27/04/2016 4:34 PM AEST | Updated 15/07/2016 12:52 PM AEST

PNG Prime Minister Says Manus Island Detention Centre Will Close

Fairfax Media

The Prime Minister of Papua New Guinea, Peter O’Neill, has announced the Manus Regional Processing Centre will close after his country's Supreme Court ruled the centre was illegal and unconstitutional.

The decision -- which comes just weeks from an Australian election -- has thrown the Turnbull government's offshore detention scheme into doubt.

"I have considered the ruling of the Supreme Court of Papua New Guinea and welcome this outcome," O’Neill said in a statement on Wednesday afternoon.

"Respecting this ruling, Papua New Guinea will immediately ask the Australian Government to make alternative arrangements for the asylum seekers currently held at the Regional Processing Centre. As I stated recently at the at the Australian Press Club, we did not anticipate the asylum seekers to be kept as long as they have at the Manus Centre."

In a statement released on Wednesday night Immigration Minister Peter Dutton said the Federal Government would not allow detainees to resettle in Australia.

"We will continue discussions with the PNG Government to resolve these matters," Dutton said.

"The Government has not resiled from its position that people who have attempted to come illegally by boat to Australia and who are now in the Manus facility will not be settled in Australia."

O'Neill said his government would enter negotiations with Australian officials regarding the timeframe for closing the centre, but said PNG would invite "legitimate refugees" to settle permanently in the country if they so wished. He also noted that he hoped Australia would help minimise damage to local businesses and workers who would be affected by the closure of the centre.

"These are many small and medium enterprises and their employees who will now be out of work. Our Government will work with Australia in order to transition these businesses and workers to new opportunities so that their communities do not suffer," O'Neill said.

Despite the controversial history of the detention centre, the PM said he was proud that his country had played a role in stopping arrivals of asylum seeker boats, and also called on the global community to do more to help refugees.

"Papua New Guinea offered to help when we saw thousands of children, women and men losing their lives as they attempted to make their journey between Java and Christmas Island," he said.

"While there may be critics, we must never forget that this policy has stopped many people from losing their lives at sea. We appreciate the reasons why people might seek to make such a perilous journey to find a better life. Those deemed to be legitimate refugees are often people who are fleeing from war or disaster, and as a global community we need to step up and do more to help. But there can be no justification for the vile trade in human misery that is peddled by people smugglers."

Speaking to media earlier on Wednesday, before the PM's announcement, Australia's Immigration Minister Peter Dutton was coy when asked how Australia would respond to the court ruling.

"The Supreme Court decision obviously is an issue for the Papua New Guinea Government and there are discussions including again this afternoon between legal representatives from my department and from the immigration department of Papua New Guinea, but the court decision is binding of course on the Papua New Guinea Government but not on the Australian Government," he said.

"We will work with the Papua New Guinea Government to look at the situation, to provide what assistance we can but we are not going to let people smugglers to get back into business."

Speaking to media on Wednesday, Shadow Immigration Minister Richard Marles said Dutton should be in Papua New Guinea trying to maintain offshore processing.

"Because it is very clear that offshore processing has been the single most important decision of any Australian Government in bringing an end to the loss of life at sea," Marles said.

"Were it me at this moment, I would be in PNG right now."