The Australian and Malaysian prime ministers announced plans to negotiate a free-trade agreement after a meeting in Canberra today but refused to concede ground on key differences regarding Canberra's role in the region.

Prime Minister John Howard and his Malaysian counterpart Abdullah Ahmad Badawi announced they had signed a declaration of intent to negotiate a free-trade agreement at a joint press conference in Canberra.

"It is a mark of the determination of both to build on what is already a very strong relationship," Howard said after meeting Abdullah during the first trip to Canberra by a Malaysian leader in more than 20 years.

Both leaders played down tensions over Malaysia's refusal to support Australia's inclusion in the inaugural East Asia summit in December, its refusal to sign the Association of Southeast Asian Nations (Asean) Treaty of Amity and Howard's threat of unilateral action against militant bases in the region.

Thorny bilateral issues

Howard cut the press conference short after persistent questioning on thorny bilateral issues.

Abdullah said a free-trade agreement would be important to both countries.

"This is not about trade per se or investment per se, it is an agreement that should look into other areas of cooperation, particularly in the area of health, the area of education and the area of tourism," he said.

Australia already has free-trade agreements with Thailand, Singapore, the United States and New Zealand.