The leaders of Australia, Indonesia and East Timor have held their first official trilateral meeting, discussing the strength of relations between the three countries and the potential for greater economic co-operation.
Prime Minister Julia Gillard also held bilateral talks with Indonesian President Susilo Bambang Yudhoyono earlier on Friday on the sidelines of a democracy forum in Bali.
Dr Yudhoyono praised the relationship between the two countries, telling Ms Gillard that he looked forward to an even stronger partnership in the future.
'Our relationship is strong and progressing well,' Dr Yudhoyono said.
'Of course you will agree with me, that there will be more (co-operation between us) in the years to come.
'That's my view, that's my hope.'
Ms Gillard pointed to agreements on the economics of defence co-operation as evidence of the strength of the bilateral relationship.
'We've actually got a lot done in quite a short period of time,' she said.
The two leaders held a private meeting, accompanied by Foreign Minister Bob Carr and his Indonesian counterpart Marty Natalegawa.
They were then joined by East Timor's Prime Minister Xanana Gusmao for the trilateral meeting.
Ms Gillard has been attending the Bali Democracy Forum, along with almost a dozen other world leaders, as well as representatives from more than 50 countries.
The forum, which ends on Friday, aims to promote democracy and peace.
'This is really a moment in history,' Ms Gillard said of the meeting.
She said the discussions focused on co-operation between the three nations, particularly in the area of 'connectivity' and ways to boost economic opportunities.
The leaders also talked about improving co-operation in the areas of infrastructure, transport, communications and capacity building.
Ms Gillard also announced that there would be a meeting in Dili in March or April next year involving officials from all three countries to work on issues discussed in Bali on Friday.