The offer for Indonesian troops to participate in military exercises with Australian and US forces in the Northern Territory early next year represents a maturing of the bilateral relationship. It is also clever diplomacy, prudent strategy, and growing recognition that the days of dealing with Indonesia as an unequal partner are rapidly passing.
When the US troop rotation on Australian soil was announced in April, Indonesian Foreign Minister Marty Natalegawa immediately said the decision could create a "vicious circle of tension and mistrust" in the region.
The fact that Indonesia--itself wary of China's rise--has significantly stepped up its military co-operation with the US might make those comments appear hypocritical.
But Jakarta was seemingly caught off guard by the announcement. It is also wary of rumours circulating about the future hosting of US military assets on Australia's Cocos Islands in the Indian Ocean, a group of atolls and islands far closer to Indonesia than Australia.
The offer to host Indonesian troops in trilateral training exercises in the NT removes an opportunity for voices in Jakarta to depict the upgrading of US-Australian military activity as against Indonesian interest.
More important than smoothing over diplomatic anxieties is longer term Australian strategic policy towards Indonesia and in the region. Indonesia has long been seen as a potential military threat, or short of that, as a cause of many problems for Canberra--from terrorism to people smuggling and drug trafficking. Jakarta has made great strides in breaking up and arresting many terrorist cells in the country.
But the messy reality of Indonesia means many of Australia's border security concerns will be tied to activity in that country.
Even so, the trick is to not simply live with the reality of a giant in our neighbourhood whose future is uncertain, but to make the best of it in strategic terms. Indonesia is a country with a population of more than 250 million people.
Over the next decade, every country in South-East Asia will have a relatively young population. However, while the rest of East and South-East Asia will have ageing demographics in 2035, only Indonesia (with the Philippines and Malaysia) can benefit from a so-called "demographic dividend" well past 2050.
Already the largest economy in South-East Asia and growing at 5 per cent to 7 per cent in real terms since this century, size alone will ensure Indonesia will emerge as the most important country in our immediate region and the natural leader of any regional grouping such as the Association of South-East Asian Nations.
Many, including framers of the 2009 Defence white paper, argue Australia has an enduring strategic interest in preventing or mitigating any attempt by nearby states (read Indonesia) from developing the capacity to undertake sustained military operations in our maritime backyard. This could be misguided.
For the moment, Indonesia's military development has not kept pace with its economic achievements. But the reality is Australia has little or no control over Indonesia's future military capabilities, and how rapid these capabilities might be acquired.
But we do have some influence over how Jakarta analyses its strategic environment. If Indonesian strategic planners can be gradually convinced the greater threat to its territory and broader regional stability lie to its north, rather than south, then a rising Indonesia is much more likely to become a benign development for Australian interest and our strategic depth against the possibility of Chinese assertiveness will be significantly enhanced.
Indonesia's stable and democratic rise is far from assured, while its direction is uncertain after President Susilo Bambang Yudhoyono steps down in 2014.
But if Indonesia continues to rise, it can only do so within a stable strategic and maritime trading environment. This means Jakarta will continue to quietly support a pre-eminent strategic role for US forces, despite its official position of "dynamic equilibrium" in which no great power becomes dominant.
Unlike calls to do so with China, genuinely deepening our strategic and military relations with Indonesia complements our alliance with the US and will not cause Australia to be pulled in opposite directions by two competing great powers.