Australia's Foreign Minister Julie Bishop says Australian assistance to Nauru is not under threat.
Ms Bishop says she has spoken with the Nauruan President Baron Waqa and he has given assurances the rule of law will be upheld.
This follows New Zealand's decision on Thursday to suspend about $US770,000 in funding for Nauru's justice sector amid long-running concerns about democratic rights and the rule of law in Nauru.
Ms Bishop says she understands legal processes involving opposition MPs are progressing and judicial processes are being followed.
She says Australia will continue to engage with Nauru until the issue is resolved.
In a statement she said Australia's development assistance to Nauru, which supports health, education and public sector management, is not under review.
Ms Bishop says Australia welcomed New Zealand's intention to continue working with Nauru to reach a point where funding could resume.
Meanwhile, the Nauru government has issued a hard hitting dismissal of New Zealand's claims about the state of its judicial sector, saying its suspension of aid funding is misguided.
The Nauru Justice Minister, David Adeang, claims the move is based on misinformation from Opposition MP Roland Kun and his wife, who he says have been lobbying the New Zealand Government.
He says any suggestion the Nauru justice system is not independent or that the rule of law is not being upheld is completely wrong and offensive to the country's judges.