Not since at least the end of the Cold War has it been so easy to paint a disturbing picture of the global strategic landscape.

Ukraine’s sovereignty has been trashed by Russia. Large swaths of Iraq and Syria have descended into medieval barbarism. On the African continent, massacres and kidnappings occur amid terrorists’ training grounds. The Mediterranean is awash with the bodies of refugees fleeing the mayhem unleashed in North Africa. Israel and the occupied territories fester with no solution in prospect. And despite a deal in the offing, Iran’s nuclear ambitions remain at best delayed, threatening a breakout of nuclear proliferation in the Middle East.

Closer to home, North Korea remains in the hands of a bizarre despot. Thailand stands on the brink of chaos if not civil war. And then there’s China.

After two decades of strong economic growth, China is testing the limits of its neighbours’ forbearance, including through an egregious claim to almost all of the South China Sea—a claim it’s asserting through brinkmanship rather than diplomacy. It’s hardly surprising that Japan is shaking off its introspection to bolster its defences and strengthen its strategic alliance with the United States. If only the United States was the omnipotent power it once was. Over the past five years, real defence spending in China has increased by 48% while US defence spending has fallen by almost 18%.

With such an outlook, you’d think that it would be easy to make the case for robust defence spending. If only it were that simple. Just as there’s a storm brewing on the strategic horizon, dark clouds are gathering on the economic horizon.

It’s been almost eight years since the world was rocked by the most serious financial crisis since the 1930s, yet the recovery remains weak, uneven and fragile. In the United States, the green shots of recovery have withered on the branch more than once—perhaps this time the recovery will hold. The Eurozone remains in the grip of anaemic growth, with cripplingly high unemployment in Greece (25.7%), Spain (23.4%), Italy (12.6%) and France (10.6%) to name a few. To make matters worse, the single currency has proven to be a trap that sustains damaging trade imbalances within its boundary. Meanwhile Japan is close to recording two decades of economic stagnation, despite heroic fiscal measures. Debt has sky-rocketed in many developed nations as governments have borrowed massively to make ends meet in the face of collapsing revenues.

For a while it looked as though emerging economies like China had escaped the ravages of the financial crisis, but that’s not the case. Having substituted infrastructure investment for exports after the crisis, China is now struggling to generate domestic demand. As a result, consistent 10% per year growth is looking more like 6%.

Policymakers have not been idle. Interest rates have been slashed to zero and quantitative easing has been injected billions of dollars into the monetary bases of Japan, the United States and the Eurozone. But much like pumping air into a tyre with a hole, they’ve little to show for it in terms of economic growth—though we cannot be sure what the counterfactual would have been.

The influx of so much money into those economies has devalued their currencies and prevented others from being export competitive. One country’s exercise of sovereign monetary policy looks like a volley fired in a currency war to another.

If this were not enough, low interest rates are fuelling extraordinary asset price booms in many markets. These booms might turn out to be unstable bubbles that lead to further financial crises. Let’s hope the watered-down tightening of financial market regulation prove sufficient to prevent a repeat of the cascading contagion of September 2008.

For a country such as Australia with a narrow export base and, for the moment at least, a narrow tax base, the first line of defence against economic and financial uncertainty is low debt. If the worst happens, the government’s capacity to borrow will be the shock absorber that will have to cushion the blow. The less debt we have entering the next crisis, the more ability we’ll have to ride it out.

Now you can see the problem. To guard against strategic uncertainty we need to invest in a capable defence force. To guard against economic instability, we need to get the deficit under control and pay down debt. The trouble is each and every dollar can only be spent once.

If the government had to choose between national security and economic security, that would be bad enough. The risks on either front are difficult to quantify and even harder to compare. But there’s a third claimant to those precious dollars; an electorate that still remembers the good times of the resource boom and the successive waves of tax cuts and middle class welfare. Everyone agrees that we need to tighten belts in the post financial crisis world—only everyone thinks that their own belt is quite tight enough, thank you. Whatever the government does to rein in spending or boost revenue risks an electoral backlash.

So what will the Treasurer have to say tonight? The promise of 2% of GDP defence spending is so far off it’ll hardly rate a mention—any details will have to await the White Paper. Perhaps there’ll be a near-term adjustment to smooth the path towards the promised end point. Of much more interest will be the fiscal strategy the Treasurer lays out. Each year that hard decisions are deferred is another year we’ll be living with heightened risk to our economic security. Moreover, the more that our debt grows, the harder it will be to fulfil the promise to boost defence spending.

