A major element of the policy is a plan to resettle asylum-seekers in Papua New Guinea which would see PNG become the major refugee processor in the region.
Mr Rudd was joined by PNG Prime Minister Peter O'Neill in Brisbane to unveil the new policy which he says aims to undermine people-smuggling in the region and prevent boat arrivals to Australia.
Amanda Cavill reports.
Prime Minister Kevin Rudd says Papua New Guinea will become the primary refugee processing hub for the region, with an increased capacity to house 3,000 asylum-seekers.
There will be capacity for 600 asylum-seekers on Manus Island when the purpose-built centre is finished in the coming months, but this would have to be expanded.
Manus Island would become the primary processing centre for the whole of the Pacific.
There are currently 215 asylum-seekers housed at the Lombrum naval base on Manus Island.
Since November, they have been housed in tents in conditions that have been strongly criticised by the United Nations refugee agency and rights groups.
Mr Rudd says any asylum-seeker arriving by boat in Australia as of now will be resettled outside Australia.
Mr Rudd says he believes this will stop the boats.
"As this regional resettlement arrangement is implemented and the message is sent load and clear back up the pipeline that the number of boats will decline over time as asylum seekers then make recourse to other, more normal, UNHCR processes to have their claims assessed. In the period ahead, our governments intend to make sure that the message is delivered loud and clear to people-smuggling networks around the world and those criminal elements in Australia who may be supporting them that the hopes they offer their customers for the future are nothing but false hopes."
Mr Rudd says the arrangement will apply for the next 12 months, and be subject to annual review.
The arrangement does not specify an absolute limit to the number of asylum-seekers who can be transferred, or genuine refugees who can be resettled.
PNG Prime Minister Peter O'Neill has welcomed the move, saying he believes Papua New Guinea and other regional countries will be able to contribute to stopping people-smuggling.
Mr O'Neill says while helping Australia the agreement will also help his country which has its own asylum seekers.
"We also have our own refugee issues. We have for many years over tens of thousands of refugees in our country. And I believe the processing centre and the resettlement arrangements that we are now forging will enable us to have an orderly processing of citizens and people who are seeking genuine citizenship of other countries in the region. That is why we agreed to a resettlement program where we believe strongly that genuine refugees can be able to be resettled in our country and within the region in the years to come."
The announcement comes as Indonesia announces it will tighten visa restrictions for visitors from Iran, in a move aimed at stemming the flow of asylum-seekers coming to Australia via Indonesia.
Iranians, like visitors from a number of countries, can currently pay to receive a visa upon arriving in Indonesia.
During his recent visit to Indonesia, Mr Rudd brought up the issue of visas arguing they are being used by asylum-seekers who fly to Indonesia before travelling to Australia on boats.
Kevin Rudd says discussions are also underway with the United States and Canada, which he describes as also being destination countries for economic refugees, about the broader global problem and the need to share the burden with others.
Mr Rudd says he'll be hosting an international conference to discuss the implementation of the 1951 Refugee Convention and has briefed UN Secretary-General Ban Ki-Moon of the Australian plan.
"And indicated Australia would be convening an international conference of relevant transit countries and destination countries within the framework of the Refugee Convention to deliberate on how to improve current global international arrangements in two respects: firstly, the adequacy of processing systems in centres around the world; and as well as that how do we have a better arrangements for Canada, the US and other countries to deal with the resettlement burden around the world."
Mr Rudd says the government is happy to work within the convention's framework while persuading other nations to do more to help the world's 43 million displaced people.
The government says the new processing arrangements take effect immeadiatly.
The Prime Minister declined to reveal the agreed costs of the exercise, saying only it would be budget-neutral.
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