Australian Associated Press

Prime Minister Tony Abbott says he's pleased Australia's friendship with China is getting stronger, playing down reports that Chinese missiles could soon reach Australia.

Mr Abbott said he would rather focus on the strength of the friendship than on hypothetical possibilities in many years time.

A new report on the Australia–US alliance, ANZUS, says China's expanding military capabilities have created scenarios that could involve allies like Australia in direct conflict with our largest trading partner.

The study by the Australian National University's Strategic and Defence Studies Centre and the US Centre for Strategic and International Studies says China's growing blue water navy and long-range missile forces threatened to put Canberra within range of the People's Liberation Army.

Mr Abbott said Australia had a good and strong friendship with China and the closest possible relationship with the US.

"Strong friendships with China, strong security relationship with the US — this is the best way to ensure the peace, security and prosperity of our region," Mr Abbott told reporters in Goulburn, NSW.

The study says the Australia–US relationship is thriving but shouldn't be taken for granted and there were challenges.

It says neither Washington or Canberra have a coherent policy on China and, until that's sorted out, both sides will be cast as diverging on key issues.

One issue is US expectations of how Australia ought to respond to growing Chinese influence and assertiveness.

There's also potential for divisions between Canberra and Washington on Indonesia.

The study suggests a new trilateral security grouping between Australia, the US and Indonesia that would give Jakarta a more prominent role on the international stage in keeping with its growing economic weight.

US ambassador John Berry said the US viewed China's territorial claims in the South China Sea with some concern and was keen to ease tensions.

"We see a future with a very healthy, very fast growing and very productive China that will become a responsible, helpful partner in leading the world," he told Sky News.

"We look forward to continuing to work with China to resolve some of these friction points."

This article was originally published at Australian Associated Press