While China’s recent assertiveness in the South China Sea might shock and surprise today’s observers, its behaviour has actually been remarkably consistent over recent decades.

China first exercised its power in the region in January 1974 when it ejected South Vietnam from the Crescent Islands. In March 1988, the Chinese Navy clashed with Vietnamese vessels, which resulted in Chinese occupation of seven islands in the Spratlys.

In 1995, China occupied Mischief Reef which fell in the exclusive economic zone (EEZ) of the Philippines. It then began building and reinforcing structures on neighbouring reefs. In April 2012 China’s clashes with the Philippines continued over Scarborough Shoal, which was eventually occupied by China. Chinese attention then moved to Second Thomas Shoal. In March 2014, Chinese coast guard vessels prevented Philippines cargo vessels from resupplying a contingent of marines stationed in a wrecked vessel there.

In April 2014 China moved the Haiyang Shiyou 981 oil rig into an area claimed by Vietnam, creating conflict with Vietnam that was only settled when the rig was removed ahead of schedule.

Since late 2014, China has engaged in extensive reclamation projects in eight locations across the Spratly Islands. Dredging work taking place on Fiery Cross Reef—which was previously under water—has been of notable concern. Chinese dredgers have been piling sand on the reef, raising it above the water level to allow for an airfield of 3,000 metres along its length. The reclaimed land could be transformed into an airfield that could support Chinese operations in the Spratlys. With air support for its coast guard, China would be able to threaten Vietnam and intimidate the Philippines.

With an increased presence in the Spratlys, China may also be in a position to impose its own resolution of maritime disputes upon the ASEAN claimants. That would entail a voluntary surrender on the part of the ASEAN claimants and their recognition of Chinese sovereignty over the South China Sea. Beijing would be in a position to offer the inducement of good relations and the benefits of trade and investment in infrastructure projects through the recently created Asian Infrastructure Investment Bank (AIIB).

Despite the pressure that China is placing on the ASEAN claimant it’s unlikely to achieve its goals. This is because its actions have increasingly involved external powers in the dispute. Both Vietnam and the Philippines have reached out to the US for support against China.

The Philippines and the US have a long history of military cooperation. In 1999 a Visiting Forces Agreement was concluded and in April 2014, when President Obama visited Manila, the Enhanced Defence Cooperation Agreement was finalised. The agreement allows the US Navy increased access to ports of the Philippines and provides for the rotation of US troops through their bases and airfields.

Vietnam has also been developing security ties with the US for the past decade in an effort to balance its relationship with Beijing. Constrained by its proximity to China, Vietnam can’t form too close a security relationship with the US, but the Vietnamese government hopes that a relationship with the US would have a restraining effect upon China.

While Malaysia and Indonesia have previously stood on the sidelines, Chinese activities in the area have stimulated their anxieties. Malaysia was jolted by Chinese naval patrols which reached James Shoal, the southernmost point of the Chinese claim falling within the Malaysia’s territorial claim. Publicly Malaysian leaders continue to bandwagon with China but defence officials are worried. Malaysia intends to construct a naval base in Bintulu in Sarawak—close to James Shoal—and the Malaysian defence ministry is now seeking US assistance and training to develop a marine corps based on the American model.

Indonesia previously regarded itself as a mediator of the dispute as a non-claimant. Recently, however, it’s become concerned about the sovereignty of the Natuna Islands. China’s claims clash with Indonesia’s ‘global maritime axis’ doctrine. Indonesia’s defence chief General Moeldoko has drawn attention to the dangers of instability in the South China Sea and has announced that additional Indonesian air units will be deployed to the Natuna Islands.

What does all of this have to do with Australia? Some would argue that Australia should avoid entanglement in East Asian affairs that could draw it into conflict between the US and China. The time when Australia could define its strategic interests so narrowly has passed; instability in the South China Sea would have consequences for Australia’s security environment.

Relentless Chinese pressure on the ASEAN claimants would draw in not only the US, but also Japan, which has its own concerns about Chinese intentions in the East China Sea, and specifically around the Senkaku/Diaoyu Islands. (Japan has also been seeking to strengthen the maritime capabilities of both Vietnam and the Philippines.) As external powers increasingly become involved, there’s the potential for ASEAN—which has been divided on the South China Sea dispute as non-claimant like Cambodia and Thailand prioritise relations with China—to fragment. ASEAN would continue with business as usual, but its lack of power would become more apparent.

