Australia’s $4 billion taxpayer-funded Pacific bank has signed a deal to upgrade one of Papua New Guinea’s major ports and lock out Beijing, as China accused the Albanese government of provocation following a confrontation between a Chinese fighter jet and Australian surveillance plane.

The incident involving the release of flares within 30 metres of the Australian P-8 aircraft, coupled with the separate arrival of three Chinese warships off Queensland, has emerged as a flashpoint in bilateral ties.