With regional tensions rising over China's aggression in the disputed waterway, the Assistant Chief of Staff to the US Army, Tom Hanson, also suggested Australia will need to make a choice between its long-standing alliance with the United States and economic relationship with Beijing.
"It's very difficult to walk this fine line between balancing the alliance with the United States and the economic engagement with China," he told Radio National.
"At some point there is going to have to be a decision about which one becomes more of a vital national interest for Australia, in my opinion."
Ahead of this weekend's G20 Summit in China, Colonel Hanson has called on Australia to "make a statement" to demonstrate its commitment to preserving regional stability in South-East Asia.
The Australian Navy regularly conducts so-called freedom of navigation patrols in the disputed waterway but unlike the United States, it does not sail within 12 nautical miles of China's artificial islands.
"I think the Australians need to make a declaratory statement and some visible action that shows their concern and commitment to upholding a rules based international order," he said.
"Clearly China believes they have an opportunity and they feel empowered to flout that so a demonstration by Australia would be welcome."
In an opinion piece he wrote for the Australian Security and Policy Institute in May, Colonel Hanson called on the Government to make a "more visible and unqualified stance against Chinese territorial aggrandisement", warning the changing strategic landscape threatens to "marginalise" Australia.