Papua New Guinea is threatening to reduce the aid money it receives from Canberra, suspend all official visits by Australians or impose travel restrictions, and recall its high commissioner.
This morning's Sydney Morning Herald, says the PNG government's threat depends on what response it receives to a strongly worded aide-memoire delivered to the deputy secretary of the Department of Foreign Affairs, yesterday.
The diplomatic note demands an explanation for the bans Australia put on visits by PNG's Prime Minister, Sir Michael Somare, and its Defence Minister, Mathew Gubag, as well as its decision to cancel the next ministerial forum between the two countries.
The note gives the Australian Government a week to respond.
The paper says that if no satisfactory response is forthcoming, PNG may suspend significant elements of Australian aid.
It is also considering refusing Australia's demands for Australians to be appointed to the positions of deputy police commissioner and solicitor-general under the Enhanced Co-operation Programme.
Another measure being threatened would suspend official visits by Australia entirely, or force officials to obtain diplomatic notes seeking PNG's approval when applying for visas.