Prime Minister Tony Abbott says a news report that he wanted to send thousands of Australian troops to unilaterally invade Iraq is "fanciful" and "false".

The Australian newspaper is reporting that during a meeting on November 25 last year, Mr Abbott suggested sending 3,500 ground troops to confront the Islamic State terrorist group.

The report says Mr Abbott put the idea to leading military planners, who were "stunned" and advised him sending the soldiers without United States or NATO protection would be "disastrous".

But Mr Abbott said the story was "fanciful".

"You absolutely can't leak something that never happened and I think just at the moment there is a little tendency on the part of journalists to pick up rumour, to exaggerate it, to beat it up, to further exaggerate it and then publish it as fact," he told reporters in Darwin.

"I think people should be very wary about taking too seriously stuff which is claimed which no-one is prepared to put his or her name to.

"The story that I read today was fanciful, absolutely fanciful.

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"Australia does not act unilaterally in the Middle East. We work with our partners and allies to meet threats to our vital national interests and to the vital national interests of our friends and partners. That's what we do.

"I rang the [Chief of the Defence Force] as you would expect, because if any such discussions had ever taken place, surely they would have taken place with the CDF and he is as mystified by this as I am.

"I note that apparently there was no attempt made to contact him and certainly there was no attempt made to raise with my office this issue of 3,500 soldiers being unilaterally sent to Iraq."

Clive Mathieson, editor of The Australian, said: "We stand by the story 100 per cent."

Treasurer Joe Hockey tweeted that the article was "complete and utter rubbish".



Finance Minister Mathias Cormann also rejected the report during an appearance on Sky News.

"That story is wrong, the Prime Minister never sought such advice," he said.

The Australian does reference a statement from a spokesman for the Prime Minister, which says: "The Prime Minister has consistently said that the Australian Government will continue to talk to the government of Iraq and to our coalition partners about what Australia can usefully do to make the world a safer place and to make Australia a safer country."

But Senator Cormann said the paper only requested comment from the Government on a very general question about increasing Australia's military efforts in Iraq, and did not raise the details that have been published in the report.

"May I say my advice is the journalist who wrote that story actually never put that proposition to the Prime Minister's office when seeking comment," he said.

In a statement, a Defence spokesperson said: "The Chief of the Defence Force does not recall, or have any record of any task from the Prime Minister to examine the possibility of a large scale deployment to Iraq of the nature described in today's media reports."