Nauru's foreign minister, Dr Kieren Keke, has signed a Memorandum of Understanding with his Australian counterpart Stephen Smith which governs Australia's development assistance to Nauru.
In the 2008-09 financial year, Australia will provide up to 27 million US dollars in Official Development Assistance to Nauru.
The assistance supports health, education, economic and financial management and public sector capacity-building, including policing assistance.
Australia says this represents the government's commitment to help Nauru restore essential infrastructure and services and to improve economic self-sufficiency.
The deal also takes into account the closure in March of Australia's Offshore Processing Centre on Nauru set up in 2001.