summarised in one simple phrase: friends with both, allies with one.”

Australia’s relationship with and interests in China were sometimes different from those of the US – as shown by the recent decision to join the Asian Infrastructure Investment Bank.

“Obviously, the Australia-China relationship is still developing the appropriate balance of trust and confidence – in many respects a never-ending journey in international and strategic relations,” Richardson said.

“And, as has been readily acknowledged by successive Australian and Chinese leaders, differences will emerge from time to time.”

Australia was concerned about the unprecedented pace and scale of China’s land reclamation activities in the South China Sea over the last couple of years.

“China now has more law enforcement and Coast Guard vessels in the South China Sea than the other regional countries put together. And given the size and modernisation of China’s military, the use by China of land reclamation for military purposes would be of particular concern.”

It was legitimate to express these concerns “because tensions and potential miscalculations are not in anyone’s interest”.

Richardson also said regional changes would eventually raise questions about whether Australia’s defence needs can be met with a spending level of 2% of GDP.

And he foreshadowed that a changing Indonesia would require new thinking by Australia.

With few exceptions Australia’s South East Asian neighbourhood would probably become increasingly wealthier and more confident.

“For the first time we will have a neighbour – Indonesia – which will have a bigger economy than our own.

"This will require a psychological adjustment by Australia, as will an Indonesia which continues to embed democratic norms. We will need to rethink engagement strategies and expectations.”

The economic and strategic changes in South East Asia would see real growth in regional defence expenditure, Richardson said.

“This will not be directed against us, but it will mean the capability gap we have traditionally enjoyed in the wider region will significantly diminish and, in some instances, probably disappear.

"This in turn will raise questions – not now but well down the track – whether we will be able to continue to meet our defence needs with around 2% of GDP.”

In 2015-16 the defence budget will reach 1.92% of GDP. The government’s commitment is for 2% of GDP within a decade.

Richardson said the growing wealth of East Asia would not be shared across much of the other part of our neighbourhood – the South Pacific.

“Here, climate change and other constraints may present us with opposite challenges to wealth and confidence. Over time, that could lead to serious questions of labour mobility if some of the smaller South Pacific island countries are to develop sustainable economic growth.”