Three people have died but another 157 suspected asylum-seekers have been rescued after their boat sank off the southern coast of Indonesia.

Earlier reports suggested that as many as 60 refugees may have perished in the accident.

Indonesian emergency authorities said 160 people were on board and that three had died, two women and a 12-year-old boy from Sri Lanka.

Australian news reports say the vessel was carrying asylum-seekers from Sri Lanka and Iran.

The Australian Maritime Safety Authority has confirmed that a rescue operation is under way.

The incident comes just days after Australian Prime Minister Kevin Rudd announced that refugees arriving by boat would no longer be settled in Australia.

Since 2001, about 1,000 people have died while trying to reach Australia's Indian Ocean territory of Christmas Island in unseaworthy boats.

More than 15,000 asylum seekers have arrived by boat in Australian territory this year.