Prime Minister Anthony Albanese says Australia re-establishing dialogue with China is important for peace and stability in the region.
His comments came as Foreign Minister Penny Wong and a bipartisan delegation wrapped up a tour of Pacific island nations.
Mr Albanese said the government will continue to forge a better relationship with Beijing, but would stand up to protect the country's national interest.
"It is in our interest to have a better relationship with our major trading partner, but it's also in the interest of peace and security in the region, to have dialogue," he told Sky News.
Next week marks 50 years of Australia-China diplomatic relations.
The prime minister said the government would consider any invitations to a meeting with President Xi Jinping in China, noting the diplomatic freeze between the two countries had ended.
"That makes a big change from the previous term of parliament when there were there was no contact, not even phone contact," Mr Albanese said.
"That's not a healthy situation."
In a joint press conference in Palau on Thursday, Senator Wong praised the nation's government for its commitment to regional unity against the backdrop of Beijing's increasing influence in the Pacific, where she was joined by her opposition counterpart Simon Birmingham.
Senator Wong thanked President Surangel Whipps for his leadership on regional ties and climate change action.
"You understand, Mr President, the importance of regional unity that inclusive, robust regional structures ... is a way of protecting sovereignty, of enhancing choices for countries at a time when there is contest, there is COVID and there is climate change," she told reporters.
"(These are) all things which are better navigated together, stronger together."
Mr Whipps, who has previously said he would stand up to Chinese "bullying", vowed his country would not have its foreign policy dictated by Beijing.
He reaffirmed Palau's diplomatic relationship with Taiwan and his nation's policy as "friends to all, enemies to none".
"We've told China that, as friends, you shouldn't tell your friends who their friends can be ... you're not going to tell us we can't be their friend," Mr Whipps said.
"Like Australia and the United States, Taiwan has been a strong ally and partner and we feel that that relationship is important to continue to maintain.
"Nobody else should tell us that we should dissolve that relationship."
He said China had retaliated in response to Palau's position, which had affected the small Pacific island country's visitor-dependent economy.
"They've turned off the faucet, played games with us," the president said.
"I don't think that's the way you treat true friendship and true partnership."
Mr Whipps also spoke of the importance of flights between Australia and Palau, which start in February, as a measure to keep the Pacific nations connected.
Senator Wong said the delegation would visit a solar project site, financed through an Australian government program for Pacific island countries, which wouldn't add to sovereign debt.
China's development loans are mainly debt-financed, and have been criticised for trapping poorer countries with unsustainable debt they cannot pay back.
