Australia's prime minister said Friday he was disgusted that Indonesia's counterterrorism chief had hosted convicted terrorists at a party, and that the Australian government would formally object.

Brig. Gen. Surya Dharma, the head of Indonesia's anti-terror unit, threw a party last month whose guests included two Islamic extremists convicted in the 2002 Bali nightclub bombings that killed 202 people, including 88 Australians.

Others at the party included a man convicted and since released in the 2003 bombing of a luxury hotel in Jakarta, several suspects on trial for beheading Christian school girls on Sulawesi island, and other veterans of terrorist training camps in Afghanistan and the Philippines.

Dharma said the party — which was revealed publicly by The Associated Press this week — was part of his unit's strategy of co-opting extremists as informers or preachers of moderation, to defuse the terrorist threat in his country.

Australian Prime Minister John Howard said on Friday — when ceremonies were held to mark the fifth anniversary of the Bali bombings — that his government would lodge a protest with the Indonesian government about the party.

"I will certainly see that there is an objection communicated," Howard told Southern Cross Broadcasting.

Howard said he was "absolutely disgusted" at the party, and that he believed it did not reflect Indonesia's broader approach to fighting militants.

He described Indonesian President Susilo Bambang Yudhoyono as a "good friend" of Australia.

"That doesn't mean I'm not entitled to express outrage at this kind of thing, because I know how the families of these people will be feeling," Howard said of the victims of the Bali bombings.

In a statement marking the anniversary of the bombings, Howard said expressed condolences to the families of the victims.

"This atrocity is now forever a tragic chapter in our nation's story," he said.

"Those who perpetrated the attacks sought to sow division and hatred," he said. ""Instead the Bali bombings brought the peoples of Australia and Indonesia closer together."