UPDATE: Australia has solidified its position as the largest foreign aid donor in the Pacific, even as funding from major Western allies like the United States, United Kingdom, and New Zealand sharply declines. New data from the Lowy Institute reveals that Australia’s foreign aid spending will plateau through 2028, primarily due to its expanding infrastructure lending, which effectively cushions the Pacific region from significant donor cuts.
According to lead author Riley Duke, “Australia’s steady aid spending and rapid expansion in infrastructure lending looks set to cushion the Pacific from the impact of major donor cuts.” The report suggests that by 2028, Australia is projected to deliver more than double the combined support of other major donors, including Japan, New Zealand, France, Germany, and the United Kingdom.
The analysis indicates a 16 percent dip in total aid funding to approximately $5.5 billion in 2023, compared to the previous year. This decline follows significant cuts to foreign aid under the Trump administration, as Australia has stepped in to fill the gaps left in the Pacific.
Currently, Australia accounts for 43 percent of official development finance in the region, a figure that is four times higher than New Zealand in second place. Meanwhile, China has shifted its focus from large-scale, loan-financed projects to smaller community initiatives and grants. This strategy has allowed Beijing to strengthen its political ties while maintaining a stable spending level.
Duke elaborates, “China now spends less than it did a decade ago, but its aid reaches far deeper into Pacific communities. Projects are smaller but more frequent and locally targeted.” The recent cuts from USAID have not only been overstated but have negatively impacted Washington’s standing in the region. According to project lead Alexandre Dayant, “While Washington steps back, Beijing is winning something far more strategic: narrative dominance.”
For Australia, the diminishing role of the U.S. is more than a mere inconvenience; it leaves Canberra increasingly isolated in its efforts to counter Chinese influence in the Pacific. The aid map collates data from over 38,000 projects, amounting to more than $80 billion from 76 development partners.
In addition to its aid efforts, Australia is collaborating with South Pacific nations, including Chile, Fiji, Papua New Guinea, and Tonga, to enhance disaster response capabilities in the region. Notably, Defence Minister Richard Marles attended the 2025 South Pacific Defence Ministers’ Meeting in Chile, where members reaffirmed their commitment to advancing a Pacific response group established the previous year.
The next phase of this initiative aims to create a shared operational model, with New Zealand taking command of the regional headquarters starting mid-2026. This collaborative defense effort signifies a critical move to fortify the Pacific region against emerging challenges.
As these developments unfold, the urgency for Australia to maintain its leading role in Pacific aid and infrastructure is clear. The implications of shifting donor dynamics will be felt across the region, making this a pivotal moment for both Australia and its Pacific neighbors. Stay tuned for more updates as the situation develops.
