Public anger against Australia has risen since the Howard government granted temporary protection visas to 42 West Papuan asylum-seekers last month.
"Australia has meddled in Indonesia's domestic affairs," said Amiruddin Saud of the Indonesian Association of Importers (GINSI).
"The boycott will remain in place until Australia cancels the visas and apologizes to Indonesia," he added.
Australian exports to Indonesia, mostly dairy produce, other food products, cotton and aluminum were worth A$2.5 billion last year.
Mr Saud said the group also deemed the boycott necessary after the publication of an Australian cartoon depicting President Susilo Bambang Yudhoyono as a dog copulating with a Papuan.
That cartoon was in response to a drawing in an Indonesian newspaper depicting Australian Prime Minister John Howard and Foreign Minister Alexander Downer as fornicating dingoes.
Black list
Some Indonesian MPs are so angry at Australia that they have created a list of Australian parliamentarians, union leaders and university academics, as well as activist groups, which support Papuan separatism.
It was prepared by a group of senior Indonesian MPs with input from the country's intelligence agency, known as the Badan Intelejen Negara, or BIN.
Australian Greens senators Bob Brown and Kerry Nettle, Democrats senators Andrew Bartlett and Natasha Stott Despoja, and former ALP national president Greg Sword head the list.
Senator Nettle was last week banned from visiting Papua on the order of Defence Minister Juwono Sudarsono, while several other Australian activists and academics have also barred from the province.
Published in major newspapers including Media Indonesia, Koran Tempo and Republika, the list also includes the Australian Council of Trade Unions, Sydney University and the Royal Melbourne Institute of Technology, the federal parliament's group on West Papua and the peak Australian Council for Overseas Aid.
Activist groups in Australia named include the Australia West Papua Association, the Asia Pacific Human Rights Network, West Papua Action Australia, the East Timor Action Network and the West Papua Project at the University of Sydney.
Professor Stuart Rees, who heads Sydney University's Centre for Peace and Conflict Studies, was also singled out, along with activist nun Sister Susan Connolly from the Mary MacKillop Institute of East Timorese Studies.
MPs to visit Australia
The list will be taken to Australia next month by a group of six MPs representing major parties in the Peoples Representative Council, or DPR, as part of a protest against the decision to grant the visas.
Delegation leader Theo Sambuaga, who heads the powerful foreign affairs commission of the Indonesian parliament, told AAP he would ask the Australian government to overturn the ruling.
The group hopes to meet with the Papuans, as well as Prime Minister John Howard and Opposition Leader Kim Beazley.
Attempts to diffuse situation
Prime Minister Howard and Foreign Minister Alexander Downer continue to try to diffuse the controversy, voicing support for Indonesian unity and oppose calls for Papuan independence.
Mr Howard has also appealed to activists in Australia not to encourage Papuan separatists to seek asylum in Australia.
"I would say to people in West Papua and I would say to any people in Australia ... who may be encouraging them to come to Australia that that is not something that the Australian government or, I believe, the majority of the Australian public wants," he told ABC radio.
Mr Howard has also praised the country saying, “Indonesia is now the third largest democracy in the world. It’s led by one of the most capable moderate Islamic leaders in the world.”
Australia’s Immigration Minister Amanda Vanstone has tried to distance the Government from the decision and praising the Indonesian President as a 'very good bloke'.
Missing six in PNG
Another boat of six West Papuans, reportedly on their way to Australia, have been located safe and well in Papua New Guinea, according to the Australian government.
The family is now believed to be in Bula in PNG, and authorities have called off their search for the group.
A spokesman for the Customs Minister Chris Ellison doesn’t believe the group ever made it to Australian waters during their journey.
Mr Howard says the fact that the group never reached Australia is good for the relationship with Indonesia.