Mr Flanagan, who used to work in PNG for Treasury and is now an academic at the Australian National University, said: "The public debt levels are expected to skyrocket from the earlier estimate of 27.8% of GDP to 41.3%."

He said that in Australia, such a rapid change in the estimated fiscal position would go well beyond being termed "a budget crisis."

"PNG's official figures are much worse than at the time of PNG's last economic crisis at the end of the 1990s," Mr Flanagan said.

In his statement on Sunday Mr O'Neill criticised Mr Flangan for having connections with the PNG opposition and said he had been asked to leave PNG previously.

Mr O'Neill said: "Parliament will meet in October and will look at priorities for readjusting the budget so that we can cater for cuts through an appropriation Bill, and we will plan for 2016.

"Together we are managing the expenditure and we are attacking the revenue side making sure that people and businesses who owe the government will pay that money.

"Hundreds of millions of kina are owed to the government in outstanding taxes.

"We are now going after those taxes so that this money comes back to fund Government services."

But Mr Flanagan had warned that PNG's mid-year economic and financial outlook released last week had been a "frightening document" and the country faced a crisis unless it took painful steps towards reviewing a Budget it could not afford.

Even though PNG's growth rate is projected by the government to be more than 10% this year due to the start of the Exxon operated PNG LNG project, it is being hit by falling commodity  prices, falling resources revenue and lower than forecast revenue from asset sales.