The talks produced plans to further increase defence ties, with priority given to the training for a US Marine task force in the Northern Territory - due to begin next month - increased use of Australian bases by US warplanes, and more US Navy access to the major Australian naval base near Perth. This could involve operations by nuclear submarines.
The developments, yet to be finalised, will be part of force posture reviews by both the US and Australia that will see a greater American focus on the Pacific and Indian Oceans.
Defence planners in both countries have said the Indian Ocean is becoming more important to their maritime strategies and, while denying that emerging plans are targeted at China, Beijing's growing power has increasingly concerned Canberra and Washington.
Concerns focus on potential threats to freedom of navigation in some of the world's most important sea lanes.
The US is in the process of reviewing its military presence, including the future of the major naval base on the Indian Ocean island of Diego Garcia, leased from Britain under an agreement that expires in 2016.
Speculation that the Cocos Keeling Islands may be developed as a reconnaissance and surveillance base has been fuelled by a report in the Washington Post.
"US and Australian officials said the atoll could be an ideal site not only for manned US surveillance aircraft, but for Global Hawks, an unarmed, high-altitude surveillance drone," the newspaper said.
"Aircraft based in the Cocos would be well positioned to launch spy flights over the South China Sea."
The islands, an important communications centre in both world wars and a key bombing base in the campaign against Japan, are at present a tourism backwater with a population of about 600. There is one airfield connecting the islands to Perth.
Smith told ABC radio that a new base would require a substantial upgrade of the airport's infrastructure costing between A$75 million and A$100 million ($91-$121 million) - "but no one is proposing or suggesting that that occur in the first instance or in the near future".
Both the US and Australia plan to operate new maritime versions of the Grumman Global Hawk spy drone, although Canberra has deferred its introduction from next year to 2016.
Intended to extend the capabilities of the new twin-jet P8 Poseidon patrol aircraft that will replace the present P3C Orions, the seven Global Hawks planned by Canberra will be able to cover huge areas of the ocean in sweeps of up to 30 hours.
But Smith said a base on Cocos Keeling was a long-term prospect.
"I think people have to be very careful not to get ahead of themselves here, whether they're officials or whether they're commentators," he told the ABC.
"Our priority in this area in terms of the US global force posture review and our own force posture review is what we're doing with the rotation of the Marine task force in the Northern Territory, what we're proposing to do in terms of greater US air access to our Northern Territory or northern Australia airfields, and then greater naval access through our Indian Ocean port as the Indian Ocean and India are on the rise."
Smith said the use of Australian facilities by the US was a logical extension of an alliance that had served the nation for more than 60 years.
"It also reflects the ongoing engagement - and indeed proposals to enhance engagement - by the United States in the Asia Pacific region."
COCOS KEELING ISLANDS
What: Australian territory in the Indian Ocean.
Geography: The 27 low-lying coral atolls 2800km off Australia's west coast are within strategic reach of one of the world's busiest shipping routes and the South China Sea.
Population: About 600 people.
Defence drawbacks: Infrastructure upgrades could cost between A$75 million and A$100 million.
