Australian Foreign Minister Julie Bishop has held the position for five years but made her first official visit to Timor-Leste, a country Australia helped found, only two weeks ago.
In promising a "new chapter" in the bilateral relationship, Ms Bishop aimed to end a period of testy tiesover the placement of the maritime boundary and the division of a lucrative US$65 billion (S$89 billion) in oil and natural gas reserves.
But the conciliatory move has been undermined by a spy scandal that threatens to do more damage.
About five years ago, a former Australian spy revealed that Canberra had bugged Dili's Cabinet offices during sensitive negotiations over the maritime boundary in 2004.
Australia has now angered Timor-Leste by announcing it would prosecute the spy - known only as "Witness K" - and his Australian lawyer, Mr Bernard Collaery, for revealing state secrets.
Witness K, reportedly a former head of technical operations for the Australian Secret Intelligence Service, allegedly helped to install listening devices under the cover of office refurbishment work that was part of Australia's aid programme. The decision to prosecute the duo has been denounced by prominent figures, including current and former Members of Parliament and judges, as well as Human Rights Watch.
A legal expert at the University of New South Wales, Professor David Dixon, said Australia's actions were vengeful and "shameful".
"Their real offence was not breaching secrecy, but embarrassing Australia," he wrote in Fairfax Media newspapers last month.
For Australia, the prosecution has revived a long-running debate over the nation's approach to Timor-Leste. Australian activists were at the forefront of the campaign to secure the nation's independence from Indonesia and the Australian military led the peacekeeping effort as Indonesia withdrew in 1999.
Canberra's subsequent close ties with the fledgling nation grew as its military remained in Timor-Leste until 2013 to help quell civil unrest.
But the maritime boundary dispute seriously frayed relations. It was brought before the Permanent Court of Arbitration but finally ended when the two countries signed a treaty in March.
The new treaty will deliver 70 to 80 per cent of the revenue from the undersea resources to Dili and the remainder to Canberra. This was more favourable to Timor-Leste than the original deal, which split the reserves between the two. The treaty paved the way for warmer ties and for Ms Bishop's visit.
Asked about the prosecutions, Ms Bishop said the move was "a domestic legal issue" and not directed at Timor-Leste. But the prosecutions have cast a new shadow over Australia's handling of ties with its small, poorer neighbour.
Former Timor-Leste president Jose Ramos-Horta, a Nobel Peace Prize winner, has urged Canberra to drop the prosecutions, saying the duo had not committed treason. "It was a case of moral conscience... that had zero impact on Australian national security," he said.
The federal government's decision to prosecute the pair was revealed in Parliament in late June by independent MP Andrew Wilkie, a former intelligence official who famously came to prominence in 2003 after resigning and speaking out against assessments of Iraq's weapons programme in the lead-up to the Iraq war.
He and three other MPs also urged the police to investigate the initial decision to spy on Timor-Leste. He said Mr Collaery and Witness K were "political prisoners".
"It's time to get to the bottom of this shameful chapter in Australian history when we sold out an old friend for commercial gain," he said.