Australia and Indonesia are neighbours, but can they become good friends?

This year's Boyer Lecture series explores the opportunities and challenges of Australia's engagement with Asia in the 21st century. Dr Mari Elka Pangestu is an Indonesian economist and former managing director of development policy and partnerships, and minister of trade in Indonesia. This is an edited extract of her lecture.

In 1966, when I was nine years old, my family moved from Jakarta to Canberra.

My father, Panglaykim, was an economist recruited to the new Australia–Indonesia Project at the Australian National University (ANU).

We arrived in a small, orderly city that felt nothing like Jakarta. The air was dry, and in my grade 3 class, there were only two Asian faces. This was still the era of the White Australia Policy.

I witnessed that policy end in high school, when the Whitlam government removed race from immigration criteria in 1973. I remember serving as the MC for an Indonesian cultural event in Canberra, paying tribute to the guest of honour, Immigration Minister Al Grassby.

I grew up in an Australia deciding what kind of country it wanted to be. There were stares, yes, but there was also warmth. A teacher asked me to tell the class about Jakarta; a neighbour who reminded my father to mow the lawn became a lifelong friend. Both impulses — insularity and curiosity — remain part of Australia's character today.

What made Canberra vital then was the extraordinary community of scholars building the intellectual foundations for Australia's engagement with Asia.

Figures like Sir John Crawford argued as early as 1938 that Australia's economic future lay with its Asian neighbours. Later, as director of the Research School of Pacific Studies at ANU, Crawford built the academic machinery for this vision.

He backed the university's Australia–Indonesia Project in 1965 during the turbulent end of the Sukarno era. My father worked alongside Heinz Arndt, Jamie Mackie, and Herb Feith — scholars who learned Indonesian, lived in Java and Sulawesi, and built deep relationships over dinner tables and in fieldwork. This dedicated group played a major role in keeping the relationship steady during political storms, even when labelled as "apologists".

Australia did not stumble into Asia. It was a deliberate, sustained effort by Australians and their Asian counterparts to imagine a new regional order. I was shaped by that effort, studying economics at ANU before completing my doctorate in the United States.

When I returned to Indonesia, I carried a conviction born in Australia: that ideas about openness and cooperation can change how countries relate.

International relationships are not made or broken solely by prime ministers. They are built across generations by diplomats, scholars, teachers and students. That is how ties become real.

When Australia chose Asia

The intellectual work of that early generation eventually met political leadership. Under Bob Hawke and Paul Keating, Australia made a historic political commitment to Asia.

ANU became a hub for thought leadership, birthing the Australia–Japan Research Centre under Peter Drysdale, where I worked as a young research assistant. In 1980, Crawford convened the Pacific Community Seminar in Canberra, charting the course toward APEC. In January 1989, Bob Hawke proposed that regional forum, changing our economic landscape forever.

If there was a golden age of engagement, it was under Paul Keating. His vision — that Australia was not a European outpost but a country inseparable from its region — was bold and fundamentally right. He made Indonesia his first overseas visit in 1992, elevating it to the first rank of priorities.

Keating pushed APEC to a leaders' summit, resulting in the historic 1994 Bogor Goals for free and open trade. Most remarkably, in 1995, our nations signed the Agreement on Maintaining Security — Indonesia's first bilateral security pact with any country.

Watching from Jakarta as a young economist, the change was tangible. Indonesian was taught in hundreds of Australian schools, academic exchanges flourished, and business links deepened.

Today, the flow of students is stronger than ever. A record 25,000 Indonesian students are studying in Australia in 2026, and more than 200,000 Indonesians have studied in Australia over the years. That is a remarkable investment in the relationship.

But the relationship must also work in the other direction. We need more Australians to study in Indonesia, learn Bahasa Indonesia, and experience Indonesia beyond Bali. The New Colombo Plan scholarship program has been an important step, and the Albanese government has rightly expanded it, with a record number of Australian scholars going to Indonesia in 2026 and a stronger focus on language and longer-term immersion.

This reciprocity matters. It is not enough for Indonesians to know Australia if Australians do not know Indonesia. A durable partnership requires young people from both countries to spend time in each other's societies, build friendships and understand how the other country sees the world.

Keating famously remarked that no country was more important to Australia than Indonesia, describing it as the place where Australia's strategic bread was buttered.

Decades later, President Joko Widodo expressed that same reality to the Australian parliament: "We cannot choose our neighbours. We have to choose to be friends."

Geography is a given; friendship is a choice.

A history of cycles and disruptions

Those of us who live this relationship know it is not a straight line. It has been a cycle of great optimism and deep frustration.

I returned to Indonesia in the mid-1980s, serving later as trade minister and minister of tourism and creative economy. From Jakarta, I watched the relationship shift.

John Howard's election in 1996 brought a de-emphasis of the "Asia first" framing, moving rhetoric back toward the US and UK. While pragmatic economic ties remained, institutional investment in south-east Asia faded, and the study of the Indonesian language in Australia began a long decline.

Then came East Timor in 1999. The crisis tested us severely. Australia led the international intervention force, but the triumphalism perceived in Jakarta left deep wounds. Bridges built over decades buckled under mutual recrimination.

The relationship recovered — as the logic of geography dictates it must — but the depth of the Keating era did not fully return.

The highs and lows continued. In 2004, the devastating Aceh tsunami saw Australia respond generously with military help and a $1 billion reconstruction fund. President Susilo Bambang Yudhoyono (SBY) addressed the Australian parliament, establishing a Comprehensive Partnership.

Yet by 2006, Australia's granting of asylum to 42 West Papuans led Jakarta to recall its ambassador. It took a "chance" morning walk between SBY and John Howard in Batam to repair the damage.

