The countries will hold annual meetings, involving leaders, foreign and defence ministers, and they will increase cooperation in research and tertiary education after an agreement between Prime Minister Kevin Rudd and Indonesian President Susilo Bambang Yudhoyono.

The leaders also discussed a framework for transferring prisoners between the countries, and will establish an Australia-Indonesia leadership dialogue.

They said in a joint statement that ''though neighbours by accident we are close friends and partners by choice''.

They noted they were ''pursuing comprehensive regional responses'' to people smuggling, including through co-chairing the Bali Process.

They also agreed on a "new implementation framework for cooperation to combat people smuggling and trafficking in persons will provide for enhanced cooperation on prevention and disruption of people smuggling ventures, border and immigration management, and legal process".

Mr Rudd said, ''This will enhance and intensify our co-operation on dealing with this complex regional and global challenge.''

Australia will also provide an additional $215 million over four years to support an Indonesia community empowerment program and for further assistance to the Indonesia disaster management response force.

Dr Yudhoyono said through an interpreter that the relationship between the countries was solid and strong, but there were more opportunities to expand it.

''Prime Minister Kevin Rudd and I share same commitment to maintain and improve this relationship while exploring new opportunities while also managing the existing relationship,'' he said.

Dr Yudhoyono will address both houses of Parliament this afternoon.