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The Indonesian army says it opened fire because an Australian patrol strayed into West Timorese territory.
BBC South East Asia correspondent Simon Ingram says the risk of such incidents is bound to rise as the peacekeepers consolidate their presence in the west of the territory.
Indonesian Foreign Minister, Ali Alatas, blamed peacekeeping troops for the clash.
![[ image: width=150]](/olmedia/470000/images/_471211_alatas150.jpg)
"This incident is, I think, truly to be deplored," Mr Alatas said, insisting members of the force should not be "trigger happy" near the border.
Mr Howard told the Australian parliament: "The government regards the incident in the most serious terms."
"It shows that some elements in TNI (the Indonesian military) may be disregarding the terms of the U.N. Security Council ... and continuing to support militia groups."
"We're also be making our concerns known to the United Nations Secretary-General," the Australian Prime Minister added.
The exchange of fire left two other policemen wounded, Indonesian media reported.
First direct clash with troops
It is the first time the members of the Interfet force have clashed directly with Indonesian security forces since they arrived last month.
The UN-backed force said that its troops were on the eastern side of the poorly marked border, disputing an earlier report in which Indonesian security personnel said the clash took place in West Timor.
![[ image: width=150]](/olmedia/470000/images/_471211_under_fire150.jpg)
But Interfet spokesman Colonel Mark Kelly said talks between the force's commander, General Peter Cosgove and Indonesian officers in Dili had arrived at the conclusion that the incident took place "well and truly inside East Timor".
The initial confusion over the border appears to stem from the fact that the peacekeepers work with maps drawn up in 1992 while the Indonesion security forces were using charts first issued in the 1930s.
It was the third fire exchange for the peacekeepers in a week.
A week of incidents
Earlier, Col Mark Kelly said that on Saturday a patrol of about five men from the multinational Interfet force responded when they came under attack from 12 to 15 militiamen.
Several other militiamen were thought to have been injured.
Col Kelly said the incident happened two kilometres inside the border at a village called Alto Lebos, north of the port of Suai.
He said the militiamen had been firing their weapons as they advanced through mountainous terrain, adopting what he described as an aggressive posture.
The special forces response unit had returned fire and retrieved the dead man's body before being evacuated by helicopter. Interfet troops suffered no casualties, he said.
The international force's first fatal engagement with the militias came on Monday last week, when two militiamen were killed and two Australian soldiers wounded.
In pictures: Peacekeepers under fire
(11 Oct 99 | Asia-Pacific)
Indonesian troops clash with Timor force
(10 Oct 99 | Asia-Pacific)
Plan to halt Timor violence set out
(09 Oct 99 | Asia-Pacific)
Asia's angst over Timor intervention
(28 Sep 99 | Asia-Pacific)
Timor: The military challenge
(24 Sep 99 | Asia-Pacific)
Shadowy militias of East Timor
(15 Sep 99 | Asia-Pacific)
BBC Indonesian Service
UN Mission in East Timor
East Timor International Support Center - Bishop Belo profile
East Timor Human Rights Centre
BBC World Service East Asia Today
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