AUSTRALIAN health officials are on alert after a deadly outbreak of bird flu on the Indonesian tourist island of Bali.

The finding is another blow to Indonesia's tourism industry, still struggling to recover from the 2002 and 2005 Bali bombings.

Ni Luh Putu Sri Windiani, from north-western Bali, became the island's first human victim of bird flu after she died of multiple organ failure on Sunday.

Doctors at the Sanglah Hospital in Denpasar confirmed last night that the 29-year-old Indonesian woman had tested positive to the H5N1 strain of bird flu.

Ms Windiani's daughter, Dian, 5, died suffering from similar symptoms at the same hospital 11 days ago after playing with sick chickens outside their house, but experts are unable to determine if she had bird flu.

It is also unclear whether Ms Windiani contracted bird flu from the chickens or from her daughter. She started showing symptoms more than a week ago, but was admitted to hospital six days later. She was transferred to Denpasar on Friday and treated in the isolation unit.

Australian officials said they were closely monitoring the investigation into the deaths.

It is unlikely there would be any immediate warnings for up to 5000 Australians now on the island, because the infections occurred in a relatively remote area, hours away from tourist precincts.

Australia's travel advisory already warns of the risk of bird flu in Indonesia, but states the danger to short-term visitors is relatively low.

A spokesman from the Bird Flu Information Centre in Jakarta, Joko Suyono, said many chickens around Ms Windiani's house had died suddenly in recent weeks.

"The villagers didn't burn the carcasses. Instead, they buried them or fed them to pigs," he said.

The deputy director of the World Health Organisation's Collaborating Centre for Reference and Research on Influenza, Ian Barr, said yesterday there was no need to panic.

"Most of these cases occur in villages, not in downtown Kuta or Denpasar, so I'm not sure that travellers should be too concerned."

A spokeswoman for the Department of Health and Ageing, Kay McNiece, said travellers to any bird flu-affected country should steer clear of birds and should practise good hygiene.

About 150,000 Australians visited Bali in the first half of this year, according to Indonesia's Statistics Bureau.

Indonesia reported its first human bird flu case in July 2005, and Ms Windiani's death raises the official toll to 82, the highest in the world.

Chairman of the Bali Tourism Board I B Ngurah Wijaya called for immediate Government action to prevent an outbreak of the disease. Any importation of poultry from other parts of Indonesia must be closely monitored, he said.

Twenty-one Indonesians diagnosed with the disease have survived.