Australia is setting its domestic spy agency on people smuggling, handing the Australian Security Intelligence Organisation greater powers and allowing it to operate overseas.

The Government in Canberra is also boosting co-operation with Malaysia - another key link in the people-smuggling chain - improving intelligence-sharing, immigration controls and the interception of smugglers' operations.

The moves emerged yesterday as Attorney-General Robert McClelland introduced new laws that will widen ASIO's brief and introduce tough new penalties, and as Home Affairs Minister Brendan O'Connor met Malaysian counterparts in Sydney.

The Government's drive to clamp down on people smuggling has been pushed by a new wave of boats carrying asylum seekers from Indonesia, straining detention facilities on Christmas Island and raising a political storm in Australia.

The Opposition claims the influx has been sparked by Prime Minister Kevin Rudd's relaxation of the tough regime imposed by conservative Liberal predecessor John Howard.

But introducing the new laws to Parliament yesterday, McClelland said a global surge in asylum seekers was being driven by conflicts and turmoil in Afghanistan, the Middle East and Sri Lanka.

He said the most recent report by the United Nations High Commissioner for Refugees estimated there were 42 million forcibly displaced people worldwide at the end of 2008, including 15.2 million mandated refugees and 827,000 asylum seekers.

The new laws will enable ASIO to specifically target people smugglers and other serious border threats, and will change the definition of "foreign intelligence" to allow the organisation and other national security agencies to collect people-smuggling intelligence overseas.

ASIO is at present not able to directly act against people smuggling and can only use and pass on information it has indirectly obtained as part of its counterterrorism operations.

The new legislation will allow it to specifically work against people smugglers, supported by extended interception and surveillance powers and the ability to collect foreign intelligence.

The gathering of foreign intelligence under present laws is restricted to information relating to foreign Governments and political organisations relevant to the defence of Australia or the conduct of the nation's international affairs.

"This position no longer adequately reflects the contemporary threats to Australia's national interests," McClelland said. "In an increasingly interconnected global community, activities such as people smuggling are usually undertaken by non-state actors, and [the new law] will enable information about foreign individuals or groups operating without Government support to be collected."

The legislation also introduces a range of new offences, including providing material support for people smuggling, which will carry a maxi-mum penalty of 10 years' jail and/or a fine of A$110,000 ($123,563).