Ties between Canberra and Jakarta have sunk to their lowest point for years in recent months over previous allegations that Australian spies tried to tap the phones of Indonesian President Susilo Bambang Yudhoyono and his inner circle.
Jakarta recalled its ambassador from Canberra and suspended cooperation in several areas, including on the sensitive area of people-smuggling, following the allegations.
As Kerry visited Jakarta today as part of an Asian tour, tensions flared over new espionage allegations in a weekend New York Times report, which said Australian spies targeted Indonesian officials during a trade dispute with the United States.
"I find that a bit mind-boggling and a bit difficult how I can connect or reconcile discussion about shrimps and how it impacts on Australia's security," Indonesian Foreign Minister Natalegawa told reporters at a press conference alongside Kerry.
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Indonesia has been embroiled in trade disputes with the US over its exports of shrimp and clove cigarettes in recent years.
Australian Prime Minister Tony Abbott has refused to confirm the report, but defended the country's intelligence -gathering today as "to save Australian lives, to save the lives of other people".
"I think there is a very important and fine distinction between to listen to one another and to listen in," he added.
Responding to a question about the report, Kerry said: "I completely understand, as we do in the United States, how there are concerns... Regarding this issue, which is challenging for all of us."
"I'd just make it clear to everybody.. The United States does not collect intelligence to afford a competitive advantage to US companies or US commercial sectors," he added.