Australia Doubles Down on Southeast Asia

Over the past two weeks, leaders from around the world headed to Southeast Asia for two prominent gatherings—the first trilateral summit between the Association of Southeast Asian Nations (ASEAN), China, and the Gulf Cooperation Council (GCC), and the annual Shangri-La Dialogue in Singapore. These conclaves reinforce Southeast Asia’s position as an economic, security, and diplomatic powerhouse. Australia is keenly aware of the region’s importance and has doubled down on efforts to forge closer ties with its Southeast Asian neighbors in recent years. While these efforts—which have yielded real results—are likely to continue under the current Australian government, deepening Australia-ASEAN relations is not without challenges.

Canberra has, in recent years, forged a “comprehensive strategic partnership” with ASEAN, hosted the second-ever Australia-ASEAN special summit in early 2024, and taken strides to increase economic, security, and people-to-people engagement with countries across the region. Sharpening focus on Southeast Asia was a key component of Prime Minister Anthony Albanese’s first administration, and with the Labor Party’s landslide election victory last month, this prioritization of ASEAN and Southeast Asia is set to continue.

Expectations Versus Reality

Despite being near neighbors, Australia’s engagement with Southeast Asia, especially in the economic domain, has not been as robust as might be expected. Australia’s trade and investment ties with Southeast Asia are modest compared to those with Northeast Asian and Western partners, and in fact Australia foreign investment in New Zealand, which has a population of just over 5 million, is significantly more than its investment into Southeast Asia, which has a population of almost 700 million. Australia’s total trade in goods with Southeast Asia was $87.3 billion in 2024, compared to the United States, which traded $489 billion with the region that same year. The United States invests more in Southeast Asia than it does in China or India and ranks among the top five sources of foreign direct investment for almost every country in the region; Australia, in most cases, trails far behind not only the United States, China, and Japan, but also several European states.

Annual surveys of elite and public opinion across Southeast Asia show that Australia, while viewed favorably, is not thought of as being in the top tier of strategic partners—the ISEAS-Yusof Ishak Institute’s State of Southeast Asia 2025 report found that, when asked to rank countries by their strategic importance to ASEAN, Southeast Asian respondents ranked Australia fifth, behind China, United States, Japan, and the European Union.

Bridging the Gap in Australia-ASEAN Relations

As Australia’s perceptions of China have evolved, so too has its recognition of Southeast Asia as a linchpin for regional security and prosperity. Since first coming to power, the Albanese government has made “ASEAN centrality” a key component of its foreign policy, and Foreign Minister Penny Wong has since 2023 repeatedly emphasized that “ASEAN’s security is Australia’s security.” Australia’s 2023 Defense Strategic Review specifically mentioned the importance of strengthening engagement with Southeast Asian partners, emphasizing that Southeast Asia is “one of the key areas of strategic competition in the Indo-Pacific.”

To drive home the focus on the region, Albanese made Jakarta his first overseas destination after his reelection in May, where he and President Prabowo Subianto recommitted to implementing a landmark security agreement reached last year and to deepening economic linkages. After his first election in 2022, Albanese also made Indonesia his first bilateral visit (after a prescheduled Quad meeting in Tokyo). 

Much as it has done in the Pacific, Australia has evolved its foreign policy in Southeast Asia to merge development assistance and relationship building with broader national security objectives, recognizing that security and prosperity in Southeast Asia directly relate to Australia’s own national security. To help inform the government’s efforts to increase ties with Southeast Asian partners, Albanese requested that Nicholas Moore, Australian special envoy for Southeast Asia, lead efforts to develop a strategy specifically aimed at enhancing trade and investment ties with the region. The government adopted the resulting report, which informed much of the follow-on economic engagement.

The framing of this increased engagement has been collaborative—striving to “meet Southeast Asia where it is” to construct a “new strategic equilibrium” in an era of great power competition. Positioning itself as a friendly, nonthreatening partner while simultaneously doubling down on its alliance with the United States has been a delicate dance, but one Australia has pursued by focusing primarily on economic and social sectors.

Within that context, Australia has still made significant strides in its defense relationships, especially with the Philippines. A status of forces agreement between Canberra and Manila entered into force in 2012, making Australia the only partner besides the United States whose armed forces could regularly train in the Philippines and vice versa. But for the next decade, that relationship remained narrowly focused primarily on counter-terror cooperation. Two things have changed that. First, Australia’s threat perception of China has risen markedly, not least because Australian forces have experienced more frequent and dangerous harassment by China’s military during lawful Australian operations in the South China Sea. Second, the government of President Ferdinand Marcos Jr. has since 2022 sought to diversify the Philippines’ defense relationships. As a result, the Australia-Philippines defense relationship has rapidly emerged as a key plank of what the Biden administration termed a “latticework” of bilateral and multilateral security ties among U.S. allies and partners in the Indo-Pacific. With the conclusion of a new Japanese status of forces agreement with the Philippines in July 2024 (dubbed a “reciprocal access agreement”), a new quadrilateral grouping of Australia, Japan, the Philippines, and the United States has emerged, often informally called the “Squad.”

