It's no like he's asking for more of what they already have. Nuclear submarine are strategic offensive weapons, and quite honestly does no fit with Australia's status as a middle power and will likely be taken noticed by Indonesia, the other middle power in the region.
All of those talks are amid a major ongoing policy debate in Australia about further strategic direction the country's going to take. If Australia does go ahead with the policy shift to build up a massive military with nuclear submarines and aircraft carriers (which is also being debated), it will change the strategic landscape in the region and may present China with an opportunity to forge closer military relationship with some of Australia's neighbors.