Australia and Indonesia have finalised negotiations on a landmark defence agreement that will allow the nations’ troops to cooperate more closely and conduct more joint military exercises.

Prime Minister Anthony Albanese and Defence Minister Richard Marles on Tuesday hosted Indonesia’s president-elect Prabowo Subianto in Canberra, where they resolved the remaining technical issues that had been holding back progress on the agreement.

Albanese said, “[the] historic treaty will bolster our strong defence cooperation, by deepening dialogue, strengthening interoperability and enhancing practical arrangements”.

“It will be a vital plank for our two countries to support each other’s security, which is vital to both countries, but also to the stability of the region that we share,” he said.

The agreement with one of Australia’s closest and most populous neighbours is an important step in the government’s strategy to deepen ties with Indo-Pacific nations and prevent them from becoming dependent on China for their security needs.

Prabowo, who will be inaugurated as Indonesian President in October after serving as Joko Widodo’s Defence Minister since 2019, said the nations had “ironed out some legalistic details in a very good outcome” and invited Marles to travel to Indonesia in the coming days to sign the agreement.

Government sources said the agreement was similar to a landmark reciprocal access agreement struck between Australia and Japan in 2022 that allows the stationing of troops in each other’s countries along with the staging of joint training exercises and disaster support.

Describing the finalising of the agreement as a “profoundly significant moment for the national security of both of our countries”, Marles said that it would typically take a decade, rather than two years, to strike such a significant pact.

Marles said that Australia and Indonesia had always shared a destiny as close neighbours but that, “from this moment forth, that destiny is very much defined by deep strategic trust”.

Prabowo acknowledged that Australia and Indonesia had experienced “ups and downs” over many years, alluding to tensions sparked by people smuggling, the status of East Timor, the death penalty in Indonesia and Australian spying on former Indonesian president Susilo Bambang Yudhoyono.

Prabowo stressed that he was keen for Australian cooperation on combating drug trafficking, saying, “I view the drugs problem and the narcotics threat to be of the highest importance in Indonesia and I really value Australian help”.