As Indonesia’s economy continues to grow and its population swells, the relationship with Australia is becoming more and more asymmetric. From the Australian perspective, it presents some opportunities but, as a counterbalance, Indonesia may be seeking to engage more closely with other, larger, powers in the region. This paper will look at the current economic and security ties in that context and explore some of the possible future prospects for the bilateral relationship.

Key points:

• Over the next decade, Australia may become increasingly less relevant to Indonesian economic interests.
• The current trade relationship is skewed in Australia’s favour and Indonesia is likely to look towards other, larger, markets to counter that deficit.
• Australia has gradually reduced the amount of foreign aid to Indonesia while, at the same time, Australian investors are deterred by the generally poor Indonesian business environment.
• There may be an opportunity for Australia to adapt its defence exports to Indonesia’s minimum essential force needs.
• The strongest ties lie in police-to-police links, aimed at combatting terrorism. That relationship could be used as a model for other bilateral linkages.