SYDNEY (AFP) - Australian Immigration Minister Scott Morrison on Wednesday said he was "taking the sugar off the table" in announcing that Canberra was slamming the door on United Nations-registered asylum-seekers in Indonesia.

Mr Morrison said that from July next year asylum-seekers officially recognised by the United Nations refugee agency in Jakarta would no longer be eligible for resettlement in Australia.

The move, he said, was part of the government's work to "strip people-smugglers of a product to sell to vulnerable men, women and children" and stop Indonesia being used as a transit lounge.

"We're taking the sugar off the table. That's what we're doing," he told ABC radio. "We're trying to stop people thinking that it's okay to come into Indonesia and use that as a waiting ground to get to Australia."

The giant northern neighbour is not a refugee-generating country, but has become a key magnet for others seeking to reach Australia, often through treacherous boat journeys that have left hundreds dead.

Since the government came to power last year, its hardline immigration policy - to deny asylum-seekers arriving by boat resettlement in Australia and instead send them to camps in Papua New Guinea and the Pacific state of Nauru - has halted the flow.

The move to shut the door on even those registered with the UNHCR refugee agency in Indonesia is the next step, Mr Morrison said.

"While nine of 10 months of 2014 have passed without a successful people-smuggling venture to Australia, we know smugglers continue to encourage asylum-seekers to travel illegally to Indonesia for the purpose of seeking resettlement in Australia," he said.

"These changes should reduce the movement of asylum-seekers to Indonesia and encourage them to seek resettlement in or from countries of first asylum."

Mr Morrison said Jakarta had been briefed on the development and insisted that Australia continued to support the UN refugee convention.

"We do support the convention," he said.

"But what we don't support is how that convention is abused by smugglers who try and leverage people into Australia through whatever means they can."

The Australian Greens said it was a cruel decision that would especially affect refugees fleeing from Iraq and Afghanistan.

"It's appalling... and cruelty writ large," Greens leader Christine Milne said, while her colleague Sarah Hanson-Young called the move "pure arrogance" from the government.

"It's the exact opposite to what Australia should be doing," she said, adding that it raised fears that asylum-seekers in Indonesia would now be encouraged to risk longer boat journeys to countries such as New Zealand.

"This is Australia saying we don't give a damn about these people," she said.