CANBERRA, Nov. 2 (Xinhua) -- Australia and Papua New Guinea (PNG) have agreed to re-develop and co-inhabit a major naval base on Manus Island.

Australian Prime Minister Scott Morrison revealed on Thursday evening that he and Prime Minister of PNG Peter O'Neill had reached an agreement to expand the base at Lombrum on the east coast of Manus Island, which is PNG's northernmost island.

The base will house Australian ships as well as Guardian-class patrol boats supplied by Australia to PNG. Both Australian and PNG personnel will live and work at the base.

"We will continue this co-operation through a new joint -initiative at the PNG Defence Force's Lombrum Naval Base in Manus Province," Morrison and O'Neill said in a joint statement.

"This initiative will further enhance interoperability between our defence forces, and deepen our maritime security co-operation, including through increased Australian ship visits over time," the statement read.

Morrison said the initiative would boost the "strong partnership with the PNG national government."

The base at Lobrum was built by the United States during World War II and was used by the Australian Navy through to the 1960s, but has since fallen into disrepair.

Vice Admiral Mike Noonan, chief of the Royal Australian Navy, described re-developing Lobrum as "hugely important."

"We operate in and around that region quite routinely. We've got a number of patrol boats operating up there through the north end of Australia at the moment," he told Fairfax Media on Friday.

News Corp Australia reported on Friday that PNG and Australia were in negotiations to upgrade ports at Wewak, Kikori and Vanimo.