The former Labor leader took aim at the prime minister, foreign minister and defence minister directly, saying China wasn't a threat to Australia.
But Mr Albanese says he will govern in the national interest by investing in both defence capability and bilateral relationships.
"My responsibility in 2023 is to give Australians the leadership they need now, not what they might have needed in the 1990s," he said.
"I am determined to make sure we do just that."
As part of the AUKUS arrangement, Australia will command a fleet of eight nuclear-powered submarines within the next three decades.
Beijing's foreign ministry spokesman Wang Wenbin attacked the deal for its "high-sounding rhetoric to deceive the world" with regards to nuclear non-proliferation.
However all three nations are confident they remain compliant with requirements, with the International Atomic Energy Agency director general content with how concerns have been handled.
Mr Wang said China was gravely concerned about the IAEA director's latest comments.
"The US, the UK, Australia and the IAEA secretariat have no right to make a deal between themselves on the safeguards issues in relation to AUKUS nuclear submarine co-operation," he said.
"Safeguards issues related to nuclear submarine co-operation should be jointly discussed and decided by the international community."
Mr Albanese said the relationship with China continued to improve.
"And that is a good thing. We are about building and investing in our capacity and also investing in our relationship," he said.
Opposition Leader Peter Dutton said Mr Keating's comments showed there was division within the Labor Party.
"There's a lot in AUKUS, not just the submarine deal, but it's also the investment in space, in many other elements of deterrence, which will be very important in the years to come," he said.
"We don't want to see bullying in our region, we don't want to see coercive activity, we don't want to see our citizens the subject of data breaches."
Both the prime minister and Defence Minister Richard Marles rebuked Mr Keating's assertion the French had approached the government with a new submarine deal, which included a delivery date of 2034 and fixed prices, but never received a reply.
Asked about the statement, Mr Albanese told 3AW radio on Thursday morning: "That's not right. I have respectful relations, including with France."
He was less definitive hours later, only telling reporters in Melbourne the government engaged in diplomacy "in good faith".
"We engage, we have a good relationship with friends, I have a good personal relationship with President Macron," he said.
State Labor premiers are also going head to head over where nuclear waste will be stored in the 2050s, with South Australian leader Peter Malinauskas saying it shouldn't necessarily be kept where the subs were built.
Victorian Premier Daniel Andrews says it should be stored where all the jobs were going, with the Osborne shipyard in Adelaide being upgraded to be able to build nuclear submarines in the future.
"If the jobs are going to a certain city maybe the waste can go to that state," he said.
"I don't think that's unreasonable, is it?"
West Australian Premier Mark McGowan said he wouldn't accept the waste, suggesting it should be stored at remote Woomera in SA.
"It's already a defence facility, it's in the middle of the desert and it was once used for nuclear purposes," he said.
The government will outline a plan on the nuclear waste storage by the end of the year.
