Two women drowned after leaping into the Indian Ocean to escape fire that engulfed the boat carrying them and 156 other refugees toward Australia.
Australian navy officials said refugees deliberately started the fire on the Indonesian boat, which was off Australia's northwest coast.
Details of the incident were released by Prime Minister Mr John Howard on the eve of a general election he is favourite to win because of his tough stance of refusing entry to boat people.
Since the new policy started in August, some refugees have resorted to sabotaging their boats, hoping the navy will rescue them and take them to Australia.
The Sumbar Lestari, carrying 158 asylum seekers and four crew, ignored a warning by a customs boat, the ACV Arnhem Bay, yesterday afternoon not to enter Australian waters.
After entering Australian waters near the territory of Ashmore Reef, 280 miles off the northwest coast of Australia, and continuing to disregard warnings, the vessel was boarded by sailors from the naval patrol boat Wollongong.
A dispatch from the Wollongongto defence headquarters said the navy sailors found a fire in the midships hold that they tried to extinguish, but a drum exploded and the flames spread.
The sailors rescued most of the refugees before the fire forced them to abandon the vessel, the dispatch said.
According to a second report from defence headquarters, both the Wollongongand the Arnhem Baybegan rescuing the remaining refugees, some of whom had jumped overboard.
"During the rescue operations, two women were recovered from the water unconscious with no pulse," a navy report said. Efforts to revive the women failed, it said.
AP