Australia and the US yesterday signed a defence co-operation deal that will lead to more naval training and exercises between the two countries.
The agreement prioritises strategic areas for co-operation, -including increased intelligence sharing and improving multilateral and defence industry engagement. 
A key focus will be on the South China Sea.
Defence Minister Marise Payne said two-thirds of Australia's sea trade passed through that area and so it was vital for the navy to be there too.
"We definitely have a presence there militarily as well," Senator Payne said after signing the deal with US Defence Secretary Ash Carter at the annual AUSMIN talks with US Secretary of State John Kerry and Foreign Minister Julie Bishop in Boston.
"We have ships sailing in the area at the moment who will actually engage with the Chinese, quite formally." Australian warships and long- range patrol aircraft are already operating in the South China Sea and the navy has regular contact with Chinese naval vessels despite rising tensions over territorial claims there.
Mr Kerry said the two delegations had in-depth talks on the -importance of maintaining peace and stability in the East and South China Seas.
Freedom of navigation and overflight were among the most essential pillars of international maritime law, he said.
"We urge the claimants to halt any further reclamation, construction and militarisation of features," Mr Kerry said.
"It doesn't matter how big a country is, the principle is clear. The rights of all nations are supposed to be respected with respect to maritime law." A Chinese embassy spokesman in Canberra responded that the comments about the -reclaimed land were not helpful and added fuel to the flames.
The spokesman said he was -seriously concerned about comments about China in the -AUSMIN statement which were "neither responsible nor constructive".
"The relevant construction on some of China's Nansha islands and reefs that we garrison in the South China Sea is reasonable, justified and lawful, and is well within China's sovereignty. It does not impact or target any country and it is thus beyond reproach," he said.
"The Chinese side stays committed to resolving disputes with countries directly concerned through negotiation and consultation and safeguarding peace and stability of the South China Sea -together with ASEAN countries." Senator Payne said Australia held the same view as the US - that freedom of navigation, freedom of flight to the extent international law allowed was vital.
Senator Payne said senior officers from China's People's Liberation Army were due to visit Australia before the end of the year and keeping lines of communications open was important.
"And while we've made very clear, from the Prime Minister to me and Foreign Minister Bishop, our view about the level of activities around the Spratleys, that doesn't mean we can't maintain a very important relationship with China in the rest of its areas of need," She said.Senator Payne said the US was engaging closely with regional -nations, including India, Vietnam and The Philippines, and was keen to involve Australia. Australia and the US also agreed to share information and intelligence on high- risk travellers and cargo.