Can Indonesia become our most important ally?

All of this means that we must now take sound steps forward in developing the trust that should exist between good neighbours.

We could instigate a new era by initiating, negotiating and signing an Investment Agreement with Indonesia, something that is even stronger and closer than the one that I outlined for China last month.

This would not just set-out the terms upon which each nation can invest in the other, but it should contain a plan for both nations to enter into many joint ventures in which we invest together in commercial projects around the world, particularly in Asia, by combining the best of our resources and skills in doing so. In this way, we would share prosperity and build a sense of common purpose.

It will also be possible for us to have one Stock Exchange that enables ordinary citizens to invest in either nation.

Once this is done, further agreements regarding social, educational and cultural initiatives can follow. In particular, we should significantly expand our mutual defence arrangements to a far greater extent than that which we have with the United States, or are ever likely to have with China.

In fact, I would prefer to have an Indonesian military presence at Darwin in preference to American Marines. After all, if ever Australia has to defend itself in a military conflict, it will be important to have Indonesia on our side, as it would be difficult for any nation to attack Australia without doing something with Indonesia first of all, as its land, sea and airspace blocks their way here.

By doing this, both nations would save considerable defence expenditure and establish a regional presence of real stature.

A strong relationship with Indonesia which has genuine long-term depth makes real sense. It is the third largest democracy in the world - only India and the United States being larger. Its population of 280 million people has a rapidly-growing middle class who want to expand their lifestyle and their horizons.

They could choose Australia as their best partner in enabling and enhancing a prosperous future, yet our two-way trade is currently only about 15 billion dollars a year, a figure that needs rapid improvement. A step forward in this direction would be to capitalise on the marketing opportunities provided by the rapidly growing use of the internet by Indonesians for online trading.

As in all opportunities, there are problems. Corruption is widespread in Indonesia, and appears to be increasing rather than decreasing. This severely handicaps the prospects of good trading, but we should also acknowledge that there are more than a few Aussies who bend the rules of the marketplace mightily.

There are also religious and cultural sensitivities that we need to acknowledge and handle with thoughtfulness while seeking acceptance of some of the unique features of our way of life. But, we should take comfort from the fact that Indonesia is a far more secular state than most Islamic nations and seek to foster the spirit of religious toleration that we observe.

We should acknowledge that we have made some blunders along the way. For example, many powerful Indonesian leaders have been massively offended by Australia's actions over the live cattle trade incident, when we painted a picture of them as being barbaric.