Aid & development, explained.

As the calendar clicks over to 2025, what’s in store for geopolitics? (Getty Images)

What I’ll be watching for in 2025

Lowy researchers gaze at their crystal balls – with questions, more than answers, for the year ahead.

Susannah Patton,Melanie Pill,Sam Roggeveen,Robert Walker,Mihai Sora,Hilman Palaon,Oliver Nobetau

18 December 20246 min read

Susannah Patton – Director, Southeast Asia Program

How an increasingly anti-Western sounding Malaysian Prime Minister Anwar Ibrahim will chair the Association of Southeast Asian Nations, including a planned meeting between ASEAN and the Gulf Cooperation Council, which strangely, will also include China.
Indonesian foreign policy under President Prabowo Subianto – it’s been a bumpy start to his administration with mixed signals and unfortunate early concessions to China. Will he articulate a clear vision of Indonesia’s global or regional role?
Of all Southeast Asian countries, the Philippines has perhaps the greatest reason for trepidation about a Trump presidency, because it relies so heavily on its alliance with the United States. Will the alliance remain solid, or will Beijing be able to drive a wedge between the two allies?
Can Australia and Timor-Leste strike an agreement on how the resources from the Greater Sunrise gas field will be exploited? This is the big unfinished work from the Albanese government’s Southeast Asia policies. The agreement is urgently needed to avoid Dili falling off a fiscal cliff within the next decade.

Melanie Pill – Research Fellow, Indo-Pacific Development Centre

Vanuatu led a global coalition asking the International Court of Justice to clarify state obligations and legal consequences related to climate change. An outcome is expected in January. What implications will this carry for negotiations and global climate action, especially in the Pacific, where climate change is an existential threat?
Crunch time to remain under the 1.5. degrees temperature target: At COP30 climate talks in Brazil, new climate pledges are due for all countries, amid a politically charged discussion about how to transition away from fossil fuels, plus a resolution on reaching $1.3 trillion in climate finance by 2035, and an outcome on Australia’s co-hosting bid with the Pacific for COP31.
A taskforce is working on establishing global solidarity levies, with a number of developed countries signed up in support. More work will be done across 2025 at various meetings, including the World Economic Forum, International Monetary Fund and World Bank Conference on Financing for Development, the UN General Assembly, and COP30.

A woman walks in front of a row of decorative national flags (Ariana Lindquist/IMF Photo) — Ariana Lindquist/IMF Photo

Sam Roggeveen – Director, International Security Program

A Trump “grand bargain”? Whether it’s with Russia, China or North Korea, the scope for a major diplomatic initiative that redefines the regional order is much higher than if Harris had won the presidential election.
A defining account of what AI means for the global economy and for humanity. Nothing I have read so far gives me a solid anchor-point on this topic.
Australia’s election. In 2019, I published a Lowy Institute Paper on the decline of major parties, and felt quietly vindicated by the 2022 poll, which saw Labor and the Liberal-National Coalition both go backwards in primary vote share. I expect the trend to continue next year.
A new economic consensus: The turn towards industrial policy and “friendshoring” feels like a temporary and mild divergence with the post-1970s consensus, not a decisive break. What, if anything, succeeds neo-liberalism?
The future of Twitter/X: My guess is it will thrive in 2025.

Robert Walker – Research Associate, Indo-Pacific Development Centre

Watching closely the bullish AI and semiconductor stock market. If firms can’t translate AI hype and investments into some tangible benefits for short-term profits soon, we might witness a strong market correction with small but real downside risks of another tech bubble. Not as big as the Dotcom bust, but a serious correction in the strongest performing stocks could bring the US post-pandemic growth spurt to an end – not a good thing for Trump.
As always, looking for signs of the elusive stimulus package from Chinese authorities – although I still have reservations this will ever come. If it does eventuate, it would have an upside for Australia’s muddling economic growth.
Tariff threats are different to implementing tariffs, so obviously watching Trump’s actions. If tariffs are introduced quickly, expect a new trade war. I imagine the policy shift will be much slower as Trump tries to negotiate with trade partners and that ends up dulling how serious and large the tariffs are in the end. Although he could just throw the baby out with the bath water and go full trade protectionist.

Looking for signs of the elusive stimulus package from Chinese authorities – although I still have reservations this will ever come.

