It's high time Indonesia resumed co-operating with Australia on asylum seekers and other issues, Prime Minister Tony Abbott says.
Mr Abbott said the suspension of co-operation had been unhelpful to his new government's aim of stopping asylum seekers coming to Australia by boat.
Indonesia suspended military, intelligence gathering and people-smuggling co-operation in November after it emerged that Australian spies attempted to tap President Susilo Bambang Yudhoyono's mobile phone, as well as those of his wife and other close political allies, in 2009.
Australia's northern neighbour wants a new code of conduct to map out the future of the bilateral relationship, including guarantees against future spying activities.
Foreign Minister Julie Bishop held talks with her Indonesian counterpart Marty Natalegawa earlier in December in a bid to mend the relationship.
Mr Abbott said on Saturday there was no doubt Indonesia's actions had been unhelpful.
"It's been singularly unhelpful," he told reporters in Sydney.
"Given that people smuggling is a crime in Indonesia, just as it's a crime in Australia, I think it's high time that ... that co-operation was resumed."
The Australian government respected Indonesia's sovereignty.
But Mr Abbott said as far as he was concerned, asylum seekers coming in boats to Australia was a sovereignty issue for this nation.