The federal government’s new Defence Strategy and Force Structure Review, released last week, paints a gloomy picture of Australia’s strategic circumstances. It warns of rising strategic rivalry, expanding military capabilities, and a growing risk of high-intensity conflict. But in fact, the review is not nearly gloomy enough, because it still makes a lot of unrealistically optimistic assumptions about what is happening strategically in Asia, and how Australia should be responding. That leaves the government’s new defence policy quite inadequate to the challenges ahead.