The Government has rejected a draft "statement of regret" that Israel wants to tender in place of an outright apology over the passport affair.

Prime Minister Helen Clark yesterday confirmed that the Israeli Government had made an approach at "diplomatic levels" through New Zealand's ambassador to Turkey, Jan Henderson, about her demand for an official apology over an attempt by suspected Mossad agents Uriel Kelman and Eli Cara to obtain a false New Zealand passport.

"That is being dealt with at a diplomatic level at the moment," Helen Clark said at a joint press conference with Australian Prime Minister John Howard.

A senior Government source later told the Herald that the so-called "apology" referred to in initial news reports was nothing more than a "statement of regret".

This stopped far short of the Prime Minister's requirements for a "triple-A" apology before diplomatic relations will be restored, in which Israel would admit its culpability for Cara and Kelman's actions.

The Government wants:

* Israel to account for what the agents wanted to do with the New Zealand passports. This is the request Israel will have the most trouble with.

* An assurance that Israeli agents will not try the same thing again.

* An apology for breaching New Zealand's sovereignty.

There is also a suggestion that Helen Clark is prepared to continue to play hardball and wants to see the outcome of an Internal Affairs investigation into whether there have been previous instances of suspected passport fraud by Israel before accepting any final "apology".

Mr Howard yesterday continued to play down the reasons his Government ordered an Israeli diplomat back to Jerusalem late last year.

The Government is fighting off allegations that the diplomat set a "honey trap" for the daughter of Attorney-General Philip Ruddock, the Cabinet minister in charge of Australia's security intelligence.

Playboy diplomat Amir Laty visited Cara and Kelman while they were in jail in New Zealand and attended the trial of the two alleged Mossad agents.

There has also been conjecture that Mr Laty ran an Israeli passport fraud ring from the Canberra embassy, gaining false identities on both sides of the Tasman for infiltration purposes. But Mr Howard indicated that the two affairs were not linked.

"Miss Clark can speak for New Zealand - the situations are separate," said Mr Howard.

"As far as Australia is concerned a person was asked to leave - he left.

"The relations between Australia and Israel are very close and very friendly. They have not been affected by this incident and we continue to be a good friend and a good supporter of Israel."