China has ended economic dialogue with Australia while also accusing the country of having a "Cold War mindset."
Australia has a fraught relationship with China. Relations broke down after Australia sided with the U.S. and followed its ban of Huawei and its call to probe China over the origins of the coronavirus.
Last year, China imposed sanctions against Australian imports which led to tit-for-tat economic measures.
On Friday, China accused Australia of intentionally derailing talks and threatening it with war.
"Recently, some Australian government officials launched a series of measures to disrupt the normal exchanges and cooperation between China and Australia out of Cold War mindset and ideological discrimination," China's National Development and Reform Commission said.
Earlier in the week, top generals in Australia said that there was a "high likelihood" that the country would go to war with China. Home Affairs secretary Mike Pezzullo echoed the sentiment and said the "drums of war" were beating.
Last month, Australia's Defense Minister Peter Dutton said war with China over Taiwan can't be "discounted" and Australians have to be "realistic" about the current situation.
Foreign Ministry spokesman Lijian Zhao responded to the comments and said "individual politicians in Australia" were the ones creating trouble because of their "selfish interests."
"We urge certain individuals in Australia to shake off the Cold War mentality, stop making irresponsible remarks and act in ways that are conducive to regional peace and stability rather than the opposite," Zhao said.
Analysts are pessimistic the spat would lead to direct military confrontation as the two nations depend on trade with each other. China remains Australia's largest two-way trading partner.
Reports from CNN analyzing the escalating conflict believe Australia would be foolish to face China head on. China's defense budget of $210 billion is six times that of Australia.
"For a country with a much smaller military and no nuclear weapons, Australia is suddenly hinting an awful lot about a war with China," CNN said.