From the late 1990s and especially in the aftermath of the September 11, 2001, terrorist attacks, the South Pacific was characterised as an ''arc of instability'', at risk of penetration by terrorists and transnational criminals.
Today, the waters are not so choppy. Last year, the stabilisation mission in East Timor withdrew. This year the small military component of the Regional Assistance Mission to Solomon Islands will return home, although an Australian policing and governance presence will remain.
Last year, Papua New Guinea and East Timor held relatively peaceful elections, and both have formed fairly stable governments. The performance of the Solomon Islands and Vanuatu governments has improved. Last year the military regime in Fiji confirmed elections will be held next year, and created a commission to draft a new constitution.
With the level of threat and instability in the South Pacific decreasing, it would be tempting for the upcoming Defence Department white paper to consider shifting Australia's focus from the region. This would be a mistake. The region remains vulnerable.
There are two key risks which Australia must focus on: strategic competition between China and the US, and the pressing risk that Chinese activities in the region may intensify state weaknesses.
Presently, the South Pacific is marginal to China's strategic calculations, but China may develop an interest in the South Pacific as part of its ''island-chain'' strategy. China has also sought access to ports and to undertake signals-intelligence monitoring, most obviously via the satellite tracking station it built in Kiribati in 1997. US diplomats are reported to think China wants ''to demonstrate big-power status in the region''.
The South Pacific's natural resources are also attractive to China, as is the area's role in competition for diplomatic recognition with Taiwan. In 2009 China pledged aid of $US26.67 million, plus loans of $US183.15 million to the region. In 2010 China encouraged investment and trade to the South Pacific worth $US3.66 billion - a 50 per cent increase from 2009.
Simultaneously, the US is undertaking a pivot, or reorientation, to the South Pacific in efforts to catch-up with Chinese influence. The US has a long association with the Micronesian sub-region, the defence of which is considered vital for sea lines of communication. Lately, the US has resumed a more active diplomatic role in the South Pacific. In 2011, it opened the Pacific Island Regional office of the US Agency for International Development in Papua New Guinea and increased its aid to an estimated $US300 million.
The unfolding situation has strategic implications for Australia.
The possibility that China and the US will compete through the build-up of military forces is low. However, if they did, this could see Australia faced with a difficult, and potentially alienating, choice very close to home.
The more serious implication arises if China's aid and other interests (which may increase if it competes with the US), exacerbate the weakness of South Pacific states. Given Australia is the largest aid donor and has undertaken several costly missions to ensure the South Pacific's stability, it is in Australia's strategic interest to ensure the region does not again emerge as an ''arc of instability''.
The Defence Department white paper should recognise the South Pacific may be an ''arc of opportunity'' where Australia can encourage co-operation with China, and between China and the US.
Co-operation could occur first via aid projects and military exercises, build to joint humanitarian and disaster relief operations, and later to joint military operations.
The South Pacific offers the opportunity to develop these proposals on a relatively small and low-risk scale. The lessons learnt and the confidence gained may benefit broader Asia-Pacific stability.
Dr Joanne Wallis researches and teaches on the South Pacific at the Australian National University's college of Asia and the Pacific.
This article is edited from a paper in the Centre of Gravity series published by the ANU strategic and defence studies centre.