Australia’s oldest trading partner was Indonesia – a relationship stretching back centuries, long before formal diplomacy, built on spice routes, maritime trade, and deep cultural exchange that predates European colonisation. Today, as Australia recalibrates its Indo-Pacific strategy amid rising US-China tensions, rekindling awareness of this historic bond isn’t just about nostalgia — it’s a strategic imperative for students, policymakers, and investors who need to understand how deep-rooted ties can stabilise regional supply chains, influence defence cooperation, and shape Australia’s role in a multipolar world.
Here is why that matters: in an era where supply chain resilience defines national security, Australia’s failure to teach its youth about its foundational trade relationship with Indonesia represents a quiet strategic blind spot. Whereas Canberra pours resources into new alliances like AUKUS and the Quad, it risks overlooking the one partnership that has endured through colonialism, war, and shifting ideologies — a relationship that could offer not just economic ballast, but diplomatic agility in a fractured region.
Late last week, the Lowy Institute released a compelling policy brief urging Australian educators to embed the history of Australia-Indonesia trade into school curricula, arguing that generations of students have grown up unaware that their nation’s first international commerce wasn’t with Britain or the US, but with the archipelago to its north. The report highlights archaeological evidence of trepang (sea cucumber) trade from Arnhem Land to Sulawesi as early as the 1700s, long before British settlement in 1788 — a fact absent from most Australian history textbooks.
But there is a catch: historical awareness alone won’t secure future prosperity. To transform this cultural memory into strategic advantage, Australia must move beyond nostalgia and actively reinvest in the economic and institutional frameworks that once made this relationship thrive. That means revisiting outdated trade barriers, upgrading maritime logistics between northern Australian ports and eastern Indonesian hubs, and confronting the lingering discomfort some Australians feel about engaging with a nation of 270 million people just 150 nautical miles away.
The Deep Dive: Why This Ancient Bond Still Shapes Global Trade
To grasp the full significance, we must look beyond the schoolyard and into the container ports of today. Indonesia remains Australia’s 13th-largest trading partner but in specific sectors — particularly live cattle, wheat, and education services — it ranks far higher. In 2024, Australia exported A$1.2 billion in live cattle to Indonesia, supplying roughly 30% of the nation’s beef consumption. Meanwhile, over 17,000 Indonesian students studied in Australian institutions that year, contributing nearly A$500 million to the services export sector.
Yet beneath these surface-level stats lies a deeper current: the potential for this relationship to act as a stabilising force in global supply chains. As Western companies diversify away from China — a trend known as “China+1” — Indonesia is emerging as a top alternative for manufacturing, particularly in textiles, electronics, and electric vehicle components. Australia, with its vast reserves of lithium, nickel, and rare earths, is positioned to become a critical upstream supplier.
“Australia and Indonesia don’t just share a maritime border — they share a complementary economic structure,”
Dr. Maya Sutrisno, Senior Fellow at the Centre for Strategic and International Studies (CSIS) in Jakarta, explained in a recent interview. “One has the resources the other needs to industrialise; the other has the manufacturing capacity and domestic demand the former seeks to access. Ignoring this synergy isn’t just a missed opportunity — it’s a strategic miscalculation.”
This complementarity is already being tested. In early 2025, Australian miner BHP signed a long-term offtake agreement with PT Vale Indonesia to supply nickel concentrate for electric vehicle batteries — a deal worth an estimated A$800 million over five years. Simultaneously, Indonesian state-owned enterprise Pertamina began importing Australian LNG to offset domestic gas shortages, a move that could expand as both nations invest in carbon capture and hydrogen hubs across the Timor Sea.
Still, friction points persist. Australian beef producers face non-tariff barriers in Indonesia, including complex halal certification processes and fluctuating import quotas. Conversely, Indonesian manufacturers cite Australian anti-dumping duties on steel and ceramic tiles as obstacles to deeper integration. These aren’t just trade complaints — they’re symptoms of a relationship that lacks the institutional depth to manage friction constructively.
