A blue water Navy, not proximity, is what is required to invade and control Australia. India and Indonesia are a non-starter given that prerequisite, and China is probably 10-20 years away from being able to accomplish this (if they chose to do it). Plus the Chinese are more concerned with the South China Sea and regional naval superiority when compared to invading continents.
Also, Pine Gap. All of the China is coming and the US is going to leave us hanging out to dry hubbub conveniently ignores this fact.
Current navy size seems less relevant than what it could be if they were planning to invade Australia. If I decided to invade an island nation my first step would be to build enough boats.
All thats needed is to get several thousand armed people to take control of Canberra, Sydney and Melbourne parliament and hold all the politicians under lock and key. And whilst Australia is too stunned to work out what has just happened, land ships and troops in Sydney then Melbourne.
China is a very real threat to Australia. They are already unhappy about how close we are to the US, our freedom of navigation routes through the South China Sea and our perceived anti-China rhetoric around national security.
And just to show you that they aren't messing around. They just funded the development of a port in Vanuatu which many have suspected as being suitable for future naval purposes:
I think this would be a huge miscalculation for China. First it would enrage Western governments, especially the US and UK. Second, I'm not completely convinced China would win. Australia is a very large country, with a population that has basically nothing in common with the Chinese. It would be very difficult to stop guerilla warfare even if they controlled the cities. Plus, China knows how ridiculously complicated this kind of stuff is to win in the long run. Look at Vietnam and Korea. I think China would be more likely to attempt stronger alliances now that US leadership is basically gone for 2-6 more years.
Also worth noting that the force needed to occupy a country is mainly proportional to the population.