Australia’s budget on Tuesday included funds for a foreign policy enterprise that, in less interesting times, may have seemed surprising.

In the coming year, the Turnbull government plans to send a handful of diplomats to set up a high commission in Tuvalu, a Pacific nation that, at 26 square kilometres, is one of the smallest countries in the world. It has one airport, one hospital, one hotel and only one other embassy, which represents Taiwan.

The Tuvalu mission, which is to cost $8.4 million over four years, marked a noticeable shift, evident in this year’s foreign affairs budget: Australia is anxious about China’s Pacific role and is launching an island pivot. It is a move that could prove increasingly costly.

For decades, the Pacific Island nations have been subject to a bidding war between China and Taiwan, both eager to secure diplomatic recognition and United Nations votes. Tuvalu has been in Taiwan’s camp for about forty years, but this could change. Beijing could outbid Taipei (as happened last week with the Dominican Republic, which switched sides after pocketing an estimated $4 billion in Chinese loans and investments).

But China, with its horizonless approach to foreign diplomacy and trade, need not win Tuvalu’s vote to gain sway there. It could issue loans, do deals or find some place for Tuvalu in its globe-spanning Belt and Road trade and investment scheme.

And the problem for Australia, which regards these Pacific states as within its sphere of influence (meaning that it must prevent the emergence of threats to it or its allies) is that the motivations behind this Chinese dealing can be confoundingly difficult to determine. If China helps to fund a wharf in Vanuatu, is it a wharf? Or a naval base in waiting?

Nobody seems to know the answer – and this budget shows that Canberra has no intention of waiting to find out. This may seem prudent, but the risk for Canberra is that it leaps to conclusions about China’s intentions that then prove self-fulfilling.

Aside from the Tuvalu mission, the government’s budget also revealed plans to fund a high-speed internet cable for Papua New Guinea and Solomon Islands. The cost was not disclosed but has been estimated at $150 million.

This project will, as foreign affairs minister Julie Bishop stated in her press release, deliver faster, cheaper and more reliable internet to these two nearby Pacific countries and provide a much-needed boost to education and health services.

But this decision, too, was guided by concerns about China. It replaces an earlier plan by Chinese firm Huawei to connect a cable between Solomon Islands and Sydney. This was the same firm that was barred from involvement in Australia’s National Broadband Network because of concerns raised by Australia’s domestic spy agency, ASIO.

Interestingly (or confoundingly), Solomon Islands, like Tuvalu, recognises Taiwan rather than China: a point that not only affirms the limitless nature of China’s reach but also suggests why Canberra will not leave it to Taiwan to ward off Chinese advances. 

But Canberra’s Pacific focus should not become a fixation. A reminder of this came just hours after the budget was delivered, as US president Donald Trump announced his latest foreign policy gamble: his abandonment of the Iran nuclear deal. The ripple effects will reach this region and could require complex and creative diplomatic responses distinct from the Pacific reset.

Despite boosting aid to some Pacific islands, the budget freezes or reduces funding elsewhere. Aid to Indonesia – the second-largest recipient after Papua New Guinea – is being reduced from $296 million this year to $266 million in 2018–19. According to the government’s 2017 Foreign Policy White Paper, released less than six months ago, this aid funding supports “Indonesia’s efforts to tackle inequality and maintain social stability, promote tolerance and pluralism, and counter violent extremism”. These, presumably, remain valid concerns. 

The other risk of Australia resorting to chequebook diplomacy is that it may increase the costs of its Pacific engagement. Pacific nations, some of which have scant resources or revenue, have traditionally been good at playing off China and Taiwan to secure funds (and several years ago courted bids from Georgia and Russia during the Russo-Georgian War): they now have a firm incentive to entertain sensitive deals with China.

Australia has been coy about stating the reasons for its island pivot. 

For a more candid explanation, it is worth looking at New Zealand, which this week also announced that it will increase spending in the Pacific (though it will do so by increasing its aid budget by almost a third). New Zealand’s foreign affairs minister, Winston Peters, not renowned for diplomatic niceties, did not bother hiding the rationale for this largesse. “Put simply,” he said, “if we’re not there some other influence will be.”