Key Points:
Foreign Affairs Minister Murray McCully is refusing to comment on claims New Zealand and Australia are tapping the phones of key figures in Fiji's self-appointed government.
Attorney General Aiyaz Sayed-Khaiyum yesterday alleged Australian and New Zealand authorities were tapping phone lines and using locals employed at their high commissions to spy on the interim government, the Fiji Village website reported.
A spokesman for Mr McCully today refused to comment on the allegations.
Mr Sayed-Khaiyum said Fiji's interim prime minister, Commodore Voreqe Bainimarama had questioned the Australian Foreign Minister Steven Smith on the alleged tapping.
Mr Smith had neither confirmed nor denied the claim.
He also lashed out at locals employed at the High Commissions in Fiji alleging that they are acting as spies against their own country.
Mr Sayed-Khaiyum earlier denied a decision by his government not to expel New Zealand's acting high commissioner for now was a back down.
The diplomatic row is over a demand by Cdre Bainimarama that a visa be granted to the son of a senior official in Suva.
He told the Government last week acting High Commissioner Caroline McDonald would be expelled if the visa was not granted to George Nacewa so he could resume studies at Massey University.
Cdre Bainimarama was told last Tuesday the visa would not be granted, and since then the Government has been waiting for his reaction.
Mr Sayed-Khaiyum yesterday said the government had decided against expelling Ms McDonald for now.
The decision followed Prime Minister John Key yesterday warning New Zealand would retaliate if she was expelled.
But today Mr Sayed-Khaiyum denied Fiji had backed down.
He said some New Zealand diplomats were disengaged with Fiji's government but engaged with the opposition, which he did not see as good diplomatic behaviour.
But Cdre Bainimarama had chosen to separate out the actions of Ms McDonald from the government-to-government relations of New Zealand and Fiji.
"There is a New Zealand diplomat who is not acting or behaving diplomatically," he said on Radio New Zealand.
"That needs to be dealt with on a separate basis. It should not in any way affect our ability on a government-to-government basis to rebuild our relationship or better our relationship."
He said Ms McDonald could still be expelled at a later date if she was found to be meddling in Fiji's internal politics.
Mr Sayed-Khaiyum said a three-member team was being set up "to try and work with New Zealand to foster better relations".
Cdre Bainimarama has become increasingly irritated by the travel sanctions New Zealand imposed on Fiji after he led a coup two years ago that overthrew the elected government.
The travel ban applies to members of his government, the military, and their relatives.
George Nacewa is the son of Rupeni Nacewa, a secretary in the Fiji president's office.
The last contact between the two governments was late last week when Cdre Bainimarama sent an angry letter to Mr McCully.
The foreign minister responded by reiterating New Zealand's position.
- NZPA understands the Government would consider expelling Fiji's high commissioner in Wellington, Cama Tuiloma, if Ms McDonald was given her marching orders.
New Zealand's previous high commissioner in Suva, Mike Green, was expelled in June 2007 after being accused of interfering in Fiji's domestic affairs.
A spokesman for Mr McCully would not comment last night on the latest developments in the saga.
- NZPA
Fiji and New Zealand are engaged in a game of diplomatic tit-fot-tat after expelling each other's High Commissioners.

This afternoon Fiji's military regime expelled acting New Zealand High Commissioner to Fiji Caroline McDonald.  The New Zealand government retaliated by expelling Fiji's High Commissioner to Wellington, Ponsami Chetty.  Both will be given a week to leave the country.

McDonald's expulsion was announced late this afternoon by Fiji's interim Attorney-General Aiyaz Sayed-Khaiyum, who said that it was "a direct result of McDonald's actions over the past year that have been contrary to the accepted international norms of diplomatic  behaviour".

The Fijian government has accused New Zealand and Australia of spying on Fiji, claiming they were tapping phone lines and listening in on members of the interim regime.

The New Zealand government has denied any "misbehaviour" by McDonald.

The round of diplomatic tit-for-tat was sparked by growing tensions between New Zealand and Fiji over sanctions put in place in the wake of the 2006 coup.  Members of the interim regime and their immediate families are barred from entering New Zealand.  Last week the Fijian regime threatened to expel New Zealand's High Commissioner unless the New Zealand government granted a visa to George Nacewa, the son of a senior regime official.  

But yesterday the interim regime apparently backed down on its threat, issuing a statement that it would not expel McDonald and announcing that it would establish a special team to improve relations between the two countries.

McDonald is the second New Zealand diplomat expelled by Fiji.  In June 2007 then-New Zealand High Commissioner Michael Green was expelled after being accused of interfering in the country's domestic affairs.

Last week ONE News Pacific Correspondent Barbara Dreaver was deported as she arrived to cover the crisis.

Fiji's military overthrew the country's elected government in a military coup in December 2006.