And the two nations have also agreed to upgrade their diplomatic relationship to a "comprehensive strategic partnership" based on five pillars, with one of those pillars emphasising respect for the rules-based international order – an apparent nod to China's growing control of the South China Sea.

In his first speech in a foreign capital since becoming Prime Minister, Mr Morrison will begin to outline some of his policy priorities at a business breakfast in Jakarta on Saturday morning.

Mr Morrison's speech will emphasise that growing foreign trade and investment will be key priorities for his government, as will be keeping the Indo-Pacific region prosperous, open and secure, and deepening engagement with key regional partners like Indonesia.

Mr Morrison said on Friday the free trade deal, memorandums of understanding on cyber security cooperation and the creative economy and the upgrade to a comprehensive strategic partnership would bring both nations closer together.

"Indonesia is a partner of choice when it comes to working for the security of our region, and across the globe," he said at the signing ceremony.

"Indonesia’s economic success is of course important for Australia, of course important for the region, but it’s important for the global economy as well."

Mr Joko said the two leaders, in addition to upgrading the relationship, had agreed on the benefits of open markets, respect for international law and nations' sovereignty, to strengthen security cooperation and to continue joint work to combat terrorism.

"Australia is an important partner for Indonesia in the region. Australia is also an important partner for ASEAN," he said.

Friday's meeting marked the conclusion of the long-awaited free trade negotiations with Indonesia and is intended to deliver a boost to Australian farmers by guaranteeing greater access and lower tariffs for grain, live cattle and dairy farmers.

Under the terms of the deal, for example, 500,000 tonnes of feed grains such as wheat will be able to exported to Indonesia tariff-free.

It will also be easier for Australian universities and health providers to set up operations in Indonesia, while other sectors such as tourism, mining and telecommunications will have greater access to the huge market of 260 million people, and its burgeoning middle class.

Indonesian Trade Minister Enggartiasto Lukita confirmed that, for the first time, Australian universities will be able to set up campuses in Indonesia and retain a majority ownership of up to 67 per cent. The limit on foreign ownership of universities now is 40 per cent.

Australian hospitals and clinics will also be able to be built in Indonesia.

For Indonesia, one of the main benefits will be most goods exported to Australia will have tariffs removed, including in the textile and garment sector.

The comprehensive strategic partnership agreement's five pillars stress closer economic cooperation, strengthening cooperation on education, cooperation in counter terrorism, maritime cooperation and stability in the Indo-Pacific.

This last point is a thinly veiled reference to China's growing influence and ambitions in the region, particularly in the South China Sea. The document emphasising the centrality of ASEAN and the East Asia Summit to solve regional tensions.

The Cattle Council of Australia hailed the agreement as it would boost the already strong relationship between Australia’s beef industry and Indonesian customers by liberalising trade.

The Australian Chamber of Commerce said the deal would boost trade and investment between our two nations and was a reminder that Australia’s prosperity depended on access to overseas markets.

Universities Australia chief executive Catriona Jackson said the deal for greater access for Australian universities to operate in Indonesia would deepen ties between the two countries and would be welcomed by the sector.

The trade deal itself is expected to be signed in November, after it has been translated into Indonesian and then legally "scrubbed" by both sides, which will ensure the deal complies with local laws.

Earlier on Friday, Mr Morrison stressed that "it is much more than a trade deal we are talking about today. It is not a transaction. This is a partnership."

"The economic relationship is where we are underdone and it is the economic relationship that needs more balance, more grunt, more investment, more engagement."