Maritime authorities have been ordered to investigate reports that the boats sank in stormy seas as they tried to sail from Indonesia to the remote Australian territory of Ashmore Reef, Immigration Minister Philip Ruddock said.
Ruddock said the government had received reports that one boat with 87 people aboard sank and that a Japanese tanker had picked up four survivors. There were also reports that a second boat carrying 80 passengers toward Australia had disappeared, he said.
The reports could not immediately be confirmed.
Australian authorities have intercepted hundreds of people on or near Ashmore Reef, a deserted island 370 miles off Australia's northwest coast, in the past few years.
The government says most of the people found there are the victims of people-smuggling rings which take money from refugees, many from the Middle East and southern China, and then put them to sea to be dumped at the reef. The spot is uninhabited and has no drinking water.
"The people smugglers who organize these clandestine trips don't care if their passengers don't survive the trip," Ruddock said in a statement. "The Indonesian crews are also expendable once the organizers have received their money."
Ruddock said weather conditions in Australia's north were "atrocious" at the time when the two boats were believed to be sailing toward Australia. He said their apparent loss was a "tragic reminder of the dangers" of people smuggling.
"Last March, we estimate that one-third of boats attempting to bring people illegally to Ashmore Reef did not arrive," he said. "These are treacherous waters and some of the boats are not seaworthy."
The boats were believed to have left Indonesia last week and were expected to have arrived at Ashmore at the weekend. The sea crossing to Australia typically takes two to three days.
According to the Australian Department of Immigration and Multicultural Affairs, 4,315 people illegal migrants have arrived by boat so far this year, an increase of 354 percent over the same period last year.