Defence Minister Marise Payne has been forced to deny Australia has recruited Indonesian military officers as spies or agents of influence while defending the government's handling of a suspension of military ties between the countries.

The shock announcement that defence co-operation was suspended after an Indonesian military officer was offended by material at an Australian military base in Perth has also seen claims from the country's military chief General Gatot Nurmantyo that Australia sought to "recruit" Indonesia's best and brightest as sources.

The allegation, raised in a speech in November, came amid anger at material understood to include documents suggesting West Papua was part of Melanesia and should be given independence and ridiculing Indonesia's national ideology, Pancasila.

Speaking on ABC radio on Thursday, Senator Payne said Indonesia had not taken part in some planned events because of the dispute but negotiations about the country's involvement in a multilateral military exercise planned for next month were ongoing.