Police officers displaying six stacks of $US100 bills during a press conference by Nusa Tenggara Timur police chief Endang Sunjaya at Rote police station in June. The asylum seekers were taken to the edge of Indonesian waters, put on two wooden vessels provided by the Australians, given chocolate and fuel and told to head for land. One of the boats ran out of fuel. The other, by now dangerously overcrowded, smashed on a reef, its bedraggled human cargo rescued by fisherman and seaweed farmers from Landu island. Each of the 65 asylum seekers paid $5000 for their ill-fated voyage, enough to net the people-smuggling syndicate some $300,000, potentially supplemented by the $US30,000 ($38,000) the Australian spy apparently paid the boats' crew to return to Indonesia. There will, however, be no refunds for the asylum seekers, which included three women and four children..

One of six: Money Indonesian police say was used to pay people traffickers. Destitute, their future bleak as they are processed by Indonesian immigration officers, the tale of those on the boat is sadly familiar in a world gripped by a refugee crisis not seen since the second world war. The United Nations revealed on Thursday a staggering 60 million people have been driven from their homes due to war and persecution. Sources have confirmed the HMAS Wollongong was the navy ship that intercepted the asylum seekers. Credit:Navy That's up more than 8 million in the past 12 months, the largest annual increase on record. If those seeking asylum or displaced from their homes were a country, it would the 24th largest and contain one in every 122 citizens on earth.

"For an age of unprecedented mass displacement, we need an unprecedented humanitarian response." said UN High Commissioner for Refugees (UNHCR), António Guterres​. Imagine if other countries followed this approach. The international order would collapse. A senior foreign affairs adviser Turning back boats, let alone bribing people smugglers to do so, is not the type of co-ordinated response the UN has in mind for what it describes as a "unchecked slide" into misery and chaos for the world's displaced peoples. "Imagine if other countries followed this approach," said one senior foreign affairs adviser in Jakarta this week. "The international order would collapse." Even given the lengths the government has gone to, to "stop the boats", the payments were astonishing, not least because Indonesia was never consulted – in contrast to the turnback operations during the Howard era and Tony Abbott's assurances before the election.

The payments would almost certainly be illegal, if not for the immunities provided to the ASIS operation. While the asylum seekers were prevented from taking a highly dangerous trip to New Zealand, the foundering of their boat off Landu Island showed the remedy was also fraught with risk. It was also a tactic replete with moral hazard – wouldn't local Indonesians be encouraged to join people-smuggling ventures knowing there could be an opportunity for a financial bonus if they were caught by the Australians? "We would certainly urge all governments in the region not to turn boats away and certainly not to co-operate with smugglers, but to bring people to safety and to make sure their needs are met," said Thomas Vargas, head of the UNHCR in Indonesia. "We hope that Australia would look at this and they would have a generous approach."

Foreign minister Julie Bishop won't comment on whether payments were made to human traffickers, although there were early denials. But she defends the government's immigration policy. "Operation Sovereign Borders is more controversial but it has been successful," she told Fairfax Media. "Indonesia is a beneficiary of that success. The effect of Operation Sovereign Borders is to dramatically reduce the number of people using Indonesia as a transit country." "If countries just open their borders, like the previous Labor government did, if they allow the people-smuggling trade to flourish, then there will be utter chaos." Certainly, in terms of domestic politics, the furore over the payments to people smugglers is widely considered to have been a raging success by government members. The early dissembling from ministers, at first denying the payments, then refusing to confirm or deny, caused uncomfortable moments, but Prime Minister Tony Abbott was able to repeat his mantra on "stopping the boats".

"Not only is what this government has done legal," said Abbott. "It is moral, it is absolutely moral, because the most moral thing to do is to stop the boats and save the lives." Meanwhile Labor's attack was cruelled when it was reminded it had given the Australian Secret Intelligence Service $21 million to disrupt people smuggling when in government, part of which was used to reward informants in syndicates and thwart boat departures. Yet, its Immigration spokesman Richard Marles maintains the government has to come clean. "The allegation that we had last week is the equivalent of paying drug dealers not to make ice, it is the equivalent of paying murderers not to go out and murder. It's paying people smugglers to do reverse-people smuggling. It is a very different proposition indeed," he said on Thursday. Foreign policy analysts say any local political advantage for the government has come at a price – a diminution of Australia's reputation as a good global citizen that will have an enduring and negative impact on Australia's national interest, especially in southeast Asia.

