Australia and Indonesia Are Neighbours — But Can They Become Real Friends?

Australia and Indonesia share one of the most important neighbourhoods in the world, but building a strong friendship between the two countries has never been easy. Dr Mari Elka Pangestu, an Indonesian economist and former government minister, recently gave a speech about this relationship as part of Australia's Boyer Lecture series. She talked about decades of history, personal memories, and big ideas about what the two countries could achieve together. Her main message was simple: being neighbours is not a choice, but being friends is.

Dr Pangestu has a deep personal connection to Australia. In 1966, when she was nine years old, her family moved from Jakarta to Canberra, where her father worked as an economist at the Australian National University. She was one of only two Asian students in her class at the time. Australia then had rules that limited immigration based on race, something she witnessed change during her high school years when the government removed race from its immigration laws in 1973.

Even during those early years, Dr Pangestu experienced both prejudice and kindness. Some people stared at her family, but a teacher asked her to share stories about Jakarta, and a neighbour became a lifelong friend. She said both reactions — being closed off from others and being curious about them — are still part of Australia's character today. These experiences shaped how she thinks about relationships between countries.

For decades, Australian scholars worked hard to understand Indonesia. Sir John Crawford argued as early as 1938 that Australia's future was tied to its Asian neighbours. Teams of researchers at ANU learned the Indonesian language, lived in Indonesian communities, and built close relationships over many years. Dr Pangestu's own father was part of this group, and she credits these scholars with keeping the two countries connected even during stormy political times.

Australia eventually made big political moves toward Asia. Under Prime Ministers Bob Hawke and Paul Keating in the 1980s and 1990s, Australia committed strongly to its region. Keating made Indonesia his very first overseas visit after taking office in 1992, and he helped establish APEC, a major trade forum for Pacific nations. In 1995, Australia and Indonesia even signed a security agreement — the first bilateral security pact Indonesia had ever made with any country.

Dr Pangestu called the Keating era a 'golden age' in the relationship. Indonesian was being taught in hundreds of Australian schools, student exchanges were growing, and business links were deepening. She watched all of this from Jakarta as a young economist and said the positive change was easy to see and feel. It was a time when both governments and ordinary people were genuinely investing in each other.

But the relationship has gone through many difficult periods too. When Prime Minister John Howard came to power in 1996, Australia's political focus shifted away from Asia, and the study of Indonesian in schools began to fall. Then, in 1999, Australia led a military force into East Timor, and many Indonesians felt that Australia was acting with too much pride. The friendship was badly damaged, even though geography meant the two countries still had to deal with each other.

More disruptions followed in the years after. Australia gave protection to West Papuan asylum seekers in 2006, causing Indonesia to recall its ambassador. A sudden ban on live cattle exports to Indonesia in 2011 caught Jakarta off guard. Then came the revelation in 2013 that Australia had been spying on Indonesia's president, which froze trade negotiations for years. Each time, both sides had to work hard to rebuild trust.

Dr Pangestu said the core problem from Indonesia's point of view was consistency. It was difficult to build a real partnership when Australia's domestic politics could suddenly cancel a major agreement without warning. She argued that the relationship had too often been about 'managing' crises rather than building something lasting. A true friendship, she said, needs more than diplomacy — it needs long-term commitment from both sides.

In recent years, there are signs of improvement. Australia signed the Treaty of Jakarta with Indonesia in February 2026, a new security pact. A record number of Indonesian students — 25,000 — are studying in Australia in 2026, and more Australian students are being sent to Indonesia through expanded scholarship programs that include language learning. Australia is also providing around $347 million in development assistance to Indonesia in 2026–27, focusing on areas like climate, health, and women's economic opportunities.

Dr Pangestu believes the two countries need each other more than ever. Global challenges like climate change, energy disruptions, and the rise of artificial intelligence are too big for any country to face alone. She pointed to a recent example: when a crisis in the Middle East disrupted shipping lanes, Indonesia supplied Australia with urea, a fertiliser that Australian farmers depend on. That kind of neighbourly help, she said, is exactly what the partnership should look like.

She ended with a call for both countries to think bigger. Australia has capital, technology, and natural resources; Indonesia has a large, growing population and a big market right next door. Together, she argued, they can build a more resilient and prosperous region. The future of the relationship, she said, depends not on geography but on choice — the choice to truly know each other, invest in each other, and build a shared neighbourhood together.