In a speech to the National Press Club on Monday the foreign minister delivered remarks outlining the nation's foreign policy outlook, warning a war over Taiwan would be "catastrophic for all".
"We know that there would be no real winners," Senator Wong said.
"Our job is to lower the heat on any potential conflict, increasing pressure on others to do the same."
People engaging in speculation about regional flashpoints should "resist the temptation" as it was the "most dangerous" of games, Senator Wong said.
She would not be drawn on whether the government could sign the Treaty on the Prohibition of Nuclear Weapons this term, despite US pressure to the contrary.
Several countries in the region have signed the treaty.
"I'm not going to set those sorts of timelines ... but we share their ambition for a world that is free of nuclear weapons," Senator Wong said.
The foreign minister said former Labor prime minister Paul Keating "diminished" himself when he attacked the Albanese government for its support of the AUKUS security pact.
Mr Keating took aim at the government in his own address to the press club in March, when he ridiculed Senator Wong for "running around the Pacific islands with a lei around (her) neck handing out money".
"In tone and substance he diminished both his legacy and the subject matter," she said in response.
In a statement on Monday, Mr Keating criticised the foreign minister for being unable to produce a "single piece of strategic statecraft" that would offer a solution for China and the US.
"Penny Wong actually went out of her way to turn her back on what she disparaged as 'black and white' binary choices, speaking platitudinally about keeping 'the balance of power', but having not a jot of an idea as to how this might be achieved," he said.
Senator Wong reaffirmed the need for businesses to diversify markets, saying it was impossible to separate economic and strategic considerations, which could have been done 15 years ago.
"We don't live in that world anymore," she said.
Asked about tackling climate change, Senator Wong said China and Australia could work together to address the issue.
"There is no effective response for humanity on climate change unless we are all in," she said.
"There is no way we can game our way out of it."
In a contested region, Senator Wong argued for a sharpened focus on Australia's values to ensure the fate of the nation is not determined by larger powers.
"It's clear to me from my travels throughout the region that countries don't want to live in a closed, hierarchical region where the rules are dictated by a single major power to suit its own interests," she said.
"Countries want a region that is peaceful and stable, and that means sufficient balance to deter aggression and coercion - balance to which more players, including Australia, must contribute if it is to be durable."
Senator Wong said Australia's strong defence forces, and working with regional partners on their own capabilities, will "change the calculus" for potential aggressors.
"We must ensure that no state will ever conclude that the benefits of conflict outweigh the risks," she said.
"Our foreign and defence policies are two essential and interdependent parts of how we make Australia stronger and more influential in the world."
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