Key Points:

Relations with Fiji are in tatters after the expulsion of New Zealand's acting High Commissioner last night and the Government's retaliatory action in sending Fiji's head of mission in Wellington packing.

Fiji refuses to rule out taking similar action against Australia's High Commissioner, James Batley, and has accused Canberra's diplomats of acting inappropriately.

Fiji's interim Prime Minister, Frank Bainimarama, called New Zealand's acting High Commissioner, Caroline McDonald, in at 5pm yesterday to declare her persona non grata.

She is the second top New Zealand diplomat he has expelled.

At 7.30pm Fiji's acting High Commissioner in Wellington, Cama Tuiloma, was expelled and given a week to leave.

Trouble between New Zealand and Fiji has been brewing since the new National-led Government rejected Commodore Bainimarama's request to lift a travel ban on family members of those involved in his regime.

Fiji has also claimed New Zealand and Australia are spying on it, including by using phone taps.

Last night Fijivillage.com said Fiji's interim Attorney-General, Aiyaz Sayed Khaiyum, criticised both Australian and New Zealand diplomats during a press conference on Ms McDonald's expulsion and refused to rule out similar action against Mr Batley.

Foreign Minister Murray McCully said no specific reasons were given for the action against Ms McDonald, and any allegation she had not conducted herself appropriately was false.

He said it was disappointing but New Zealand could not have acceded to "threats and ultimatums" from Fiji. The Government had tried to establish a constructive relationship.

"That has been made difficult by the fact that Commodore Bainimarama has employed ultimatums and threats to advance his case.

"This Government has no intention of making concessions with a gun pointed at our heads."

At the press conference, Mr Sayed Khaiyum said it was a matter between the two countries and would not alter Fiji's relations with other countries including other Pacific Forum countries, according to Fijivillage.com.

However, the action raises the stakes for Fiji, which was already facing possible suspension from the Pacific Islands Forum when country leaders meet in Papua New Guinea at the end of January.

Mr McCully said New Zealand did not want the expulsions to derail the chances of making progress with Fiji in that meeting. But the Government could not accede to Fiji's threats.

In June last year, Fiji expelled New Zealand's High Commissioner, Michael Green, after accusing him of interfering in domestic politics.

The new diplomatic breakdown comes a day after Fiji's Attorney-General said Suva wanted to improve relations with New Zealand and intended setting up a team to do so.

He has previously accused New Zealand and Australia diplomats of trying to foster discontent against the regime among the people of Fiji.