The government has been forced to consider a mini-budget to cut spending on services and development as its economic growth prospects have been battered by the slow demise of the $6.5 billion gas pipeline.

Speculators say the final nails in the coffin for the project came with last weekend's approval for the $2.3 billion Bayu-Undan gas project in the Timor Sea and its associated pipeline to Darwin.

The Bayu-Undan approval compounded the loss of provisional buyer AGL, who pulled out, and then Alcan's alumina plant at Gove in the Northern Territory opted to source gas from Woodside's Blacktip field instead.

PNG Cabinet Ministers held a crisis meeting to consider new ways of boosting economic growth, including establishing a domestic gas industry following the latest blow to the pipeline, which had been the country's chief hope for growth.

Inflation in PNG has reached 21% and interest rates are even higher.