Australia and Singapore have strengthened ties by entering into a comprehensive strategic partnership (CSP) that will see increased defence and economic cooperation.

Prime Minister Tony Abbott and Singapore's prime minister, Lee Hsien Loong, announced the signing of a partnership at a news conference in Singapore.

The leaders also signed a memorandum of understanding to cooperate on counter-terrorism in the region.

Mr Lee said the partnership was a "road map" for closer relations in trade, investment, foreign policy, defence and security.

"I'm glad today we have taken one step forward, one important step forward with a comprehensive strategic partnership that PM and I have just signed," Mr Lee told a news conference.

"I would like to thank Mr Abbott for his very strong support, because without his initiating this and pushing this and bringing it through the CSP may not have materialised."

Mr Abbott said he was pleased the partnership had been formalised.

"I want to see an intimate defence partnership with Australia and Singapore and I know that building on the very long educational relationship that Singaporeans have had with Australia, and the much newer but rapidly deepening educational relationship that Australians have had with Singapore, that our two peoples will walk arm in arm into a brighter future," he said.

The two leaders also agreed to review the 2003 Australia-Singapore free trade deal, with Mr Abbott adding that the Coalition wants to increase Singaporean investment in Australia.