Talek Harris, Sydney – Australia said on Tuesday it remained in talks with East Timor over a regional asylum seeker center despite a rejection by the tiny country's Parliament, which dealt the pre-election policy a severe blow.

Prime Minister Julia Gillard said East Timor's government was still discussing processing refugees seeking asylum in Australia – a major plank of her election strategy that has become mired in difficulty.

Australia's first woman leader, who is expected to announce the polls within days after ousting the once hugely popular Kevin Rudd last month, was speaking after 34 of Timor's 66 lawmakers voted against the plan.

"This was a vote on a resolution in the East Timorese Parliament at a time when the Parliament was not well attended," she told reporters in Canberra, adding that officials were involved in discussions in East Timor on Monday.

"The East Timor government continues to confirm to us that it is open to the dialogue about the regional processing center, and we're in that dialogue now."

Foreign Minister Stephen Smith is also holding talks on the proposal this week in Indonesia, a major transit point, following criticisms that Gillard did not consult widely enough before making her announcement.

The prime minister was forced to backtrack last week when she clarified East Timor was only one possible location for the center, despite earlier indicating that it would be built there.

The controversy has taken some gloss off the straight-talking, Welsh-born lawyer's image, which had gleamed after she settled a damaging mining tax row just days into her premiership.

"The East Timor solution is totally and utterly sunk," said opposition leader Tony Abbott.

Australia's ruling Labor Party and opposition have both unveiled tough policies on asylum seekers, with Greens party chief Bob Brown saying the debate reminded him of 1990s anti-immigration firebrand Pauline Hanson.

Gillard's "Timor Solution" has won favor with about two-thirds of voters, although a similar number also believes the policy was badly thought-out, according to a poll of voters released this week.

Australia currently processes asylum seekers on Christmas Island, an Australian territory in the Indian Ocean, but a steady flow of refugees has overwhelmed facilities and forced the reopening of centers on the mainland.

The arrival of mainly Afghan and Sri Lankan refugees proved a thorn in Rudd's side after he scrapped the harsh mandatory detention policy of his conservative predecessor, John Howard.