Anthony Albanese is in Port Moresby as PNG marks its 50th anniversary, with more celebrations to take place on Tuesday.
The anniversary is set to coincide with Australia and PNG agreeing to a new landmark security agreement, although it has yet to be formally signed off.
The prime minister said the treaty would be significant.
"This agreement, that's going through the processes here in PNG, will just take that partnership to the next level," he told ABC TV on Tuesday.
"It will be a treaty similar to the relationship that we have with the United States."
Mr Albanese said PNG's cabinet had not signed off on the agreement as there were'nt enough members present to do so, due to the celebrations.
But he is confident the deal would go through.
"This will be seminal in our relationship with Papua New Guinea, our closest neighbour and one of our dearest friends," he said.
"We're respecting the processes of Papua New Guinea and letting them go through their processes. That's really important, that we respect their sovereignty."
Pacific Minister Pat Conroy said discussions on the treaty would take place on Wednesday, once anniversary celebrations have concluded.
"This is an important affair and we'll get to it," he told ABC Radio.
"We're not like other countries. We don't come in and try and close our will on the Pacific family."
Mr Albanese told Nine's Today program neighbouring countries in the region, such as Indonesia, had been consulted on the security agreement.
Australia will help PNG build a new ministerial wing onto its parliament, as a gift to mark 50 years of the nation's independence.
Mr Albanese announced the support after attending a state dinner in Port Moresby with other country representatives, including Prince Edward, on Monday.
"Our support for the expansion of Parliament House is an investment in Papua New Guinea's democracy and sovereignty that will benefit future generations," he said.
The government said the construction of the wing will follow a PNG-led design and consultation process, drawing on local craftsmanship and expertise.
"As close neighbours and warm friends, the future prosperity of our two nations are bound together," the prime minister said.
A range of Pacific leaders and former Liberal prime minister Scott Morrison are in Port Moresby for the commemorations.
"What better time to reassert close ties," Monash University's Nicholas Ferns told AAP, noting the defence pact would be of interest to Australians given concerns over growing Chinese influence in the Indo-Pacific region.
The longer historical ties with Australia were "pretty powerful" in the Pacific nation, he said.
That meant Australia had more sway over security decisions in PNG than in the Solomon Islands or Vanuatu.
Dr Ferns said the challenges recognised at PNG's independence 50 years ago were still there, including regional and tribal differences and corruption.
"This is a place still trying to find its way in the world to make the most effective use of its natural and human resources," he said.
"The optimism of 50 years ago might be more tempered today."
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