In Brisbane, Prime Ministers Peter O'Neil, Malcolm Turnbull and Rick Houenipwela witnessed the signing of a memorandum of understanding that paves the way for the project to go ahead.
Australia is spending nearly $137 million to lay the cable and Turnbull described it as a "very practical way" of providing foreign aid.
"We spend billions of dollars a year in foreign aid, and this is a very practical way of investing in the future economic growth of our neighbours in the Pacific," he said.
In June, Australian company Vocus was awarded the $136.6 million contract to manage the construction of the 4000km cable.
