Sydney - Prime Minister John Howard refused to confirm a report on Thursday that Australian intelligence was hunting for an Indonesian spy in a top-level government department in Canberra.
The Australian Financial Review quoted intelligence sources in Canberra in reporting the Indonesian agent was run directly out of the office of Jakarta's Badan Intelijen Strategis (BAIS) intelligence agency.
The agent is reportedly in a position to provide highly classified information as well as help shape Australian policy in ways that benefit the existing political and military power structure in Indonesia, the financial daily said.
The report comes at a sensitive time in Australia-Indonesia relations, with Australia preparing to lead a peacekeeping force into the troubled Indonesian-controlled territory of East Timor.
Howard said he had read the report - but refused to confirm or deny it.
"I saw that report, obviously it's of interest to me," he told ABC radio.
"I don't comment on intelligence matters," Howard said. But he added: "Anything like that, of course it would be of concern. You often get those reports. Sometimes they have substance, sometimes they don't."
The BAIS is headed is Lieutenant General Tyasno Sudarto, who took over from Major General Zacky Anwar Makarim in January.
Anwar helped orchestrate a campaign of terror, involving large-scale torture, rape, murder and forced relocation of the people of East Timor, according to the Financial Review.
The extent to which Australia exchanges intelligence information with various Indonesian intelligence organisations has become a contentious issue among Canberra officials, the paper says.
A Defence Intelligence Organisation official working in the Australian embassy in Washington, Mervyn Jenkins, hanged himself in June after being investigated for alleged security breaches.
The paper said he was passing on information about East Timor to US intelligence, in a practice which Canberra had decided to discontinue. - Sapa-AFP