Malaysia and New Zealand have agreed to undertake studies on a possible free trade deal, New Zealand Trade Negotiations Minister Jim Sutton said on Sunday.

Malaysia is New Zealand's biggest trading partner within the Association of Southeast Asian Nations (Asean) and "it's very encouraging" that a bilateral agreement is being considered, he said.

Sutton had discussed free trade prospects with Malaysian Trade Minister Rafidah Aziz on the margins of an Asean ministerial meeting in Indonesia.

"We have agreed that we will undertake separate studies over the next six months," he told the New Zealand Press Association from Jakarta.

"If the studies show benefits, we should then move to negotiations."

New Zealand already has a free trade pact with Singapore, Asean's strongest economy, while the entire 10-nation bloc agreed on Sunday to launch negotiations on a free trade agreement with Australia and New Zealand next year, according to Australian Trade Minister Mark Vaile.

Asean consists of Thailand, Singapore, Indonesia, Vietnam, the Philippines, Brunei, Laos, Burma, Malaysia and Cambodia.