The Weekend Australian revealed that talks with PNG officials over the Prime Minister's PNG solution and Australian access to the site had been suspended.
PNG had complained its officials were not being consulted, the PNG military had been snubbed and local business frozen out of tendering for work.
"The truth of that matter is that that correspondence is a week or so old and based on a statement overnight by the PNG Foreign Minister I think you would be aware of the fact that all those matters have been dealt with and agreed on already,'' Mr Rudd told media in Sydney this morning.
In a confidential letter obtained by The Weekend Australian, PNG's chief migration officer Mataio Rabura told Australia's Department of Immigration and Customs that Australian access to the building site at Manus and discussions on resettlement had been suspended.
Mr Rabura complained about Australian officials not consulting him; tenders for work only being advertised in Australia, effectively delivering a snub to the PNG Defence Force that "can put up tents"; PNG companies not receiving the business suggested by Mr Rudd and PNG Prime Minister Peter O'Neill; and hasty decision-making.
He described the situation as one that could "jeopardise implementation of the agreement reached by our two prime ministers".
Mr Rabura said DIAC had sought meetings to discuss resettlement but added, "I am not ready to engage in discussions on resettlement until outstanding matters relating to processing are resolved."
Immigration Minister Tony Burke yesterday confirmed the PNG government had suspended access to the site on Manus Island, which is being expanded to accommodate 3000 asylum-seekers, but said access had been restored.
He said Australian government officials yesterday received a letter from Mr Rabura, which clarified that issues relating to the east Lorengau site had been settled. "That site is now available for us to begin work on," Mr Burke said.
On the question of resettlement, Mr Burke said an Australian official in PNG had been working "with the PNG government and potential employer organisations and non-government organisations to make sure that settlement arrangements are ready to go by the time the first positive determinations are made".
"At this stage it is still some time before any of the refugee assessments will be completed," Mr Burke said.
The resettlement of refugees in PNG is a key point in the deal Mr Rudd announced on July 19 because it is the basis for his assertion that no asylum-seekers will come to Australia from Manus Island.
Opposition immigration spokesman Scott Morrison said the letter "demonstrates very clearly that discussions about how resettlement is to be done ... haven't even begun''.
"The centrepiece of Kevin Rudd's PNG election fix, resettlement in Papua New Guinea, remains an unanswered question,'' Mr Morrison told reporters in Sydney today.
The plan was "unravelling'', Mr Morrison said. "This is a deal that's a donut, there's nothing in the middle of it.''
Mr Morrison brushed aside questions about a subsequent letter, restating the country's commitment to Labor's plan.
"The issue remains, (Mr Burke) has no detailed resettlement arrangements with Papua New Guinea,'' he said. [AAP/TheAustralian| GettyImages]