We have blundered.
The Wise Heads are saying that we should tough this out, simply asserting that everyone does it. In fact we've gone a bit further. We've confirmed that we think if you can do it, then you should: 'The Australian government uses all the resources at its disposal'. They say the relationship has mutual benefits and will fix itself in time.
No, the relationship is the accumulation of all the pluses and minuses, perceived slights and recognised good deeds. This adds to the wrong side of the ledger. The memory recedes over time, but it remains.
No, you shouldn't do things just because you can. Society works because people exercise restraint. International relations are no different.
What should we do?
First, we should see this as an opportunity to take a hard look at the cost/benefit balance of intelligence activities. In return for a load of gossip and the rare insight that could have been more easily gained by open diplomatic activity, we have not only offended an important neigbour, but made ourselves look foolish.
What did we hope to learn that couldn't be learned another way? The post-9/11 atmosphere has given the security industry a huge boost and it's time to rein it in, with fewer resources and more common sense. Let's put most of those saved resources into conventional diplomacy. That way you not only hear what people say, but have a dialogue on which proper understanding is based.
Second, let's apologise (always a good move when you are wrong). An apology by itself doesn't mean much. In addition to saying that we now realise that some of what we were doing was an unfriendly and unnecessary act, we should try to define in general terms the new, smaller, perimeter of our efforts. Just where these boundaries are would come out of the first action, above: let's look at the value of what we have been collecting and weigh this against the cost.
Third (probably the hardest part, because it is unfair), someone's head has to roll. When the Department of Immigration was widely (perhaps unfairly) perceived to be incompetent, the head of the department was relieved of his job and shifted elsewhere. He got more blame than he deserved, but had to make the sacrifice (and the downside wasn't too bad: ambassadorship in Jakarta, actually).
Photo by Flickr user doovie.