Will also be watching Prabowo’s domestic economic policies closely. He has set targets of 7-8 per cent growth, which is pretty unsustainable without massive spending programs and/or deregulation, therefore putting Indonesian macroeconomic credentials at risk. Will be concerned if debt-to-GDP forecasts begin rising and the legislated budget deficit limit is allowed to be breached.

Mihai Sora – Director, Pacific Islands Program

Australia finished the year with solid diplomatic wins in the Pacific: A modicum of strategic exclusivity in exchange for an NRL team in Papua New Guinea, and a firmer, if more cynical, commitment from Nauru to run any mooted security cooperation with third countries past Australia under a new treaty. But how will China respond in the new year? Particularly if it further leverages its two best friends in the region, Kiribati and Solomon Islands, to make new inroads into Pacific security?
Will the American cavalry arrive in the Pacific under a Trump banner? US diplomats seem to oscillate between nervous assertions that “the US pivot to the Pacific really started under Trump”, implying momentum will continue, and, somewhat fatalistically, “the US resource allocation to the Pacific is so small that it may well slip under the Trump radar”, suggesting we’ll have business as usual. Which is to say, all hat and no cattle.
The 2025 Pacific Islands Forum Leaders’ Meeting in Honiara will undoubtedly draw an international crowd. Set against the backdrop of Solomon Islands’ deepening ties with China, the leaders’ meeting will be a barometer for how geopolitical tensions are shaping the region’s peak political gathering. Solomon Islands’ role as host could be pivotal in determining whether Taiwan retains its tenuous position as a development partner for the forum.

Royal Solomon Islands Police training with US and Australia troops in Honiara (James Gulliver/US Marine Corps)

Hilman Palaon – Research Fellow, Indo-Pacific Development Centre

Indonesia's downstreaming policy on critical minerals: What progress can be made in reducing reliance on China while strengthening trade and investment ties with the United States and European Union?
How feasible is it to use Low Earth Orbit satellites to enhance connectivity in remote areas and serve as a backup for undersea cable disruptions?
Neutrality: Is it the best strategy for developing nations? Rather than choosing between China and the West?
How can the next phase of digital success be unlocked globally by addressing policy issues such as competition dynamics, privacy in the digital age, cross-border data flows, and growing inequalities?

Oliver Nobetau – FDC Pacific Fellow

Papua New Guinea turned in a better overall economic performance than expected, despite a year featuring riots, a massacre, disaster, and political instability. The saving grace seems to be attributed to significant revenue gains from Australian direct budget support, and the rollout of an IMF program. Hopes are now high about major extractive projects to come online in 2025 (which were supposed to happen this year but didn’t). If these major projects progress, and absent major domestic disruptions, the PNG economy could finish strong and on track for a budget surplus in 2027.
No more votes of no confidence? In the last parliament sitting this year, a law was passed that ensures where any future vote of no confidence is attempted and fails, the government is guaranteed another 18-month grace period. This new law will prevent the opposition from sporadically attempting to vote out the government, as happened this year, and may also give the Marape government a sense of security to undertake more brazen domestic reforms.
Developments on Bougainville? The appointment of former NZ governor-general Sir Jerry Mateparae as the UN moderator might give assistance to the parties in resolving their stalemate over independence, but how soon this occurs may influence the actions of Bougainville’s leaders. If there is no progress before presidential elections due in 2025, more drastic measures could be taken, such as another declaration of independence, in a bid to score political points in the campaign.

About the authors

Susannah Patton

Susannah Patton is Director, Asia Engagement at RMIT and a Nonresident fellow at the Lowy Institute.

Melanie Pill

Dr Melanie Pill was a Research Fellow in the Lowy Institute’s Indo-Pacific Development Centre where she was responsible for progressing the Centre's work on climate change.

Sam Roggeveen

Sam Roggeveen is Program Director of the Lowy Institute’s International Security Program. He is the author of The Echidna Strategy: Australia's Search for Power and Peace (Opens in new window), published by La Trobe University Press in 2023.

Robert Walker

Robert Walker is a Research Fellow at the Lowy Institute and works as an economist in the Institute’s Indo-Pacific Development Centre.

Mihai Sora

Mihai Sora is Director of Research at the Lowy Institute, where he leads the Institute’s research agenda across programs spanning geopolitics and security, the Indo-Pacific, China, the United States, global economics, aid and development, and the international order.

