''We need to be flexible enough to anticipate and match their actions to avoid the terrible consequences of this trade. No doubt there will be some people smugglers who now encourage asylum seekers to test our resolve. Be in no doubt. If people are paying thousands and thousands of dollars to a people smuggler,they are buying a ticket to a country other than Australia.''

Refugee advocate and lawyer David Manne said Australia had repudiated its obligation to protect refugees and would leave asylum seekers in''inhumane and degrading conditions''.

While PNG was a signatory to the refugee convention,it had opted out of commitments to provide refugees with freedom of movement,education,housing or employment.

''All the independent evidence points to PNG being … a place where there is widespread and pervasive violence,including against women,and serious and ongoing daily human rights abuse,''he said.

Mr Rudd said the agreement had been written''mindful''of the potential for legal challenges.

Under the new arrangement PNG officials will assess asylum seekers'claims for refugee status. In exchange for PNG receiving asylum seekers,the Australian government will help fund the redevelopment of the major referral hospital in Lae,its long-term management needs and half the cost of reforming PNG's university sector. Mr Rudd said the government would consider progressively increasing Australia's humanitarian intake.

Immigration Minister Tony Burke said in the past couple of weeks he had removed children and families from Manus Island because''the facilities as they are right now are not appropriate for some of those different groups''. There are now 145 asylum seekers on Manus Island.

Opposition immigration spokesman Scott Morrison said people would continue to be sent to Australian detention centres''while the lawyers circle'',because it could take years for PNG to be able to take the number of asylum seekers Australia has received in recent years.

He said:''There is currently not the capacity for people to be transferred to Papua New Guinea in the numbers that are arriving.''

Refugee advocates said they would examine the legality of Mr Rudd's changes,despite Attorney General Mark Dreyfus'assurances the changes abide by the Refugee Convention.

Greens leader Christine Milne said it was''absolutely immoral''for a rich nation like Australia to''dump thousands of vulnerable people into an impoverished country''.

''Who would have thought a prime minister who said under Julia Gillard the country would lurch to the right on asylum seekers would lurch so far to the right he has leap-frogged Tony Abbott in terms of cruelty and just how far he's prepared to go with the treatment of people seeking asylum,''she said.

WithDANIEL HURST andTOM ALLARD

An earlier version of this story incorrectly referred to the city of'Lei'rather than Lae. The text has been changed