Foreign Minister Stephen Smith held talks with Indonesia on plans for a regional asylum-seeker centre in East Timor and admitted anger over the issue was "killing" the government.
Australian Foreign Minister Stephen Smith met his counterpart Marty Natalegawa in Jakarta to discuss plans by new Prime Minister Julia Gillard for a boatpeople processing centre to be built in East Timor.
Julia Gillard's vision for a refugee processing hub in East Timor has been dealt another blow, with the country's deputy prime minister the latest to reject the proposal.
As the government on Wednesday maintained East Timor remained its focus for solving the region's refugee problem, Senator Evans told a conference in Sydney the asylum-seeker debate had become toxic.
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Senator Evans is believed to have told immigration experts at the conference at the University of NSW that managing the asylum seeker issue had been one of his greatest failings as immigration minister.
The immigration minister also told those present that the debate on asylum seekers was "killing the government", Fairfax Radio
reported.
The network did not air audio of the remarks.
Opposition immigration spokesman Scott Morrison said the comments showed the government was more interested in polls and spin than an effective policy.
"It is Labor's policies that have failed, not their message nor their messenger," Mr Morrison said.
"Chris Evans' biggest failure has been to wind back the strong border protection regime he inherited from the coalition government."
Another asylum seeker boat, carrying 84 passengers and three crew, was intercepted northwest of Browse Island off WA on Wednesday morning.
In a statement released later in the day, Senator Evans softened his comments, saying the asylum seeker debate had been "difficult" for the government over a long period.
"The debate has changed substantially since Julia Gillard became prime minister and seized the opportunity to confront the issue and speak honestly and frankly with the Australian people," he said.
"We now have a clear way forward under prime minister Gillard. We are focused on developing a regional protection framework and are already engaged in discussions with East Timor."
But Ms Gillard's vision for the emerging nation to become home to a regional refugee processing centre received another setback on Wednesday, with East Timor Deputy Prime Minister Mario Viegas Carrascalao rejecting the plan.
"Timor-Leste is not a colony of another country. We have sovereignty and our people have rights to decide for themselves what they want," he said.
"We don't want another country to dictate to us. We're already independent and won't be a puppet of any other country."
The comments came after the East Timor parliament earlier in the week also rejected the proposal.
Despite the opposition to her plan in Dili, Ms Gillard maintain Labor will continue to push for an East Timor solution, despite offers from Nauru to reopen a detention centre used under the former Howard government's Pacific Solution.
The government has ruled out reopening Nauru on the grounds that unlike East Timor, the Pacific nation was not a signatory to the UN convention on refugees.
Nauru President Marcus Stephen on Wednesday reiterated that his government would consider signing the convention on refugees if it would advance Ms Gillard's plan for a regional processing centre.
"Naturally, we would consider any request for assistance either on this matter or any other issue," he told the Macquarie Network.
"There has been no official or formal request for discussions from the Australian government."
Opposition Leader Tony Abbott urged the government to reconsider using Nauru.
"Nauru has a centre, it was built by Australia, with Australian taxpayers' money," Mr Abbott said.
"There's no reason why it can't be used again."
