Bilateral relations

Indonesia is Australia’s 13th largest trading partner. Total goods and services trade amounted to $17.7 billion in 2019, accounting for 1.9% of total international trade. The COVID-19 pandemic disrupted bilateral trade in 2020. Indonesia remains an important trading partner. About 2,500 Australian companies export to Indonesia, and around 250 Australian businesses have a subsidiary in Indonesia.

Australian goods and services exports amounted to $8 billion in 2019, made up predominantly of coal, live animals, crude petroleum and wheat. The entry-into-force of the Indonesia–Australia Comprehensive Economic Partnership Agreement (IA-CEPA) in July 2020 provides further opportunities for Australian exporters and investors to take advantage of Indonesia’s growth potential, regional proximity and the modernisation of sectors such as health and education, to diversify their businesses.

The Indonesian consuming class hit 70 million in 2016 and is forecast to increase by 5 million each year to 125 million by 2030, according to McKinsey. This makes Indonesia the greatest expanding consumer market worldwide. Australia is to benefit from rising Indonesian consumer demand for education, finance, healthcare, information and communications technology, and tourism. Beyond the pandemic, Indonesia’s plans to develop mass tourism could present further opportunities for Australian agricultural producers to supply hotels.

Imports from Indonesia amounted to $9.6 billion, consisting mainly of tourism, crude and refined petroleum, tobacco, monitors and televisions.

Australia exported $1.8 billion of services to Indonesia in 2019—mostly education and tourism. Before the pandemic, roughly 23,000 students undertook education in Australia in 2019 (2.4% of the total). Almost 222,000 (2.4% of the total) Indonesian’s visited Australia in 2019, continuing a solid growth trend. However, the COVID-19 pandemic and associated international travel restrictions disproportionately hurt services trade in 2020. Ongoing international travel restrictions points to another challenging year for services exports in 2021.  

To support the government’s economic growth objectives, Indonesia is looking to maximise the benefits of its demographic dividend, including through increased access to globally relevant education and training. President Widodo has set an ambitious target of adding 57 million skilled Indonesians to the workforce by 2030. That will open up opportunities for Australian education operators, particularly vocational education and training providers.

Indonesia is a small investor in Australia, owning a portfolio of just $800 million in 2019. The stock of Australia’s investment in Indonesia is larger, at $8.1 billion (0.3% of the total in 2019, up from 2018, and broadly in line with the average from 2010-17. The projected rise in Indonesian demand for consumer goods and services — particularly for premium food and beverages, education and healthcare, financial and ICT services and tourism — and its ambitious infrastructure investment agenda offers significant opportunities for Australian investors and exporters.