Foreign Minister Julie Bishop said she is confident of Australia's strong relationship with the island nation 1750km east of northern Australia.
Labor foreign affairs spokeswoman Penny Wong said if the report was correct the base would be a "potential game changer for the region and for Australia", with security and economic implications.
"New Zealand is opposed to the militarisation of the Pacific", Jacinda Ardern said. "We are not interested in militarization, we are just not interested in any sort of military base in our country", Regenvanu told the ABC broadcaster.
But he added that it could raise sovereignty issues in Vanuatu and the local population would "need to think through" any proposal for a military base and "work out what they get out of it".
China had been more engaged with the Pacific recently and its naval ships visited Vanuatu in 2017, but those sorts of visits were normal for all nations to conduct, Ms Bishop said.
China has also faced criticism over its activities in the disputed South China Sea, where it has been building artificial islands on reefs, some with ports and airstrips. It is China's first overseas naval base, but Beijing describes it as a logistics facility.
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Fairfax reported there had been informal discussions between China and Vanuatu, but no formal offer, about a military buildup.
The head of the national security college at the Australian National University, Prof Rory Medcalf, said any foreign power establishing a foothold in the South Pacific would represent "a long-term failure of Australian policy".
"The government of Vanuatu has said there is no such proposal, but it is a fact that China is engaging in infrastructure investment activities around the world", Bishop told Australian Broadcasting Corporation radio.
But Vanuatu's high commissioner in Canberra, Kalfau Kaloris, was quoted as saying his country's foreign ministry was "not aware" of China's determination to build a permanent presence on the island. A Chinese embassy spokesman even called the idea "ridiculous".
Defence experts said a military base on Vanuatu, which would likely be followed by bases elsewhere, would allow the PLA to challenge the US' post-war dominance of the Pacific, which is strongly supported by Australia and has been seen as a cornerstone of Australia's security.
Such a Chinese presence would make the seas "more crowded" for the Royal Australian Navy, though professional forces could manage this safely and it would not stop Australian or United States forces operating where they needed to, he said.
"If it turns out there are one or more Chinese bases. what it has the ability to do is challenge, and make much more challenging, American access into the region", said Dr Charles Edel, a former adviser to former USA secretary of state John Kerry.