The Government says it is not engaged in negotiating any "people swap" deals with Indonesia, but has conceded that talks are underway between the two countries about how to handle asylum seekers rescued by Australian ships.

Yesterday, a senior adviser to Indonesia's vice-president said there were discussions underway about exchanging asylum seekers picked up by Australian ships for refugees held in Indonesian detention centres.

In response, Immigration Minister Scott Morrison released a statement saying the Government "will continue to pursue all areas of possible cooperation" with Indonesia, but he stated clearly that "the Australian government is not engaged in people swaps".

"Our discussions are about handling of passengers rescued at sea, and ensuring people are taken to a place of safety as soon as possible," he said.

"We will continue to undertake these discussions directly with Indonesia, and honour our commitments to protect the confidences of these discussions."

Indonesia has an obligation: Abbott

Prime Minister Tony Abbott said he did not want to negotiate with Indonesia "through the media" but said talks were underway about the fate of rescued asylum seekers.

"We are, of course, talking with the Indonesians, as you'd expect, about the best way of handling people who are picked up in their search and rescue zone," he said.

And he has again suggested that Indonesia had an obligation to accept a group of asylum seekers who were rescued last week.

"Obviously under normal search and rescue rules, people who are picked up in a country's search and rescue zone go to the nearest safe port in that country, but we're discussing this with Indonesia," he said.

Mr Morrison said the Prime Minister's special envoy, Major General (retired) Jim Molan, will be in Jakarta this week to continue the talks.

Shorten: 'What is the Government hiding?'

Last week, Indonesia refused to take about 60 asylum seekers rescued by an Australian ship off the south coast of Java.

Yesterday, both the Prime Minister and Immigration Minister expressed some frustration with the decision, with Mr Morrison saying that "there's no real rhyme or reason to it".

Opposition Leader Bill Shorten would not say if he supported the prospect of "people swaps" with Indonesia.

"I support working with Indonesia, not telling them what to do," he said.

"This patronising paternalistic attitude to me is breathtaking.

"What are the Government hiding? We all know that their policy's in tatters.

"They clearly don't want to tell us what's going on."

In 2011, then prime minister Julia Gillard announced Australia had struck a so-called people swap deal with Malaysia to send 800 asylum seekers there in return for taking 4,000 refugees.

The Coalition argued against the arrangement, protesting that Malaysia was not a signatory to the UN Refugee Convention.