AUSTRALIAN aid money to Papua New Guinea is being wasted on "middlemen", such as lawyers and consultants, PNG prime minister Peter O'Neill says.
Mr O'Neill said PNG wanted to ensure that financial support develops real long-term capacity and skills, and not just temporary relief.
"As a developing country we don't want handouts, we don't want Australian taxpayer money wasted and we don't want boomerang aid," he said.
"Papua New Guinea is changing, we are growing and as a nation of 8 million people we want to move beyond handouts and work with our partners to strengthen capacity."
The prime minister also said there needs to be a better deal for the taxpayers of contributing countries like Australia, saying that one of the biggest obstacles to effective support were middlemen who take commissions on aid expenditure.
"Development assistance has become a billion dollar 'industry' where so much of the goodwill ends up in the pockets of middlemen and expensive consultants," Mr O'Neill said.
"I wonder if the people of Australia realise how much of the money they give to help Papua New Guinea and other countries is actually paid to middlemen and lawyers."
Mr O'Neill's allegations of wasted funds have also been supported by rights groups and independent trade monitors in recent months.
Aid Watch director Thulsi Narayanasamy recently stressed that aid focusing on tackling corruption may in fact be "benefitting" from ongoing corruption in PNG.
"Australia has done nothing to bring these companies to account ... despite them being Australian," he said.
"We would see that as Australia benefitting off the corruption in PNG."