Australia and Indonesia will lift their economic ties: PM

Prime Minister Scott Morrison is in Indonesia on  a two-day official visit.

Australia and Indonesia are doing more "heavy lifting" in their economic relationship to link their close security ties, says Prime Minister Scott Morrison.

The new leader will meet with Indonesian President Joko Widodo in Jakarta on Friday to conclude negotiations on a free trade agreement.

"It's much more than a trade agreement, we're talking about today, it's not just a transaction, it's an association," Morrison told reporters in Jakarta on Friday.

Australia and Indonesia are two of the 20 largest economies in the world and close neighbors, but neither is among the top 10 trading partners.

"That's the part of the relationship where we have to do something heavier, the economic relationship," Morrison said.

"We do not realize the full potential."

"It is much more than a commercial agreement," says the prime minister before the official talks with President Joko Widodo.

AAP

The agreement will free Indonesia's university sector for Australian investors, allowing up to 67 percent foreign ownership.

Foreign investors are currently excluded from majority ownership in a university in Indonesia.

In addition, 99 percent of Australia's exports of valued goods to Indonesia will enter duty-free or under significantly improved arrangements compared to previous conditions, according to Trade Minister Simon Birmingham.

The agreement, which has been debated since 2012 and initially had to be completed last year, should be signed later this year after a legal review of the documents.

"It's about using the strengths of Australia to build in Indonesia, but at the same time, providing opportunities for Indonesia to take advantage of what is happening in Australia," Morrison said.

The chairman of the Australian Business Council in Indonesia, Phil Turtle, said the trade had been "underestimated" for many years.

"There is a great opportunity now to have this agreement as an initial impulse to try to do much better than what we have been," he told reporters.

Mr. Morrison and President Widodo will sign memorandums of understanding on trade and strategic security.

It is understood that the two countries increasingly see regional security in the same way.

"We all live together in this part of the world," Morrison said.