Sydney - The ARU will further cut the number of Wallaby contracts on offer this year in a move expected to put pressure on Super Rugby franchises trying to retain local players within a reduced salary cap.

Chief executive John O'Neill said the ARU would sign 32 Test players, two fewer than last year, after slashing that number down from 54 so-called ''top-up'' contracts four years ago.

''That was, for a lot of reasons, too many and unsustainable and highly impractical and too costly,'' he said. ''The universal opinion … was to get that Wallaby top-up figure down to close to 30, we're currently at 32.''

In an arrangement similar to Cricket Australia's contracting process, the anointed 32 players will be ranked in value by Wallabies coaches Robbie Deans and David Nucifora before being offered contracts reflecting their position in the pecking order.

But in a scenario likely to make life more difficult for Super Rugby clubs, players must finalise their provincial contracts before going into negotiations over their Wallaby deals. It means clubs will no longer be able to factor in, with any certainty, a player's Wallaby top-up payment and forecast match fees when countering offers from overseas clubs.

''It used to be the reverse sequence - come to the ARU first and do your provincial contract second,'' O'Neill said.

''It is a shift in accountability more pointedly back to the franchises to run their franchise within their own budget constraints.''

O'Neill was speaking at the launch of Pacific in Union, a new partnership between the ARU, the International Rugby Board and the Australian government's development agency AusAID, which will send ''rugby ambassadors'' into Pacific island nations in an effort to promote social and cultural development.

The ARU is in the midst of delicate negotiations with the Rugby Union Players Association over the new collective bargaining agreement, which covers the incoming salary cap and other player contract issues.

O'Neill said that he hoped the ARU and the association could come to agreement by the end of this month.

''It's down to a handful, literally a handful, four or five deal breakers, but [we're] pretty close,'' he said.

There is talk the salary cap may be increased to $4.8 million next season but about $800 000 of that would have to come from the provinces themselves.

O'Neill said on Wednesday the franchise contribution was essential to securing agreement over the final figure.