There’s no reason to be militarily afraid of China even with them having a more powerful military than us. Geopolitically a war between us wouldn’t benefit either and any such war would be entirely unwinnable for whoever initiates.

Escalations between our countries with regards to naval exercises are worrying, however the Australian government could if they wanted to diplomatically end any live fire exercise close to Australia by Chinese warships. All they would have to do is promise to stop sailing warships through the South China sea and the Taiwan strait under the pretext that China would stop its exercises near Australia too. The Australian government isn’t making that decision because it believes its interests in South East Asia are more important than live fire testing off the coast. Probably because they can leverage that fear amongst the gullible and cowardly to garner support for military spending and draw attention away from movements insisting on real change and building a more equal Australia.