William Cabantog, 35, and David Van Iersel, 38, were arrested on Saturday during raids of homes and nightclubs in the resort village of Canggu.

Denpasar police drug crime unit boss Mikael Hutabarat said the pair were found in an office of the Lost City nightclub, along with cocaine, and later returned positive urine tests.

"In many place we have information, say two people bring cocaine so we catch them," the policeman told the Nine Network in broken English on Tuesday.

He said the men were being "cooperative and they give one initial name for us to investigate".

The name is believed to be that of a drug supplier.

Wearing orange prison clothes and shackled at the wrists and ankles, Cabantog and Van Iersel were paraded before a media pack on Tuesday.

Accompanying police posed with bags of cocaine and scales which they will use as evidence against the men, along with CCTV footage.

A police statement said the men were arrested with 1.12 grams of cocaine and they faced prison sentences ranging from four to 12 years if found guilty.

Australia's Department of Foreign Affairs and Trade confirmed the arrests on Monday.

"We stand ready to offer consular assistance ... should they request it," the statement said.

Cabantog was a Melbourne nightclub promoter before moving to Bali. His Instagram account shows him dining and swimming with friends in Indonesia during the past year.

"So blessed to live in paradise and to have my friends to experience this beautiful island together," he posted last month.

Australian Associated Press