Mr McCully was commenting during a 6.30pm speech to more than 100 people on the first day of the University of Otago's latest annual Foreign Policy School, this year devoted to ''Pacific Geopolitics in the 21st Century''.
Among several topics under consideration are the growing roles of both China and the United States in the Pacific and prospects for the return of democracy to Fiji, where elections are due to be held next year.
Mr McCully said he was ''pouring cold water'' on the idea of major difficulties emerging from the growing engagement of the US and China in the region, and was not being kept awake at night by talk of ''potential conflict between the Great Powers''.
The United States was, in fact, ''gradually and steadily'' increasing its engagement with the Pacific and this was nothing to be concerned about.
China and New Zealand were already working together over some Pacific development and China had signalled it wanted to have further talks to increase such co-operative involvement, he said. New Zealand's Pacific setting was of major importance to the Government and to himself, Mr McCully said.
He had previously commented on the ready availability of ''soft loans'' to Pacific nations from China, but said this matter was already proving self-correcting.
Some countries had already ''maxed out'' their loan capacity and some external funding bodies were declining to provide further credit because of existing debts, he said.
Collaborative approaches were needed among Pacific nations to greatly increase the availability of renewable energy, and to overcome challenges involving fisheries, and to provide more affordable transport solutions, including aviation.
In response to a question from Prof Robert Patman, of the Otago politics department, Mr McCully said that both China and the United States appreciated the positive role that New Zealand could play, including in fostering co-operative dialogue in the Pacific. The university's 48th Foreign Policy School is being held at St Margaret's College and ends tomorrow.
