Top Australian ministers are confident a security treaty can be signed with Vanuatu after the deal was scuppered days before it was set to be signed.
Prime Minister Anthony Albanese was expected to ink the $500 million Nakamal agreement when he visited Vanuatu before the Pacific Islands Forum leaders' meeting.
But his counterpart Jotham Napat said some of the wording needed further discussion, particularly around other nations being able to fund the nation's critical infrastructure projects.
In August, Defence Minister Richard Marles was one of three senior ministers to visit Vanuatu, where negotiations on the treaty were supposedly finalised before the prime minister's visit.
Mr Marles, who doubles as the deputy prime minister, said Australia understood negotiations took time.
"But progress is happening in our relationship with Vanuatu, it is being utterly transformed," he told reporters in Sydney on Wednesday.
Pacific Minister Pat Conroy, who accompanied Mr Marles to Vanuatu, said the two nations had agreed on the principles of the pact.
"The important thing here is that we respect the sovereignty of Vanuatu and we respect their need to work through their processes to get this finalised," he said.
Mr Napat did not mention China by name, but Beijing has provided a substantial amount of development funding as it builds a strategic foothold in the island nation.
The nature of the wording has not been made public, but similar agreements Australia has inked with other Pacific nations restrict them from entering into security agreements or critical infrastructure deals without Canberra's sign off.
This includes areas such as telecommunications, banking, energy, ports and aviation.
Mr Conroy has pushed more broadly for development funding reform in the Pacific to ensure local Pacific islanders are employed to complete infrastructure projects.
Such a move would hinder Chinese state-owned enterprises from winning contracts and importing Chinese workers over hiring local labourers.
Foreign Minister Penny Wong said the bilateral pact would be "certainly in Vanuatu’s interest in terms of development and also in the interests of Australia in the broader region".
Senator Wong said Australia had "lost the opportunity to be the only partner of choice" when asked about Chinese influence in the Pacific, blaming her predecessors for creating a diplomatic vacuum Beijing exploited.
She said Australia would continue to engage with Port Vila to reach an agreement that "works for them and works for the Australian people".
"There's obviously still issues that need to be resolved, we're willing to engage on those issues," she said.
Vanuatu pushed for visa-free travel arrangements, but Mr Napat acknowledged that would be dealt with under a secondary agreement.
Senator Wong said the government was "always very conscious of the importance of managing that appropriately" when asked if Australia was willing to give concessions on that issue.
