The drills are taking place at a Philippine coastal, town on the disputed South China Sea, where the allies have raised alarm over Beijing's assertive actions.
The exercises are called Alon, meaning wave in the Philippine language Tagalog, and will showcase Australia's firepower.
The drills beginning on Friday will involve a guided-missile navy destroyer, F/A-18 supersonic fighter jets, a C-130 troop and cargo aircraft, Javelin anti-tank weapons and special forces sniper weapons.
Military officials said defence forces from the United States, Canada, Japan, South Korea, New Zealand and Indonesia will join as observers.
"This exercise reflects Australia's commitment to working with partners to ensure we maintain a region where state sovereignty is protected, international law is followed and nations can make decisions free from coercion," Vice Admiral Justin Jones of the Royal Australian Navy said in a statement.
The exercises will run until August 29.
Australia is the second country, after the US, with a visiting forces agreement with the Philippines, allowing the deployment of large numbers of troops for combat exercises in each other's territory.
The Philippines has signed a similar pact with Japan, which will take effect in September.
It is in talks with several other Asian and Western countries, including France and Canada, for similar defence accords.
China has deplored multinational war drills and alliances in or near the disputed South China Sea, saying the US and its allies are "ganging up" against it and militarising the region.
China claims most of the South China Sea, a busy global trade route, where it has had a spike of territorial face-offs with the Philippines in recent years.
Vietnam, Malaysia, Brunei and Taiwan also lay claims to the resource-rich waters.
On Monday, a Chinese navy ship collided with a Chinese coast guard ship while trying to drive away a smaller Philippine coast guard vessel in the Scarborough Shoal in the South China Sea.
In response, the US deployed two warships off the Scarborough on Wednesday in what it called a freedom of navigation operation to protest China's expansive claims, restrictions and its demand for entry notifications in the disputed waters.
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