This could involve changes to the exchange of information and co-operation on people smuggling or a blanket refusal to accept returned asylum seekers rescued at sea. Prime Minister Tony Abbott's refusal to say sorry over spying revelations has angered Indonesia. Credit:Andrew Meares President Susilo Bambang Yudhoyono's foreign affairs adviser Teuku Faizasyah said when Mr Abbott spoke on Tuesday he was "addressing the domestic audience". "Well, we still need an official explanation … a formal response," he said. "It's not advisable to maintain the status quo of not confirming or denying to these tapping incidents in the past. So we are waiting. At stake is the strategic relationship that we have established."

Mr Abbott's unapologetic approach to the spying allegations threatens to escalate tensions and damage relations between the nations, a confidant of Dr Yudhoyono warned, as the Indonesian ambassador arrived back in Jakarta after being recalled from Australia over the affair. A defiant Mr Abbott ignored a plea by Dr Yudhoyono on Tuesday both for an official explanation of events of the past, and a halt to future spying on Indonesia. Instead, he strengthened his stance on the issue, saying Australia gathered information ''to advance its national interests''. In a special pre-question time statement, Mr Abbott refused to utter an apology to Dr Yudhoyono for attempted phone intercepts in 2009, offering only ''regret [for] any embarrassment that recent media reports have caused him''. The comments came just hours after the Indonesian President had taken to Twitter to express his personal affront at revelations that his phone and that of his wife, Ibu Ani Yudhoyono, and eight of their close circle were the subject of surveillance by Australia's Defence Signals Directorate. Dr Yudhoyono said bringing Indonesian ambassador Nadjib Riphat Kesoema back was a ''firm diplomatic response''. He also demanded an ''official response'' that could ''be understood by the public''. ''I also regret the statement of Australian Prime Minister that belittled this tapping matter on (sic) Indonesia, without any remorse,'' he wrote.

But just hours after the tweets, Mr Abbott said in Parliament that ''Australia should not be expected to apologise for the steps we take to protect our country now or in the past'' or be expected to ''detail what we do to protect our country''. ''All our resources, including information'' had been used to ''help our friends and allies, not to harm them,'' Mr Abbott said. He reiterated that he wanted ''to build the strongest possible relationship with Indonesia''. But Daniel Sparringa, a close adviser to Dr Yudhoyono, said: ''This wound can be healed only if the Australian government would display good intentions to end the issues and commit to avoid the same recurrent things happening.'' Mr Abbott's office would neither confirm nor deny if he had telephoned or attempted to telephone Dr Yudhoyono.

Opposition Leader Bill Shorten called for a more conciliatory approach, suggesting Mr Abbott might copy US President Barack Obama, after similar allegations emerged of American phone hacking of German Chancellor Angela Merkel. Mr Obama assured her the US would halt any wiretaps. The rare division between the two sides of politics on a matter of national security has created the bizarre situation of a new Coalition government defending the behaviour of a former Labor government, while Labor appeared to advocate some kind of apology. In the Indonesian Parliament, meanwhile, Dr Yudhoyono's response was being seen as too weak. A senior member of the Parliament's foreign affairs committee, Tantowi Yahya, said that if Australia did not apologise, "I think it shows how unfriendly they are". "Australia keeps saying Indonesia is its strategic partner … well, we think it's just lip service. So what we need right now is actually a strong stance shown by our highest leadership, which unfortunately does not exist."

With Canberra-Jakarta relations deteriorating, Mr Abbott had been under pressure from a variety of foreign policy experts to temper his initial reaction to the revelations of Australian spying. Former Coalition foreign minister Alexander Downer said he feared the insult to the Indonesian President would have significant ramifications for Australia. Former Labor foreign minister Bob Carr went further, calling the diplomatic crisis ''catastrophic'' and calling on the government to apologise. Experts said there was strict ministerial approval and oversight of such activities in Australia. Clinton Fernandes, a former intelligence officer and now an international relations expert at the University of NSW, said ministers would know about it.

''My reaction to the idea that it would not be known about SBY is pull the other leg.'' Loading with Deborah Snow, James Robertson and Jonathan Swan.