The Federal Government has dumped the Salvation Army as a long-term partner in providing services in offshore processing centres.

The Salvos say their contract to provide "emotional support, humanitarian assistance and general education and recreation programs" to asylum seekers in detention centres on Nauru and Manus Island will not be renewed beyond February.

Immigration Minister Scott Morrison says the Government has been forced to make contract changes, because of the way the system was being administered by the former Labor government.

But he refused to confirm the details.

Budget update to reveal $1 billion 'black hole' in offshore processing funding

Mr Morrison also confirmed the Government's offshore processing expansion plans will cost $1.2 billion more than Labor had budgeted.

He says Labor did not allocate enough money to build and run the centres on Nauru and Manus Island.

"This Government is now more than doubling the capacity on Nauru and Manus Island, and we expect to have that completed within the next month," he told the ABC.

"If you are going to run offshore processing you need to ensure that everybody is subject to it, with no exceptions, and that's just simply not what the previous government funded.

"This Government has corrected that."

The Treasurer's office has confirmed the offshore processing budget shortfall will not be offset by savings and is considered an unfunded "black hole" left by Labor.

Iranian, Indonesian arrested on people smuggling charges

The Federal Government used Friday's weekly Operation Sovereign Borders briefing to promote two more people smuggling arrests.

Two men have been charged with people smuggling offences by the Australian Federal Police.

Operation Sovereign Borders commander Angus Campbell says a 25-year-old Indonesian man at the Villawood Detention Centre has been charged with crewing and navigating a boat that capsized near Christmas Island in August, claiming the lives of five asylum seekers.

General Campbell also revealed a 28-year-old Iranian man has been arrested in the Melbourne suburb of Werribee and charged with one count of aggravated people smuggling.

Police will allege he was involved in organising an asylum seeker boat that capsized on the way to Christmas Island in March this year, leaving two people dead.

"Following the vessel's capsize, 96 people were recovered, three required intensive medical care and two were deceased," General Campbell said.

It was also revealed at the briefing that in the past seven days one asylum seeker boat has been intercepted trying to reach Australia.

General Campbell says three asylum seekers and two crew were picked up on Wednesday.