Police Commissioner David Manning says all options remain on the table to secure the hostages' release.
"Our specialised security force personnel will use whatever means necessary against the criminals, up to and including the use of lethal force, in order to provide for the safety and security of the people being held," Mr Manning said in a statement early Tuesday morning.
"Security personnel are operating within their set rules of engagement in dealing with these criminals, with the safety of the innocent being their top priority."
The police commissioner said he believed the hostages were taken by chance by the armed men who took them into the bush and demanded a ransom.
"However, we are offering the abductors a way out. They can release their captives and they will be treated fairly through the criminal justice system," Mr Manning said.
"But failure to comply and resisting arrest could cost these criminals their lives."
Air support has been approved and the military was on standby in surrounding regions as of Monday.
The four hostages had been conducting field research in the Southern Highlands.
PNG Prime Minister James Marape initially said five hostages remained on Monday but the police commissioner said only four had been taken in his most recent statement.
There have been no reports of anyone being freed.
Local missionaries are acting as intermediaries on the ground.
Australia has a no ransom policy and opposition foreign affairs spokesman Simon Birmingham said it's not in the nation's interest to be handing over ransoms unnecessarily.
"We need to be working hand in glove with the government of Papua New Guinea with their law enforcement authorities to try to ensure the swift and safe release of these individuals," he told Sky News on Tuesday.
"The government would be wanting to make sure what they are doing with the government of Papua New Guinea is done in the most effective means possible.
"Sometimes that means they will have to work quietly behind the scenes to try to secure the best outcome."
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