Australian intelligence agents apparently spied on the wife of Indonesia President Susilo Bambang Yudhoyono because they wanted to monitor her rising influence.
An Australian newspaper report on Saturday said they believed she was hatching a plan to have her eldest son succeed her husband as Indonesia's president next year. Dr Yudhoyono is due to step down next year after serving two terms.
The newspaper, The Australian, cited a 2007 cable from the United States embassy in Jakarta leaked in 2011 saying that the Indonesian First Lady, Madam Kristiani Herawati, was "the only person the President could truly trust on every issue and he was increasingly moving in lockstep with his wife".
But palace officials and politicians from the ruling Democrat Party have rejected the allegation. They said the leaked document was being used as an excuse to spy on Ibu Ani, as she is popularly known.
Mr Teuku Faizasyah, the President's spokesman and adviser, told The Sunday Times: "Is hearsay the justification for the Australian government at the time to tap (the phones of) the Indonesian President and First Lady? The article is misleading and only attempted to give the rationale as to why Australia's spies targeted the First Lady."
The latest news is expected to raise tensions again, just as Australia is making headway in soothing ties strained by the spy scandal that broke a month ago.
The outcry in Indonesia raised diplomatic tensions. Jakarta recalled its ambassador to Australia on the same day that Dr Yudhoyono ordered a suspension of all security exchanges with Canberra.
In an effort to mend ties, Australia's Foreign Minister Julie Bishop flew to Jakarta this month and pledged Australia's commitment to a code of conduct on information and intelligence-sharing.
Indonesia observers say the leaked intelligence revealing Ibu Ani's growing power is not shocking.