A ferry carrying about 350 passengers sank off Papua New Guinea Thursday, with many feared dead, Australian rescue authorities said.

Australia's Maritime Safety Authority said 238 people had been plucked from the sea and from life rafts by 5.30 p.m. local time, about 12 hours after the MV Rabaul Queen went down.

The 47-metre ship reportedly sank about 16 kilometres off Finschhafen on the South Pacific nation's north coast.

The ferry was on its way from Kimbe, a dive spot on the island of New Britain, to the mainland city of Lae.

The ship's owners, Rabaul Shipping, said they had no information about what caused the accident, adding the vessel sank quickly and without sending a distress message.

Papua New Guinea Prime Minister Peter O'Neill said the government would carry out a full investigation into the disaster.

He also called for better safety measure for sea transport, in a country where the cost of flying is prohibitive for most people.

"We will leave no stone unturned,” O'Neill said. “We need to bring some safety measures back into this industry. We cannot afford to continue to lose our people's lives. Sea transport is one of the most important forms of transportation in the country."

PNG, Australia's nearest neighbour, is largely undeveloped, with poor infrastructure and limited facilities despite enormous resources wealth.

The majority of its six million people eke out subsistence livings in villages clinging to jungle-clad mountains or scattered around its many islands.