JAKARTA (Reuters) - Indonesians burned Australian flags on Thursday over reports Australia's spies tried to tap the phones of President Susilo Bambang Yudhoyono and his wife, plunging relations between the neighbours to their lowest point since the late 1990s.
About 200 people marched to the heavily fortified Australian embassy in Jakarta - the scene of a 2004 bombing that killed 10 people - to demand an apology over the alleged spying, which prompted Yudhoyono to downgrade diplomatic relations with Canberra on Wednesday.
Many of the protesters carried banners lambasting their southern neighbour, including one saying, "We are ready for war with Australia".
Other protesters in the Central Javanese city of Yogyakarta burned Australian flags in a show of anger, though the demonstrations were smaller than police had expected.
Australia earlier updated its travel advisory for Indonesia, the country's second-most popular tourist destination after New Zealand, urging citizens in the Southeast Asian archipelago to avoid protests and "maintain high levels of vigilance".
Yudhoyono went on national television on Wednesday to announce that he was freezing military and intelligence cooperation, including over the issue of asylum seekers, which has long been an irritant in relations.
The reports that sparked the Indonesian outrage quoted documents leaked by former U.S. National Security Agency contractor Edward Snowden, suggesting Australia had tried to monitor the phones of top Indonesian officials in 2009.
Australian Prime Minister Tony Abbott has not confirmed the spying or apologised, although he has expressed regret for the embarrassment the media reports had caused Yudhoyono and his family.
Indonesia's Coordinating Minister for Economic Affairs Hatta Rajasa told Reuters there had been little economic impact from the row. "In the area of economy and business, our cooperation is continuing," he said.
Trade Minister Gita Wirjawan said on Wednesday Indonesia was reviewing its trade ties with Australia, worth more than $11 billion last year.
Indonesia is a major importer of Australian agricultural products such as wheat and live cattle, while Australia is Indonesia's 10th-biggest export market.
SECURITY COOPERATION SUSPENDED
Deputy Trade Minister Bayu Krisnamurthi said there had been "no policy change yet" that would affect beef and cattle imports from Australia.
Indonesia has loosened its cattle and beef import regulations this year to curb rising food inflation, giving a boost to Australian exporters. The world's fourth-most populous country is Australia's biggest market for cattle and beef.
But there was some confusion among Indonesian authorities over Yudhoyono's threat to halt all cooperation with Australia, including between police who have forged close relations in the fight against Islamist militants and people smugglers.
Indonesia's foreign ministry spokesman Michael Tene said: "The suspension of intelligence and information sharing covers all related institutions including police, not just the military."
However, police officials contacted by Reuters said they had yet to receive word.
"We have not yet received instructions on stopping cooperation with them (Australian federal police). I don't know about it," Colonel Budi Suntoso, of People Smuggling Task Force, told Reuters.
Abbott, in a statement to parliament on Thursday, said he had received an official letter from Yudhoyono seeking an explanation for the spying reports, and reiterated his earlier pledge to respond "swiftly, fully and courteously".
Relations between Australia and Indonesia hit a nadir in 1999 when Australia sent troops into East Timor to restore peace and subdue Jakarta-backed militias after Indonesia's military pulled out of the former colony.
Ties with Jakarta have improved significantly since the two countries were drawn together in response to the 2002 bombings on the Indonesian holiday island of Bali, which killed more than 200 people including 88 Australians.
But they have taken a turn for the worse since Abbott took office in September, because of the spying reports and tension over how to prevent asylum seekers sailing from Indonesia to Australia.
(Reporting by Nina Kusuma Adriana and Yayat Supriyatna in JAKARTA, Lincoln Feast and Maggie Lu Yueyang in SYDNEY; Editing by Stephen Coates, Robert Birsel and Ryan Woo)