Malcolm Cook and Ivan Cook – Unlike people, countries cannot choose their next-door neighbours or the neighbourhood they live in. Australia's position next to Asia - and far from the cultural origins of most of us – has deeply affected our views of Australia's place in the world. The good news is that Australia's "Asian angst" is history. The 2006 Lowy Institute Poll, released yesterday, confirms that we feel at home in Asia.

Australians polled had warmer feelings towards Singapore and Japan than the US. The new – and distant – Asian powers, India and China, were on par with the US. Australians see the rise of China as an opportunity, not a threat. We also see better days ahead. A majority of people polled believed our relations with China, India and Japan were the same or improving, with China topping this list.

The bad news is that, while we are happy with Asia and its upwardly mobile giants, we are much less sure about our nearest Asian neighbour, Indonesia. In the 2005 and 2006 Lowy Institute polls, Australians displayed a distinct lack of warmth towards Indonesia, ranking it 12th out of 15 countries and regions surveyed. This year, Indonesia ranks ahead of only Iraq, Iran and North Korea – not a very good crowd.

Our much smaller and weaker Pacific neighbours, East Timor (where our Diggers are dug in) and Papua New Guinea (our former colony), score noticeably higher.

Australians are comfortable with Asia and our Pacific neighbours. Only Indonesia stands out uncomfortably.

Like neighbours who do not know each other's first names, Australia-Indonesia relations are stunted by ignorance and a tendency to believe the best of our own intentions while questioning those of the other. Despite the best efforts of political cartoonists, less than one-fifth of Australians knew the name of the Indonesian President, while just over one-quarter of Indonesians correctly named Prime Minister Howard. Kofi Annan in the distant but well-loved UN was much better known on both sides of the Arafura Sea.

Australians are more vexed than Indonesians about living next door to each other. In the wake of tensions over Papuan asylum-seekers and the Bali Nine, roughly half our respondents believed that Australia's relations with Indonesia were worsening. This was the only one of the six relationships surveyed that we thought was in decline. Polled at the same time, Indonesians were more relaxed: only one-fifth thought relations were worsening. Indonesians were more worried about their relations with Singapore, China and Japan.

While Australians as a whole feel quite safe, Indonesia looms large and dark in our psyche. Respondents felt firmly that Indonesia is essentially controlled by the military, that it is a dangerous source of Islamic terrorism and that it could pose a military threat to our homeland.

Indonesians, on the other hand, proudly see themselves as an emerging democracy and not as a dangerous source of Islamic terrorism. They worry about us interfering in their household affairs, particularly over Papuan separatism. And while we firmly believe that Indonesia benefits from being next to their true blue (if somewhat anxious) friend, Indonesians are less sure about the strength of Australia's friendship or the benefits of being next door.

Positive results on regional relations, including those with our old foe, Japan, and traditional source of ideological concern, China, show that historical fears have largely been allayed. But while successive Australian governments have also seen close relations with Indonesia as a vital national interest, and despite thousands of Indonesian students studying here and millions spent on cultural exchange, Indonesia remains an acquired taste.

Australia has a blind spot on Indonesia and our Government has a serious public diplomacy problem. For years, many felt that the largely autocratic Suharto regime challenged Australia's democratic values. Yet Indonesia's great strides into democracy since 1998 have gone largely unnoticed here.

Public comment, including politicians' sound bites, has instead focused on neighbourly spats despite the shared tragedy of the Bali bombings.

There has been much cause for cheer in our recent history, but we continue to emphasise the things that separate us and ignore what brings us together.

Fortunately, there is something to build on. Three-quarters of Australians and two-thirds of Indonesians said it was important that we work to develop a close relationship, rather than supporting the view that we are too different to develop a close relationship. That gives us a start in what is going to be a long but necessary task of building first knowledge, then understanding, with our closest Asian neighbour.

[Malcolm Cook is the program director, Asia and the Pacific, at the Lowy Institute. Ivan Cook is research associate and co-ordinator of the Lowy Institute Poll. The report is available at www.lowyinstitute.org.]