Papua New Guinea and Australia have signed an agreement for Canberra to pay for the retrenchment of another 601 PNG servicemen.
The deal, which was signed in Port Moresby, will see Australia pay more than six million US dollars to cut the positions within eight months.
The funds will be used to send the servicemen and their families home from Port Moresby.
The Australian high commissioner, Michael Potts, has told the National newspaper that Australia is supporting the defence force cut because it was a home-grown initiative.
Mr Potts says the restructuring of the defence force to 2000 members would improve its sustainability in the long run.