The latest threat from Indonesia to freeze Australia's live cattle trade takes the fallout from the spying scandal to a disturbing new level.



Federal Agriculture Minister Barnaby Joyce on Friday postponed a trip to Indonesia amid reports a state-owned Indonesia firm had halted talks with the Australian cattle industry in light of the on-going spying scandal.

So far this been a war of words and tense diplomatic exchanges, some of which have been conducted over social media and retweeted around the world.

Now the sabre-rattling poses a real threat to Australia's live cattle exports which is estimated to be worth around $174 million a year.

Regardless of whether the latest salvo is a bluff, the damage to Australia's reputation as an honest broker in the world of trade and diplomacy is being harmed by the day.

Live cattle is one area where Indonesia could apply pressure and tensions look set to ramp up unless the Prime Minister comes forward with the sort of face-saving apology president Susilo Bambang Yudhoyono appears to be seeking.

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The escalation comes as Australia prepares to take over the chairmanship of the G20 from Russia on December 1.

Indonesia is a powerful G20 member so at the very least, the diplomatic arm twisting could grow more intense given that G20 meetings are billed as opportunities to foster and strengthen trade relations.

It's likely that Indonesia could flag the option of boycotting future G20 talks as part of the protest.

Australia hosts the G20 leaders summit in Brisbane next November and in the meantime, organisers from the Department of Prime Minister and Cabinet will be in damage control mode to neutralise fallout from the spying revelations.

And there'll be more scrutiny on intelligence and communications security than usual given claims that G20 meetings have been bugged by foreign governments in the past.

Follow Peter Ryan on Twitter @peter_f_ryan and on his blog.