The Australian government’s decision to send all refugee boat arrivals to Papua New Guinea (PNG) is a political earthquake. It has nothing to do with alleviating the suffering of asylum seekers – if Canberra cared about it, a regional solution would allow processing of claims in Indonesia – and will further burden a poor neighbour. Some will be licking their lips at the prospect of massively enlarged detention centres; private companies will make a killing.

Veteran ABC journalist Sean Dorney rightly worries about social cohesion in PNG with the inevitable influx of thousands of people. Local communities there are already concerned that once again, they’re being forgotten. There’s no welfare system in the state, and its health and education infrastructures are crumbling. They’ll rightly wonder why these new arrivals will be treated better than the countless families in squatter settlements, including in the centre of the capital, Port Moresby.

I visited these areas myself in 2012 and spoke to locals who reminded me that Australian aid, over $500m annually, was having no positive impact on their lives. Prime minister Kevin Rudd’s latest announcement – to improve hospitals and universities in a touching bribe to PNG’s political elites – will be greeted with necessary skepticism by the many citizens who never see a decent hospital or school for their children.

The problem has never been that Australia gives too much aid; it’s that we’re throwing huge amounts of money to avoid a failed state on our doorstep by backing rapacious mining interests and overpaid consultants. After decades of Australian aid, PNG’s rates of infant mortality, sexual violence against women and corruption have never been worse.

None of this concerns both major sides of Australian politics. For more than a decade, they’ve outsourced the most unpleasant tasks of refugee processing to largely unaccountable private firms (British multinationals Serco and G4S being the most obvious), and Rudd’s latest moves will inevitably enrich even more of them. G4S, currently embroiled in a massive overcharging investigation case in Britain and facing a civil suit over claims three of its UK security officers assaulted a man while escorting him on a plane during a deportation, was granted an $80m contract by Australia to run the government's facilities on PNG’s Manus Island. Recent revelations in the Guardian reveal that there has been no official oversight of processing times in the UN condemned facility.

A building damaged by the riot at the Nauru immigration detention centre last Friday. Photograph: Department of immigration and citizenship

This mirrors my own investigations, assisted by a senior Serco source, that confirms Canberra barely monitors the operation, because Australia so desperately needs the corporation to warehouse individuals and families.

This is the fate now facing PNG, with even more multinationals bidding for influence and profits in a nation whose last government was described by US officials in Wikileaks cables as a “totally dysfunctional blob”. G4S already have a large presence in PNG, I saw local staff guarding many buildings and energy installations last year, and Port Moresby has allowed the company to manage the soon-to-launch Exxon-Mobil LNG plant.

NGO Jubilee Australia released a 2012 report called Pipe Dreams (disclosure: I offered advice on certain sections and provided some photos) that questioned the Australian government’s financial and rhetoric backing of the $19bn LNG project. “There are serious risks that the revenues generated by the project will not mitigate the negative economic and social impacts of the project”, they argued. “In fact, it is very likely that the Project will exacerbate poverty, increase corruption and lead to more violence in the country.” Remember this is what Australia means when it boasts of assisting our northern neighbour.

History is repeating. I visited the province of Bougainville in 2012 to witness the aftermath of a civil war between a state and locals who opposed a polluting mine. At least 15,000 people were killed during the conflict in the 1980s and 1990s. Australia backed the PNG government to the hilt, and today there are moves to re-open the copper and gold mine without justice being served for crimes committed or a thorough environmental clean-up. This is how Australia supports PNG. A number of PNG citizens told me they wanted all Australian aid to stop immediately, because we’re forcing on them a development model that is only enriching political and industry elites.

Facebook Twitter Pinterest A protester holds a placard in the rain during a protest against the Australian Government asylum seeker policy in Melbourne on July 20, 2013. Photograph: Paul crock/AFP/Getty

Australia’s relationship with PNG since Canberra granted independence in 1975 has been based on paternalism. We have believed that throwing billions of dollars at our former subjects will bring prosperity and security. Former prime minister John Howard proudly wore the title (endorsed by former US President George W Bush) of Australia being "Washington’s deputy sheriff in the Asia-Pacific region".

The population of PNG knows that we don’t treat them with respect and this latest move against asylum seekers will merely confirm that belief. Tragically, akin to Nauru having no economic alternative to accepting refugees from Australia, PNG is placed in exactly the same position by a regional bully that contributes to both these nations lying in ruin.

“Stopping the boats” and avoiding people dying at sea is a noble motive if its combined with solutions that place the rights of refugees first. Instead, we’re locked in a battle to punish a tiny fraction of the world’s asylum seekers.

The idea that refugees are an existential threat to Australia is laughable, but Labor’s so-called PNG solution completely accepts the narrative set by the Liberal Party since before 9/11. It remains almost verboten to argue for open borders in Western political discourse. An Indonesian people smuggler has already told ABC that the “PNG solution” may reduce the boats “for a while”. But at what cost? Using PNG as a dumping ground for an Australian political problem is guaranteed to breed resentment in a country most of our media studiously ignores.

Australia treats its neighbours with contempt. As soon as the latest contortions of refugee policy were announced last week, I tweeted that Australia could possibly expect international sanctions, not unlike against Israel due to its human rights abuses of Palestinians. If we flagrantly ignore international law and morality while locking up the most vulnerable people on the planet in privatised centres, we deserve nothing less.