The Prime Minister's flying visit to Indonesia was more than a diplomatic courtesy call. It was a signal of what's next in this relationship and that Australia sees Indonesia not just as a neighbour, but an emerging economic giant, central to our foreign policy future.
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Australia is getting more serious about regional influence, economic security, and sovereign resilience, and cultivating this relationship matters most. Anthony Albanese recognises this, which is why he brought his two most trusted ministers with him, Foreign Minister Penny Wong and Home Affairs Minister Tony Burke.
Indonesia is more than our biggest neighbour. It's a strategic anchor in the Indo-Pacific, controlling key maritime chokepoints and on track to become the world's fourth-largest economy by 2040.
Few things stir anxiety in Canberra more than the prospect of rival powers gaining a foothold there. Jakarta swiftly denied recent reports of a potential Russian naval base in eastern Indonesia, but the speculation still struck a nerve. The incident underscored growing unease about great power rivalry on Australia's doorstep. Beijing's maritime flex with a naval task group circumnavigating Australia and Washington's tariff roulette underscore that Australia won't be a spectator in the shifting regional order.
Both Australia and Indonesia are navigating an increasingly contested world. China is seeking to establish new rules, while Trump's America is unravelling old ones. Countries like Australia and Indonesia must decide what course to chart in this strategic environment. If the Prime Minister wants to leave a meaningful foreign policy legacy, it won't begin in Washington or Brussels, but Jakarta.
The Prime Minister's first term was characterised by domestic priorities and overseas crises in Ukraine and the Middle East. Now, with a renewed mandate and political capital to spend, he has a rare opportunity to shape Australia's regional future. Strengthening substantive ties with Indonesia should be central to that agenda.
The Albanese government has made welcome moves to deepen regional engagement, including elevating Southeast Asia in the national security conversation and commissioning the Southeast Asia Economic Strategy to 2040. However, that intent has yet to translate into a clear or confident strategy about Indonesia, a populous G20 nation with rising global relevance and staggering investment opportunities.
Beyond the comfortable talking points of "shared values" and "close friendship", our economic engagement with Indonesia still runs too shallow. Two-way investment remains minimal. Australian businesses are conspicuously absent in a market where others, from Korea to the UAE, are active and visible. We've been slow to adjust to the changing reality of Indonesia as a peer receiving global attention.
Canberra has long struggled to craft a coherent economic narrative around Indonesia. Political visits have often centred on defence, disaster relief, or development assistance. While these are important, economic development is Indonesia's chief priority, and our strategy must reflect that new ambition.
The Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) is underutilised. We need renewed energy and clarity to embed this agreement in a broader economic vision.
The core challenge remains unchanged: Australian firms still hesitate to view Indonesia as a market of first resort. At the same time, competitors like Japan, Korea and Singapore engage with greater capital, consistency, and cultural fluency.
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This visit offered the Prime Minister an opportunity to break new ground. Has the door opened? The months ahead will be telling. The $200 million pledge for climate and infrastructure, announced in the government's first term, was a useful down payment. If Australia wants to shift from donor and commodity supplier to strategic partner, this visit must signal a new phase of co-investment.
That means more Australian firms operating in Indonesia, greater representation of Indonesians in our skilled migration and education systems, and stronger bilateral mechanisms that turn goodwill into results. It requires a mindset shift - viewing Indonesia as essential to Australia's long-term prosperity and security. Our diplomats and trade officials understand this; the wider public and business community do not.
President Prabowo Subianto's relatively new administration presents a timely window. While signalling continuity with President Widodo's infrastructure agenda, Prabowo brings a more assertive tone and sharper focus on human capital. This creates both opportunity and urgency for Australia to act.
A key test will be how we engage with Indonesia's new sovereign wealth fund, Danantara. Its rollout has been uneven, unsettling some investors, but it sits at the heart of Prabowo's economic agenda. Countries like France are already engaging. Australia should, too - constructively. We can help shape governance, share expertise, and co-invest. That's how long-term influence is built.
If the Prime Minister wants to establish a lasting foreign policy legacy, it begins in Jakarta with a partnership based on investment, skills, and shared ambition.
- Leigh Howard is CEO of Asialink Business at the University of Melbourne.
