In the first-ever speech by a foreign leader to the PNG Parliament, Mr Albanese said Australia wanted to deepen its economic and defence ties with its closest neighbour, including enabling more Papua New Guineans to work in Australia.

"My government backs your ambition to significantly increase the number of PNG workers who take part in this program in Australia and contribute to the future prosperity of both our nations," Mr Albanese told the PNG Parliament.

"We are expanding opportunities for PNG citizens to travel and work in Australia through the Working Holiday Visa, the Pacific Engagement Visa and - in particular - the Pacific Australia Labour Mobility Scheme."

In a carefully worded joint statement following their leaders' dialogue meeting later in the day, Mr Albanese and PNG Prime Minister James Marape declared their "intention to significantly boost Papua New Guinea's participation in the ... scheme, acknowledging Prime Minister Marape's ambition to deploy 8000 ... workers to Australia".

The statement said "specific actions" to strengthen PNG worker mobilisation will be discussed at a ministerial forum to be held later this year.

Mr Albanese said a reciprocal Working and Holiday Visa scheme would come into effect from July 1. He did not specify a cap but Department of Home Affairs documents indicate it will initially be 100.

Papua New Guineans will also be eligible for the Pacific Engagement Visa (PEV), which will offer permanent migration to up to 3000 Pacific Islanders and their families each year, to be allocated via a lottery.

The Prime Minster's commitment has come amid mounting evidence of severe labour shortages afflicting Australian businesses.

The Australian Bureau of Statistics reported earlier this week that there were 444,200 job vacancies in the three months to November - virtually double the pre-pandemic number - and almost 28 per cent of employers had positions to fill.

The numbers, combined with the historically low unemployment rate of 3.4 per cent, point to very tight conditions in the labour market.

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Employer organisations including the Australian Industry Group, the National Farmers' Federation and Approved Employers of Australia report that members are finding it very difficult, if not impossible, to recruit the workers they need.

"You name it, horticulture, meat workers, hospitality, aged care, they are all screaming out for workers," Approved Employers executive officer Steve Burdette said.

Mr Burdette said the Pacific Labour Mobility scheme was "very good" but needed to expand beyond its current reliance on smaller Pacific Island countries like Vanuatu, Tonga and Samoa. He welcomed plans to increase the intake from PNG.

During 2021-22, 18,202 workers came in under the scheme but most arrived from countries other than PNG. As at the end of November, only 915 Papua New Guineans were working in Australia under labour mobility programs.

The director of Australian National University's Development Policy Centre, Professor Stephen Howes, said the number of workers coming to Australia from PNG under the scheme was increasing "but there is still a long way to go".

Professor Howes said PNG had been a late-comer to the scheme and credited PNG Treasurer Ian Ling-Stuckey with driving PNG's increased participation.

He said that PNG's size - it is estimated to have more than eight million people - meant it could become a significant source of workers for Australia without triggering "brain drain" issues that concern smaller countries such as Samoa and Tonga.

Professor Howes said the participation of PNG in the Working and Holiday program was a good initiative and described its inclusion in the PEV as "a really historic opportunity".

He said because visas would be allocated on a pro-rata basis PNG - as the Pacific Islands' biggest country by far - would receive a significant number and recipients would have up to nine months to secure a job in Australia.

Professor Howes said Australia had a very small PNG diaspora, and the PEV would help to deepen the relationship between the two countries.

He said the move to increase PNG's participation in the labour mobility scheme was not only economically beneficial to both countries but should also be seen in light of the strategic competition between Australia and China over PNG.