A policy advisor to Cabinet Minister Christopher Pyne has been arrested, as part of a group of Australian men who stripped down to their swimmers emblazoned with the Malaysian flag at Sunday's Formula One race in Kuala Lumpur.

Jack Walker was among nine men, aged between 25 and 29, who were arrested yesterday while watching the grand prix, won by Australian Daniel Ricciardo, at the Sepang International Circuit.

Jack Walker is a staffer for Defence Industry Minister Christopher Pyne. ( Facebook: Jack Walker )

Pictures of them celebrating in a circle with their pants around their ankles were posted on social media. They were holding up an Australian flag, while wearing the Malaysian-themed underwear with the words "budgy smuggler" across the back.

Video footage also shows the men drinking from shoes — an act known as a "shoey", which is a celebration commonly seen in motorsports.

Malaysian media quotes local police who say the Australians will be remanded for four days and are being investigated for indecent behaviour in a public place and disrespecting the national flag.

Chief executive of the Sepang International Circuit Datuk Razlan Razali told New Straits Times the Australian men deserve to be "locked up, investigated and taken action against".

"This shows a huge lack of respect to us as Malaysians; this is stupid behaviour from foreigners who have no sense of cultural sensitivity and respect.

"It embarrasses their own country as well, it gives Australians a bad name."

Mr Walker is an advisor to Mr Pyne, in his capacity as Defence Industry Minister, and previously worked for a company founded by New South Wales Liberal powerbroker Michael Photios.

The former army reservist has also worked for Macquarie Bank, according to his online profile.

A spokeswoman from Mr Pyne's office told the ABC: "This matter is being handled appropriately by the Australian High Commissioner. Until we have a clearer picture of the process at hand it would be unwise to comment further."

Morrison urges legal understanding

It is unclear what penalty the men might face, but Treasurer Scott Morrison said it was a reminder for Australians travelling overseas to behave appropriately.

Mr Morrison told radio station 2GB: "They're their laws, their rules, you're on their ground, so you know you've got to comply."

"It's a timely reminder for young people when they travel overseas — know what the laws and rules are and respect them."

The Federal Government's statement of ministerial standards has a section specifically for ministerial staff.

"Their closeness to the most significant decisions of government is a privilege that carries with it an obligation to act at all times with integrity and awareness of the expectation of the Australian community that the highest standards of conduct will be observed."

Federal Opposition Leader Bill Shorten said it was "incredibly serious" for any Australian to be arrested overseas.

"I'm not about to jeopardise an already complex situation by making further commentary," he said.

"I don't think inflamed debate from Australian politicians is what their families, or they need, and I certainly won't do that."

Matter could be treated as 'misdemeanour'

Australian National University Professor of International Law Don Rothwell said it is likely the act will be treated as a "small misdemeanour".

"I think at worst they might just find themselves being deported," he said.

"We need to be mindful that the Malaysian grand prix is a major tourism event for the Malaysian Government.

"The Australians were obviously exuberant, they were celebrating the win of Daniel Ricciardo, so accordingly I think the Malaysian Government will be sure to make sure that its international reputation as a tourist destination for the grand prix is not too damaged."

Australia's SmartTraveller website provides a warning about the pitfalls of inappropriate dress in Malaysia.