Immigration minister Peter Dutton was yesterday speaking with the country's Prime Minister, Tony Abbott, who had just returned from the Pacific Islands Forum Summit in Papua New Guinea, where climate change was a key focus.
Noting that the meeting was runing late, Mr Dutton remarked that it was running to "Cape York time", to which Mr Abbott replied, "we had a bit of that up in Port Moresby."
Mr Dutton then responded: "Time doesn't mean anything when you're about to have water lapping at your door," to which both Mr Dutton and Mr Abbott laughed.
The Social Services minister, Scott Morrison, then pointed out that there was a large television microphone directly above them.
The comments have stirred anger from the leaders of low-lying Pacific nations struggling against rising sea levels and intensifying weather systems.
The president of Kiribati, Anote Tong, said the joke showed a sense of moral irresponsibility unbecoming of leadership in any capacity.
He also warned Mr Dutton that a future Australian immigration minister will have to deal with a wave of Pacific refugees from low-lying countries like Kiribati, if sea levels continue to rise.
The foreign minister of the Marshall Islands, Tony de Brum, took to Twitter to express his dismay, saying "[it] seems insensitivity knows no bounds in the big polluting island down [south]."
Mr de Brum continued: "Next time waves are battering my home and my grandkids are scared, I'll ask Peter Dutton to come over, and we'll see if he is still laughing."
Mr Dutton has refused to comment about his joke, describing the exchange as a private conversation.
That conversation was only hours after the Pacific Islands Forum meeting highlighted a growing chasm between the Pacific countries and Australia and New Zealand on the issue of climate change.
Early on in the summit, conflicting views emerged as small island states like Kiribati and Palau reiterated their calls for greater action from more developed nations, such as New Zealand and Australia.
The major sticking point was a call for emissions to be lowered to the point where global temperatures would not increase more than 1.5°C above pre-industrial levels, while New Zealand and Australia have so far stuck with the UN promoted target of 2°C.
The forum agreed to disagree on the target to be pushed for at the end-of-year UN climate change conference in Paris.