Australian PM on defensive over asylum seekers

Australian Prime Minister Kevin Rudd was forced onto the defensive on the key election issue of asylum seekers Saturday, three weeks ahead of national polls, with cracks appearing in his hardline refugee policy.

Rudd's so-called Papua New Guinea Solution allows people smuggled by boat to be sent to the impoverished Pacific nation even if found to be genuine refugees.

But his PNG counterpart Peter O'Neill on Saturday indicated that the agreement was not open ended -- as had previously been suggested -- and there was a limit to the number of boatpeople it could settle.

"There is no agreement that all genuine refugees will be settled in PNG," O'Neill told Fairfax newspapers.

"We will take what we think we are able to assist, but we are also aware that we have our own issues with refugees from West Papua."

Refugees are a sensitive political issue in Australia and Rudd has gambled his electoral fortunes on the PNG circuit-breaker, which has so far slowed the flow of smuggling boats.

It is shaping up as a major election battleground, with the conservative Tony Abbott-led opposition pledging their own crackdown that would see all refugees put on three-year temporary visas and forced into a work-for-welfare programme without family reunion, appeal or permanent residency rights.

Abbott is favourite to win the September 7 poll according to opinion polls, and his party seized on O'Neill's remarks as evidence that the deal was "unravelling", along with ruling Labor's election campaign.

"The Papua New Guinea prime minister has made it very clear in this latest interview that the arrangement that Kevin Rudd claims to exist does not exist in those terms," said immigration spokesman Scott Morrison.

Further compounding Rudd's woes, O'Neill said Australia would ultimately have to take back some of the boatpeople it sent to PNG for processing, under its international refugee convention obligations.

"They will get some and New Zealand has indicated they would take some," O'Neill said of the refugees unable to be accommodated by PNG.

He described asylum-seekers as an "Australian issue" and said "we can easily walk away from it and allow Australia to deal with it."

The remarks cast a cloud over Rudd's plan, which has succeeded in slowing the flow of people-smuggling boats in recent weeks by removing the incentive of Australia as an end destination.

Rudd said he had spoken to O'Neill on Saturday and the PNG leader had affirmed his "full 100 percent support for the agreement".

But Rudd stuck closely to the letter of the deal, the language of which is broad and makes no mention of PNG exclusively settling all of Australia's boatpeople and only applies for an initial 12-month period.

"I draw your attention to the provision of the regional resettlement arrangement which says persons found to be refugees will be resettled in PNG and other participating regional states, including Pacific Island states," said Rudd.

"That's what we agreed to, that's what we support now, that support continues to the present and that has been confirmed as late as today."