A second result could be the polarisation of the region between China and its few allies, and the US–Japan relationship, to which disaffected states, fearful of Chinese rise and ambitions, would gravitate

This situation could be averted if external powers voiced their concern about the South China Sea, and pressed China to cease its provocative actions and negotiate a code of conduct with ASEAN. In the past, China has responded to external pressure; a fear of external involvement has moderated its behaviour. China withdrew the oil rig from Vietnam’s EEZ in July 2014 after Vietnam launched an international shaming campaign to expose China’s actions. Indeed, Australia should contribute its voice to this cause in recognition of the fact that a united ASEAN is in its interests.

Thanks to Andrew Kwon for his reflections on the piece Natalie Sambhi and I wrote recently, in which we considered the future of America’s Asia–Pacific rebalance should Hillary Rodham Clinton make it to the White House. There’s no doubt that the rebalance has steadily continued over the past few years—albeit with less fanfare than many thought would be the case at the end of 2011. And yes, Ash Carter appears well credentialed and well respected; his first international jaunt as Secretary of Defense showed that he’s motivated and looking in the right direction. But while senior leadership is important to reassure allies and reorient the American consciousness, it’s only one way to contribute to regional stability—a central objective of the rebalance. Another way comes from beyond the US and is found in America’s allies and partners networked across the Asia–Pacific.

For a number of years, China’s been pushing the boundaries—hoping to push its boundaries—in a very nineteenth-century fashion. Unilaterally declaring an Air Defence Identification Zone over a large section of the East China Sea, placing a state-owned oil rig in Vietnam’s exclusive economic zone (EEZ), building a ‘great wall of sand’ through persistent land reclamation efforts (such as those seen on Mischief Reef in the EEZ of the Philippines), and the wholesale rejection of international arbitration to resolve disputes are all developments of concern to some of China’s neighbours. As a consequence, those same neighbours are increasingly seeking solace and safety in numbers.

There’s an observable trend toward more bilateral security cooperation within the region, and between Asian countries and the US. In a variety of fora and in various permutations, they’ve released carefully worded statements on the current and future state of the region’s security order. The themes are well known: rule of law and international norms are central, regional prosperity has been borne of regional stability, dispute resolution mechanisms are important, and self-serving actions to change the status quo aren’t received kindly.

While the US has been preoccupied seeing to its global responsibilities, it has encouraged its allies and partners in the Asia–Pacific to deepen and broaden cooperation. For the Americans, the request is a way of sharing the security burden. For US allies and partners, it’s an opportunity to buy into a cooperative security position stronger than they could sustain on their own. For Beijing, it’s cooperation that can only increase the effort needed to advance Chinese claims.

Where states have a similar reading of the regional security order and see strategic value in closer alignment (be it militarily, diplomatically or economically), they’ll usually act to realise the benefits. In this cooperative environment every strategic partnership entered into, every statement released, every joint endeavour announced and military exercise conducted is at China’s expense. Each is another run on the board for the US-led, rule-of-law-loving order that’s supported regional stability and prosperity for over 60 years. After some fallow periods, the soil is prepared, ready for more rebalancing.

Japan’s been leading the pack. Shinzo Abe will be in DC this week to address a joint session of Congress and to finalise an update to US–Japan defence guidelines. As Patrick Cronin notes, ‘the ascent and trajectory of the alliance from April 28, 1952 to that of April 28, 2015 is nothing short of astonishing.’ (On the home front, Abe’s moves to do away with the last of the Yoshida Doctrine are being assisted by China’s campaigning.)

The Philippines looks set to gain a new ‘strategic partner’ in and at the behest of Vietnam. It’ll be the third such partnership for the Philippines, with Vietnam joining the ranks alongside the US and Japan. Exercise Balikatan, the war game between the US, the Philippines and Australia currently underway in the South China Sea, is reportedly the largest iteration in 15 years. For Australia’s part, the alliance with the US is primed and ready, and our relations with Japan continue to deepen (with some going so far as to claim an Australia–Japan ‘quasi-alliance’). Even the historically ‘non-aligned’ sense a need for change, with India’s Narendra Modi hugging for security as China subtly agitates on land and at sea, and as Pakistan becomes an increasingly important Chinese partner.

