The Australian government is prepared to reopen South Pacific asylum seeker detention camps to process boatpeople arriving from Indonesia in return for the country's opposition backing a plan for a regional asylum processing center in Malaysia.
The offer to reopen centers in Nauru, a tiny island 4,000 km (2,500 miles) northeast of Australia, or Papua New Guinea is a major compromise by the Labor government. The centers were established under the previous conservative government and closed by Labor.
The minority Labor government needs conservative backing in parliament to pass its plan for a Malaysian center, which has already been defeated once in the parliament.
"We need the Malaysia agreement because you need that disincentive. We need Malaysia plus we need one other," Immigration Minister Chris Bowen said on Friday
"Nauru by itself would be an expensive white elephant, but Nauru with an agreement with Malaysia would be an effective part of a regional solution."
Asylum seekers are a long-running political flashpoint in Australia, despite it receiving just under 0.5 percent of the world's refugee hopefuls, according to the United Nations.
Voters link boatpeople arrivals with border security, an issue which has decided past elections. Elections are not due until mid-2013, but the government trails so badly in opinion polls it would be thrown from office if an election was held.
The sinking of an Indonesia boat last Saturday which resulted in hundreds of asylum seekers drowning, mainly Afghan and Iraqi, has renewed the boatpeople debate in Australia.
But despite the government's offer, a bipartisan deal on boatpeople is unlikely in talks later Friday, with the opposition continuing to oppose the Malaysian plan and imposing other conditions unlikely to be agreed to by the government.
"Malaysia deal is a bad deal. It was a bad deal six months ago -- it's a bad deal today," said conservative opposition leader Tony Abbott.
"But let's go forward with Nauru. After four tragic years for the people and families that have died at sea let's go forward and open Nauru."
Prime Minister Julia Gillard has twice failed to establish a regional processing center, firstly in East Timor and then Malaysia, in an effort to fight perceptions her government is soft on border security.
The government said its Malaysia plan was aimed at breaking the business model of people-smugglers by stopping asylum seekers reaching Australian soil.
Under the deal, Australia would transfer 800 asylum seekers to Malaysia in return for accepting 4,000 registered refugees, while also agreeing to pay Kuala Lumpur $300 million to cover processing and accommodation costs.