The Indonesian president says he has suspended co-operation with Australia on people smuggling in the wake of the Guardian Australia and ABC revelations about phone tapping.

Susilo Bambang Yudhoyono's announcement appeared to dash hopes of a thaw in relations after the head of Indonesian security said Australia had pledged to stop tapping the phones of Indonesian politicians

The president had been holding high-level talks with ministers on Wednesday.

Speaking before a meeting with the president, Marciano Norman, the head of the Indonesian State Intelligence agency (BIN), said he had spoken to Australian security officials who had reassured him that the phone tapping would stop.

“According to my latest communication, starting from now they will stop [wiretapping] – they won't do it anymore," he said.

Norman, speaking to Indonesian news site viva.co.id, continued: "If they conduct activities outside the existing information sharing co-ordination, then it is a violation and thus it is unacceptable."

Earlier a number of reports suggested Indonesia had officially downgraded its relationship with Australia.

Jakarta-based paper Media Indonesia reported that the foreign minister, Marty Natalegawa, had said bilateral relations had been officially downgraded.

"We will continue to downgrade our relationship with Australia," Natalagewa said. “Downgrading includes reviewing all bilateral co-operation between the two countries – not only information and intelligence exchange. It's no longer business as usual.

"We will continue to monitor and evaluate further steps in a measured manner."

AAP quoted Natalegawa as saying on Wednesday that “the downgrading in the level of the Indonesian-Australian relationship has been done.

"We have taken measured steps in accordance with their response and attitude."

But later comments appear to suggest this downgrade may only apply to certain areas of co-operation. Speaking before the presidential meeting at the palace, the influential co-ordinating minister for security, legal and political affairs, Djoko Suyanto, said that “some co-operations, not all” were being reviewed.

“Some co-operations are mutually beneficial. So only some, not all of them,” he said.

Yudhoyono earlier voiced his outrage on Twitter at the phone-tapping revelations published by Guardian Australia and the ABC. He said he was not happy with the response so far offered from Canberra.

On Wednesday the president summoned the returned Indonesian ambassador to Australia, who arrived in Jakarta on Tuesday, for a palace meeting along with a host of other powerful Indonesian politicians.