High-level defence and counter-terrorism talks between Australia and Indonesia have wrapped up, with Foreign Minister Julie Bishop insisting relations between the nations are in very good shape.

Relations with Indonesia might have been frosty following the Bali Nine executions, but Ms Bishop says there have been 15 ministerial meetings between the countries since August.

The third 2+2 meeting in Sydney on Monday focused on national security, including counter-terrorism, deradicalisation and intelligence sharing, as well as economic ties, she told reporters after the meeting.

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Australia and Indonesia were close neighbours and natural partners, Ms Bishop said.

As well as security and economic ties, there were growing links in tourism and student exchange.

“We have shared and common interests across a broad and diverse range of areas,” Ms Bishop said.

Julie Bishop and Retno Marsudi meet at the third 2+2 meeting. Photo: AAP

“There is room for us as two G20 economies to do a great deal more together.”

Defence Minister Marise Payne said Indonesia and Australia will undertake a new humanitarian relief exercise in 2016.

The pair also agreed to renew the defence co-operation agreement, due for review in 2017.

Senator Payne echoed the words of her counterpart Ryamizard Ryacudu, who quoted an Indonesian maxim: “You can choose a friend, but being neighbours is a destiny.”

“We are definitely making the most of this very productive destiny that we have together,” she said.

Indonesian Foreign Minister Retno Marsudi agreed the relationship between Jakarta and Canberra was in good shape, especially after Prime Minister Malcolm Turnbull’s visit to Jakarta.

The touchy issue of people smuggling and Australia’s boat turnback policy was the subject of a “very frank and honest discussion”, Ms Bishop said.

Ms Marsudi said both nations would continue to co-operate on addressing the root causes of people smuggling.

Mr Ryacudu said real threats facing the region included terrorism, natural disaster, disease, drug smuggling and the “hassle” of refugees.

He issued a blunt warning to other countries about getting involved in the issue of West Papua, insisting it was part of Indonesia.

“There is no other solution, that’s it, that’s the way it is,” he said, adding Indonesia had never disrupted or caused disruptions in other countries.

“Indonesia also doesn’t want to be disrupted or have other people involved in its affairs.”