The status quo of patchwork agreements had failed to tackle transnational crime, illegal fishing, disaster response, climate-related security, and cybersecurity issues, according to Lowy Institute's Pacific islands program director Mihai Sora.
"These vulnerabilities create space for external actors, above all China, to gain leverage in the Pacific Islands," he said said in a policy brief released on Wednesday.
The intelligence-sharing arrangement would mirror the Five Eyes partnership between Australia, New Zealand, Canada, the United States and the United Kingdom.
This would patch gaps in the system "and provide regional partners with the shared awareness needed to anticipate and blunt geopolitical coercion", Mr Sora said.
"A Pacific intelligence-sharing arrangement involving Australia, New Zealand, PNG, Fiji and other willing Pacific Island countries would help to close those gaps."
Fiji and PNG were already working to modernise their national security systems and were well-placed to act as intelligence providers, Mr Sora said.
Australia has been working to block China out of the region by signing security deals, including with Nauru and Papua New Guinea.
The security treaty with PNG includes a mutual defence clause while the pact with Nauru effectively gives Australia a veto over it entering similar agreements with other nations in areas like national security, policing or critical infrastructure.
Beijing has made "unprecedented inroads" and its secretive security pact with the Solomon Islands has raised fears of a Chinese military presence in the Pacific, Mr Sora said.
Mounting threats of organised crime, illegal fishing, cyber attacks and political unrest could be linked - directly and indirectly - to China's actions, he added.
"The region lacks a mechanism that both fosters a shared strategic approach and provides timely warnings of transnational shocks and geopolitical surprises," he said.
"Without one, Pacific island governments, and Australia as their principle security partner, risk being blindsided again by the next deal, deployment or coercive move from Beijing."
Mr Sora recommended a phased rollout starting with high-priority areas before expanding into more politically sensitive domains "conditional on proven trust and operational success".
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