An Australian journalist and his Thai colleague have been cleared of charges of defaming the Thai navy by a court on the island of Phuket.

Human Rights Groups immediately welcomed Tuesday's acquittal but said the case should never have been brought in the first place.

Alan Morison and Chutima Sidasathian were facing up to seven years in prison over a report in their online news website "Phuketwan" saying military forces accepted money to assist or turn a blind eye to the trafficking of refugees from Myanmar by sea.

The contested report on the Phuketwan website was excerpted from an extensive story published by the Reuters news agency in July 2013. The Reuters story was part of a series that won the news agency the 2014 Pulitzer Prize for international reporting.