Julia Gillard has resorted to a policy of processing refugees abroad to try to stop the boats and shut down damaging debate over asylum seekers.

But the fate of her policy rests with two foreign governments and the United Nations, all of which gave no firm commitment to the plan.

After defusing the mining tax issue, Ms Gillard nominated asylum seekers as the next item on her to-do list. She now has only to announce stop-gap renewable energy measures to address climate change before clearing the decks for the election.

With the Opposition Leader, Tony Abbott, promising a return to the ''Pacific solution'' in which asylum seekers would be processed by Australian authorities in a third country such as Nauru, Ms Gillard promised to establish a regional processing centre in East Timor.

The policy, denied by the government 10 days ago, would mean unauthorised arrivals in Australia and other signatory nations would be sent to East Timor for processing under the auspices of the UN High Commissioner for Refugees and the International Organisation for Migration.

Those found to be refugees would be relocated in Australia, New Zealand and any other nations that signed up.

The President of East Timor, Jose Ramos-Horta said that Timor would not seek favours in return for co-operating. ''Timor-Leste will look at any proposals with an open mind, based purely on humanitarian considerations.''

Ms Gillard contacted Mr Ramos-Horta, the New Zealand Prime Minister, John Key, and the UN High Commissioner for Refugees, Antonio Guterres. She said Australia must rise above the unedifying debate that surrounded asylum seekers and her solution would stop the ''evil trade'' of people smuggling. ''A regional approach … effectively eliminates the onshore processing of unauthorised arrivals and ensures that anyone seeking asylum is subject to consistent process of assessment in the same place,'' she said.

''A regional processing centre would remove the incentive once and for all for the people smugglers to send boats to Australia. Why risk a dangerous journey if you will simply be returned to the regional processing centre?''

After a UNHCR report found the Sri Lankan situation was improving, Ms Gillard lifted the three-month processing freeze on Sri Lankan arrivals with the expectation that most applicants would be rejected.

A UNHCR spokesman welcomed the lifting of the freeze. He said the commission was favourably disposed towards the Timor proposal but said it was ''too early to discuss specifics''.

Mr Key, in South Korea, said he had told Ms Gillard New Zealand would not increase its annual refugee quota of 750. ''In addition, we won't be sacrificing our security checks on those seeking refugee status in New Zealand.''

Immigration Minister, Chris Evans, first approached the UNHCR several months ago about it presiding over a processing centre in a third country and that the commission was lukewarm about the idea.

Diplomatic sources said that when Mr Ramos-Horta visited Canberra two weeks ago Mr Rudd was advised not to raise the idea during talks that lasted more than two hours.

The opposition immigration spokesman, Scott Morrison, said the Coalition's policy was aimed at solving Australia's problem, whereas Ms Gillard's idea was unwieldy and required regional agreements and pacts.