BBC News

A Foreign Ministry spokesman in Jakarta said the change of policy would damage international efforts to find an acceptable solution to the problem.

Australian Foreign Minister Alexander Downer said his country would no longer support the status quo. Instead it would press for autonomy for the territory, leading to possible independence.

He described the move as a "significant change in policy".

Hope for reconciliation

He said the Australian Government now believed that allowing East Timorese to vote on independence after a period of autonomy offered the best chance of reconciliation for the territory.

East Timor independence activist Jose Ramos Horta said he was "very pleased and encouraged" by Australia's support for "a referendum on the definitive future of the territory".

The Australian foreign minister also called for the release of East Timorese resistance leader Xanana Gusmao, who is being held in jail in Jakarta.

Dangers of fragmentation

However, Mr Downer emphasised that Australia still favoured Indonesian sovereignty over the territory, and feared an immediate vote on independence might provoke further bloodshed.

He said Australia was concerned that East Timor's secession might lead to a further fragmentation of the country. Such a move could have destabilising consequences across the region.

Australia was the only Western country to recognise Indonesia's claim to sovereignty over the former Portuguese colony.

Correspondents say such a public pronouncement by Indonesia's traditional ally may increase international pressure on Jakarta to consider East Timorese calls for a referendum on independence.

Hopes for progress

Talks are currently underway between Indonesia and Portugal at the United Nations in New York over a form of autonomy for East Timor.

Since it invaded East Timor in 1975 and annexed it a year later, Indonesia has insisted the status of the territory - as another Indonesian province - is non-negotiable.