Australian police have dropped a war crimes investigation into the killing of five journalists in the Timorese town of Balibo almost forty years ago.

New Zealander Gary Cunningham was one of those killed in what a coronial inquest concluded was an attempt by the Indonesian army to cover up its invasion of East Timor.

Police say they have insufficient evidence to prove an offence.

The case has been a long-running sore for Australian-Indonesian relations.