Indonesia's President Prabowo Subianto with Australia's Prime Minister Anthony Albanese. Photo Credit: @prabowo, X

Indonesia's President Prabowo Subianto with Australia's Prime Minister Anthony Albanese. Photo Credit: @prabowo, X
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Australia–Indonesia Pact: A New Anchor For Indo-Pacific Stability – OpEd

Simon Hutagalung 0 Comments

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The defence and security treaty between Australia and Indonesia entered its last phase of negotiations during November 2025 before its scheduled January 2026 signing.

The agreement between Prime Minister Anthony Albanese and President Prabowo Subianto on board HMAS Canberra establishes military cooperation and crisis management, and strategic consultation without creating a mutual defence agreement. The renewed partnership between Australia and Indonesia works to achieve peace in the Indo-Pacific region, but its long-term success depends on solving strategic imbalances and handling domestic political challenges and great power interference, and uniting economic cooperation with security measures.

The Indo-Pacific region will face increasing national competition in 2025. The South China Sea continues to experience Chinese military activities, which have reached Indonesia’s Natuna Islands. The AUKUS agreement between Australia and Washington has enhanced their alliance through nuclear submarine development and advanced cyber warfare capabilities. The Australian defence budget reached AUD 55.7 billion during 2025, but Indonesia spent USD 9.5 billion on defence, which shows a major disparity in military strength. The different military capabilities between Australia and Indonesia create challenges for their ability to work together because Australia operates with advanced technology, while Indonesia focuses on traditional defence methods and sea boundary protection.

The treaty creates value because it enables two nations to unite their different strategic paths. The partnership between Australia and Indonesia serves as a vital element for Australia to establish credibility in Southeast Asia while Indonesia gains access to advanced training programs and intelligence sharing, and maritime surveillance capabilities. The partnership between Australia and Indonesia enables Indonesia to access better training programs and intelligence sharing, and maritime surveillance capabilities, while Australia respects Indonesia’s goal to maintain strategic independence. The treaty builds upon the 2024 Defence Cooperation Agreement to create permanent strategic dialogues and joint military operations and maritime domain awareness programs. The two nations recognise that achieving regional stability requires them to work together through their combined middle-power diplomatic influence.

Multiple obstacles exist which threaten to hinder the successful execution of this treaty. The strategic difference between Australia and Indonesia has the potential to harm their trust relationship because Indonesia might view Australia’s advanced military capabilities as a threat to its independence. The treaty faces obstacles during its implementation because political factors inside both nations prevent them from making decisions. President Prabowo faces opposition from two groups because Indonesian nationalists question Western security alliances, and domestic critics express concerns about national sovereignty risks from increased cooperation. The Australian government faces criticism from domestic opponents who believe closer ties with Jakarta will create problems for their alliance with the United States and AUKUS partnership. The treaty faces external challenges because Beijing views Australia’s alliance with the United States and Japan as containment efforts, while Indonesia faces challenges to its neutrality because of Chinese economic influence. The treaty needs to prevent China-related perceptions because these perceptions could lead to countermeasures that would harm ASEAN unity.

The economic bond between these two countries supports stability through their shared advantages, yet creates major weaknesses in their system. The trade relationship between Australia and Indonesia reached AUD 18.2 billion during 2025, while showing a 12 per cent growth from 2024 levels because of the energy sector and agricultural and educational exchanges. The Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA), established in 2020, now functions as a framework which promotes investments for infrastructure development and digital service delivery and renewable energy projects. The growing Australian investment in Indonesian nickel production and battery supply chains responds to worldwide electric vehicle market requirements. The IA-CEPA agreement enables educational exchanges between Australia and Indonesia through its programs, which welcome more than 20,000 Indonesian students to Australian universities in 2025. The economic ties between these nations create operational reasons to preserve stability, which backs their security partnership.

The security partnership strengthens through economic cooperation because it enables the two nations to work together against shared security threats. The strategic priority of supply-chain resilience has emerged because critical minerals and food staples, and medical supplies, need protection. The Australian wheat and beef exports to Indonesia help the country maintain market stability during inflationary periods. The clean energy transition of Australia depends heavily on Indonesian nickel production for its success. The economic and security cooperation initiatives help nations decrease their foreign aid dependence while building their capacity for regional autonomy.

Security dilemmas between nations can create economic conflicts which damage their diplomatic ties. The Indonesian government maintains protectionist policies which create difficulties for Australian businesses operating in the country. The two nations might experience conflicts because of their different agricultural trade agreements and worker migration rules, which could harm their friendship. The defence sector of Australia focuses on technology, but this approach differs from Indonesia’s requirements for development, which leads to different strategic objectives between the two nations. The economic relationship between Australia and Indonesia faces challenges because Indonesia maintains its largest trade relationship with China, while Australia seeks to strengthen their security partnership.

The partnership between Australia and Indonesia has the potential to establish lasting peace in the disputed Indo-Pacific region. The Indo-Pacific region needs institutions with strength and balanced power distribution, and inclusive regional dialogue to establish peace. Economic interdependence functions as the main structural element which protects peace from destruction. The expansion of trade and investment and supply-chain cooperation between Australia and Indonesia will create mutual stability interests which surpass military alliance benefits. Middle powers like Australia and Indonesia work together to establish security and prosperity throughout their regional area.

The two governments need to create institutional frameworks which will maintain their partnership. A permanent joint secretariat needs to be created for maintaining ongoing operations when leadership changes occur. The partnership will gain public support through expanded Track-1.5 dialogues, which bring together academics and civil society representatives and business leaders. The two nations should work together to establish educational programs and research collaborations which focus on maritime law and climate security, and economic governance to build mutual understanding. The treaty will develop into a permanent cooperation system through actual projects which go beyond military alliances.

Multiple major obstacles exist which threaten to disrupt the successful execution of this treaty. The increasing defence spending of these nations leads to financial challenges because their internal political structures restrict their ability to make decisions, and external forces prevent them from staying neutral. The economic differences between the two nations, together with regulatory disagreements, threaten to damage their trust relationship. The Indo-Pacific region would experience increased instability because middle powers would lose their strategic direction, which would result in rising coercion levels. The Indo-Pacific region will achieve peace through integrated security and economic cooperation between Australia and Indonesia, which demonstrates middle power influence in regional order development.

The 2025 Australia-Indonesia partnership functions as a strategic alliance which enables practical cooperation between these two nations. The treaty’s sustainability depends on the successful management of strategic differences and the successful domestic approval and coordinated economic and security strategies. The partnership between Australia and Indonesia will strengthen their bilateral relationship and create a more stable Indo-Pacific region when they succeed, but will create more instability if they fail to maintain their partnership.

The opinions expressed in this article are the author’s own.

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Simon Hutagalung

Simon Hutagalung is a retired diplomat from the Indonesian Foreign Ministry and received his master's degree in political science and comparative politics from the City University of New York. The opinions expressed in his articles are his own.

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