Prime Minister Tony Abbott’s visit to Papua New Guinea will occur at a complex time in a complex relationship with a complex neighbour.

Although warnings that forecasting is a ‘mug’s game for strategists’ are doubly ominous in ‘the land of the unexpected’, Abbott’s scheduled to arrive in Port Moresby this evening, so I’ll recklessly hazard a few observations, some predictions, and even make a suggestion or two.

The idea that PNG is at a ‘crossroads’ has been applied to various issues at several points over the years—most memorably by David Hegarty in 1989 as the Bougainville crisis escalated, economic woes deepened, and the still fairly upbeat ‘post-colonial twilight’ faded into the past. PNG has experienced resource booms every decade from the 1970s on, but it’s still hard to think of another era when the country has simultaneously stood tantalisingly close to really taking-off but also to taking a nasty fall. While there’s probably some life yet in another old trope, that ‘PNG will always muddle through’, the current situation seems more a case of 'crash-through-or-crash' than just bumbling along.

So why do Port Moresby’s prospects appear at once so promising and fragile? And given our stake in a stable, prosperous, confident and active PNG, how might Mr Abbott help it soar rather than stumble?

Let’s start with Prime Minister Peter O’Neill, whose own position partly mirrors PNG’s. He retains a seemingly unassailable 100 or so of the 111 seats in Parliament and has a year left to run of his 30-month freedom from votes-of-no-confidence. He easily accomplished a recent muscle-flexing exercise by sacking the heads of major parties in his governing coalition; his talented and ambitious Treasurer and his hitherto powerful Petroleum Minister. The immediate catalyst for the dismissals were quarrels over a billion dollar loan to reacquire PNG’s stake in resource bonds previously hocked to purchase equity in another resource project. This episode raises concerns that O’Neill may be making double-or-nothing wagers against future national revenue that will pay-off handsomely if events fall his way but leave PNG highly exposed if things unfold badly. The show of strength in sacking both ministers also suggests he feels the sharks are starting to circle.

PNG’s economic outlook actually appears pretty positive, but again there are causes for concern. ExxonMobil’s $19 billion LNG project is a case in point. It’s several months ahead of schedule, and should start supplying gas to Asia by midyear. This'll provide modest revenue to Port Moresby shortly thereafter and very substantial income a few years from now. The plant has substantial expansion capacity and major international firms are seriously pursuing other large gas projects. But at the same time, a combination of low global commodity prices, natural events, and fears that economic nationalism and sovereign risk is re-emerging (notwithstanding widespread acceptance that the nationalisation of Ok Tedi mine was a special case) have led to weaker mineral exploration and a large revenue shortfall.

The situation for PNG’s seven million citizens has bright spots. A decade of strong economic growth has allowed the Government to start implementing free education and health policies, but these are huge, difficult and expensive initiatives. Inequality is high and growing, as prices rise and rapid population growth exacerbates social pressures in urban and rural areas. In 2011, 40% of Papua New Guineans were judged to be poor. PNG won’t meet any of (and is actually going backwards against) its millennium development goals. And high levels of violence continue to impede economic growth and blight lives, especially for women.

So where does Australia fit in? The Abbott and O’Neill Governments’ instincts are similar on channelling Australian aid toward PNG priorities for building societal and governance as well as physical infrastructure to boost the economy. But while most would agree that preventing poverty is better than alleviating it, Port Moresby will need some help meeting sovereign responsibilities to deliver health, education and other vital services, and to assist the most disadvantaged, in addition to aid-for-trade, for a while yet.

In the security realm, military ties are growing, as agreed last December. PNG’s new national security policy and defence white paper provide a framework for prioritising growing cooperation. Abbott could usefully assure O’Neill that new vessels to replace its Pacific patrol boats are really coming and will meet PNG’s needs. Without this assurance, Port Moresby will continue to waste time window-shopping for frankly unaffordable vessels. (PNG may value Australian-provided boats more if it makes a financial contribution in return for greater input to their specifications.) For most Papua New Guineans, though, security means law and justice. Here, O’Neill values the visible AFP presence agreed last year. Australia's also providing advice in the thorny area of anti-corruption, and we’ve made a start reinvigorating Bomana Police College. Yet the greatest help we could provide would be to deploy training-teams to generate large numbers of capable and disciplined PNG cops.

The PNG and Autonomous Bougainville Governments have made some progress advancing the peace process this year. However, while outcomes that might be acceptable to all—for instance, some form of independence-in-free-association—are conceivable, they’re far from assured and daunting practical challenges remain. Good communication between Port Moresby and Buka will be vital to ensure all parties prepare for, and can live with the results of, the coming referendum. Mr Abbott might usefully reiterate that Australia stands ready to assist such dialogue, and to help with any support the ABG requests, given our stake in avoiding renewed violence. As many Bougainvilleans rightly or wrongly consider that Australia was a party to the 1988–98 conflict, he could also indicate we’re ready to symbolically reconcile.

Finally, issues surrounding the Manus asylum-seeker facility will take centre-stage in public attention to the visit. Stephen Howes and Jenny Hayward-Jones have warned that Canberra’s focus on this matter could distort or damage interactions with Port Moresby. In fact, PNG’s centrality to ‘stopping the boats’ has had upsides as well as drawbacks up to now. Some in Port Moresby have valued the sense of a more equal partnership attached to ‘helping a friend’ rather than only ever being helped. This has probably contributed to friction points, such as PNG’s purchase of counterfeit drugs and Edward Snowden’s allegations being addressed calmly and mainly behind closed doors, as in grander ‘special relationships’. Even PNG’s suspension of visa-on-arrival arrangements hasn’t sparked noisy recriminations. However, the cost to O’Neill of helping Canberra is rising on a number of fronts: the issue of potential resettlement of asylum seekers in PNG approaches; a previously-stalled constitutional challenge is proceeding; and multiple inquiries into the killing of an asylum seeker on Manus sharpen neo-colonial ‘Pacific hellhole’ language. O’Neill and Abbott may need a clever formula to sustain this game of bluff.

Australia and PNG have some tricky issues to work through, but both PMs are strong communicators. Current bilateral relations seem as well placed as ever for frank, productive, discussions.

Karl Claxton is an analyst at ASPI. Image courtesy of Department of Defence.