Indonesia has frozen a broad range of cooperation with Australia in response to revelations that Australian intelligence tapped the phones of the Indonesian president, his wife and top officials.
The decision, announced by Susilo Bambang Yudhoyono in a television address on Wednesday, follows increasingly tense relations between the neighbours since Tony Abbott became Prime Minister in September this year, Reuters reports.
On Tuesday, Indonesia demanded an apology and explanation within two days over revelations from fugitive American intelligence analyst Edward Snowden that Australia tried to listen in on Mr Yudhoyono's phone calls in 2009.
Among the measures, Indonesia will suspend military cooperation and intelligence exchanges, including over the politically charged issue of asylum seekers, Reuters reports.
Mr Abbott has been pressing Jakarta over the issue of boat people who frequently head to Australia via Indonesia.
Mr Yudhoyono said he is again demanding an official explanation from Australia and would write to Tony Abbott. However, the president said he wanted to return to good relations once the phone-tapping problem was resolved.
Indonesia's Foreign Minister Marty Natalegawa said the fact that eavesdropping took place at all is the core issue - as it is illegal, violates human rights and an individual's rights to privacy. He said that is why Indonesia has recalled its ambassador from Canberra for consultations.
Tony Abbott has declined to apologise for the spying, but told Parliament on Wednesday he regrets any embarrassment to Mr Yudhoyono and will do anything he can reasonably do to strengthen ties, the ABC reports.
Mr Abbott said Mr Yudhoyono was perhaps one of the very best friends that Australia has anywhere in the world.
Indonesia has already warned that several key agreements with its southern neighbour are at stake and a government minister has cancelled a planned trip to Australia.
