Ties between the neighbours sank to their lowest point in years in November after reports Australian spies tried to tap the phones of President Susilo Bambang Yudhoyono and his inner circle.
Jakarta recalled its ambassador from Canberra and suspended cooperation in several areas over the incident, including efforts to stop people-smuggling boats reaching Australia.
Yudhoyono called for a code of conduct to govern behaviour during talks with Australian Prime Minister Tony Abbott in June, and the agreement reportedly includes a promise from Canberra never to use its intelligence agencies to harm its neighbour.
“We have reached agreement on the joint understanding and we are currently arranging a time to sign it,” Bishop said yesterday.
The deal will be signed in Indonesia by Foreign Minister Marty Natalegawa, with outgoing president Yudhoyono a witness, her office said.