The move follows Australia's intervention in the Solomons

The deal, worth more than $1bn, was completed in Adelaide on Thursday and signed by the two countries' foreign ministers.

It is part of Australia's new role as peacekeeper in the South Pacific.

Earlier this year Australia led a force of 2,000 regional troops to restore order in the Solomon Islands.

Thursday's deal will mean that up to 230 Australian police will arrive in Papua New Guinea next year to fight crime, and also to ensure that the country does not become a base for terrorism.

"Our close historical ties and the extensive personal relationships between Australians and Papua New Guineans underpin a common interest in peace and stability in a region free from terrorism," Australia's Foreign Minister, Alexander Downer, said in a statement.

His Papua New Guinea counterpart, Rabbie Namaliu, said that the deployment of Australian police would in no way affect the sovereignty of his country, which became independent from Australia in 1975.

The deal was instigated by Australia and initially opposed by Papua New Guinea's nationalist Prime Minister, Michael Somare.

As well as providing police officers, around 70 Australian officials will also take up positions in Papua New Guinea's public sector.

At least four Australian judges will sit on the Papua New Guinea bench and an Australian will become the country's top lawyer, the solicitor-general, to try and improve the justice system.