Australia hikes aid in Pacific as China pushes for influence

Australia is refocussing its foreign aid programmes in a move to win hearts and minds in the island nations of the Pacific, as an increasingly assertive China flexes its muscles in the region.

The country has pledged more than Aus$1.3 billion (US$970 million) -- its largest ever aid commitment to the Pacific -- to fund projects including an undersea communications cable to Papua New Guinea and the Solomon Islands.

The government said the reorientation of its aid priorities, revealed in a budget on Tuesday, reflected "the fundamental importance to Australia of the stability and economic progress of Pacific island countries".

Canberra and other regional capitals have become increasingly alarmed at China's push into the Pacific which could potentially upset the strategic balance in the region.

Australia's Lowy Institute estimates China provided US$1.78 billion in aid, including concessional loans, to Pacific nations between 2006-16.

And reports last month -- which were denied -- said Beijing wanted to establish a permanent military base in Vanuatu.

The extra Aus$200 million in aid, which will also go towards a new High Commission in Tuvalu, means the Pacific now represents some 30 percent of Canberra's total aid budget, which stood still at Aus$4.2 billion.

Aid agencies were quick to criticise the freeze in overall aid funding, at just 0.23 percent of national income despite a significant boost to government revenues from a pick-up in commodity prices and employment growth.

"This budget was an opportunity to show leadership and use some of the unexpected revenue to repair past damage to aid," said Marc Purcell, chief executive of the Australian Council for International Development.

In contrast, neighbour New Zealand this week announced a significant rise to foreign aid, delivering Aus$668 million in extra funding over the next four years, largely directed at the Pacific.