Australia and the US are in talks to deepen their military co-­operation, with plans for new ­exercises on Australian soil ­including joint training with American army soldiers.

The proposed exercises with the US army would be modelled on the annual rotation of Marines through Darwin, and use a variety of military training areas including those in Queensland.

The Morrison and Biden ­administrations are also in the midst of delicate negotiations to build guided missiles in Australia using top-secret US technology, and store US weapons and equipment at Top End bases.

The US wants to store munitions and defence equipment in Australia’s Top End under a bilateral force posture review to better prepare the ANZUS allies for growing strategic threats from China.

Mr Goldman said geostrategic tensions required a more “innovative defence partnership” between Australia and the US, including co-production of precision-guided weapons on Australian soil.

He said a bilateral force posture review working group, established following last year’s AUSMIN talks, had met for the first time ­earlier this month to discuss “a wide range of contingencies”.

Mr Goldman said it was too early to provide details on any new initiatives, but said pre-positioning US weapons in Australia offered strategic advantages.

Mr Goldman’s comments follow the US government’s announcement last year of a $15m contract to build an earth-covered weapons magazine and munitions conveyor at RAAF Base Tindal, south of Darwin, as well as upgraded fuel storages.

Australia should brace for a strong response by China after reports the Federal Government was in talks about strengthening US military capability in the Northern Territory, an expert has warned.

"Australia should expect a large amount of rhetoric from state-backed media or a foreign ministry spokesman," Dr Coyne said.

Acting US ­ambassador to Australia Mike Goldman said the closer links "just makes sense" in light of the "new geostrategic context" in the Asia Pacific region.

Australia is in talks with Washington to build US-designed missiles on home soil and to store a stockpile of American munitions in the NT, as tensions between China and the West soar.

While nothing has been finalised, Prime Minister Scott Morrison announced in March the government plans to shell out $1billion to start producing hi-tech guided missiles in Australia.

#redefiningAnzus

Australia will spend A$747 million ($580 million) to upgrade four military bases in its north and expand war games with the United States, Prime Minister Scott Morrison will say on Wednesday.

An airstrip in the Northern Territory will be lengthened to support larger aircraft, firing ranges overhauled and new training facilities set up for defence personnel and U.S. marines, according to extracts of the announcement seen by Reuters.

“Working with the United States, our allies and Indo-Pacific neighbours, we will continue to advance Australia’s interests by investing in the Australian Defence Force,” Prime Minister Scott Morrison will say.

Australian Defence Minister Peter Dutton on Sunday said a conflict between China and Taiwan “should not be discounted”.