Like all policy, America’s rebalance is intended to advance its national interests. It makes sense for Washington to want to maintain primacy in the Asia–Pacific, particularly in the face of Beijing’s destabilising assertiveness. For that reason and others, America’s regional allies—save for Thailand—are doubling down on their alliances, and its partners are pushing for cosier relations, either intra-regionally or bilaterally with the US. In the absence of strong senior leadership on the rebalance, be it from the White House, the State Department or the Pentagon, Asia–Pacific powers are doin’ it for themselves. Those deeper relations are potentially costly to China, which carries on seemingly unconcerned that their every action to unilaterally alter the status quo is having an equal and opposite reaction.

Taiwan’s Vice Premier Simon Chang wants in on the US government’s Cyber Storm exercises. A biennial exercise series curated by the Department of Homeland security, Cyber Storm tests the capacity of agencies and critical infrastructures to absorb and respond to cyber attacks. Several foreign government agencies, including Australia, have been invited to participate in the exercises in the past. Chang argues that the move would help strengthen the countries’ defences against unrelenting attacks from China. US cyber security firm FireEye released figures in 2014 that showed Taiwan faced the most targeted attacks that sought to steal data in the Asia-Pacific region, a large proportion of which targeted government networks.

US coding site GitHub knows all about unrelenting attacks. The site is enduring the sixth day of a massive DDos attack. The attacks have been traced back to Chinese search engine Baidu and are targeting two specific pages. One, GreatFire, develops ways for users to circumvent the so-called ‘great firewall of China’. The other is a Chinese mirror page for the blocked New York Times website. The company has successfully managed to deflect a large amount of the DDos traffic, which is positive given the amount of companies and programmers who rely on the site as a coding resource.

The US has taken China to the WTO over its proposed new banking technology restrictions, with some success. The new rules, proposed in December were set to force banks to have ‘all new computer servers, desktop computers and laptop computers and 50 percent of new tablets and smartphones meet “security and controllability” requirements’. These moves were developed to encourage ‘indigenous innovation’ and promote ‘cybersecurity’. However, the US government challenged the plan, arguing that they challenged the WTO fair trade rules. It seems that their protests have gained some traction as China has ‘suspended’ the regulations, for now.

While bigger international security issues continue to grab headlines, more mundane cybercrime is arguably far more damaging to the overall stability and security of cyberspace. As Charles Henderson, vice president of managed security testing at Trustwave, characterised the threat to point-of-sale devices, ‘It’s not some ninjas coming through the ceiling on ropes, putting malware on your point of sale in the dead of night… It’s fairly easy attacks.’ The reason that simple attacks can wreak such havoc is that so many businesses are not taking the most basic steps to improve the security of their systems and lack of deep-dive testing.

Of course, one cannot blame businesses for forgoing pragmatic steps to improve cybersecurity when government is setting such a poor example. An Auditor-General’s report found that the information security of four of Tasmania’s largest state bodies were lacking, with all the departments failing to fully implement the top four mitigation strategies from the Australian Signals Directorate. The Department of Treasury and Finance and the Department of Primary Industries, Parks, Water and Environment struck back, claiming that state agencies do not require the same level of cyber protection as Federal Departments and that the costs don’t justify implementation of these measures.

One group not taking the cyber threat so lightly are lawyers. With further data retention and breach notification legislation in the works, cyber risk insurance market is set to boom and as the Australian Security and Investments Commission continues to focus on incident reporting, companies are likely to ‘face greater compliance and regulatory burden’ in cyber risk management.

While greater investment in business cybersecurity would be a welcome step, without proper information sharing within the private sector and between government and businesses, the cards will remain heavily stacked against the defenders. Step one to facilitate information sharing is building trust, no easy task. Deepak Jeevankumar offers a call to arms and a few suggestions to bridge the trust chasm, including the appointment of Chief Trust Officers and expiration dates for data. The US Congress has been set to take a crack at this challenge as well, however Jennifer Granick tempers expectations, calling this a banner year for flawed cyber information sharing proposals.

Of course all of this will be moot when the robots take over. DARPA is kicking off a two-year competition to lay the groundwork for automated cyber defence. Although very much at its early stages and a fully-automated systems is not likely anytime soon, initial tests have been promising and these systems could offer a more cost effective way for companies to automatically spot and fix vulnerabilities.