Australian Foreign Minister Stephen Smith is on his way to Indonesia for talks about plans for a regional refugee processing centre.
Australia has proposed setting up an asylum seekers’ centre in East Timor.
But Indonesia has expressed concern that this could attract more refugees to Indonesian waters, and East Timor has not agreed to the plan.
Australia wants to deter asylum seekers, many from Sri Lanka and Afghanistan, from sailing to Australia.
Many of them have been caught in Indonesian waters, and Indonesian authorities have pointed out that Indonesian West Timor and independent East Timor share a porous land border.
The Australian foreign minister will meet with his Indonesian counterpart Marty Natalegawa in Jakarta.
Mr Smith told Australian media that a regional processing centre would encourage asylum seekers to focus on one destination in the region.
“I think when we sit down with not just Indonesia, but other countries in the region the policy rationale for a regional processing centre is to undercut the incentive for secondary movement, particularly to undercut the incentive for secondary movement by boat across the high seas in dangerous circumstances,” he said.
Australia has also said it remains in talks with East Timor over the plan, despite a rejection by the country’s parliament.
“Our focus is on discussions with the East Timor government, and the East Timor government continues to confirm to us that it is open to the dialogue about the regional processing centre, and we’re in that dialogue now,” new Prime Minister Julia Gillard told parliament on Tuesday.
Meanwhile, the Pacific territory of Nauru has offered to host a processing centre again, as it did under a previous Australian government in what was called the Pacific solution.
Immigration is highly controversial in Australia, where an election is expected to be called shortly.
Asylum-seekers are currently processed at Christmas Island in the Indian Ocean, but this centre is overwhelmed and others have had to be reopened on the Australian mainland.
The BBC’s Indonesia correspondent Karishma Vaswani says Indonesia and Australia have struggled to solve this issue in the past.
Last year they failed to sign a wide ranging agreement on asylum seekers which had been dubbed by the media as the Indonesian solution.
Official figures show that about 2,982 asylum-seekers were intercepted on their way to Australia this year until 19 May.