Australia's chief diplomat has admitted the Papua New Guinean government was not told of Australia's plans to open a diplomatic post in Bougainville, despite the Foreign Minister insisting discussions had been ongoing.

Last month, PNG prime minister Peter O'Neill said he was "shocked" by an announcement in the budget that Australia was building a new diplomatic mission in the autonomous region's capital, Buka.

Mr O'Neill said there was no consultation about the decision from the Abbott Government to build the new diplomatic post and that he learnt about it from media coverage of the budget.

Today in Senate estimates, Department of Foreign Affairs head Peter Varghese admitted the PNG government had not been consulted.

"Regrettably there was a miscommunication on this. It was our intention, certainly the Foreign Minister's intention that advice of our interest in opening or expanding our presence in Buka should've been conveyed to the government of Papua New Guinea in advance of the budget," Mr Varghese said.

"Unfortunately, a combination of the general proprieties of observing the secrecy of budget decisions, together with the difficulty in reaching senior levels of the PNG government in the days before the budget prevented that from happening in the way that we would've liked it to happen.

"Consequently, I think the foreign minister and prime minister of Papua New Guinea had not been briefed on it, and that is very regrettable and we have subsequently been in discussions with the government and government officials about how we can take our interests forward."

At the time, Foreign Minister Julie Bishop denied Mr O'Neill's allegation, saying she had discussed the proposal during a visit to PNG in December 2014.

Earlier this week Papua New Guinea lifted its ban on Australians travelling to Bougainville, put in place as a protest to Australia's plan.