CANBERRA, March 5, 2009 (AFP) - Australia and South Korea agreed during a summit between Prime Minister Kevin Rudd and President Lee Myung-bak Thursday to deepen security ties and launch formal talks on a free trade agreement.

The security agreement calls for close consultations on issues of common strategic interest in the Asia-Pacific region, counter-terrorism strategies and transnational crime, a joint statement said.

The two countries will also sign a pact allowing for the secure exchange of classified military information between defence organisations and related industry contractors.

"We believe it is important for our military to work more closely together and to deal with some of the common challenges of security together in the Asia-Pacific region."

Lee told the news conference he believed a "new era of partnership" had begun between the two countries along with a personal friendship between the two leaders.

The two countries will also expand cooperation on global disarmament "and non-proliferation of weapons of mass destruction and their means of delivery," the statement said.

North Korea said last month it will fire a rocket to put a satellite into orbit, but the United States and South Korea believe it is a pretext to test a missile that could theoretically reach the US.

On trade, Rudd announced that formal negotiations on a free trade agreement between the two countries would begin in May.

The two leaders launched preparatory talks on such an agreement during a meeting in Seoul in August.

"We take what is already a very good economic relationship between the two of us and we intend to make it even closer, even bigger, even better," Rudd said.

South Korea is Australia's fourth-largest export market, with resources such as energy and mineral products accounting for the bulk of outgoing trade.

Imports from South Korea are dominated by cars and telecommunications equipment.