Australian navy has rescued an Indonesian boat carrying about 80 suspected asylum seekers after it developed snag in the seas south of the Pacific country, on a day the two countries held talks over the issue of illegal migrants, officials say.

The boat put out a distress signal on Friday when it was about 42 nautical miles from the main island of Java.

"It's still upright. The people seem all OK," a spokeswoman for the Australian Maritime Safety Authority (AMSA) told Reuters news agency by telephone.

She said eighty people were on board when the boat called the AMSA and reported it was taking on water.

We want these countries to sit together and really find a solution

Indonesia's President

The Indonesian National Search and Rescue Agency, however, said the boat had only developed engine trouble and it managed to fix the problem quickly, and continue its journey.

“The agency talked to people on the boat at 1:25pm local time. It had engine trouble but they have already fixed it and are able to travel slowly," the agency official, Rusliansyah told the AFP news agency.

He said the boat was heading to the Australian territory of Christmas Island, a common landing point for asylum-seeking boats.

"We can't stop them as the rescue team in the area does not have the right kind of boat to chase them," the official said.

Rudd in Indonesia

The latest incident coincides with the Australian Prime Minister Kevin Rudd's visit to Indonesia where he is addressing sensitive bilateral issues, including the thorny issue of asylum seekers, with Indonesian President Susilo Bambang Yudhoyono.

On Friday, both countries backed talks with originating countries to try to stem a tide of asylum-seeking boats staging perilous journeys to Australia.

Rudd has already drawn Indonesia into the domestic debate, criticising opposition leader Tony Abbott and his plan to "turn back" the boats, saying this risks a diplomatic flare-up with Jakarta.

In his previous stint as prime minister up to 2010, Rudd relaxed tough refugee controls.

He is now under pressure to take a hard line on the issue, although he gave little indication after Friday's talks that he was about to do so.

The Indonesian President Yudhoyono listed Afghanistan, Iran and Myanmar as countries where many asylum seekers come from, and described Thailand, Malaysia and Indonesia as transit points.

"We want these countries to sit together and really find a solution," he said, without giving a date for the meeting.

More than 13,000 asylum-seekers have arrived in Australia by boat since January this year, piling pressure on Australia's ruling Labor party in an election year.

It is a controversial political issue likely to loom large in the lead-up to polls to be held later this year.