"From now on, any asylum-seeker who arrives in Australia by boat will have no chance of being settled in Australia as a refugee," said Rudd, unveiling his new hardline border protection policy in an election year flanked by PNG counterpart Peter O'Neill.
Asylum-seekers arriving at Australia's far-flung Christmas Island will be sent to the Manus Island processing centre on Papua New Guinea and elsewhere in the Pacific nation for assessment, with no cap on the number to be transferred.
Those whose applications were not successful would be sent back home or to third countries.
The Regional Settlement Arrangement, which was signed by the two leaders today, will initially be in effect for 12 months and reviewed annually. It will come into effect immediately.
The aim is to pose a strong disincentive for people considering the dangerous boat journey from Indonesia, particularly so-called "economic migrants" who make the trip not to flee persecution but for a better life in Australia.
Rudd's new policy was announced as Indonesia agreed to tighten visa restrictions for visitors from Iran, who currently enjoy visa-free entry to the sprawling Southeast Asian nation and can then pay people-smugglers for passage to Australia.
It follows talks between Rudd and Indonesian President Susilo Bambang Yudhoyono in Jakarta earlier this month, where they announced an agreement to promote greater regional cooperation on cross-border immigration.
"The minister plans to sign a letter that will prevent Iranian citizens from being granted visas on arrival. But he has not done so yet," Ministry of Justice and Human Rights communications chief Goncang Raharjo told AFP in Jakarta.
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