Canberra's fractious relationship with Jakarta faces new strains after Prime Minister Tony Abbott re-affirmed Australia's intention to stop the flow of asylum seeker boats, irrespective of Indonesian concerns over recent territorial incursions.

He said Australia was ''entitled'' to protect its borders and would continue to do so.

The strong statement came after the government released terms of reference late on Tuesday for an inquiry into how and why the navy breached Indonesian waters as part of the secretive Operation Sovereign Borders.

Mr Abbott, who had promised to rejig Australia's foreign policy to be more Jakarta and less Geneva, nonetheless used that European country as the stage to announce Australia would ''continue to do what we are entitled to do to secure our borders''.

Speaking from the Swiss resort town of Davos, where he is attending the World Economic Forum, Mr Abbott praised Indonesia's President Susilo Bambang Yudhoyono but said that he ''of all people'' understood Australia's motivations.

''Stopping the boats is a matter of sovereignty and President Yudhoyono of all people ought to understand … just how seriously countries take their sovereignty. So we will continue to do what we are entitled to do to secure our borders,'' Mr Abbott said.

That is thought to have been a reference to Indonesian sensitivities over West Papuan independence claims.

Australian National University Indonesia expert Greg Fealy said while the logic of Mr Abbott's comments may have been sound, the tone was likely to be counter-productive and could see Mr Abbott's reputation permanently damaged in Indonesia.

''This will probably not be well received,'' he said. ''I think the way in which he said it could easily be seen as Tony Abbott lecturing to President Yudhoyono.''

With Michael Bachelard, Jakarta.