Talks with Papua New Guinea over Australia's police deployment are reported to have stalled after both nations refused to budge on the issue of legal immunity.
Citing unnamed officials, The National newspaper says both countries are threatening to call off the plan to send 230 Australian police to help restore law and order in PNG.
It reports that PNG is refusing to grant the legal immunity from PNG law that Australia is demanding for its personnel under the plan.
An official says PNG has taken offence to the attitudes of the Australian officials.
The official says PNG is furious at the arrogance of the Australians for not recognising the laws and sovereign jurisdiction of PNG.
The newspaper said PNG argued it should not have to grant such immunity because it is not a "failed state".
So far, eight Australian officials have arrived in PNG as part of Australia's $800 million pledge to help fight crime and corruption over the next five years.
While PNG Prime Minister Sir Michael Somare has accepted the Australian aid package, he has said he is opposed to granting legal immunity.
A spokesman for the Australian High Commission said the government may comment on the talks later today.