Prime Minister Tony Abbott has abandoned a planned trip to Indonesia due to an "on-water operation" which Australian Government sources believe has the potential to cause "embarrassment" to president Susilo Bambang Yudhoyono.

Mr Yudhoyono had invited Mr Abbott to attend the Open Government Partnership Conference in Bali next week and plans were in place to make it happen.

But the trip has been cancelled because of a current asylum seeker operation.

Consistent with policy under Operation Sovereign Borders, the Government will not comment on details of the "on-water operation".

"The Prime Minister was hoping to attend the Open Government Partnership conference in Bali next week at the invitation of President Yudhoyono," a spokesperson for Mr Abbott said in a statement this morning.

"The Prime Minister is grateful for the invitation.

"Unfortunately the Prime Minister is unable to attend at this time and he hopes to visit Indonesia to meet with the president at a mutually convenient time."

The West Australian newspaper reported that a Border Protection Command boat had spotted and was planning to intercept a boat in waters between Java and Ashmore Reef.

Indonesia's presidential office has responded to the reports, with a spokesman saying he will not comment on speculation that a current asylum seeker operation is in force.

However, he said the Indonesian government was aware of Australia's upcoming budget and that it was part of Mr Abbott's schedule.

Australia's embassy in Jakarta has declined to comment.

If the trip to Bali had gone ahead, it would have marked a significant thawing in diplomatic relations which had been strained by Australia's asylum seeker policies, and by last year's revelations that Australia had tried to spy on the mobile phones of Mr Yudhoyono, his wife and other officials.

Greens leader Christine Milne says the fact that Mr Abbott has been forced to cancel the trip has damaged Australia's diplomatic relationship with Indonesia.

"It's because of his own policies that he stood to humiliate Australia, but more particularly embarrass severely the Indonesian president," she said.

"This is Tony Abbott in action; he is an embarrassment internationally and at home."

Last month, a senior Navy officer was stripped of his command, another will be sanctioned and others counselled over their involvement in incursions into Indonesian waters last summer while enforcing the Government's asylum seeker boats policy.

Defence Force Chief David Hurley said in February that the Navy's incursions into Indonesian waters had led to a "go slow" in the military relationship between the two countries.