Australia's foreign aid budget cuts could backfire in the Pacific region, a leading think tank warns.

According to a new report from the Australian Strategic Policy Institute, cutting aid by $11 billion over four years to help offset a boost to defence spending may prove counterproductive.

The federal government insists the trimmed down aid budget will prioritise the Asia Pacific region however, cuts are expected to programs across the board.

Dr Karl Claxton argued in the report that to avoid the likelihood of leading costly interventions in the Pacific, Australia had to lift its game on preventing friction in the first place.

"Reducing deprivation and inequality as potential sparks for violence can deliver strategic benefits," Dr Claxton said.

Australia's stabilisation mission in 2003 to rescue the Solomon Islands cost $2.6 billion over 10 years.

Kiribati, Vanuatu, East Timor, Solomon Islands and Tuvalu are on the United Nation's 2014 list of least developed countries.

Dr Claxton said the aid budget should be restored as soon as circumstances permit but in the meantime the economies of struggling Pacific island nations could be boosted by the expansion of Australia's seasonal workers program.

The report also called for Australia to adopt a smorgasbord rather than one-size-fits-all approach to Pacific trade negotiations and to coax Fiji back into regional bodies.

Dr Claxton said Australia's increased focus on pressing global issues shouldn't be at the expense of attention on security and development challenges closer to home, where there's the greatest ability to make a difference.