Kapociunas, an artist and sculptor, is accused of sexually assaulting the girl at his Spanish home three times in one day.

That night, the child indicated to her mother that Kapociunas had kissed her on her groin area.

The Crown, represented by Carolyn Davenport, SC, also say he touched her indecently on the outside of her pants during piggybacks, although he is not charged with those acts.

Kapociunas was in Spain with his wife, the former ambassador to Spain, Jane Hardy.

Kapociunas told the court on Friday he strenuously denied the allegations, and only ever blew raspberries on her stomach.

At times, he struggled to hold back his emotions as he spoke of the positions in which he had piggybacked the girl.

He said it would have been physically impossible for him to touch her in the way she had claimed.

The girl, he said, was very inquisitive and had a "lovely" imagination.

Under cross-examination, Ms Davenport asked him why he thought it was appropriate to blow raspberries on the stomach of a young child while they were alone in a bedroom together.

Kapociunas said he began tickling her as a joke after she commented on how peaceful the room was, saying she had laughed.

He said her stomach became exposed while that occurred and he blew a raspberry near her belly button.

"It was an instinctive thing that I did, which I now greatly regret," he said.

"But it was completely innocent."

He denied the Crown's accusation that he told that to police because he was worried about his saliva being found on the child.

Ms Davenport asked how the girl's dress, which she showed to the court, could possibly have wriggled up high enough during the tickling to expose her belly button.

Kapociunas did not agree with her assertion that it would have been difficult.

He described as "outrageous" a suggestion that he felt he could deal with the child in any way he liked.

When asked whether he had a romantic fantasy concerning the child, he replied "absolutely not".

Earlier, his barrister Bernard Collaery asked him whether he had touched the girl during every piggyback he gave her, as the child had alleged, including one in front of her parents.

"No I didn't, I never rubbed her," he said.

Kapociunas also gave evidence that he and the child's father were speaking about the Rolf Harris child abuse case in the presence of the girl.

He claims the father was telling him how disappointed he was that Harris, someone he'd idolised, would do such things.

Kapociunas said:

"At that stage I became aware that someone was standing in the doorway," he said.

He said it was the girl, and she asked who Rolf Harris was.

"At that point, her father was abrupt and almost angry, he said 'He was a bad man, go away', or something like that."

Kapociunas also denied the child was ever topless in his company, something her mother and father have claimed to have seen.

The trial continues before the ACT Supreme Court and Chief Justice Helen Murrell on Monday.