Government denies offering 'bounty' for asylum-seekers

SYDNEY - Faced with a steady stream of asylum-seekers heading towards Australian shores, the Government is seeking a deal with Indonesia that would guarantee its assistance, but denied yesterday that it is offering its neighbour a "bounty" payment for every would-be migrant.

As the 35th boat to arrive in Australian waters this year was intercepted off Christmas Island yesterday, reports emerged that the Sri Lankan occupants of another boat had drilled holes in its hull to force the Australian Navy to rescue them.

The 78 Sri Lankans were transferred to the Australian Customs boat Ocean Viking last weekend after the Navy concluded their vessel was not seaworthy. Indonesia has agreed to process them, following negotiations between the Australian Prime Minister, Kevin Rudd, and President Susilo Bambang Yudhoyono.

Rudd intervened earlier this month to persuade Indonesian authorities to intercept another boat carrying 255 Sri Lankans, who remain docked in the West Java port of Merak, refusing to go ashore.

The Government has confirmed it is seeking a deal involving financial incentives for Indonesia to intercept and house asylum-seekers en route to Australia. But Foreign Minister Stephen Smith said yesterday: "I'm not aware of any consideration being given to a price per head." He refused to confirm the boat picked up last weekend had been sabotaged.

Rudd called on the Liberal Party to withdraw support from one of its politicians, Wilson Tuckey, who suggested terrorists were masquerading as asylum-seekers.