The Taiwan issue is purely China's internal affair and involves the country's core interests, and no external forces are allowed to interfere, he said, adding that the root cause of the current tension in cross-Strait relations is that Taiwan's Democratic Progressive Party (DPP) authority refuses to recognize the 1992 Consensus that embodies the one-China principle, and colludes with external forces to continuously seek "independence".
Minister Dutton said given the militarization of bases across the region and animosity between China and Taiwan, conflict "should not be discounted", but Australia will work with its allies to try to maintain peace in the region.
In response to Pezzullo's statement, Home Affairs Minister Karen Andrews said "the overarching message from government is that we need to be alert but not alarmed".
Australian officials and lawmakers were split on Pezzullo and Dutton's comments amid rising tensions with Beijing.
Pezzullo noted that this year marks the 70th anniversary of Australia's defence treaty with the United States.
Australia must reduce the likelihood of war, "but not at the cost of our precious freedom", Pezzullo said.
Military analysts, meanwhile, have warned that Australia is woefully underprepared for any potential conflict, particularly against China.
What did China say about Taiwan?
Speaking in Beijing, Chinese Foreign Ministry spokesman Wang Wenbin said he hoped Australia was aware of the sensitive nature of the issue and could "avoid sending any wrong signal to Taiwan independence forces".
"For us, we want to make sure we continue to be a good neighbour in the region, that we work with our partners and with our allies, as nobody wants to see conflict between China and Taiwan or anywhere else".
What is the rift between Australia and China?.
China - one of Canberra's biggest trade partners - has since imposed tariffs and other restrictions on certain Australian exports.
Foreign Minister Marise Payne announced last week that Victoria's Belt and Road Initiative agreement with Beijing had been cancelled under new foreign veto powers.
Beijing's military buildup, combined with moves to fortify its hold on disputed territory in the South China Sea, has raised fears that it could look to deny the USA military access to waters off China's coastline.
The federal government has earmarked nearly one billion dollars to upgrade military training bases and ranges across Australia's Top End.
Beijing said the decision would "bring further damage to bilateral relations and will only end up hurting" Australia.