They say economic policy is both plumbing and poetry — pipes, pressure, and the promise of a better life. In Jakarta, that promise is currently being rewritten. Finance Minister Purbaya Yudhi Sadewa has swaggered into the Treasury with a straightforward slogan: if you don’t spend, the economy won’t move. He moved IDR 200 trillion (20 billion AUD) of idle state cash into five major banks and openly advocates for looser money and bolder fiscal nudges to kick-start growth — a move that garnered applause in the markets for its ambition and raised alarm bells in others due to its risk.
This is not just a domestic struggle over macro controls. It is a strategic change with significant foreign policy consequences. A faster-growing Indonesia, which meets the government’s 6% target, alters the economic landscape of Southeast Asia, enhances supply connections, and attracts the type of foreign investment that moves geopolitical power. However, growth without trustworthiness is unstable: more short-term spending may result in future inflation, and increased debt now may lead to political problems later. The Asian Development Bank and World Bank data quietly highlight the tension: regional forecasts were lowered even as local policymakers promise to speed up. Indonesia’s 2025–26 outlook is around 4.9–5.0% according to multilateral agencies, not the 7–8% surge some ministers claim.
The substance of Purbayanomics is a three-part recipe. First, liquidity and credit: that IDR 200T placement aimed to thaw lending pipelines and prop up employment-heavy sectors. Second, targeted populist supports: cash transfers, food aid and subsidies to strategic rural sectors that will buy political peace and immediate demand. Third, a willingness to cajole the central bank toward a “lower-for-longer’ rate stance when growth flags — Bank Indonesia’s May 2025 benchmark at 5.50% speaks to that tilt. Taken together, this is a deliberate gamble on demand-led recovery and visible outcomes.
ASEAN and neighbouring countries should watch with binoculars and a stonking national interest. For Australians for instance, a more robust Indonesian consumer market is good for Aussie exporters and for the region’s resilience against global shocks. But Canberra should also appreciate the hard lesson of history: when central banks look too cozy with treasuries, bondholders and rating agencies grow twitchy. Fitch and other credit monitors have already signalled that loosening fiscal discipline without clear offsets risks rating pressure — and that reduces affordable capital for development projects, climate transition and the very infrastructure the region needs. Short wins can curdle into strategic weakness.
There is a middle ground — and it is the diplomatic story we should be promoting. Indonesia can be both daring and credible if its expansion is conditional, transparent, and limited in time. Consider the blueprint used elsewhere in policy circles: a legally defined Memorandum of Understanding between the Ministry of Finance and the central bank that activates only during specific shocks, clear ‘sunset’ dates on emergency credit measures, and real-time dashboards showing stimulus spending so citizens and markets can monitor every rupiah. These are technical details, but they also serve as geopolitical protection. Investors, multilateral lenders, and partner countries like Australia will only support your growth if they can see the exit strategies.
Contrast Jakarta’s decision with its competitors’ cautious pragmatism. Chile, for example, has built strong fiscal anchors and countercyclical buffers to ensure macroeconomic stability while funding social spending; Peru and Mexico’s fiscal laws provide escape options for genuine shocks. Indonesia could adopt this discipline and combine its stimulus with high-multiplier efforts such as rural roads, port logistics, irrigation, and school meals tied to local procurement, which would increase both supply and demand. That way, the stimulus pays for itself in productivity, not merely in temporary votes.
This is also a moment for global institutions. The World Bank and UNDP have underlined Indonesia’s structural challenges, including youth unemployment, island disparities, and the need for robust public services. Partnering with conditional financing (blended finance, targeted guarantees, green bonds) to catalyse private funding can help Jakarta meet political commitments while maintaining future credibility. As a result, Australia’s diplomatic toolkit—concessional finance, technical help for tax reform, digital governance, and procurement transparency—is precisely the type of quiet leverage that converts high-sounding rhetoric into high-quality growth.
If Purbaya delivers visible jobs and roads while binding his fiscal gambits to transparency, Indonesia will become the region’s accelerant rather than its risk. If not, the costs will have a social impact: inflation that hurts the poorest, currency wobbles that frighten away long-term investors, and budgetary tightening that hits the same groups that a populist administration promised to protect. The choice is both strategic and economic: to sprint or to establish a sustainable path to the future.
Make no mistake — this is a pivotal chapter in Jakarta’s story. It will shape Indonesia’s ability to project soft and economic power across the Indo-Pacific. For Australia and others, the task is clear: encourage ambition, insist on rules, and help stitch fiscal courage to institutional discipline. That, not cheap applause for headline growth, will secure the region’s prosperity — and the politics that follow.
