Yes, terrorism in Australia is horrible. But we also need to talk about the threat of war with China

A photo released by China's Xinhua News Agency shows anti-surface gunnery fired from China's Navy missile frigate Yulin during exercises in the South China Sea.

The nation's attention in the past fortnight has been riveted by the shooting of Curtis Cheng by a teen extremist. It is a horrible event. The prospect of school kids being radicalised to murderous degrees beneath the radar of police is chilling.

Whatever path we take could change life as we know it 

But the security threat posed to Australia of small terror plots or lone-wolf attacks, while real, is neither existential nor potentially catastrophic. It is not going to bring down our country.

Another security issue meanwhile has been rising in temperature with far less public attention than it deserves – the US Navy is belatedly preparing to challenge China's provocative island-building in the South China Sea.

These artificial islands, which host air strips and ports, could be used militarily to project Chinese power far beyond its mainland. This is a huge, long-term headache for Australia, which needs to decide what role it will play in the tussle between great powers whose rivalry will shape the 21st century.

It may not create bold headlines every day but it represents a challenge that requires hard yards from a generation of our top government officials. For a good illustration of where our strategic planners see the long term challenges, look at the upcoming Defence White Paper. While our troops are regularly being deployed to the Middle East as part of the broader fight against terrorist organisations, the backbone of the defence blueprint will be tens of billions of dollars spent over coming decades to create the most powerful Royal Australian Navy the nation has ever had.

To be clear, we are not talking here about ranking threats or saying which is more important, terrorism or strategic competition in Asia. The issue rather is that we tend to focus in our public discussion blinkeredly on dangers that are immediate and visceral rather than grappling with longer term, more complicated challenges.

Today's terrorism plots have a high likelihood of happening but a low impact in the number of lives they claim.

War with China is comparatively unlikely but would be catastrophic if it happened.

Equally if we walk too softly in order to avoid potentially escalatory conflict with China, that too may come at great cost. The test of wills in the South China Sea is not about rocks, reefs and tiny islands, it is about the rule of law and the stability of the international system.

If the island-building goes unchallenged, a new baseline will be set for further transgressions. The rules-based system that has underpinned Asia's staggering rise in prosperity, most notably China's, will give way to an order in which might makes right.

Whatever path we take could change life as we know it.

Washington's response, which reportedly could take place within days – apparently without Australian involvement for now – may be to send a naval ship or group within 12 nautical miles of one of the islands, signalling that the US does not recognise Beijing's concocted territorial claims.

It is a fraught exercise that needs to be carefully calibrated to send a message to Beijing without giving the PLA Navy a reason to confront the US physically and risk an escalation. That is inherently unpredictable.

Labor's David Feeney, who recently attended the recent Australian American Leadership Dialogue in Hawaii where these issues were discussed in depth, offered as just one example a scenario in which the US Navy ship is challenged by a Chinese "white hull" civilian vessel.

"I ask you to imagine this: a US warship or task group with partners, maybe Australia, sails into waters that are claimed as sovereign territory by China. China confronts them with white hulls, say customs ships. They are civil, not military, vessels but they are nonetheless very capable. Imagine the optics. Are we really going to run down a customs vessel?"

China has so far shown the initiative and forced the US and its allies into a position where they face such dilemmas as these. Feeney says that the prevailing view he hears in defence circles is that "it's over and China has won" this round.

That is deeply worrying. What's happening out there on the remote seas in Asia is big and serious. We should be talking about it more. By David Wroe National security correspondent Photo: AP