Australia’s Southeast Asia Pivot: Beyond Security, Towards Economic Influence
Australia has been actively strengthening its security ties in Southeast Asia, recently signing a security treaty with Indonesia and upgrading its defence agreement with the Philippines. However, a growing consensus suggests that lasting regional influence requires a more substantial economic commitment. While security cooperation is vital, Australia’s economic footprint in the region remains comparatively small, hindering its overall standing, and potential.
The Security Focus: A Necessary First Step
The recent defence agreements demonstrate a clear strategic intent from Canberra to bolster regional security. These moves are particularly relevant given the increasing geopolitical complexities in the Indo-Pacific. Australia’s defence networks already rank second in Asia, after the United States, highlighting its established role as a security partner. However, this focus shouldn’t come at the expense of economic engagement.
Economic Lag: Where Australia Falls Short
Despite recognizing the importance of Southeast Asia to its economic future, Australia’s trade and investment in the region haven’t kept pace with its growth. Trade currently hovers around 14% of Australia’s total overseas trade, and investment is heavily concentrated in Singapore, accounting for less than 2% of total investment in 2024. Outside of Singapore, less than 1% of Australia’s total overseas investment goes to the rest of Southeast Asia.
This imbalance is reflected in Australia’s declining ranking in the Lowy Institute’s Asia Power Index, falling to sixth in Asia in 2025. The index reveals a significant gap between Australia’s defence capabilities and its economic influence.
The Regional Perception: A Trust Deficit
Australia’s limited economic presence impacts its regional reputation. According to the ISEAS-Yusof Ishak Institute, only 8% of respondents in Southeast Asia identify Australia as a “preferred and trusted strategic partner” for hedging against US-China rivalry, lagging behind the European Union, Japan, and India.
Green Energy and Development: Opportunities for Growth
To enhance its influence, Australia should prioritize two key economic areas: green energy and development assistance. Recent agreements with Vietnam and Singapore demonstrate Australia’s potential to support the region’s transition to renewable energy sources. Collaboration with Vietnam on developing its semiconductor industry, leveraging shared critical mineral resources, presents a strategic opportunity to decouple from China’s supply chain dominance.
Australia can too position itself as a preferred development partner, particularly in addressing climate adaptation and infrastructure needs. The redirection of $100 million in foreign aid to Southeast Asia and the Pacific, following the reduction of US overseas assistance, was a positive step. However, funding for ASEAN and the Mekong subregion has already seen a decline, from $102 million in 2023-24 to $95.7 million in 2025-26.
Navigating a Changing Global Landscape
The Albanese government’s decision to refrain from joining Donald Trump’s “Board of Peace” signals a move towards a more independent foreign policy, distancing Australia from its historical role as America’s “deputy sheriff.” This independence is crucial for building genuine partnerships based on mutual benefit, not simply alignment with a major power.
Frequently Asked Questions
Q: What is Australia’s current trade relationship with Southeast Asia?
A: Australia’s trade with Southeast Asia has grown nominally but remains around 14% of its total overseas trade.
Q: What are the key areas for economic cooperation between Australia and Southeast Asia?
A: Green energy and development assistance are identified as critical areas for collaboration.
Q: How does Australia rank as a strategic partner in Southeast Asia?
A: Australia is not currently seen as a top-tier strategic partner, with only 8% of respondents in a recent survey identifying it as a preferred partner.
Q: What is the significance of the Australia-Indonesia Defence Cooperation Agreement?
A: The agreement reinforces the existing Lombok Treaty and signals a commitment to deeper practical cooperation in defence matters.
Did you know? Australia’s investment in Southeast Asia, excluding Singapore, represents less than 1% of its total overseas investment.
Pro Tip: Focusing on sustainable development and green technology initiatives can significantly enhance Australia’s reputation and influence in the region.
What other steps should Australia take to strengthen its economic ties with Southeast Asia? Share your thoughts in the comments below!