Australia-ASEAN Special Summit: Launch Pad for Deeper Relations?

The ASEAN-Australia special summit, held in Melbourne, Australia, in March 2024, commemorated 50 years of ASEAN-Australia relations. Aiming to position itself as a committed partner focused on elevating ASEAN priorities amid the turmoil of great power competition, Australia astutely centered the summit around economic initiatives, people-to-people ties, and environment and resilience efforts. Recognizing that Australia-ASEAN trade relations were underdeveloped, economic pronouncements were significant, including a $2 billion Southeast Asia Investment Financing Facility to catalyze Australian private sector investment in Southeast Asia, an additional $140 million through a specialized infrastructure program, and several other initiatives to encourage trade and business ties. Environmental commitments included significant resourcing for the Mekong-Australia Partnership to help the vulnerable subregion combat critical water and climate-related challenges. Australia also launched a new ASEAN-Australia center and announced additional scholarships to enhance socio-cultural ties. Notably, security pronouncements were muted, with funding for maritime capacity building being the only security-related initiative.

In the year since the special summit, Australia has striven to demonstrate follow-through on summit commitments. In addition to the major strides in defense relations with Indonesia and the Philippines—including signing a defense cooperation agreement with Indonesia—Australia approved the first program of its Southeast Asia Investment Financing Facility, executed the first Australia-Southeast Asia Business Exchange, and called for proposals for Mekong-Australia Partnership programming. The Australian government’s 2024–2025 budget committed AUD 505 million (about USD 330 million ) over five years to deepen engagement with Southeast Asia. Australia and ASEAN held their fourth leaders’ summit in Vientiane, Laos, on the sidelines of the October 2024 ASEAN Summit.

Persistent Challenges, Regional Opportunities

Despite Australia’s desire to deepen relations across Southeast Asia and a widespread openness to such efforts by regional states, persistent challenges to the relationship remain, including those exacerbated by U.S. actions on trade.

Australia has already made bolstering economic ties a key component of its growing engagement in Southeast Asia, and this objective is only more urgent against the backdrop of U.S. tariffs. As Malaysia’s foreign minister Mohamad Hasan stated just prior to the ASEAN Summit in late May, Southeast Asian nations must diversify their markets and “deepen regional economic integration” to overcome the “fallout from global trade disruptions resulting from sweeping U.S. tariffs.” ASEAN leaders also launched the Kuala Lumpur Declaration, which explicitly noted ASEAN’s “deep concern” over U.S. tariffs and actions that have been so disruptive for the region’s trade-reliant economies. At a time when Southeast Asian countries are seeking to establish new and enhanced trade agreements, it is notable that, alongside the traditional leader-level summit, ASEAN held its first combined summit with Gulf leaders and China, focusing on enhancing economic integration among the three regions. In that context, Australia should see both the opportunity and the imperative to ensure that Southeast Asia is not just looking to illiberal countries such as China to strengthen its economic standing. While business exchanges are a positive step, more focus should be placed on achieving actual investment and trade deals with the region.

Australia will also need to balance its desire to do more in Southeast Asia with increasing resource demands in the Pacific and for its own defense. Against the backdrop of AUKUS and conventional defense needs, Albanese has announced that defense spending will increase to 2.3 percent of GDP over the next decade—although others note that this may be too small a number. U.S. Secretary of Defense Pete Hegseth last week at the Shangri-La Dialogue called for Australia to up its defense spending to 3.5 percent of GDP. Beyond defense spending, Australia is facing an increasingly contested Pacific Islands region, along with the potential to have to backfill declining U.S. foreign assistance programming.

Despite the intense focus on invigorating Australia-ASEAN economic engagement, Australia is also likely to continue purposefully developing its defense and security ties across the region. Doing so will require careful navigation of ASEAN’s constant balancing act with its larger northern neighbor. While most Southeast Asian countries welcome partners outside of China and the United States to help neutralize growing tensions between the great powers, few are willing to act in a way that China might perceive as taking sides. At the same time, Australia should be wary of pursuing engagement primarily through the lens of the “ASEAN way,” as it does when engaging Pacific Island countries in the “Pacific way.” ASEAN’s requirement for full consensus among its 11 members often results in toothless responses to regional and global challenges such as the current trade war, the civil war in Burma, or China’s aggression in the South China Sea. Upholding international rules and norms and freedom of navigation will require stronger voices. Australia should engage with all ASEAN states without sacrificing the ability to go much farther with some willing states, like the Philippines, even when that makes others in Southeast Asia uncomfortable.

Kathryn Paik is deputy director and senior fellow with the Australia Chair at the Center for Strategic and International Studies in Washington, D.C. Gregory B. Poling is a senior fellow and director for the Southeast Asia Program and the Asia Maritime Transparency Initiative at CSIS.