The rising economic firepower of some Asian nations means they may not need Australian aid within a decade.
But the Pacific region will continue to need our helping hand, Department of Foreign Affairs boss Peter Varghese says.
By 2025, several major aid recipients in the region are projected to reach levels of per-capita income at which aid ceased in the past," he told the Australasian Aid Conference in Canberra on Wednesday.
Indonesia, Australia's second-largest aid recipient, is likely to become a top 10 global economy in coming decades.
Mr Varghese warned there were risks some countries may fall into the middle-income trap and not develop a broader middle class.
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"The choices that these governments make about their public spending will dwarf the impact of aid spending," he said.
Rapid economic development may spark a shift away from aid service delivery to helping governments operate more effectively with their own resources.
However, Australia was likely to have an ongoing role in the Pacific because outside of Papua New Guinea the prospects of economic growth for island nations was modest.
Mr Varghese warned the international community was under-investing in establishing rule of law and security in the early stages of post conflict.
"This under-investment has, in turn, reduced the effectiveness of investments in social and economic development," he said.
For much of the past 70 years there had been attempts to transplant the traditional British or European notions of state across the developing world.
"It may be that we need to start understanding better the nature of the social contract in the societies in our region so that the nature of the state reflects that social contract," Mr Varghese said.
The international focus on free and fair elections in developing countries may not be a silver bullet for democracy.
"It could be argued that a focus on elections alone could simply lead states to engage in rent-seeking behaviour or a spoils-of-war approach, especially if you are resource-rich," Mr Varghese said.
There were no easy answers on whether to work with corrupt governments on aid delivery and legitimise them or work around them through non-government organisations.
