It's an encounter that has gone into the folklore of our diplomatic service.
An Australian envoy meeting a senior Malaysian official heard a familiar complaint about critical coverage of his country's politics in the Australian media.
He snapped back: ''The media in Australia are not owned or controlled by the government,'' the envoy said. ''Here they all are, and throughout my time here, I've never seen a favourable report about Australia.''
Senator Nick Xenophon, who went up last month to join an international team looking at Malaysia's electoral system, has just had a personal lesson in just how slanted and hostile its media can be. After the team published a highly critical report, the New Straits Times newspaper, owned ultimately by the ruling United Malays National Organisation or UMNO, went to work on him.
It took a passage from one of his old parliamentary speeches on a favourite topic - ''Scientology is not a religious organisation. It is a criminal organisation that hides behind its so-called religious beliefs'' - and substituted the world ''Islam'' for ''Scientology'' throughout. It's hard to think of a cheaper reporting trick in a strongly Muslim country.
Australians often trip rather too naively into Malaysia's murky political world. Succumbing to the happy multicultural story of ''Malaysia - truly Asia'' a lot of us don't see the deep racial fears and antipathies swirling in the country's history and heating its politics even today.
Malaysia is a country of great wealth and many competencies, but despite decades of high growth still falls behind its potential because it hasn't yet shaken itself free of its poisonous beginnings. Riven by massive fraud, waste and economic distortion, it is a country of religious zeal, yet as noted by Bridget Welsh, a political scientist at the Singapore Management University, its political life is dirty.
''Murder, sodomy, secret trysts, sex videos and conspiracy are all commonplace, and corruption scandals occur regularly,'' she wrote on the East Asia Forum website recently. ''Both sides wallow in this political gutter, each trying to darken the reputation of the other, and not fully appreciating how much the system as a whole has been damaged.''
Australia and Australians have often been a convenient diversion from this domestic mudslinging, with sniping reaching low points in the 22 years of Mahathir Mohamad's prime ministership.
It's getting testy again as Malaysia's current Prime Minister, Najib Razak, heads towards a critical national election trying on one hand to preserve the ethnic dominance endowed in UMNO and on the other to reform the discredited underpinnings of that power.
Najib took the prime ministership after the UMNO-led ruling coalition suffered a big setback in the last elections, in March 2009, losing the two-thirds majority in Parliament that allowed it to make constitutional amendments and control five of the 13 states to a three-party opposition alliance put together by UMNO's alienated former deputy prime minister Anwar Ibrahim.
Najib came with a lot of baggage - notably a kickback scandal on French submarines purchased while he was defence minister, about which two examining magistrates in Paris would like to interview him - but he's tried to wield a new broom.
A new economic policy is aimed at watering down preferences for ethnic Malays. Stakes have been sold off in bloated public sector enterprises to try to make them more efficient. Last month, the government repealed the colonial-era Internal Security Act, which allowed indefinite detention without trial, and it changed the public assembly law.
But the reforms haven't resulted in much perceptible change. The UMNO membership is resisting a loss of Malay perks, entrenched cultures remain in public enterprises like the national airline, and a replacement security law has been widely condemned by local and international human rights groups as wide open to similar abuse as the old one.
One result has been that Najib's personal approval has been running at a high 69 per cent in the opinion polls, while the UMNO coalition's support has been a lacklustre 46 per cent or so, suggesting the public give Najib marks for trying but don't think his efforts will work. About a third of those favouring Najib say they will still vote for Anwar's opposition.
Najib's support also has flicked sharply downwards when familiar instruments of repression are wielded. A movement for electoral reform called Bersih (meaning ''Clean'') led by a doughty woman barrister, Ambiga Sreenavasan, has had its demonstrations declared illegal and then met with massive police force. The latest was in Kuala Lumpur last Saturday, attended by tens of thousands. Xenophon and other observers shared in a dousing with tear gas and water cannon.
Bersih's concerns are echoed by the foreign observer group. The electoral system gives wide scope for gerrymandering, with electorate sizes ranging from 7000 to 100,000 voters. Suspiciously, numbers of new voters, over 30 per cent of the previous total, are being registered in opposition-held electorates. Party monitors have just been barred from scrutinising the eligibility of intending voters at polling stations.
Armed force and police personnel have their votes scrutinised by senior officers, and the 240,000 public servants assigned to election duties are required to make postal votes. But strangely, the hundreds of thousands of Malaysians working overseas or employed away from their home towns are not allowed to make absentee votes. A snap poll - a campaign is usually only about 10 days - means a lot of the country's best and brightest won't have time to return to their place of registry.
Bersih's experience with the Malaysian traditional media - owned either by the ruling parties in the case of the newspapers and commercial television, or by politically-directed state broadcasters - illustrates the problem of unequal access to campaign coverage. Before its recent mass demonstrations, media stories have linked it variously to Christian, Jewish and communist conspiracies, and even Islamic extremists.
The internet, with portals like Malaysiakini and Malaysia Today, has given outlets for opposition voices and analysis that reach urban, well educated voters. But rural people get only the slanted pro-government media, at best anodyne, at worse mendacious.
Xenophon's experience suggests the settings won't change for the election Najib seems about to call. It's a pity, given what Malaysia could be.