'Spying game' may damage trade ties with Indonesia

The furore over Australia's Indonesian spying program could damage Australia's economic relationship with the country - the largest economy in south-east Asia.

Most Australians are unaware of the size of Australia's trade relationship with Indonesia, though many local banks and miners have a significant footprint in the country.

It is Australia's 12th-biggest trading partner. Last year, Australia's trade with Indonesia was worth $14.6 billion, and there is "good potential" for the economic relationship to grow further, according to the Department of Foreign Affairs and Trade.

But economists say Australian businesses have not been able to take full advantage of Indonesian economic growth in the past decade, and the scandal about Australia's spying program could further hinder it.

"It is a huge trade partner, but many Australians seem unaware of how trade, jobs and the economy could be put at risk if we rock the boat from Indonesia," Tim Harcourt, an economist from the University of NSW's Australian School of Business, said.

"The 'spying game' will put lead in the saddle bags of Australian business already struggling to make headway in the archipelago."

Mr Harcourt said there were roughly 2580 Australian companies exporting to Indonesia, but that number had remained largely unchanged over the past five years even though Indonesia has averaged an economic growth rate of 4-6 per cent over the past decade.

The number of Australian companies based in Indonesia has fallen from 400 before the 1997 Asian financial crisis.

Austrade estimates there are roughly 250 Australian companies there today.

But the size and growth of Indonesia's population presents good opportunities for Australian businesses, according to DFAT. Indonesia has more than 244 million people, and a middle class of roughly 45 million people, which is forecast to increase to 135 million by 2030. It is the largest economy in south-east Asia, and it is projected to be the world's seventh largest economy by 2030.

"Rising Indonesian demand for consumer goods and services, particularly in education, finance, healthcare, ICT and tourism, aligns well with Australian industry capabilities," DFAT said on its website.

Australia's biggest banks have a prominent place in Indonesia's financial services sector.

Commonwealth Bank has been in Indonesia since 1997, specialising in insurance and retail and small business banking. ANZ Bank is one of Indonesia's 10 largest private commercial banks.

IAG and Macquarie Group also have operations there.

"Thirty-eight Australian-listed companies are active in more than 120 mining ventures across Indonesia, including BHP Billiton, Newcrest, Leighton and Thiess," DFAT said.