A report from Australia says the government believes it 6-hundred million US dollar aid programme with Papua New Guinea has irretrievably collapsed.
Scores of Australian police and public servants were taken home after PNG's Supreme Court ruled in May that the so-called Enhanced Co-operation Programme breached the constitution.
The Australian newspaper, The Age, reports the federal government is planning to redirect hundreds of millions of dollars earmarked for the aid initiative.
The newspaper quotes what it describes as a senior government figure as saying 'the programme is dead, it's a matter of who does the funeral rites and what follows.'
The PNG Prime Minister Sir Michael Somare says his government wants the Australians back but it won't budge from its position that the constitution shouldn't be amended to suit Australia's demand for immunity for police officers.