Malaysia has not ruled out including Australia in a planned new Asian grouping, Foreign Minister Alexander Downer said on Sunday, amid opposition charges that the country's stance on terror had hurt its involvement in the region.

Malaysian Prime Abdullah Ahmad Badawi stopped short during a visit here last week of backing Australia's inclusion in the inaugural meeting of the East Asia Summit to be held in Kuala Lumpur in December.

Badawi's deputy Najib Abdul Razak has already called for Australia, New Zealand and India to be left out of the new Asian bloc which combines the 10-member Association of South East Asian Nations (Asean) with Japan, China and South Korea.

But speaking on commercial television, Downer said Malaysia did not appear to be opposed to Australian involvement in the meeting during his talks in Canberra with senior officials, including Prime Minister John Howard.

"We had very encouraging discussions with the Malaysians about it. They weren't negative about Australian participation and the way it is sometimes characterised," he told Ten network.

"They are not sure about the timing of the inclusive approach to the East Asia Summit.

"But they certainly didn't say to us privately they were opposed to an inclusive approach."

Badawi left Sydney on Saturday after agreeing to begin negotiations with Australia on a free trade agreement but failing to resolve key differences on tackling Southeast Asian terrorism.

Australia and Malaysia have a long history of tense relations, particularly under Abdullah's predecessor Mahathir Mohamad, but the relationship has improved since Abdullah took power in 2003.

Sticking point

The Malaysian leader has questioned Howard's threat to take unilateral action, if there was no other option, against extremists' bases in the region.

"We can certainly take care of what happens within Malaysia," Badawi said this week. "If it is necessary that we seek help and assistance from other countries, then we would do so."

Downer dismissed concerns that Canberra's refusal to sign a non-aggression pact with Asean was an obstacle to it joining the East Asia Summit.

"Nobody has ever said that it would be a condition of participating in the East Asia summit, that we should sign the Treaty of Amity and Cooperation," he said.

But the Labor opposition has said Australia's refusal to sign the treaty, combined with Howard's mention of making pre-emptive strikes on neighbouring countries to break up terror cells, had hurt Canberra's engagement with Asia in particular with the summit.

Howard's discussion of pre-emptive strikes had "been a sticking point in making good Australian progress towards being included in this important piece of emerging regional architecture," foreign affairs spokesman Kevin Rudd said.

Asean comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar (Burma), Philippines, Singapore, Thailand and Vietnam.