Indonesian ambassador Nadjib Riphat Kesoema.

Indonesian ambassador Nadjib Riphat Kesoema. Photo: Lyn Mills

THE Indonesian ambassador to Australia has quietly returned to Canberra in a signal that relations between the two countries are defrosting after last year's spying revelations.

Australian foreign affairs minister Julie Bishop confirmed on Monday that Nadjib Riphat Kesoema had returned six months after having been recalled by a furious president Susilo Bambang Yudhoyono after revelations that his phone and that of his wife and inner circle had been bugged by Australian spies in 2007.

"This is part of the process of resolving the issues that we inherited from Labor," a spokeswoman for Ms Bishop said.

However, Dr Yudhoyono's foreign affairs spokesman, Teuku Faizasyah, said on Monday the ambassador's return was "only a step towards normalisation of bilateral relations".

There is no resumption yet of cooperation between the countries on people smuggling, intelligence sharing or military exercises, which were terminated when the ambassador withdrew.

"Cooperation is related to the agreement of a code of conduct [on surveillance to be agreed between the two countries]," Mr Faizasyah said.

Ms Bishop and Indonesian foreign minister Marty Natalegawa have been trying to negotiate a protocol since December last year.

"The ambassador is returning to Australia very much to send a message that we are making progress in the discussions on the code of conduct … and it's also an incentive to speed up the normalisation process," Mr Teuku said.

"If we have someone there [in Canberra], I think it also has an impact on the way the discussions proceed."

The thaw is likely to be partly a product of a phone call between Dr Yudhoyono and the Australian Prime Minister earlier this month, when the Indonesian president expressed a desire to have relations normalised by August.

Until then, the Indonesians had refused to put a deadline on negotiations.

Dr Yudhoyono's term as president ends in October and he is keen to see the situation resolved before he leaves office, possibly to seek some role on the international stage.

With AAP