Defence Minister Marise Payne has been forced to deny Australia has recruited Indonesian military officers as spies or agents of influence while defending the government's handling of a suspension of military ties between the countries.
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The shock announcement that defence co-operation was suspended after an Indonesian military officer was offended by material at an Australian military base in Perth has also seen claims from the country's military chief General Gatot Nurmantyo that Australia sought to "recruit" Indonesia's best and brightest as sources.
The allegation, raised in a speech in November, came amid anger at material understood to include documents suggesting West Papua was part of Melanesia and should be given independence and ridiculing Indonesia's national ideology, Pancasila.
Speaking on ABC radio on Thursday, Senator Payne said Indonesia had not taken part in some planned events because of the dispute but negotiations about the country's involvement in a multilateral military exercise planned for next month were ongoing.
Senator Payne said she had only written to her Indonesian counterpart about the dispute for the first time this week despite becoming aware of the concerns in November.
She said an Australian Defence inquiry into the offensive material, under way since late November, was "close to finalisation".
Australia had not attempted to influence or recruit Indonesian officers for spying or intelligence activities, Senator Payne said.
"That is not the case and it is something which we would not countenance, of course," she said.
Senator Payne said the incident was "clearly a matter of significant concern" that Australia took seriously and suggested that the government had apologised.
"We have indicated our regret that this occurred and that offence was taken," she said in a press conference on Thursday.
Fairfax Media understands that neither Prime Minister Malcolm Turnbull or Foreign Minister Julie Bishop have contacted their Indonesian counterparts on the issue and are leaving the matter to Senator Payne to manage.
Senator Payne has refused to provide details on the offensive material in question - which has been removed - and, after Indonesia raised concerns about West Papua, reiterated that Australia adheres to the Lombok treaty, recognising "Indonesia's sovereignty and territorial integrity and that is our firm and stated position".
She said: "The investigation requires an examination of materials, requires interviews with the Australians involved and requires an opportunity for the Indonesian officer to comment.
"These things need to be done appropriately and fairly. They take time but it is close to finalisation."
In a speech in November, reported by the ABC, General Nurmantyo said military officers would be "recruited" by Australia.
"Every time there is a training program, like recently, the best five or 10 students would be sent to Australia. That happened before I was chief so I let that happen," he said.
"Once I became chief commander of the national forces, it did not happen again. They will certainly be recruited. They will certainly be recruited."
Despite General Nurmantyo's apparent hostility towards co-operation with Australia, Senator Payne said the Chief of the Defence Force, Air Chief Marshal Mark Binskin, maintains a "very constructive" relationship with his counterpart.
"I have a great deal of respect for the General and the way he works with his military," she said.
Senator Payne said Australia's military service heads had been dealing with their counterparts and progress had been made to resolve the dispute, while work on a range of matters including turning back asylum seeker boats and anti-terrorism measures had not been compromised.
"We have no indication of any change [in regard to people smuggling operations] and I don't expect there to be," she said.
Overnight, a spokesman for Indonesian President Joko Widodo told Reuters: "This was not a decision of the President."
Senator Payne said she hoped for a speedy resolution.
"I would hope that, at the conclusion of the inquiry, we are able to indicate to Indonesia the steps that have been taken in Australia to address these concerns," she said.
"We'll be able to discuss resuming the relationship across the board then."
Senator Payne would not say if the Australian responsible for the materials which caused offence had been disciplined in any way.
"I am not going to comment on the ongoing activities of the inquiry at this stage, not until after it is finalised," she said
