The clearest example of how these secure regional waters have suddenly changed into treacherous ones can be seen in Australia's relationship with Fiji. A series of coups, and the current military-dominated Government (that we don't approve of) threw up a series of diplomatic challenges. How would it be possible to criticise the army for seizing power and still maintain a close relationship with the people of all ethnic groups on the islands?

Achieving this balance has proved to be completely beyond Australia's capacity. Instead of redoubling efforts to find a new way of engaging with different constituencies, Australia is now perceived as a wishy-washy regional power, prevaricating between action and rhetoric, completely unable to decide how it should act. By trying to walk in the centre, and sticking to a delicately neutral line, it has managed to alienate everyone.

The biggest blunder was probably the heavy-handed military exercise that took place just off the coast of Fiji in 2006. This was gunboat diplomacy of the worst sort; farce that rapidly descended into tragedy when a helicopter was lost off the deck of HMAS Kanimbla. Two men died and another eight were injured. This terrible event vividly demonstrated if there was any doubt that Australia had absolutely no capacity to take any military action against the coup leader. But when Fiji's Prime Minister Commodore Frank Bainimarama visited China recently he didn't just intend to spend his time watching the Olympic Games. When he left Beijing he took a sensational present with him: a multi-billion-dollar soft loan that at one stroke has completely emancipated the islands from any reliance on Australian aid. Fiji has realised as have other Pacific islands that the emerging Chinese superpower is now ready to back its desires to engage with the region with serious money.

In a matter of weeks Australia has lost its once pre-eminent status in the region. The Department of Foreign Affairs and Trade was unable to provide even an off-the-record briefing about either the detail of the loan to Fiji, or how it might be spent. It would be difficult to find a clearer indication of just how we were blindsided by the Chinese initiative, which has left our own efforts in the region completely outflanked.

It is neither possible nor desirable for Australia to buy influence in the region as it cannot hope to match the large amounts of money that a superpower can throw at the island states. Nevertheless, where Australia has been able to shine in the past is by demonstrable goodwill, contact and genuine assistance over a long period of time.

The flagship of our defence program has been provided by the Pacific Patrol Boat program, which was announced with much fanfare by then prime minister Bob Hawke, at a Pacific Forum meeting in 1983. Originally the program was to equip eight countries with 10 patrol boats; it was such a success that 12 countries now operate 22 of the boats.

The vessels are small (just 31.5m long and operated by a crew of 19 sailors), but they're crucial for the islands. The boats represent the only way the forum countries can police their waters; by preventing illegal fishing and providing a presence for the fragile governments of the Pacific. The micro-states don't have a lot of money and as a result there have been difficulties with the program.

For example, instead of being at sea for up to 50 days a year, some of the boats have averaged less than 36 days. That's been caused by crewing difficulties and the cost of the fuel needed to operate the boats. Unsurprisingly, some of the micro-states find it difficult to obtain the hard currency required to achieve everything they'd like, but at least the program demonstrates that Australia does care for its neighbours. Instead of costing us about $12million a year, costs have blown out to nearly $50million a year.