Espionage and foreign investigation laws are set to be overhauled in response to concerns about growing Chinese influence in Australia's democratic process, with Malcolm Turnbull declaring he took threats to national sovereignty seriously.
Attorney-General George Brandis plans to take reforms to Cabinet and introduce legislation by the end of the year.
The decision follows revelations by a joint Fairfax Media/ABC investigation that spy agency ASIO had briefed the major parties about the risks of accepting donations from two high-profile Chinese-Australian businessmen because it may pave the way for Communist Party influence locally.
The spectre of Russian interference is also alarming western intelligence services, with US President Donald Trump dogged by claims over ties between his campaign and administration officials with the Kremlin and that his victory was aided by the Russians.
"The threat of political interference by foreign intelligence services is a problem of the highest order and it is getting worse," Senator Brandis said.
"Espionage and covert foreign interference by nation states is a global reality which can cause immense harm to our national sovereignty, to the safety of our people, our economic prosperity, and to the very integrity of our democracy."
While ASIO is spending much of its time on counter-terrorism, Senator Brandis said it was originally established to investigate foreign intelligence activity and "a significant proportion of its resources continue to be dedicated to this work".
"Earlier this year the Prime Minister initiated a comprehensive review of Australia's espionage and foreign interference laws, which he asked me to lead," he said.
"As part of this process we are considering the adequacy and effectiveness of the espionage offences under the Criminal Code Act 1995, relevant international frameworks, and whether there are complementary provisions that would strengthen our agencies' ability to investigate and prosecute acts of espionage and foreign interference."
Mr Turnbull said the review was representative of his "proactive" approach to managing security matters.
He said he had consistently stated China should respect the sovereignty of other nations.
"Threats to our sovereignty are very serious," he said.
"The sovereignty of Australia, the sovereignty of our democratic processes free from foreign interference is a matter of the highest concern."
He said the Government continued to work on legislation banning foreign political donations.
'That's treachery'
Deputy Prime Minister Barnaby Joyce said on Tuesday morning he was very concerned about Chinese influence and backed the need for a ban on foreign political donations.
"If people are buying influence in our nation, that's treachery," he said.
The investigation by Fairfax Media and the ABC's Four Corners program revealed ASIO has separately briefed Prime Minister Malcolm Turnbull, former PM Tony Abbott and Opposition Leader Bill Shorten on the potential of Chinese Communist Party influence.
The program also revealed ASIO director-general Duncan Lewis secretly briefed the three major parties' bosses in 2015 about concerns over billionaire property developers Huang Xiangmo and Chau Chak Wing, who, along with their associates, have made about $6.7 million in political donations.
Despite the warning, the Coalition still subsequently accepted $897,960, while Labor has received $200,000.
According to the program, Mr Huang attempted to use a $400,000 donation a fortnight before the 2016 election to try to pressure Labor to change to a pro-Beijing policy regarding the militarisation of the South China Sea.
The shadow defence minister at the time, Stephen Conroy, had declared in a speech to the National Press Club on June 16 the navy should conduct freedom of navigation patrols in the South China Sea.
The comments enraged Mr Huang, and a day later NSW Labor Senator Sam Dastyari did a press conference for Chinese language media staing Australia should not interfere in the disputed region.
The program also claimed that Senator Dastyari - who quit Labor's frontbench last year after a firestorm erupted over his acceptance of donations to pay for legal and travel bills - had repeatedly assisted Mr Huang in his attempt to gain Australian citizenship. Senator Dastyari says he assists constituents in migration matters and no longer has contact with Mr Huang.
Mr Turnbull Senator Dastyari had questions to answer over his ties to China and "clearly he should".
Independent Senator Cory Bernardi called for a royal commission into the "attempted corruption" of Australia's political system while Greens leader Richard Di Natale said the revelations re-affirmed the need to clean up politics.
"The time is long overdue for a national anticorruption watchdog, a ban on corporate and foreign donations and an end to the revolving door between parliament and big business," Senator Di Natale said.
"We call on the Liberals and Bill Shorten to support our legislation for a federal ICAC, comprehensive donations reform and a 5 year ban on former ministers working as lobbyists and we'll be putting them to the test when Parliament returns."
Reports biased: Beijing's response
A spokesperson for China's foreign ministry dismissed the media reports, accusing it of being biased.
"What's told in the report is totally unfounded and irresponsible, and not worth refuting," the spokesperson said.
"I want to stress two points: first, China commits itself to conducting friendly exchanges and practical cooperation with Australia on the basis of mutual respect, equality and mutual benefit. The development of China-Australia relations has brought tangible benefits to the two peoples and served the common interests of the two sides.
"Second, China urges the relevant Australian media to abide by the professional ethics of journalism, discard ideological bias and report on China's development and China-Australia relations in an objective and fair manner.
"Your reports should encourage friendly exchanges, mutual understanding and trust, and greater cooperation between the two peoples instead of creating obstacles for China-Australia relations."
