Australia supplants China as Pacific’s biggest lender

Australia has supplanted China as the dominant lender and infrastructure investor across the Pacific as the government ploughs billions of dollars into the region through both foreign aid and loans.

The latest version of the Lowy Institute’s Pacific Aid Map also shows that Australia has also maintained its position as by far the largest aid donor in the region, with the federal government providing around 37 per cent of all development spending across the Pacific in 2024. That puts Australia well ahead of the other countries, with New Zealand sitting at 11 per cent, the US at 8 per cent, China at 6 per cent and Japan at 3 per cent.

Much of Australia’s new infrastructure funding has been funnelled through the Australian Infrastructure Financing Facility for the Pacific (AIFFP), which has already committed more than a billion dollars in loans as well as more than $850 million in grants since being established in 2019. The Lowy Institute estimates the government has signed new loan agreements worth $US2.4 billion ($3.44 billion) since 2021.

The map’s lead author, Riley Duke, said the latest data showed a “striking” shift, with China’s lending to the region continuing to fall away. “Historically this has been an area very much dominated by China. Beijing has built a lot of relationships and influence through these big loan finance infrastructure deals.” But he also said it was far too early to judge the success of Australia’s push into the infrastructure space, because it was still a newcomer.

A small number of Pacific countries, particularly Tonga, have struggled with the financial implications of Chinese loans, and the issue has generated political controversy over several years. The shift means that Australia will face growing pressure to show it can deliver major infrastructure effectively without saddling Pacific nations with unsustainable debt.