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Australia said on Tuesday that it would spend billions of dollars to improve ties with neighbouring Pacific nations and shore up its defence capabilities, as it looks to counter China's growing strategic influence in the region.

Prime Minister Anthony Albanese's second budget since his centre-left Labor government was elected in May last year has pledged A$1.9 billion ($1.3 billion) over the next five years to expand engagement with Pacific nations.

"The Albanese Government is delivering a transformational package of support to the Pacific, to respond to Pacific priorities and ensure our shared interests in a peaceful, prosperous and resilient region," the government said in a statement.

Of the total figure, A$1.4 billion will be spent on expanding Australia's defence engagement in the Pacific over the next four years and strengthening law enforcement in the region.

About A$114 million will go to supporting regional architecture while A$300 million will go to the labour schemes between the Pacific and Australia over the next four years.

Canberra has looked to build its defence capabilities amid concerns about rising global geopolitical tensions and China's growing influence among Pacific island nations.

Defence spending as a proportion of GDP will lift above its current trajectory to be 0.2% higher by 2032-33, the budget showed.

Over the next four years, the government will invest more than A$19 billion to implement the priorities identified in a defence strategic review released last month, the budget statement said.

"Ultimately, defence spending will grow over the medium term, which is in line with the strategic circumstances," defence minister Richard Marles said in a statement.

The spending includes A$9 billion for the nuclear-powered submarine programme through AUKUS, a trilateral security pact with the United States and Britain, and A$4.1 billion for long-range strike capabilities. (Reuters)