China labelled Home Affairs boss Mike Pezzullo a troublemaker after he warned "the drums of war are beating" and raised the prospect of armed conflict last week.
Major-General Adam Findlay reportedly gave a confidential briefing to Australia's special forces soldiers last year, warning of a high likelihood of conflict.
According to The Sydney Morning Herald and The Age, General Findlay identified China as the main regional threat and said Beijing was already engaged in "grey zone" warfare against Australia.
Defence Minister Peter Dutton last month said a war over Taiwan could not be discounted.
China has accused Australia of meddling in its affairs over criticism of appalling human rights abuses against Muslims in Xinjiang and reacted angrily to telecommunications giant Huawei being banned from the 5G network.
Meanwhile, Scott Morrison insists the government will not jump to conclusions as Defence reviews a Chinese's company's 99-lease of the Port of Darwin.
With relations between Canberra and Beijing in the doldrums, the government has announced it will reassess the national security implications of state-owned Landbridge's lease.
The prime minister said he would not pre-empt any fresh advice on the port.
"I'm not jumping to the next step," he told the Seven Network on Tuesday.
"This is a matter for our security and defence agencies to advise if there's been any change in the security status of those port arrangements."
Mr Morrison said the Port of Darwin was a name for a specific part of the area rather than the entire port.
"It is one section. It's not where our military and defence facilities are, that's in another area," he said.
Foreign Affairs Minister Marise Payne rebuked China for striking deals with developing nations that potentially saddle those countries with debt under its Belt and Road initiative.
"We do not try to buy influence to advantage our individual countries," she wrote in an opinion piece in The Australian.
"Rather, we know that a stable, secure neighbourhood of sovereign states, in which we have networks of familiarity and trust, are good, safe places for our people to live and thrive."
Senator Payne said Australia's focus was on solving practical problems to create regional and global stability.
"Not because by doing so we expect to achieve targeted influence in individual countries that we pick off as notches on our belts."