Hilman Palaon

Dr Hilman Palaon is a Research Fellow at the Lowy Institute’s Indo-Pacific Development Centre. His work focuses on digital economy issues in the Indo-Pacific region, including financial inclusion, economic empowerment, and technology innovation.

Oliver Nobetau

Oliver (Oli) Nobetau is Pacific Islands Program Director at the Lowy Institute.

Topics

Aid & development China Indonesia Taiwan Russia Papua New Guinea Solomon Islands United States Southeast Asia Climate & environment Cyber & technology Trade & investment

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Susannah Patton – Director, Southeast Asia Program

How an increasingly anti-Western sounding Malaysian Prime Minister Anwar Ibrahim will chair the Association of Southeast Asian Nations, including a planned meeting between ASEAN and the Gulf Cooperation Council, which strangely, will also include China.

Indonesian foreign policy under President Prabowo Subianto – it’s been a bumpy start to his administration with mixed signals and unfortunate early concessions to China. Will he articulate a clear vision of Indonesia’s global or regional role?

Of all Southeast Asian countries, the Philippines has perhaps the greatest reason for trepidation about a Trump presidency, because it relies so heavily on its alliance with the United States. Will the alliance remain solid, or will Beijing be able to drive a wedge between the two allies?

Can Australia and Timor-Leste strike an agreement on how the resources from the Greater Sunrise gas field will be exploited? This is the big unfinished work from the Albanese government’s Southeast Asia policies. The agreement is urgently needed to avoid Dili falling off a fiscal cliff within the next decade.

Melanie Pill – Research Fellow, Indo-Pacific Development Centre

Vanuatu led a global coalition asking the International Court of Justice to clarify state obligations and legal consequences related to climate change. An outcome is expected in January. What implications will this carry for negotiations and global climate action, especially in the Pacific, where climate change is an existential threat?

Crunch time to remain under the 1.5. degrees temperature target: At COP30 climate talks in Brazil, new climate pledges are due for all countries, amid a politically charged discussion about how to transition away from fossil fuels, plus a resolution on reaching $1.3 trillion in climate finance by 2035, and an outcome on Australia’s co-hosting bid with the Pacific for COP31.

A taskforce is working on establishing global solidarity levies, with a number of developed countries signed up in support. More work will be done across 2025 at various meetings, including the World Economic Forum, International Monetary Fund and World Bank Conference on Financing for Development, the UN General Assembly, and COP30.

Ariana Lindquist/IMF Photo

Sam Roggeveen – Director, International Security Program

A Trump “grand bargain”? Whether it’s with Russia, China or North Korea, the scope for a major diplomatic initiative that redefines the regional order is much higher than if Harris had won the presidential election.

A defining account of what AI means for the global economy and for humanity. Nothing I have read so far gives me a solid anchor-point on this topic.

Australia’s election. In 2019, I published a Lowy Institute Paper on the decline of major parties, and felt quietly vindicated by the 2022 poll, which saw Labor and the Liberal-National Coalition both go backwards in primary vote share. I expect the trend to continue next year.

A new economic consensus: The turn towards industrial policy and “friendshoring” feels like a temporary and mild divergence with the post-1970s consensus, not a decisive break. What, if anything, succeeds neo-liberalism?

The future of Twitter/X: My guess is it will thrive in 2025.

Robert Walker – Research Associate, Indo-Pacific Development Centre

Watching closely the bullish AI and semiconductor stock market. If firms can’t translate AI hype and investments into some tangible benefits for short-term profits soon, we might witness a strong market correction with small but real downside risks of another tech bubble. Not as big as the Dotcom bust, but a serious correction in the strongest performing stocks could bring the US post-pandemic growth spurt to an end – not a good thing for Trump.

As always, looking for signs of the elusive stimulus package from Chinese authorities – although I still have reservations this will ever come. If it does eventuate, it would have an upside for Australia’s muddling economic growth.

Tariff threats are different to implementing tariffs, so obviously watching Trump’s actions. If tariffs are introduced quickly, expect a new trade war. I imagine the policy shift will be much slower as Trump tries to negotiate with trade partners and that ends up dulling how serious and large the tariffs are in the end. Although he could just throw the baby out with the bath water and go full trade protectionist.

