CANBERRA - Indonesia and Australia on Wednesday agreed to beef up efforts to combat people smuggling, President Susilo Bambang Yudhoyono said, following a spike in asylum seekers reaching Australia.

The two countries agreed to expand cooperation in fighting "transnational crime, including people smuggling," he told a joint press conference with Prime Minister Kevin Rudd.

"The handling of boat people is a very complex issue," the president said after meeting Rudd during a three-day visit to Australia.

"It relates to issues of law, it relates to... security and to humanitarian issues, that is why we need to coordinate and to cooperate very closely in handling this issue," he said.

Ties between the two neighbours have been severely strained in recent months after a sharp increase in the number of rickety boats loaded with asylum seekers reaching Australian waters from Indonesian ports.

The two leaders gave few details of the deal to block illegal migration but Foreign Minister Stephen Smith said late Tuesday the agreement would include disrupting people-smuggling rings.

"It does go to both operational matters and also to prevention and disruption and the organisational arrangements," Smith told the state broadcaster.

The two leaders also agreed to boost cooperation in fighting extremism and Rudd congratulated Indonesia's efforts to dismantle terror networks.

The praise came after counter-terrorism forces on Tuesday killed a man believed to have been one of the masterminds of the 2002 Bali bombings during a raid in the capital Jakarta.

Yudhoyono will later Wednesday become only the fifth foreign leader to address a joint sitting of Australia's parliament, a day after receiving Australia's highest civilan honour for his work after the 2002 Bali bombing.

-AFP