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imageSYDNEY: Australia's policy of sending asylum-seekers offshore to camps in Papua New Guinea and Nauru will weigh on the budget and cost Aus$2 billion (US$1.79 billion) over four years, officials said Tuesday.

In releasing a mid-year economic outlook, Treasurer Joe Hockey said there were several issues left over by the previous Labor administration, including a Aus$1.2 billion shortfall in funding for offshore processing.

Canberra began sending asylum-seekers who arrived by boat to PNG's Manus Island and Nauru in late 2012, and in July hardened the policy to ensure that all arrivals would not only be processed but resettled offshore.

Conservative Prime Minister Tony Abbott's new government has kept the policy but revealed Tuesday it was facing at least four more years of budget deficit as the economy struggles with the end of a long boom in mining investment.

The government said it would save Aus$964.5 million over four years by cutting the humanitarian refugee intake from 20,000 to 13,750 places.

It also costed a range of measures designed to crack down on the people-smuggling trade which brings would-be refugees to Australia by boat, often on unseaworthy wooden vessels which embark from Indonesia.

Some Aus$40.9 million will be spent over three years to help regional countries to detect and disrupt asylum-seeker boats, while Aus$81.2 million will go towards increasing the Australian Customs and Border Protection Service's operations in response to people-smuggling.

The government will also pour $19.9 million over four years into "community engagement and communications activities to help prevent and disrupt maritime people-smuggling activities".

"Funding will be provided to expand and enhance existing community engagement activities in Indonesia, targeting potential illegal immigrants and crews of people-smuggling ventures," the government document said.

Broadcaster ABC reported that this money had earlier been earmarked for the government's controversial scheme to buy decrepit Indonesian fishing boats to stop them falling into the hands of people-smugglers -- a policy that angered Indonesia.

Australia's policy of sending those arriving by unauthorised boats to bare-bones camps on the Pacific islands appears to have stemmed the flow of asylum-seekers, with numbers dramatically lower in recent months.

But it has enraged rights groups, with Amnesty International saying conditions in PNG amount to torture and the UN refugee agency reporting that the camps fail to meet international standards of treatment.