The article outlines the Australia–Indonesia relations in the context of the changing regional order in Asia-Pacific and specifically of th e rivalry between China and the United States. According to official documents, Australia and Indonesia are strategic partners enjoying good cooperation in all key areas and share a similar vision of the desired regional order (regarding, e.g., the role of the US and China in Asia-Pacific as well as the pivotal role of ASEAN in regional institutions). However, their cooperation is hindered by a number of issues, the most important one of which is the misperception of the potential and significance of their respective partners. Not only does this frequently strain the diplomatic relations between Australia and Indonesia but also weakens the foundations for long-term partnership. The article suggest an alternative approach to Australia–Indonesia relations as described by Rod Lyon – namely the transformation of their bilateral cooperation from a ‘strategic partnership’ existing on paper only to an actual multi-faceted partnership leading to the creation of a third ‘power centre’ in Asia-Pacific (the others being China and the US).