Australia may soon have a new country next door, but research says the process will likely be fraught.

On Wednesday, the Lowy Institute released a research paper looking at how the autonomous region in Papua New Guinea is preparing for the referendum and what the different outcomes could mean.

The ballot will ask Bougainville people if they should have greater autonomy from PNG or full independence.

"Based on current sentiment in Bougainville, it appears a majority of Bougainvilleans - perhaps three-quarters or more - will opt to vote for independence," the paper said.

Should this be the case, the Bougainville Peace Agreement requires PNG and Bougainville to negotiate an outcome after the conclusion of the referendum, with PNG Parliament having the final approval.

And, according to the Lowy Institute, that is where things could unravel.

"If the people of Bougainville vote for independence and are unable to reach an agreement with the government of Papua New Guinea, the Bougainville issue may precipitate another regional crisis."

It warned that PNG rejecting the vote could lead to a "unilateral declaration of independence by Bougainville ... that some countries in the Pacific - and China - might recognise".

While on the ground in Bougainville this may mean "a substantial deterioration in the security situation, which could potentially require the deployment of another regional peacekeeping force or peace enforcement operation".

From war to ballot box

From 1988-1998, a civil war between PNG and Bougainville secessionist forces cost an estimated 10,000–15,000 lives.

"[It was] the most intense conflict in the Pacific since the Second World War," the report said.

A peace agreement was reached in 2001 which formally ended the war, with a referendum being one of the "main pillars" of the deal.

The report said "[the vote] is a culmination of a 20-year peace process".

Role of Australia

Australia has "a long history and a complicated relationship with Bougainville," according to the institute.

The island group was administered by Australia as part of Papua New Guinea for 60 years between 1915 and 1975.

And Australia has financed and provided personnel and logistics for several major peacekeeping operations in Bougainville over the years.

"A peaceful resolution to the Bougainville question is important for Australia. It was a protagonist during the colonial period and subsequent conflict, and it has invested heavily in a largely successful peace process since," the paper said.

A peaceful resolution to the Bougainville question is important for Australia

"Moreover, at a time of growing geopolitical contest in its immediate region, Australia and its regional partners will be keen to demonstrate they remain reliable security guarantors in the Pacific region."

It said "Australia must be ready for a variety of possible situations ... [but] the larger question is whether Bougainville itself is ready for independence".

"The short answer is no, but most Bougainvilleans see no alternative to independence, despite the obstacles."