Rabaul, on the northern tip of the island of New Britain.

Canberra - An Australian Navy minehunter has found the lost wreck of a suspected Japanese World War Two submarine off the South Pacific outpost of Rabaul, Australian defence officials said on Friday.

The wreck is 55 metres below the surface in Simpson Harbour in Rabaul in Papua New Guinea.

“The wreck is partially buried in the harbour floor but remains upright,” the Defence Department said.

“The Royal Australian Navy (RAN) will now work with Japanese authorities to assist in determining the wreck's identity.”

The wreck was found by the Australian navy minehunter HMAS Gascoyne, which was helping to find and neutralise unexploded ammunition from World War Two in the South Pacific nation.

Rabaul, on the northern tip of the island of New Britain, was the site of fierce fighting during World War Two, and became Japan's key naval base for the southwest Pacific from 1942.

Rabaul's harbour, surrounded by active volcanoes, is popular with divers due to the easy access to war wrecks.

Rabaul was also the site of the first Australian action during World War One, when the town hosted a German radio base for the Pacific. Australia's first submarine, the HMAS AE-1, was lost off Rabaul in 1914 and has never been found.

But officials dismissed media speculation the submarine they had found could be the AE-1.

“The imagery obtained by HMAS Gascoyne was examined by RAN historical staff, who concluded that the wreck is not AE-1 but a Japanese submarine,” officials said. - Reuters