<i>Illustration: John Shakespeare.</i>

Illustration: John Shakespeare.

Tony Abbott was supposed to be in Bali on Tuesday. He was supposed to be shaking hands with the President of Indonesia, attempting to thaw the frosty relations with Australia’s only strategically important near neighbour.

He wanted to go. With only six months remaining of Susilo Bambang Yudhoyono’s decade in power, there are limited opportunities to restore normal relations while Indonesia is still led by the most pro-Australian president it has ever had.

But Abbott’s not there. He pulled out of the trip late on Friday. News had broken that the Australian authorities had intercepted a boat carrying asylum seekers. They were turning it around to send it back to Indonesia.

Why is that a problem? Abbott judged that it could have been seen as an insult to his host to turn up amid publicity of an Australian policy to which Indonesia has objected so strenuously.

Abbott was wise to cancel. But it’s a stark illustration of how much damage the boats policy has caused. The policy is not the sole cause of the rift; it is, however, an obstacle to healing it.

It turns out that the Prime Minister of Australia cannot meet the President of Indonesia whenever there are reports that Australia is actively conducting its boats policy.

This is an extraordinary reversal of relations, and one that was probably avoidable.

Until the great chill descended in November, Indonesia’s President was exceptionally solicitous of Australia’s interests.

Whenever a major international event affecting Australia was approaching, the embassy in Jakarta would typically receive a note from the President’s palace: “What does Australia want?”

The notes were sent at the initiative of the President himself.

Susilo Bambang Yudhoyono, or SBY, an English-speaking former general, has been a moderate, secular, pro-Western leader with a long history of contact with Australia.

But now the notes have stopped coming. SBY recalled Indonesia’s ambassador to Australia last November. He hasn’t yet returned. Indonesia reviewed all its areas of co-operation.

And while collaboration continues in about 60 different fields, SBY’s government decided to suspend co-operation in 10 areas, according to a recent audit by the embassy in Jakarta.

These 10 areas include the most sensitive and some of the most important – police-to-police relations are frozen, and so is military co-operation. There is no Indonesian assistance with asylum seekers. Customs and intelligence co-operation has been curtailed.

“Australia’s relations with Indonesia go up and down, and at the moment they are somewhat down,” says one of Australia’s longest-standing observers of Indonesia, Dick Woolcott, who served as ambassador to Jakarta in the 1970s .

“But they are probably better in the last months of SBY than they will be at any time in the future.”

Why? “None of the main candidates to replace him has any interest in Australia.”

An eminent Indonesian, Agus Widjojo, a retired general and a noted military intellectual, argues that relations with Australia are best restored while SBY is still in the palace.

“It would be desirable if the situation [of suspended co-operation] can be terminated under SBY, says Widjojo, “because it would be easier for a new administration to start with a clean sheet than inheriting a problem that’s specific to the SBY administration. It would help to give the new administration a clear view.”

After SBY, he says, Indonesia’s leadership is likely to be more nationalistic.

It’s not that the leading candidate for the presidency, the enormously popular Joko Widodo, is hostile to Australia. His son studied for two years at the University of Technology, Sydney.

The frontrunner, known by his nickname Jokowi, visited several times to see his son, and says he’s been impressed with a number of aspects of Australia including its emergency response to floods and public transport in Sydney.

It’s rather a combination of two factors. First, Jokowi, mayor of Jakarta,  doesn’t have any particular interest in Australia or any agenda he wants to pursue.

Second, Indonesia’s political system gives him no incentive to develop one.

Australia is widely seen as rich and arrogant. It’s seen as being, at best, insensitive to Indonesia’s interests and, at worst, hostile.

The biggest problem Australia suffers in Indonesia is that no politician ever wins plaudits by being positive towards Australia; politicians win kudos by attacking Australia.

The specific problems in the relationship at the moment are the boats policy and Australian spying.

The Howard government showed that it was possible to turn back asylum-seeker boats towards Indonesia without harming relations.

Could Abbott have done the same? The critical difference is that Howard didn’t talk about it, in advance or when it was in progress.

 Philip Ruddock, immigration minister in the Howard government, told me: “Indonesia will work with you if you don't decide to embarrass them over it.” Yet this is exactly what the Abbott opposition did. It talked loudly and endlessly about its plan to turn back the boats.

The boats policy caused serious ill will in Jakarta, but it was the revelation of Australian spying on SBY and his wife during the Labor years that was the specific trigger for the freeze.

Could Abbott have handled his response better? Probably. But that’s now academic.

Despite the difficulties in relations, SBY is an asset for Australia. But he is a fast-perishing one. The immediate challenge for the Abbott government is to navigate a rapprochement.

The bigger, long-term challenge for Australia is to remake itself in the Indonesian mind so that politicians have incentives to deal with it, not just to demonise it.

Peter Hartcher is SMH international editor.