CANBERRA - Australia may have to resume dealing with asylum seekers on its mainland because proposals to move their processing overseas are being blocked by the opposition and by legal obstacles, Prime Minister Julia Gillard said on Tuesday.

In a fresh blow to the minority government, opposition leader Tony Abbott has refused to support a deal to process asylum seekers in Malaysia because the Southeast Asian nation had not signed the UN refugee convention.

Abbott's opposition means the Malaysia plan will be defeated in a parliamentary vote after it is introduced on Wednesday, with the government then being forced to deal with asylum seekers on the Australian mainland, Gillard said.

"The logical conclusion of Mr Abbott's slamming the door on the national interest is that offshore processing is at risk in its entirety," she told Australian radio.

Australia, a nation of about 23 million people, receives up to a few thousand asylum-seekers by boat each year, stirring intense political debate over border security.

Ten years ago, Canberra began sending asylum seekers to the Pacific island of Nauru to discourage new arrivals, ushering in a decade of public division over tough immigration laws. But now, Gillard said, the rejection of the new proposals could see Australia again processing refugees onshore.

The defeat of her proposals will be a major setback for the embattled prime minister, who is trailing badly in opinion polls.

Under the Malaysian deal, Australia planned to send 800 asylum seekers to Malaysia where their refugee claims would be assessed in return for accepting 4,000 refugees from Malaysia.

But, on Aug 31, the High Court ruled the deal was invalid because Canberra could not ensure protection for asylum seekers sent to Malaysia, leaving Gillard with little option but to gain opposition conservative support for changing immigration laws.

Gillard, who has been fending off speculation about her leadership after the court ruling, faces opposition on offshore processing from the Greens, who hold the balance of power in parliament, while Abbott's conservatives want to reopen a detention centre on Nauru.