Mihai Sora – Director, Pacific Islands Program

Australia finished the year with solid diplomatic wins in the Pacific: A modicum of strategic exclusivity in exchange for an NRL team in Papua New Guinea, and a firmer, if more cynical, commitment from Nauru to run any mooted security cooperation with third countries past Australia under a new treaty. But how will China respond in the new year? Particularly if it further leverages its two best friends in the region, Kiribati and Solomon Islands, to make new inroads into Pacific security?

Will the American cavalry arrive in the Pacific under a Trump banner? US diplomats seem to oscillate between nervous assertions that “the US pivot to the Pacific really started under Trump”, implying momentum will continue, and, somewhat fatalistically, “the US resource allocation to the Pacific is so small that it may well slip under the Trump radar”, suggesting we’ll have business as usual. Which is to say, all hat and no cattle.

The 2025 Pacific Islands Forum Leaders’ Meeting in Honiara will undoubtedly draw an international crowd. Set against the backdrop of Solomon Islands’ deepening ties with China, the leaders’ meeting will be a barometer for how geopolitical tensions are shaping the region’s peak political gathering. Solomon Islands’ role as host could be pivotal in determining whether Taiwan retains its tenuous position as a development partner for the forum.

Hilman Palaon – Research Fellow, Indo-Pacific Development Centre

Indonesia's downstreaming policy on critical minerals: What progress can be made in reducing reliance on China while strengthening trade and investment ties with the United States and European Union?

How feasible is it to use Low Earth Orbit satellites to enhance connectivity in remote areas and serve as a backup for undersea cable disruptions?

Neutrality: Is it the best strategy for developing nations? Rather than choosing between China and the West?

How can the next phase of digital success be unlocked globally by addressing policy issues such as competition dynamics, privacy in the digital age, cross-border data flows, and growing inequalities?

Oliver Nobetau – FDC Pacific Fellow

Papua New Guinea turned in a better overall economic performance than expected, despite a year featuring riots, a massacre, disaster, and political instability. The saving grace seems to be attributed to significant revenue gains from Australian direct budget support, and the rollout of an IMF program. Hopes are now high about major extractive projects to come online in 2025 (which were supposed to happen this year but didn’t). If these major projects progress, and absent major domestic disruptions, the PNG economy could finish strong and on track for a budget surplus in 2027.

No more votes of no confidence? In the last parliament sitting this year, a law was passed that ensures where any future vote of no confidence is attempted and fails, the government is guaranteed another 18-month grace period. This new law will prevent the opposition from sporadically attempting to vote out the government, as happened this year, and may also give the Marape government a sense of security to undertake more brazen domestic reforms.

Developments on Bougainville? The appointment of former NZ governor-general Sir Jerry Mateparae as the UN moderator might give assistance to the parties in resolving their stalemate over independence, but how soon this occurs may influence the actions of Bougainville’s leaders. If there is no progress before presidential elections due in 2025, more drastic measures could be taken, such as another declaration of independence, in a bid to score political points in the campaign.

What I’ll be watching for in 2025

Susannah Patton – Director, Southeast Asia Program

Melanie Pill – Research Fellow, Indo-Pacific Development Centre

Sam Roggeveen – Director, International Security Program

Robert Walker – Research Associate, Indo-Pacific Development Centre

Mihai Sora – Director, Pacific Islands Program

Hilman Palaon – Research Fellow, Indo-Pacific Development Centre

Oliver Nobetau – FDC Pacific Fellow

The Interpreter on Aid & development

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Australia remains the dominant Pacific aid partner

Energy insecurity remains extreme even as renewables investment picks up

China now favours frequent, small grants as big project lending subsides

Pacific aid rebounds, but growth is increasingly debt-driven

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Susannah Patton – Director, Southeast Asia Program

Melanie Pill – Research Fellow, Indo-Pacific Development Centre

Sam Roggeveen – Director, International Security Program

Robert Walker – Research Associate, Indo-Pacific Development Centre

Mihai Sora – Director, Pacific Islands Program

Hilman Palaon – Research Fellow, Indo-Pacific Development Centre

Oliver Nobetau – FDC Pacific Fellow

The Interpreter on Aid & development

Nepal’s floods will test whether loss and damage funds can actually work

Rebuilding Nepal without repeating the mistakes of 2015

PNG wants a bigger economy – Indonesia shows how

More on Aid & development

Australia remains the dominant Pacific aid partner

Energy insecurity remains extreme even as renewables investment picks up

China now favours frequent, small grants as big project lending subsides

Pacific aid rebounds, but growth is increasingly debt-driven

Subscribe to