Linda Reynolds has also spoken of a "deepening sense of anxiety" throughout the Indo-Pacific, and the rise of China's influence in the region.
In her first major speech since taking on the portfolio, the minister acknowledged intensifying competition between the US and China for regional clout.
Senator Reynolds said trade and investment were being increasingly used as tools to build strategic influence, not just to gain commercial advantage.
"There is no doubt that China is increasing its influence, but we have always worked with China diplomatically and economically," she told reporters afterwards.
"These are changing strategic circumstances and we need to reflect on those and chart our course."
Senator Reynolds told the Australian Strategic Policy Institute in Canberra that Defence was working alongside other government agencies to broaden its influence in the Pacific.
"What Australia is intent on doing is making sure that not only are our sovereign interests, economically and security wise, reserved," she said.
"But also that we continue to work with our southwest Pacific partners, in particular, to ensure that they maintain their sovereignty, and also that we can assist them to develop."