By Adam Gartrell
AAP Diplomatic Correspondent
Papua New Guinea's leader wants Australia to rethink its aid spending in his impoverished nation, calling for a greater focus on big-ticket infrastructure projects like roads and ports.
PNG Prime Minister Peter O'Neill has also called for a shake-up in trade and investment links between the two nations.
Mr O'Neill says the PNG-Australia relationship is currently in "good shape" but has warned against complacency.
He said while he welcomed Australia's generous development assistance to PNG - totalling close to $500 million in 2012/12 - he wants to see it more closely aligned with his government's priorities.
The country is in "dire need" of better economic infrastructure like roads, ports and airports, he said.
"To effectively deliver on these priorities would require a total realignment of the aid program, from small projects in diverse range of areas to major infrastructure projects," he told the National Press Club in Canberra ysterday.
"I know there will be some in the aid program who will be horrified by this suggestion.
"But if we are going to make sure your aid genuinely supports our economic and social development and helps us guarantee our security and stability we simply must make sure it is more targeted to align with our priorities."
Australia's aid program in PNG currently focuses more on needs like health, education and governance.
China had made great inroads into the South Pacific region by funding infrastructure projects but Mr O'Neill insisted the Chinese aid footprint in his nation was very small - although he would welcome more.
Mr O'Neill said he did not want to suggest AusAID's current programs were not working, simply that they were spread too thin.
The prime minister said there was also need for a "new focus" on trade and investment. There is currently significant Australian investment in resources projects but Mr O'Neill wants more diversity.
"I would like to see a greater focus on two or three areas in our economy where there is a lack of competition and where we want to see strong investment in the near future," he said, nominating construction and agriculture.
Mr O'Neill also criticised Australian media coverage of PNG, particularly claims that his country is a failed or failing state.
"This is just simply wrong," he said, describing the claims as "harmful" and "hurtful".