The agreement, which called for the posting of an Australian defense attache at NATO headquarters in Brussels, was signed during a landmark visit here by NATO Secretary General Jaap de Hoop Scheffer.

Defense Minister Robert Hill said the closer links with NATO made sense in light of the expanding mission of the US-European military alliance, which is already working with Australian forces in both Afghanistan and Iraq.

"We believe with the changes of emphasis of NATO, we are likely to be working more closely with NATO in the future," Hill said during a joint press conference with Scheffer and Australian Foreign Minister Alexander Downer.

"Looking at what is happening in Iraq at the moment already illustrates that that likelihood would come to be the case," Hill said.

"We therefore see it in our interests to be closer to NATO in a more practical way."

Downer stressed the importance of dealing with terrorism on a global scale and said NATO and Australia both had vital roles to play in the fight.

"We've agreed that there will be some exchanges of intelligence on counter-terrorism between Australia and NATO and that will take forward yet another step in our relationship on those issues," Downer said.

The Australian attache in Brussels would ensure that intelligence and other information is shared more easily between NATO and Australia -- one of the United States' closest foreign allies, Hill said.

Scheffer, the first NATO chief to visit Australia, said the new cooperation would also deal with the spread of banned weapons and the threat of unrest in failing states.

"We are all facing -- the NATO alliance, Australia and this region -- the proliferation of weapons of mass destruction and we're all faced with the consequences of fragile and failing states," he said.

"It is important that we exchange as much information as we can, also of a classified nature, that's the reason we signed this security agreement," he said.

Australia has been closely involved in the US-led Proliferation Security Initiative (PSI) designed to counter weapons smuggling by rogue states like North Korea and has led interventions to prop up fragile Pacific states, including the Solomon Islands and Papua New Guinea.

Scheffer said such experience made Australia a key partner in dealing with such threats.

"It is important that I touch base on behalf of NATO on what's happening in this region, which is geographically far away but nevertheless, given the challenges I've mentioned, very relevant to NATO," he said.

Scheffer was rebuffed however when he suggested Australia increase its role in Afghanistan, where just one Australian soldier is assisting in clearance of landmines and unexploded ordnance.

At the peak of fighting following the September 11, 2001 Al-Qaeda attacks on the United States, 150 Australian special forces troops joined operations against Al-Qaeda and Taliban remnants. The last troops were withdrawn in December 2002.

Scheffer told his hosts NATO would like to see more Australian troops join new Provincial Reconstruction Teams (PRT) being deployed around Afghanistan.

"I have told ... the ministers that the PRT concept is important and that Australia in the future might again think about participating," he said.

But Hill said Australia did not "have any plans at this time to send further troops to Afghanistan."