Trade, terrorism and China's territorial ambitions in the South China Sea will be front and centre during a two-day visit to Australia next week by Indonesian President Joko Widodo that will include an address to Parliament on Monday.

President Widodo, who is visiting under a 2010 agreement that the leaders of Australia and Indonesia meet annually, is considered by Australia to be a vital ally not just in economic terms but as a bulwark against China's growing influence over the members of Association of South-East Asian Nations, or ASEAN.

Mr Widodo will spend Sunday in Sydney, where he will have a meeting with Prime Minister Malcolm Turnbull, before following in the footsteps of his predecessor, Susilo Bambang Yudhoyono, who addressed Federal Parliament in 2010.

Prime Minister Malcolm Turnbull and Indonesian President Joko Widodo meet on the sidelines of the Association of South-East Asian Nations summit in Laos in September.

Sources have told The Australian Financial Review that with Beijing flexing its muscles over the South China Sea, which includes wooing the smaller members of ASEAN, Australia increasingly regards a strong Indonesia as vital in maintaining regional balance.

"For us, a strong Indonesia playing a major role in ASEAN is good for Australia," a source said.