Both Australia and New Zealand have longstanding and wide ranging ties with individual member states of ASEAN and the group as a whole. However,

• there is potential for closer relations across the spectrum, based on consultation, agreement and partnership;

• the principles of closer ties should be mutual benefit and respect, and shared interests and priorities.

Recent changes of leadership and attitude in Southeast Asia have reopened the door to closer engagement with ANZ. Australia and New Zealand should take this opportunity to further strengthen ties with the region. The government and the opposition in both countries are committed to engagement with Asia, although they differ in some areas on how best to achieve this.

Meanwhile, the relations of Australia and New Zealand with Indonesia – by far the biggest member of ASEAN – have improved. But they still need to be carefully managed and given higher priority by Canberra and Wellington as well as by Jakarta. Australia and Indonesia have worked closely together to track down the terrorists responsible for the Bali bombings in October 2002 that killed dozens of Australians and Indonesians as well as several New Zealanders.

Why all sides stand to gain from closer ties

1. A stable and increasingly prosperous and democratic Southeast Asia is very much in the strategic and economic interests of Australia and New Zealand. Southeast Asia has recovered from the Asian financial crisis of 1997-98. Much of the region is now growing impressively again and its trade with ANZ is rising sharply. A vibrant, economically integrated Southeast Asia would be a globally attractive marketplace and centre for investment, especially when linked to other parts of Asia by agreements designed to expand trade and investment.

2. ANZ is valuable to Southeast Asia as a market and source of technology, knowledge, expertise, capital and other resources. Australia is the world's 15th largest economy.