While there is much theoretical study of the evolution of border disparities, there is little empirical analysis of development asymmetries across border regions, and their causes or solutions. Often disparities among countries hinder the ability of transboundary agreements and other development initiatives to generate sustainable development. This study quantifies development progress amongst communities in Australia and Papua New Guinea (PNG) covered by the Torres Strait Treaty, 26 years after its inception. Using regional census data from 2011 we found contrasting patterns of human development, with markedly poorer education levels in PNG. This asymmetry was confirmed by a Human Development Index of 0.735 for the Torres Strait and 0.270 for the neighbouring province in PNG. From a survey of 1089 PNG households in 2012–2013 we calculated that 63% of people in the villages were multidimensional poor, and 28% were ‘vulnerable to poverty’. Poverty was positively correlated with poor health, which has implications for the control of tuberculosis in the region. While Treaty provisions may have reduced poverty amongst some PNG villages closest to Australian communities, development initiatives by Ok Tedi mine in compensation for its environmental impacts have not. Our study highlights the causes of the sustainable development gap between PNG and Australian communities, and the necessity for transboundary agreements and institutions to have the capacity to adapt to their unintended consequences and rapid global change.