Australia's Centre for Independent Studies says Papua New Guinea has one of the worst performing economies in the developing world,and as a result,its social sectors are in dire straits.
The Centre for Independent Studies, in a report titled "Can Papua New Guinea Come Back from the Brink?" says PNG has to turn its economy around or risk becoming a dysfunctional state.
The author, Professor Helen Hughes from the Australian National University, says labour-intensive industries such as agriculture, tourism and manufacturing, are the way forward.
And Professor Hughes says a huge lift in Australian aid - which is about to begin with the deployment of police and officials - will only succeed if PNG pursues reforms that remove what she calls the roadblocks to growth.
"If aid goes to countries that have bad economic policies, it is wasted, and past New Zealand and Australia aid to the Pacific has largely been wasted, because their domestic policies have not been targeted at growth."