When Kevin Rudd took office, there was renewed energy. We launched the Indonesia-Australia Comprehensive Economic Partnership (IA-CEPA) process. But domestic pressures intervened again. The sudden 2011 live cattle export ban caught Indonesia by surprise.

As trade minister, I managed to do damage control working behind the scenes with my Australian counterpart at the time, Craig Emerson — a friend from our student days at ANU.

Worse followed in 2013, when leaked documents revealed Australian intelligence had targeted President Yudhoyono's phone. Cooperation was suspended, and IA-CEPA negotiations were frozen.

The concern in Jakarta was consistency. How can you build a relationship when domestic political pressures can disrupt major bilateral commitments overnight without warning?

Recently, there has been a recalibration. PM Anthony Albanese launched the Southeast Asia Economic Strategy to 2040, admitting Australia had underinvested in the region.

In February 2026, Albanese and President Prabowo [Subianto] signed the Treaty of Jakarta, a new common security pact. Albanese echoed Keating: "No country is more important to Australia … than Indonesia." Prabowo agreed that good neighbours are essential, stating we are destined to live side by side.

There is also a more practical dimension to this recalibration. The Albanese government has put development assistance back at the centre of Australia's engagement with the region.

In a period when many traditional donors are cutting aid, Australia has maintained its development budget and directed more than three-quarters of its assistance to the Indo-Pacific. In south-east Asia, assistance is increasingly focused not simply on poverty reduction, but on economic resilience, climate adaptation, energy security, health, skills and institutional capacity.

This matters for Indonesia as well. Australia remains a major development partner, with around $347 million in official development assistance to Indonesia in 2026–27. The focus is increasingly on areas where our interests and capabilities meet — from economic reform and women's economic participation to climate and energy, health security and private-sector development.

I think this is an important strength of the current relationship. Australia is beginning to see development cooperation not as a separate aid program, but as part of a broader partnership — one that helps build the capabilities, institutions and connections that allow both countries to respond to shared challenges.

That is particularly important in south-east Asia, where development, economic resilience and regional stability are increasingly intertwined.

Looking back, the pattern is clear. Australia's engagement has too often depended on the government of the day and, as new prime ministers and leaders arrive, the framing alters, influenced by domestic politics and other forces.

But the deep relationships built over the course of decades continue, and act as the reliable cushion to get back on course. They will help the two countries rise above this bilateral management of crises and focus on building a shared neighbourhood.

A different global landscape

This resilience is so needed because international order is under severe strain. The broad-based US tariffs of 2025 spared few in our region. The retreat of multilateralism creates deep uncertainty. US-China competition means trade and technology policies are now viewed entirely through the lens of security and vulnerability.

At the same time, the challenges are increasingly transnational. The energy transition requires massive investment. Climate change threatens south-east Asia with rising seas and agricultural disruption. The recent Strait of Hormuz crisis reminded us how exposed our economies are to distant energy routes, impacting fertilisers, food and manufacturing. Furthermore, artificial intelligence is driving unprecedented demand for data centres and energy infrastructure.

These problems cannot be solved alone. The Australia–Indonesia relationship matters because it represents two neighbours and substantial middle powers capable of shaping a resilient regional order where neither is forced to choose between openness and security.

For too long, the approach to this relationship has been to see it as something to manage — managing differences, managing crises. We should aim higher: we should build.

Australia has capital, technology, and resources; Indonesia has scale, market growth, and proximity. By connecting these strengths, we can produce and compete together globally.

Openness must recognise risk. We need economic security that does not devolve into economic nationalism or over securitisation. Australia and Indonesia can diversify without decoupling, keeping markets open while securing critical minerals and food supplies.

This isn't about choosing between Washington and Beijing, or Australia and Asia. It is about expanding regional capacity so we both have more choices and be more resilient facing shocks and uncertainties.

We saw this during the Hormuz crisis: when supply chains fractured, Indonesia supplied the urea vital for Australian farmers. That is what neighbours are for — we help each other during times of need.

Today's vulnerabilities do not arrive neatly labelled. An energy disruption becomes a food crisis; a cyber incident becomes a financial one. We need an architecture that connects finance, trade, investment, energy, digital and AI policy.

The recent track 1.5 Indonesia–Australia Economic Security Dialogue began this work by recognising that economic resilience is inseparable from common security. We need a framework that builds security through prosperity, openness, and institutional cooperation.

Choosing our future

I have lived my life between these two nations. I carry an Indonesian passport, but part of me will always belong to the nine-year-old girl who arrived in Canberra in 1966.

Australia gave me my education and lifelong friendships; Indonesia gave me my identity and the privilege of public service.

What I have learned is that we understand each other better than we think — but we do not always know each other well enough. Understanding comes from proximity, but long-lasting relationships require long-term investment.

The generation of Sir John Crawford planted trees whose shade they knew they might never sit in. They could not have imagined the complexities of 2026 — AUKUS, artificial intelligence, or severe climate change. But they understood a fundamental truth: Australia's future is shaped in Asia, and Australia must help shape Asia in return.

Geography gives us the relationship; history gives us the responsibility; but choice gives us the future.

We cannot choose where our countries sit, nor the global crises that reach our shores. But we can choose how we respond. We can choose whether to see interdependence as a vulnerability or an opportunity. We can choose whether Australia and Indonesia remain nations that happen to live next to each other, or nations that are neighbours by choice and build their neighbourhood together.

Sixty years ago, Australia was deciding what kind of country it wanted to be. Today, it faces another choice: not whether it is part of Asia, but whether it is prepared to make that reality a permanent part of its national character.

That is the work ahead. I hope that, 60 years from now, the next generation will look back and see that we chose well.

This lecture and other Boyer Lectures will air on consecutive Sundays from October 18 on ABC Radio National's Sunday Extra program. They can also be found on ABC listen.