Mr Morrison threw his political weight behind survivors before the May election, saying he was "deeply distressed" that planning approval for a five-story development of the former Sari Club, on the Kuta tourist strip, had been granted.

Construction has since been put on hold.

That has fuelled hopes among survivors that lengthy and arduous negotiations with developer Sukamto Tjia could be resolved, after his family backed out of an earlier deal of $4.9 million for the 700 square metres plot, demanding a further $9 million 'in compensation'.

"I am very happy because I have heard your prime minister talking about the Bali peace project," survivor and spokesperson for the Bali Peace Park Association, Thiolina Ferawaty, said. "We have his support."

The concept of the park - with a garden, memorial and quiet space for contemplation - has been floated ever since Islamic militants detonated two bombs on the Kuta strip that killed 202 people, 88 Australians among them, and left many more badly wounded.

The Australian, Indonesian and Balinese governments have supported the proposal along with senior officials like Made Mangku Pastika, the general who led investigations into the attacks by the al-Qaeda-linked terror group Jemaah Islamiyah.

Ferawaty, who made seven trips to hospitals in Perth for shrapnel and eye injuries, said talks were in a delicate stage and would "hopefully be finished by the end of the year."

Her sentiments were echoed by other survivors gathered at a regular meeting in Denpasar, accounting for 110 victims from 53 families, who survived the 2002 twin bombings and the strike at nearby Jimbaran three years later that claimed another 20 lives.

"We do not need another restaurant. It's not a site for business. We want a garden, a beautiful garden so people can remember the victims in peace," said J. Wayan Sudiana, 53-year-old tour guide.

Survivors argue a peace park would send a strong message to violent jihadists and potential terrorists - some Bali bombers are expected to be released from prison later this year - and are also asking for better access to education and jobs.

David Napoli, chairman of the Bali Peace Park Association, said two approaches for a peace park could be made to challenge radical thinking while serving as a memorial for survivors and the wider public.

"One is to effect them emotionally. The other is to give them a new experience," he said. "The park provides a peaceful sanctuary in a busy part of Bali, surrounded by nature, allowing an alternative experience that may foster reflection.

"The other is to have story pods from victims' families and survivors telling their stories of how the night of the tragedy changed their lives," Mr Napoli said.

Sudiana's wife, a cashier in the Sari Club, was just four metres from the detonation and died instantly, leaving behind a young child who is now about to graduate from university.

"The families, they need jobs and the kids need jobs after they graduate," he said.

Abdanev Jopa, a technical expert with the Indonesian Victim and Protection Agency (IVPA), said it was important to restore the lives of survivors as much as possible - physically and psychologically - with provisions for child care, education or funds for business start-ups.

He said survivors of terrorist attacks tended to be worse off than victims of other crimes because their scars were often permanent, citing one woman whose entire skin needs to be routinely bound and can rarely venture outside.

"When she does, and goes to a restaurant, she is told 'you can't eat here'," he said. "Victims of terrorism, they will suffer for the rest of their lives."

Among the victims is 50-year-old Gatut Indro Suranto who was standing just 25-50 metres from ground zero when it exploded. His chest and arms are covered with shrapnel scars, his lungs were punctured and he has trouble hearing.

"Victims need to be reassured that this will never happen again," he said.

"There are many types of jihad and this type of jihad is wrong," he said, rolling-up his sleeves and pointing to the many scars on his arms. "For me, jihad is trying to earn a living so I can look after my family."

Negotiations are believed to be at delicate stage. Australia has promised some funding, which remains undisclosed, and the Balinese governor has offered a land swap.

"We don't have the funds to buy the land so we have to work with the NGOs (non-governmental organisations)," Jopa said.

Meanwhile, Ferawaty added: "If it was not for Australia, I think I would have died - I hope the whole peace park issue is resolved soon."

Australian Associated Press