It called for an overhaul of the way Australia delivers aid in the county, saying there was an over-reliance on technical advisers — which PNG has also criticised — to build the capacity of government personnel and institutions.

It also said Australia should ­instead ramp up its support for “progressive reformers” to agitate for change in PNG.

The critique comes at a sensitive time in the Australia-PNG ­relationship, with PNG Prime Minister James Marape calling for up to half of Australia’s aid to the country to be poured into the nation’s ailing budget.

The Morrison government has rejected Mr Marape’s request but is examining a potential loan, amid suggestions by Mr Marape that he could seek billions of dollars from China.

DFAT’s 2018-19 Aid Program Performance Report said PNG’s annual spending on health was just $50 per capita — 100 times less than Australia’s.

It said PNG also needed an ­estimated $1bn more each year for the next decade to invest in basic education — an investment that was “beyond the reach of Papua New Guinea and its international partners”.

“The cost of service ­delivery across Papua New Guinea’s difficult terrain are high. Those costs increase through corruption and weak management,” the DFAT report said.

It said the credibility of national policy-making and the effectiveness of the Papuan public service were “holding steady or modestly improving”.

But it noted: “An exception is law and order, which appears to be deteriorating.”

A lack of funding by PNG was compromising the effectiveness of Australia’s law and justice support and the ability of police to mount effective investigation and prosecution of serious crimes, corruption and family sexual violence, the report said.

The program’s performance in promoting effective governance and improving human development rated as “amber” in a traffic light ratings system.

 “While these two objectives have improved over the previous 12 months, due to slow progress in previous years and continuing difficulties with some investments, there is insufficient justification and evidence to rate them green in 2018-19,” the DFAT report said.

ANU development expert Stephen Howes said a recent World Bank assessment confirmed the Pacific was “perhaps the world’s worst governed region”, with six of 10 Pacific nations being rated as “fragile”, including PNG.

Professor Howes said it was good to see recognition of the program’s over-dependence on technical assistance and training, which was had also been a recommendation of a 2010 review of the aid program that he had co-written for the Australian and PNG governments.

Labor’s spokesman on international development and the ­Pacific, Pat Conroy, said DFAT’s over-reliance on external technical advisers was “undermining the aid program”.

“It is consistent with external analysis of the PNG aid program and is especially troublesome given PNG is our nearest neighbour and one of our most important international partners,” Mr Conroy said.