Military troops from the Philippines, the United States and Australia have staged a live fire drill in waters facing the South China Sea.

The exercise on Wednesday saw the joint force unleash a barrage of high-precision rockets, artillery fire and airstrikes.

They also sank a mock enemy ship, a decommissioned tanker made in China, that was approaching Philippine territory.

The drill was conducted off the coast of Ilocos Norte province as part of the annual Philippine-US "Balikatan" exercise which got underway on April 22.

The Australian Air Force also participated in Wednesday's training.

During the two-hour live-fire drill, the Philippine navy's flagship frigate launched an anti-ship cruise missile for the first time. Manila acquired the missile system from South Korea three years ago under the military's modernization drive.

A Philippine official says the exercise is aimed at sending a message of deterrence while promoting peace and stability in the region.

The drill is being held at a time when Beijing is increasingly flexing its muscles in the contested South China Sea. In the latest incident last month, Manila says Chinese coast guard ships fired water cannons at Philippine vessels, causing damage.