How History Informs Today’s Geopolitical Calculus
The historical dimension isn’t merely academic. During the Cold War, Australia’s relationship with Indonesia swung from hostility — following the 1965 anti-communist purge and the subsequent annexation of West Papua — to cautious cooperation, particularly after the 1999 East Timor referendum. Today, that history informs everything from defence procurement to intelligence sharing. The 2018 Indonesia-Australia Comprehensive Strategic Partnership (CSP) explicitly references “historical ties” as a foundation for cooperation on maritime security, counter-terrorism, and people-to-people links.
Yet as Professor James G. McDonald of the Australian National University warns,
“We treat history as a decorative banner when it should be the bedrock of policy. If students don’t know that Macassan traders were visiting Arnhem Land before Cook arrived, they won’t understand why northern Australia feels culturally closer to Sulawesi than to Sydney — and that misunderstanding can lead to flawed defence planning or misguided immigration policy.”
This gap in historical literacy has real-world consequences. When Australian policymakers advocate for stronger US alignment without considering how Indonesia perceives such moves — particularly regarding AUKUS and nuclear-powered submarines — they risk pushing Jakarta closer to Beijing. Conversely, when Indonesian officials lament Australia’s “inconsistent engagement,” they’re often referring to a pattern where Canberra engages intensely during crises (like the 2004 tsunami or 2018 Lombok earthquake) but recedes during peace.
The Global Ripple: Why This Matters Beyond the Timor Sea
Zoom out, and the Australia-Indonesia relationship becomes a bellwether for broader Indo-Pacific stability. Unlike flashpoints in the South China Sea or Taiwan Strait, this bilateral dynamic operates beneath the radar — but its health affects everything from maritime patrol coordination to intelligence sharing on people-smuggling and terrorism. A strong, trust-based relationship here allows Australia to act as a credible mediator between ASEAN and Western alliances; a frayed one pushes Indonesia toward non-alignment or closer alignment with China.
Consider the data: according to the Lowy Institute’s 2024 Asia Power Index, Indonesia ranks 10th in comprehensive power — behind China, Japan, and India, but ahead of South Korea and Australia. Its diplomatic influence, economic resilience, and defence networks give it outsized sway in ASEAN consensus-building. For Australia, which lacks Indonesia’s population scale or diplomatic bandwidth, leveraging this relationship isn’t about equality — it’s about asymmetry: how a middle power can amplify its influence through a trusted, historic partner.
To illustrate the evolving dimensions of this relationship, here’s a snapshot of key metrics:
| Indicator | Value (2024) | Source |
|---|---|---|
| Two-way trade (AUD) | 22.1 billion | Department of Foreign Affairs and Trade (Australia) |
| Australian exports to Indonesia (AUD) | 12.8 billion | DFAT |
| Indonesian exports to Australia (AUD) | 9.3 billion | DFAT |
| Indonesian students in Australia | 17,400 | Australian Government International Education |
| Live cattle exports (head) | 850,000 | Meat & Livestock Australia |
But numbers only tell part of the story. The real test lies in whether Australian universities will heed the Lowy Institute’s call to rewrite curricula — not just to add a unit on Macassan trade, but to reframe the entire narrative of Australia’s place in the world. Imagine a classroom in Brisbane where students learn that their ancestors traded with Indonesian fishermen before the First Fleet sailed; where they understand that the wool on their backs once sailed north to be traded for spices, not south to Manchester.
Such education doesn’t just build historical awareness — it builds strategic empathy. And in a world where alliances are tested not just in boardrooms but in classrooms, that empathy may be the most valuable export Australia has to offer.
The takeaway? Rediscovering Australia’s oldest trading partner isn’t about rewriting the past — it’s about future-proofing the nation’s place in a rapidly shifting Indo-Pacific. If we seek students to navigate global complexity with wisdom, we must first teach them that Australia’s story didn’t begin in 1788 — it began centuries earlier, on the monsoon winds, in the salt spray of the Timor Sea, where two cultures met not as coloniser and colonised, but as trader and trader.
What do you feel — should this history be mandatory in Australian schools? And how might knowing it change the way young Australians witness their neighbours to the north?
