Australia–Vanuatu Pact Signals New Phase in Pacific Diplomacy
By Alex Blackburn | 28 August 2025
Summary
A landmark 10-year AUD 500m deal aims to strengthen security, climate resilience, and economic modernisation, including funding for data centres and disaster preparedness, while reinforcing Australia’s influence in the Pacific against China’s growing presence.
Early project planning and climate initiatives will demonstrate progress, but unresolved issues, particularly visa-free travel and sensitivities around security cooperation, could spark domestic debate in Vanuatu, echoing the collapse of a similar 2022 pact.
If fully implemented, the agreement is likely to transform Vanuatu’s digital and economic infrastructure, entrench Australia as its primary development and security partner, and expand labour mobility ties, though balancing sovereignty with external partnerships, especially China, will remain a strategic challenge.
Australia and Vanuatu have reached a landmark 10-year agreement worth AUD 500m (USD 328m), designed to strengthen security and economic ties between the two Pacific nations. Known as the Nakamal agreement, after the traditional Vanuatuan meeting place, the deal was unveiled this week following months of negotiations. Both countries hailed the pact as transformative for their relationship, with Australia’s Deputy Prime Minister Richard Marles stressing the “shared destiny” of the 2 nations, and Vanuatu’s Prime Minister Jotham Napat describing it as a “win-win situation.”
The announcement marks a significant step in Australia’s strategy to deepen ties with Pacific island states amid growing geopolitical competition. Canberra has stepped up engagement across the region, partly to counter China’s expanding economic and security influence. Similar agreements have recently been signed with Tuvalu, Papua New Guinea, and the Solomon Islands, where Australia concluded an AUD 190m security pact in December 2024. Although full details of the Vanuatu deal have not yet been revealed, reports indicate that it will fund the construction of 2 primary data centres in Port Vila and Santo, bolster climate resilience in the low-lying nation, and enhance Vanuatu’s security capabilities - with the Nakamal agreement superseding the 2022 security agreement signed by both states. Discussions on visa-free travel for Vanuatuan citizens, once regarded as central to the negotiations, remain unresolved but could feature in a separate subsidiary agreement.
The Nakamal agreement is likely to reinforce Australia–Vanuatu relations. For Vanuatu, the deal offers much-needed financial and technical support at a time when climate change threatens the livelihoods and infrastructure of its communities. Investments in data centres and digital infrastructure also point towards economic modernisation, opening opportunities for Vanuatu to strengthen its connectivity and diversify its economy from relying on foreign aid and tourism. The security provisions, though not fully detailed, could enhance Vanuatu’s capacity to respond to natural disasters and external threats, while creating new channels for cooperation with Australian defence and law enforcement agencies.
For Australia, the agreement consolidates its role as a leading security and development partner in the Pacific. Canberra’s approach reflects an understanding of the necessity of hard and soft security in sustainable partnerships - addressing climate resilience, digital transformation, and labour mobility alongside traditional defence ties. It also signals Australia’s determination to ensure that its Pacific “family,” as Deputy Prime Minister Marles put it, remains aligned with democratic and rules-based frameworks rather than drifting towards China’s orbit. Still, the pact leaves some uncertainties. It is unclear what commitments Vanuatu has made in return, and whether elements of the agreement might spark domestic debate, as seen in 2022 when a similar proposal collapsed over security concerns. Moreover, the unresolved issue of visa-free travel could influence how ordinary Vanuatuans perceive the deal’s benefits.
The Nakamal agreement could set a precedent for deeper regional integration. If implemented effectively, it will not only strengthen bilateral relations but also serve as a model for Australia’s wider Pacific strategy. The emphasis on long-term development, highlighted by Foreign Minister Penny Wong’s remarks about the 10-year horizon, suggests Canberra is seeking enduring partnerships rather than transactional arrangements. For Vanuatu, the challenge will be to balance closer ties with Australia while safeguarding its sovereignty and maintaining space for other partners, including China, which remains active in the region. However, success will ultimately depend on whether the deal results in tangible improvements for ordinary citizens, from job opportunities under expanded labour mobility schemes to benefits from climate resilience projects. Ultimately, the Nakamal agreement marks a new phase in Pacific diplomacy - one where infrastructure, climate action, and digital connectivity are as crucial as security cooperation. If the promises are realised, both Australia and Vanuatu stand to gain not just from strengthened bilateral relations but also from a more stable, resilient, and interconnected Pacific region.
Phillip Capper/Wikimedia, CC BY 2.0
Forecast
Short-term (Now - 3 months)
The Nakamal agreement will almost certainly consolidate Canberra’s role as Vanuatu’s lead partner in security and development, particularly through early infrastructure projects (data centres, climate adaptation works).
However, with visa-free travel unresolved and benefits not yet tangible for most citizens, public perception in Vanuatu will likely be ambivalent.
Australia’s visible investment will likely deter China from taking action in acquiring influence over Vanuatu’s infrastructure and security space in the near term, but Beijing will not retreat. Instead, it is likely to pivot to other economic sectors, such fisheries or concessional loans, that Australia is less active in. This competition could benefit Vanuatu by giving it leverage to extract concessions from both sides.
Long-term (>1 year)
If the Nakamal agreement is consistently implemented, Vanuatu will likely firmly embed in Australia’s strategic sphere, with institutional cooperation spanning defence, climate resilience, and digital governance. Over time, this could evolve into a semi-formal “special relationship” in which Canberra acts as Vanuatu’s primary guarantor of security and development assistance.
Investment in data centres and connectivity is likely to modernise Vanuatu’s economy by enabling e-government, digital services, and greater integration into Pacific markets. Coupled with climate adaptation initiatives, this could strengthen resilience against natural disasters while opening new employment opportunities. Expanded labour mobility, if eventually included, would further bind Vanuatu’s economy to Australia through remittances and migration links.
Even under a deepening partnership, Vanuatu is unlikely to sever ties with China, which will remain active in the Pacific through infrastructure investment, aid, and political influence campaigns. A decade of close cooperation with Australia may reduce the likelihood of Vanuatu aligning fully with Beijing. However, domestic politics could still shift if Australia fails to deliver on its commitments or if local leaders feel sovereignty is being compromised.
