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Serious talks: Joe Hockey and Tony Abbott in cabinet on Monday. Photo: Andrew Meares

Indonesia has said that talks with Australia over people smuggling and asylum seekers have stalled because of the phone-tapping row, flatly contradicting Immigration Minister Scott Morrison.

As Indonesian President Susilo Bambang Yudhoyono declined for the third day to make a public statement about the letter he has received from Prime Minister Tony Abbott, the extent of the damage wrought by the spying revelations is becoming increasingly clear.

Immigration Minister Scott Morrison

Trying to reach a deal: Immigration Minister Scott Morrison. Photo: Alex Ellinghausen

Indonesia's national police have confirmed they will make no attempt to catch asylum seekers leaving Indonesia on boats. They have withdrawn co-operation from the Australian Federal Police over cyber crime and terrorism operations. The chief of the Indonesian national police, General Sutarman, was reported by website Vivanews as saying: "Their intention is to go there, so it is not in our authority [to prevent them]."

A meeting of the countries' search and rescue agencies has been postponed and a personnel exchange program suspended.

Mr Morrison has been trying since last month to reach a deal with his counterpart, co-ordinating minister for legal, political and security, Djoko Suyanto, over which parts of Coalition asylum seeker policy are palatable to Indonesia.

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Still in no hurry to respond to the letter: Indonesian President Susilo Bambang Yudhoyono (right), with Prime Minister Tony Abbott. Photo: Reuters

On Monday Mr Morrison acknowledged he had not spoken to Air Chief Marshal Djoko since the phone-tapping revelation. He said talks at operational level were continuing but General Djoko's spokesman said that was untrue.

"Honestly, even the dialogue at technical level is temporarily stopped, too," he said. "We are still waiting for Mr President's instructions since he received the letter from Prime Minister Tony Abbott."

The Coalition is trying to secure agreement with Indonesia over its key policies of turning back the boats, Australian transit ports on Indonesian soil and buying up fishing boats in villages. But the row suggests an agreement is a long way off as tensions increase over revelations that in 2009 Australia had tried to tap the phones of the President, his wife and inner circle.

Dr Yudhoyono received a letter from Mr Abbott on Saturday but instead of responding on Monday, he fulfilled a commitment to open the World Culture Forum in Bali. Dr Yudhoyono's spokesman Teuku Faizasyah said the contents of Mr Abbott's letter reflected "Australia's good intentions" but he did not go into detail. Mr Teuku said Dr Yudhoyono would comment on the letter soon.

"It takes the right time to convey the content of the letter to the public. It takes deep thought," Mr Teuku said.

The extent of Indonesia's withdrawal of co-operation was underscored by the reaction of the police who said they would continue to arrest people smugglers who brought asylum seekers to Indonesia, but on the weekend a spokesman said Indonesia would examine all equipment Australia had given them to search for bugging devices and, only "if it's free of bugs, we will continue using them". Police will also stop co-operating on training, Australia's supply of equipment for the anti-terrorism police squad and cyber crime.

Arief Sulistyanto, the police chief of special economic crimes, told The Jakarta Post any co-operation to detect cyber crime would be suspended. Australia has spent almost $10 million since 2011 helping Indonesia tackle this form of crime.

Indonesia postponed indefinitely last week a meeting between the countries' search and rescue agencies. Indonesia had intended to argue for a cut in the size of its zone, which includes Christmas Island, because it was unable to service it adequately.

Yopi Haryadi, the chief of the rescue division at Indonesian agency Basarnas, said the meeting had been cancelled because of the President's orders to suspend co-operation with Australia.

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