The two nations have sought to boost security ties in the face of numerous flashpoints in the Asia-Pacific region including the contested South China Sea.

Australia and Indonesia cemented a landmark defence pact last year that includes provisions for joint drills and deployments to each country, with the neighbours pledging closer cooperation in the region.

Albanese made the Indonesian capital his first overseas stop after securing a second term in an election earlier this month, in what has become a traditional tour for new Australian premiers.

The Labor party leader said Thursday that Australia is seeking to build on the defence cooperation agreement signed with Indonesia in August.

"This treaty-level agreement, underpinned by the Lombok treaty, will enable new cooperation in maritime security, counterterrorism as well as humanitarian and disaster relief," Albanese said in a joint press conference with Indonesian President Prabowo Subianto.

Albanese called the August deal "the most significant step" in Australia and Indonesia's security partnership for three decades.

"Let me be very clear, I do not see this agreement though, as the last step, just the next step," he added.

The earlier Lombok treaty, which entered into force in 2008, included agreements on joint military exercises, maritime security and military training.

Prabowo told journalists that Jakarta and Canberra would further discuss ways to improve defence ties, as well as forge closer economic cooperation.

"We also invite Australia to participate more in our economy," he said, calling on Australian businesses to invest in his country.

"It is important to strengthen this cooperation amid uncertainties in the current global economic situation."

Albanese said the strengthening of Australia's investments in Indonesia is "natural and vital but it is not inevitable", adding that greater engagement from government, business and civil society was needed.

"The growth of your nation and your region also speaks for the prosperity and opportunity created by free and fair trade," he added.

Indonesia has moved to bolster relations with Australia under Prabowo's administration.

In December, months after Prabowo took office, Jakarta returned the five remaining members of the "Bali Nine" drug ring to Australia under a deal between the two countries.

Following the signing of the defence deal last year, more than 2,000 soldiers from the two countries held joint military drills in November that included air, land, sea and cyber exercises.