And it is part of a disturbing new pattern in the way the government is handling its foreign policy, says John McCarthy, the veteran diplomat who served as ambassador in Washington and Jakarta in a 40-year diplomatic career. As well as an immigration policy that includes deals with authoritarian and impoverished regimes to host refugees in exchange for money, he cites cuts to foreign aid and the plans to strip dual-nationals who join terrorist groups of their citizenship as part of a "disgraceful" turn in Australia's foreign policy that will infuriate allies and undermine co-operation in the long term. "What you have now is a foreign policy that features very naked self-interest based on domestic politics, as opposed to broader Australian national interests which take into account our external environment. It's driven by very raw domestic politics." For a middle power that has used its reputation as a good global citizen to press for advantage, it is a "major" shift, argues McCarthy, who is national president of the Australian Institute for International Affairs. The Indonesian foreign adviser put it another way: "This is an existential question for Australia. What does it stand for? Australia is seen to be going against its international convention obligations in terms of its responsibility towards migrants. It seem uncaring and unco-operative."

Relations with Indonesia are at a low not seen since East Timor crisis. For that, Indonesia must take much of the blame, not least for its insistence on executing Andrew Chan and Myuran Sukumaran. Even so, says Australian National University's Andrew Carr, "the self interest on boats has basically killed off this idea of a more-Jakarta, less-Geneva foreign policy" espoused by Tony Abbott before his election. "The risk with pursuing this type of policy is it makes it harder to build the relationships … that does play into Australia's ability to lead on other issues." As well as reminding voters of the influx of refugees and deaths at sea under Labor, the government this week used its controversial proposal to give the minister for immigration the right to strip citizenship off dual nationals to hammer its opponents. While Cabinet now appears to have rallied to support the measure after divisions last week, Labor's shadow attorney-general Mark Dreyfus says the immigration minister shouldn't have such extraordinary power unless a conviction was handed down by the courts first.

The two issues neatly coalesced for Abbott when he launched his coup de grace during parliamentary debate this week. "We're going to keep terrorists out where they're dual nationals and it seems that the opposition wants to bring them home, no doubt roll out the red carpet for them like it rolled out the red carpet for people smugglers when it was in government," he said. But, says McCarthy, the citizenship changes will add to Australia's reputation as a selfish country unconcerned by the consequences of its actions on other nations. "We are engaged in a war in the Middle East. A lot of the people we are aligned alongside in this war have real issues about us saying, 'Well, OK, this person is a dual national, we are going to deprive him of citizenship. You guys in, say, Turkey or Lebanon, can keep him." Many of the Australians fighting for Islamic State – including Khaled Sharrouf, who posed his children with severed heads and is reportedly a senior member of the terror group – have dual Lebanese-Australian nationality.

Besieged by more than one million refugees each, Lebanon and Turkey are crucial allies if some kind of peace and security is to be restored to Syria. But the countries are hardly well placed to be solely responsible for terrorists raised in Australia. "There are perfectly good laws in Australia that punish these people, and that's a good thing; laws that can put people these people away for life. This is populist politics of the worst kind," says McCarthy. Australia's dogged defence of coal mining, a huge contributor to global warming, and policies to discourage renewable energy sit at odds with much of the rest of the global community. Again, say critics, it is an example of foreign policy that suits Australia's short-term interests but harms others in the process. For many in the region, the deep cuts to development assistance – down by 40 per cent for Asian countries in one year alone – is seen as more evidence of an abandonment of good global citizenship by a wealthy nation. Bishop says the government is using the aid budget in more "innovative" ways to produce good outcomes. She adds that Australia will unveil its post-2020 targets for reducing greenhouse gas emissions. "I'm very comfortable with the direction that's heading."

Bishop also notes more refugees displaced from the conflict in Syria will come to Australia, spaces freed up in the humanitarian immigration intake by the slowing in boat arrivals. But Bishop's argument doesn't appear to be carrying the day in the world's capital, especially when it comes to immigration. "There is increasing concern not only within the UN but within the wider diplomatic community as to the morality, legality and adverse regional and global impacts of Australia's refugee and asylum-seeker policy," says Phil Lynch​, the director of the Geneva-based International Service For Human Rights. "Australia's disdain for the rules of international human rights law, particularly the Refugee Convention, not only inflicts irreparable short-term harm on desperate people fleeing desperate circumstances, but is likely to undermine the rules-based international order on which Australia's security, stability, trade and investment so heavily relies."