AUSTRALIA must improve relations with Asian nations in order to be successful, according to former Prime Minister Paul Keating.

Mr Keating also criticised his successors John Howard and Kevin Rudd, and current PM Julia Gillard, for not fostering relationships with Asia built in the late 1980s and early 1990s.

Mr Keating, speaking at the annual Keith Murdoch Oration, said improving relationships with South-East Asia was the natural place for Australia and singled out Indonesia as our most important ally.

"No country is more important to us and it is a country which has shown enormous tolerance and goodwill towards us," he said.

"Focus on this country should be a major imperative driving our foreign policy."

A capacity crowd, which included actor Sigrid Thornton and Eddie McGuire, Premier Ted Baillieu, Governor Alex Chernov and former premier Steve Bracks, attended the sold-out event at the State Library of Victoria.

Mr Keating reflected on much of his tenure as treasurer and prime minister when he pushed for Australia to focus on neighbouring Asian countries.

"As prime minister from 1991, I saw the writing on the wall as to the relative decline of the Anglosphere, perhaps more clearly than my predecessors," Mr Keating said.

"More than that, I rejoiced in the diversity around us and the fact that the big and old societies of the East, formerly locked down by colonialism and poverty, were free to go their own way."

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