AHC: Better Papua New Guinea

Would it help if Papua New Guinea also controlled the western half of the island as well?

Not sure, our timeline's Papua New Guinea is already hard to rule, due to several isolated tribes, in the jungle. The addition of the western half of the island may complicate things even more.
 
Having worked there for about 5 years, I would say that the geography of the place precludes significant social cohesion
 
Australians considered Papuans racially inferior. The question was whether they would be treated like aboriginal peoples and Torres Strait islanders and abused inside Australia; or treated like Pacific Islanders and abused by Australians outside of Australia.

Fear of a black Australia resulted in the second choice.

Give Far North Queensland their own colony before federation and the kanakas aren’t repatriated to be murdered and are instead enslaved. Result: PNG is either made a state or incorporated into FNQ (probably along with the Northern Territory). Some company from Broken Hill makes Rhodesia look humane. Your choice of field telephones or napalm. For reference material see Australia’s role in supporting Indonesia’s occupation of East Timor or Australia’s role in supporting PNG’s security regime in Bougainville.
 
Papua New Guinea was more of geographical expression than a national identity for much of the twentieth century, this question is a tall order. Papua New Guinea (PNG) was one of the first places where agriculture began, but it doesn't have a presence of edible/domesticable crops and large proto-livestock animals like Eurasia and the Americas did.

This made it harder for smaller communities to scale up into larger kingdoms or states, which is why the island has around 700 native languages. The mountain geography of the main island, as well as the existence of several other islands, has contributed to this extreme degree of heterogeneity. Two adjacent mountain valleys often speak different languages, it's like if Afghanistan was an island.

Rapid population growth, urbanization and deforestation has increased contact between different linguistic groups in the past few decades, and a creole language called Tok Pisin is becoming a national language. PNG is somewhat culturally isolated as well.

If the natural resources on the island were discovered earlier (copper, oil, gold) AND the revenue was invested in the country's people (infrastructure, health, etc), it might develop earlier. This combination seems unlikely though, earlier evidence of mineral wealth would probably just fill the coffers of Australia, Germany, or the UK.

The early history of PNG is fascinating. The indigenous peoples of PNG split off from the first migration out of Africa much earlier than Europeans or Asians. Aboriginal Australians are the closest relatives to the peoples of PNG, but even this relationship is a stretch. The ancestors of modern day PNG peoples were the first explorers and pioneers, for a while geneticists used to think they had been part of an earlier migration out of Africa from other non-African populations.

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The genetic history of Aboriginal Australians and Papuans
Evidence found for a single major 'Out of Africa' migration event

With this first large-scale study of genomes of Aboriginal Australians the researchers found, in contrast to many earlier theories, that this population derived the vast majority of its genetic ancestry from the same wave of migrants as all other present-day non-African populations, who left Africa approximately 60-70,000 years ago.

The DNA sequences showed that the ancestors of Aboriginal Australians and Papuans had then split from Europeans and Asians by at least 51,000 years ago. By comparison, the ancestors of Europeans and Asians only became genetically distinct from each other roughly 10,000 years later. The researchers charted several further divergence events in which various parts of the population became separated.

...”We compared the genomes of Papuan people to those of Aboriginal Australians, and discovered that these two populations are actually strikingly distinct from each other. Surprisingly, Papuans and Aboriginal Australians appear to have diverged from each other at least 25,000 years ago, even though the landmasses of Australia and New Guinea were only separated by rising sea levels less than 10,000 years ago.”
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