JAKARTA/CANBERRA - Indonesia's intelligence agency chief says Australia has agreed to stop wiretapping following outrage over reported eavesdropping on senior Indonesian leaders' phones.

Mr Norman Marciano told reporters today (Nov 20) that he has been communicating directly with Australia's intelligence agency and that he has been assured the wiretapping has stopped and will not resume.

He spoke before attending a meeting called by Indonesian President Susilo Bambang Yudhoyono to discuss the issue with Foreign Minister Marty Natalegawa and Indonesia's recalled ambassador to Australia.

Earlier today, Mr Natalegawa said that Indonesia has “downgraded” its relations with Australia and is reviewing bilateral cooperation on issues with its neighbour. 

President Susilo Bambang Yudhoyono, who earlier in the week recalled the country’s ambassador to Australia, was expected to speak on the issue later today.

The latest flare-up followed Australian media reports, quoting documents leaked by former United States National Security Agency contractor Edward Snowden, that Australian spy agencies had tried to tap the mobile phones of Mr Yudhoyono, his wife and senior officials. Reports last month said Australia’s Jakarta embassy had been part of a US-led surveillance network to spy on Indonesia.

Today, Prime Minister Tony Abbott told Parliament he would do everything he “reasonably can” to repair relations with Indonesia. But Mr Abbott told Parliament he did not “propose to overreact now” to Indonesian anger over this issue.

“I deeply and sincerely regret the embarrassment that media reports have caused President Yudhoyono who is a very good friend of Australia; perhaps one of the very best friends that Australia has anywhere in the world,” Mr Abbott said today.

“I do understand how personally hurtful these allegations have been, these reports have been, for him and his family,” he said.

“My intention, notwithstanding the difficulties of these days, is to do everything I reasonably can to help to build and strengthen the relationship with Indonesia which is so important to both our countries,” he added.

But Abbott failed to directly answer a question asked by opposition leader Bill Shorten: What progress had been made to restore Australia’s relationship with Indonesia?

Analysts describe the furor as the lowest point in a perennially volatile bilateral relationship since 1999, when Australia led a United Nations military force into the former Indonesian province of East Timor following a bloody independence ballot. At that time, Indonesia ripped up a 4-year-old security treaty with Australia. A new treaty has since been signed.

Indonesian Religious Affairs Minister Suryadharma Ali has become the first government minister known to have canceled a visit to Australia because of the spying furor, an Australian academic said today.

Professor Damien Kingsbury, director of Deakin University’s Center for Citizenship, Development and Human Rights, said Mr Ali was to arrive in Melbourne next weekend to give a seminar on managing religious diversity in Indonesia. He cancelled yesterday, said Prof Kingsbury, who had organised the seminar based on the minister’s promise to attend.

“The technical reason given in writing in the official letter was that he had to resolve some financial matters to do with his party before the end of the year,” Prof Kingsbury said.

“But the email correspondence I got from his office was that it was obviously too sensitive; it was too difficult a time for him to come,” he said.

The minister could not immediately be contacted for comment.

Mr Abbott told Parliament on Tuesday he would not apologise or explain Australia’s espionage activities. AGENCIES