The draft of a security pact between China and the Solomon Islands was first leaked on social media before elements of the agreement were "initialled" by both sides on Thursday.
The deal between the Solomon Islands and China could involve the provision of police, security forces and training. But the arrival of Chinese navy vessels has raised concerns, with Australia's military saying it would impact operations.
The head of foreign affairs' Pacific office said the government wasn't surprised at China's interest in the region, something Australia has been very conscious of.
"So it wasn't unexpected, given the interest, for this to occur," Ewen McDonald told senators.
But the foreign minister appeared to suggest the potential security pact had caught her off-guard, saying she first became aware of it "when this was a public document".
The admission came just days after Deputy Prime Minister Barnaby Joyce said it would be "naive" to think the Australian government wasn't "completely all over this issue".
"The prime minister, the national security committee, they're not fools," he said.
"We're engaged because we are not blind to the tactics of other people who are going through the process of trying to restrict our capacity of movement and intimidate us. We are putting a lot of effort into the Pacific."
Senator Payne says Australia has diplomatic representation in every member of the Pacific Islands Forum and would continue working with island nations to address the region's security needs.
"We will work with the Pacific on what is not just ... a bilateral issue with the Solomon Islands but more broadly, a regional security issue," she told Senate estimates.
"There is not one single event or ask that Australia has not been prepared to meet. In my experience that will continue to be the case."
Labor has criticised the government for tapering diplomatic relations with Pacific nations like the Solomon Islands after reports emerged its opposition leader tried to warn Australia about a potential Sino-security agreement last year.
Defence Minister Peter Dutton criticised China's aggressiveness in the Indo-Pacific.
"We need to be very cautious here because the Chinese are incredibly aggressive, the tactics that they're deploying into small island nations are quite remarkable," he told Sky News on Friday.
"(Australia) should never take peace for granted in our region but everything we're doing is designed to deter aggression and maintain that peace."
Solomon Islands Prime Minister Manasseh Sogavare described the backlash to his country's security negotiations with China as insulting.
Mr Dutton said Australia respects the sovereignty of the Solomon Islands and what it decides is in its best interests.
But there are many neighbouring countries who have rightly expressed concern about the deal, he said.
"We do respect the (Solomon Islands') sovereignty ... they are family to (Australia) so we want to work very closely with them, but we need to express an honest view about the circumstances in the Indo-Pacific," he said.
"Every effort that we're making at the moment is to try and deter any act of aggression, to try and stop China heading down a path where they could deviate from a peaceful course."
with Reuters
