Malcolm Turnbull and Joko Widodo have taken to the internet to declare the likelihood of a trade deal by the end of 2017.
The prime minister and Indonesian president met in Hamburg ahead of the start of the G20 summit on Friday.
The two countries are working on an Indonesia-Australia Comprehensive Economic Partnership Agreement, which would improve on the existing ASEAN-Australia-New Zealand free trade agreement.
"We have so many things in common and we are working to complete the (agreement) by the end of the year," Mr Turnbull said in a Twitter video with his Indonesian counterpart.
President Widodo also expressed confidence the deal could be struck by the end of 2017.
Mr Turnbull said the Australia-Indonesia relationship was getting closer and the discussions had been "constructive".
During the hour-long meeting, which was originally ear-marked for 30 minutes, the prime minister and president discussed terrorism, including the situation in Marawi in the Philippines and the ongoing threat from ISIL to the region.
They agreed on the importance of furthering counter-terrorism cooperation, including exchanging intelligence and supporting the Philippines, as well as combating terror financing.
As US President Donald Trump prepared to attend his first G20 bringing with him an "America first" approach, the pair noted a strong US involvement in the region was vital and was in America's national interest.
With the issue of North Korea's missile tests on the G20 agenda, the leaders agreed to work with other countries to restrain the pariah state's continued belligerence.
