Papua New Guinea's Prime Minister Peter O'Neill said on Thursday that Australia's refugee detention centre located on the Manus island damages the archipelago's reputation and called for the immediate closure of the camp.
Australia's coalition government led by the conservative Liberal party, which came to power in 2013, strengthened security measures to deter refugees and also adopted a campaign called Stop the Boats.
Under the regulation, everyone who arrives in Australia by boat is detained and sent to the detention centres in Nauru or Papua New Guinea's Manus Island.
"It has done a lot more damage for Papua New Guinea than anything else, O'Neill said.
"When we saw women and children dying at sea, we stepped up our offer to help, and that's what we have done... At some stage, of course, we need to close the centre,
These people cannot remain in Manus forever... But it is entirely up to the Australian government."
Australia's refugee policy has attracted international criticism from human rights groups and the United Nations.
While the number of refugees trying to reach Australia is small compared with those arriving in Europe, border security has long been a hot political issue.
Australia's High Court last month rejected a legal challenge to the country's right to deport 267 refugee children and their families brought to Australia from Nauru for medical treatment.
The detention and likely deportation back to Nauru of a baby girl known as Asha, born in Australia to Nepalese parents, sparked an outpouring of support that could prove a watershed in public opinion against Australia's harsh policies.