Fiji's military leader Commodore Frank Bainimarama expelled Australia's last high commissioner to Fiji in 2009 - a move reciprocated by Australia.
However, Foreign Minister Bob Carr has announced Australia and Fiji will once again exchange high commissioners.
The director of the ANU's Centre for the Contemporary Pacific, Professor Brij Lal, says they are steps in the right direction.
But he questions the regime's commitment to democracy when the country does not even have a free press.
"It's important to measure words against deeds," he said.
"Once Australia has embraced the Fijian regime, it will be very difficult for it to disengage and to take a more objective stance."
The Fijian regime says it will hold elections in 2014 and is preparing to consult on a new constitution and to register voters electronically.
"It would have been prudent on the part of Australia to see some of the fruits of those initiatives before going as far as it has done," Professor Lal warned.
New Zealand has also announced it will re-establish ties with Fiji, while both countries will move to relax sanctions.
The Australian Council of Trade Unions has been lobbying Senator Carr over Fiji's restrictions on workers' rights.
"We have seen some token gestures but our experience with the Fiji military regime is that they make a lot of promises that they do not follow through," ACTU president Ged Kearney said.
"So we would like to see some very serious changes in those human rights issues in the very near future for us to fully believe that there's going to be any great change."
She is equivocal about restoring ties with Fiji.
"I've had a long discussion with the Foreign Minister and I think he really believes that these will help the situation," Ms Kearney said.
"We're willing to wait a short while and see if indeed they make any progress, but we are a little sceptical of that."
Former foreign minister Alexander Downer has backed the Federal Government's move.
"Just having an endless stand-off, it's not achieving anything," he said.
"There are times when you have to speak to people you don't necessarily approve of, you don't necessarily approve of what they've done, but you give yourself the opportunity to explain your case to them."
But even as diplomatic relations with Fiji were thawing, the country's last democratically elected prime minister, Laisenia Qarase, was found guilty of corruption.
The case was prosecuted by Fiji's Commission against Corruption, which established by Commodore Bainimarama - the man who ousted Mr Qarase.
Mr Downer said that illustrates how much work there is to do.
"It disappoints me if politicians, or at least former politicians, former political leaders in Fiji are going to continue to be harassed," he said.
"That's the sort of conversation we should have with them."