A deal has been struck to resolve claims Australia spied on Indonesia and could be formalised as soon as next week.

News Corp Australia reports that Foreign Minister Julie Bishop is planning to fly to Jakarta to co-sign the agreement with counterpart Marty Natalegawa in the presence of outgoing President Susilo Bambang Yudhoyono.

The Canberra-Jakarta deal would aim to settle all issues arising over allegations Australia’s Defence Signals Directorate spied on the Indonesian leader and his inner circle in 2009, the Australian says.

It will also lead to the resumption of co-operation in policy areas suspended by Jakarta.

The agreement will be called the Joint Understanding of a Code of Conduct and involve Australia promising never to use its intelligence agencies to harm Indonesia.

It is understood Prime Minister Tony Mr Abbott was personally involved in drafting the form of words in the agreement and Dr Yudhoyono then reviewed them.