The Philippines and Australia are working towards a new defence agreement to be signed next year, their defence ministers said on Friday, as both nations seek to step up military cooperation to deal with shared security challenges in the Indo-Pacific.

The Philippine military has blamed China for a collision between two Chinese navy and coast guard ships in disputed waters.

The latest flare-up in the long-seething territorial disputes around the Second Thomas Shoal came up in closed-door talks between Philippine Defense Secretary Gilberto Teodoro and his visiting Australian counterpart,