Australia said it expects to start negotiations with Malaysia in the next few months on a bilateral free trade agreement (FTA) to help boost trade between the two countries.

Trade Minister Mark Vaile said both governments were undertaking "scoping" studies on a trade deal and that formal negotiations were imminent.

"We are on the cusp of embarking upon an FTA negotiation with Malaysia," he said.

Such a deal would have been impossible only a few years ago due to the often antagonistic relationship between former Malaysian Prime Minister Dr Mahathir Mohamad and Canberra.

However, Mahathir's successor Abdullah Ahmad Badawi has taken a softer line with Australia.

Easy working ties

Vaile said Malaysia was Australia's 10th largest trading partner, even though Australian investment in the country dropped off after the Asian financial crisis in 1997.

He said the two countries had similar legal systems and that many Malaysian bureaucrats and politicians had been educated in Australia, making working together easy.

Australia is also seeking a free trade agreement with the 10-nation Association of Southeast Asian Nations (Asean) bloc, of which Malaysia is a member.

Australia already has similar deals with the United States, New Zealand, Thailand and Singapore.