The Trump Administration has called on the Morrison Government to extend its "step-up" strategy in the Pacific to South-East Asia, as Washington grapples with China's rising regional influence.

Key points: The US Ambassador urged Australia to look to South-East Asia and northwards

The US Ambassador urged Australia to look to South-East Asia and northwards He said Australia 'sits on the frontline of the great strategic competition of our time'

He said Australia 'sits on the frontline of the great strategic competition of our time' Foreign Minister Marise Payne said Australia had expanded its engagement across the Indo-Pacific

The Pacific Step-up strategy, which aims for closer engagement between Australia and its neighbouring countries, is considered one of the Federal Government's highest foreign policy and defence priorities.

Speaking at The Australian Financial Review Business Summit, US Ambassador Arthur Culvahouse Jr said his government would like to see it go further.

"We'll be pushing Australia to expand its step-up from the Pacific Islands region to South-East Asia and to look north as well," he said.

Ambassador Culvahouse indicated that the next round of Australia-United States Ministerial Consultations (AUSMIN) would look to "further enhance" the Pacific Step-up in the Pacific Islands region.

The US Ambassador told the gathering of business leaders on Tuesday night that Australia "sits on the frontline of the great strategic competition of our time".

"If the security and prosperity enjoyed by our countries and the region is to continue, this is a competition that we must win," he said.

"Even as we face a new landscape of strategic competition, the private sector can and must play an ever more critical role in ensuring the continued stability and prosperity of our two countries."

Marise Payne said Australia had already begun expanding its influence across the Indo-Pacific. ( ABC News: Toby Hunt )

Foreign Minister Marise Payne, who is currently in Washington for talks with her US counterpart Mike Pompeo, said Australia had expanded and deepened its engagement not just through the Pacific Step-up, but across the Indo-Pacific more broadly.

"We are engaged at all levels with our South-East Asian friends and neighbours. Our approach to the Indo-Pacific has ASEAN centrality at its heart," she said.

"Those relationships in the region have grown and changed.

"They are richer and more varied than in the past, and they reflect South-East Asia's growing economic heft — shown by major trade deals such as the Indonesia-Australia Comprehensive Economic Partnership Agreement and the Regional Comprehensive Economic Partnership, which has ASEAN at its core.

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"With the US, we work together through our aligned Indo-Pacific strategies and initiatives, such as the Blue Dot Network announced at the East Asia Summit, to maintain a stable, secure and prosperous region in which rules and freedoms are ensured, sovereignty respected and protected, and coercion resisted," Senator Payne added.

Australia's military engagements with South-East Asia include participation in the Five Power Defence Arrangements alongside the United Kingdom, New Zealand, Malaysia and Singapore, as well as training tens of thousands of troops in the Philippines under "Operation Augury".

In a statement, Labor said the Government had "dropped the ball" in the region and the US Ambassador's comments had highlighted its lack of an effective plan for South-East Asia.

"There is growing evidence that the Pacific Step Up has come at the expense of a South-East Asia step-down, at a time when greater competition means maximising our influence in the region has never been more important," Shadow Foreign Minister Penny Wong said.

"Australia needs a comprehensive and well-resourced Indo-Pacific strategy that strengthens regional stability and prosperity."