Australia holds firm as foreign aid cuts hit Pacific
Australia remains the largest foreign aid donor in the Pacific, with other Western partners such as the US, UK and New Zealand cutting funding.
The Lowy Institute’s Pacific aid map predicts a pause in aid until 2028, with Australia’s increased infrastructure loans largely offsetting cuts from other donors.
“Australia’s steady aid spending and rapid expansion of infrastructure lending are likely to cushion the Pacific from the impact of major donor cuts,” said lead author Riley Duke.
“Australia’s dominant role in Pacific development is expanding.
“By 2028, Japan is likely to offer more than double the combined support of New Zealand, the US, France, Germany and the UK.”
The map tracked official development financing between 2008 and 2023, which found that total funds fell by 16 percent compared to the previous year, falling to around $5.5 billion in 2023.
Preliminary data and forecasts were used for the period from 2024 to 2028 after the Trump administration cut foreign aid and Australia took steps to close gaps in the Pacific.
Australia accounts for 43 percent of official development finance in the region; that’s four times as many as New Zealand, which ranks second.
China has moved from loan-financed infrastructure projects to grants and smaller community initiatives.
This has allowed Beijing to strengthen political and grassroots ties while spending remains steady.
“China now spends less than it did a decade ago, but its aid reaches much more deeply into Pacific communities. Projects are smaller but more frequent and locally targeted,” Mr Duke said.
The impact of USAID’s cuts in the region has been exaggerated by reinforcing China’s narrative of US unreliability, but this has damaged Washington’s standing in the region, said Alexandre Dayant, project leader of the aid map.
“As Washington steps back, Beijing gains something much more strategic: narrative dominance,” he said.
“For Australia, America’s withdrawal is more than just inconvenient, it leaves Canberra increasingly alone in countering Chinese influence.”
The aid map brings together data from more than 38,000 projects worth more than $80 billion from 76 development partners.
Australia is also working with South Pacific countries such as Chile, Fiji, France, New Zealand, Papua New Guinea and Tonga to better respond to natural disasters in the region.
Defense Minister Richard Marles attended the 2025 South Pacific Defense Ministers Meeting in Chile, where members decided to move forward with the Pacific response group agreed upon the previous year.
The next phase of development will create a year-round shared location model, with New Zealand taking command of regional headquarters for two years from mid-2026.
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