Australia’s Pacific Step-up is shaped by the threat of China undermining Australia’s long-standing influence. However, Australia’s foreign aid budget enabling this Step-up has been subjected to unfavourable domestic political forces.

Answers provided in early 2020 to questions taken on notice at a senate estimates hearing saw the Department of Foreign Affairs and Trade (DFAT) confirm an increased flow of aid spend to the Pacific, as well as a broad move from health and humanitarian programs toward infrastructure projects. It also revealed that this had come at the cost of deliverables in Africa, the Middle East, and parts of South and West Asia. Though, it is important to note that cuts to funding for health have been largely reversed recently.

The Australian government’s infrastructure pivot was becoming more obvious. One of its most emblematic features is the Coral Sea Cable project, which was greenlit by former Prime Minister Malcolm Turnbull. The project, costing nearly AU$200 million was funded as a grant and had to be absorbed by the already tight aid budget. It was finished under current Prime Minister Scott Morrison and seeks to deliver greater internet access and coverage in Papua New Guinea and the Solomon Islands. A similar project was funded by New Zealand for the Cook Islands in 2020, and Australia, the US, and Japan are working towards such an initiative for Palau.

In his autobiography, Turnbull pragmatically acknowledged the underpinning geostrategic purposes of the project, stating that the motivation was to ensure that “critical communications infrastructure did not fall under the control of China or any other country whose interest may not always be aligned with our own, let alone the values of Pacific Island nations.”

In mid-2019 another substantial step could be seen when Canberra announced the Australian Infrastructure Financing Facility for the Pacific (AIFFP). The $2 billion initiative is focused on boosting infrastructure developments through grant funding and loans in the Pacific. It is understood to be driven by the same considerations that underpinned the Coral Sea Cable project.

Further evidence of the infrastructure pivot can be seen in July 2021, when stories emerged that the federal government, after holding private meetings with the Biden administration, was providing support to Australian company Telstra to possibly acquire telecommunications business Digicel Pacific – who have a majority market share in a number of Pacific Island countries. This story was justified by so far publicly unsubstantiated claims that a Chinese state-owned telecommunications company was looking to acquire the strategically valuable network for economic leverage and, lesser so, espionage.

COVID-19 Pandemic Accelerating Trends

Prior to the onset of the pandemic, the federal government announced a review to measure the effectiveness of Australia’s aid spend and identify “new and emerging priorities.” However, it was shelved by DFAT as the pandemic took hold globally and was replaced with a short term and immediate regional aid and support strategy. This included an update that sought to provide a holistic policy platform for Australia’s immediate approach to tackling COVID-19 in the Pacific. The sidelining of the slower consultative departmental and parliamentary review processes effectively accelerated the strategic shifts in aid spend that were well underway. The review is not expected to be revisited till after the next federal election in 2022.

Australia, the largest aid provider in the region by some measure, has found itself competing for influence against an assertive Beijing who now also has sought to urgently shift the narrative regarding its perceived mismanagement of the pandemic through aid spending and loan offerings. In addition to increased humanitarian support, and a commitment of $130 million AUD to the global COVAX scheme, Australia has delivered on its vaccine supply promises and agreed to guarantee supply to meet all the vaccine demand needs of Pacific nations.

However, accusations have been levelled at Australia by Chinese state-run media that Australia has sought to undermine China’s vaccine cooperation efforts in the Pacific, an argument that is not limited to this case and will continue to play out for a while yet. This has been strongly denied by Australia’s Minister for International Development and the Pacific, Zed Seselja.

What’s Next?

Former high commissioner to Papua New Guinea Ian Kemish has pointed out that China’s approach in the Pacific on infrastructure can be “favoured” by many countries as it delivers a “sugar hit in terms of public relations and leaves behind a standing symbol of China’s support.” Temptation exists to engage with easier access to money, and this has only been exacerbated by the crippling effects of the pandemic. Even as the Lowy Institute’s Pacific Aid Map shows how in 2019 China’s aid spend had fallen away, author Jonathan Pryke emphasises that China “could also be building influence in the region in other ways, such as direct diplomacy and commercial dealings.”

New and emerging international forums, such as the Quad, will play a growing role as well. Hayley Channer of the USAsia Perth Centre notes that “the [Quad] framework is clearly trying to win over the region with honey rather than vinegar.”

Australia’s move towards funding infrastructure initiatives is a wise step. However, it stretches an already strained budget unless new funding is provided in addition to pre-existing allocations. Geostrategic contest via the creep of China into the region led to the Pacific Step-up, and its influence over the aid budget, has since been accelerated by the COVID-19 pandemic.

Philip Citowicki is an Australian foreign policy commentator and a former adviser to former Australian foreign minister the Hon Julie Bishop.

This article is published under a Creative Commons Licence and may be republished with attribution.