The Papua New Guinea prime minister, Sir Michael Somare, says the opposition leader does not understand how the Australian aid programme works.
The opposition's Sir Mekere Morauta said earlier this week that Australia needed to exercise more control over the use of aid by PNG.
However, Sir Michael says Sir Mekere's statements imply that the current 200-million US dollar-a-year programme was largely controlled by PNG.
Sir Michael says Australia does not give PNG budget support any longer.
He says all aid is programme aid and is tied to specific programmes discussed by both countries but determined by the Australian government and its agency AusAID.
Sir Mekere negotiated the package when he was prime minister in the last term.