Indonesian and Australian leaders will commit to a security deal later this month in an effort to thaw relations between the two countries, the Sydney Morning Herald daily reported on Thursday.
The newspaper quoted Indonesian presidential spokesman Dino Djalal as saying the two countries are "working on a security treaty" but it will not be completed at the end of the month when Australian Prime Minister John Howard visits Indonesia.
Instead, Howard and Indonesian President Susilo Bambang Yudhoyono would sign a declaration committing to the security agreement and broader bilateral cooperation, the report said.
The report described the security deal as a "surprise move" and will begin a new era in the bilateral relations which saw months of diplomatic turmoil.
The relations were frozen since last March when Canberra granted asylum to 42 Indonesian Papuans. Indonesian ambassador to Canberra was recalled home.
The treaty is expected to include significant military-to- military cooperation, intelligence sharing and joint naval and surveillance patrols.
Australia will pledge support for Indonesia's territorial integrity, according to the report.
Djalal said the treaty has been discussed by Australian Foreign Minister Alexander Downer and his Indonesian counterpart Hassan Wirayuda in Singapore last month.