Australia's Upper House of Parliament has approved legislation for a free trade deal with Malaysia, which will allow almost all Australian goods to enter the Asian country free of import duties.
The Malaysia-Australia Free Trade Agreement will guarantee tariff-free entry for 97.6 per cent of current goods exported from Australia after it comes into force. It will rise to 99 per cent by 2017.
In return, Malaysian exporters will enjoy duty-free entry to the Australian market.
Malaysia is Australia's 10th largest trading partner, with two-way trade worth almost $16 billion in the past financial year.
Under the deal, Australian exporters of automotive parts, iron, steel and dairy products will benefit from improved market access.
On Thursday, the Australian Senate approved legislation to implement the free trade deal - an agreement signed between Australia and Malaysia in May.
Independent Senator Nick Xenophon says any free trade deal must be conditional on Australia's support for free and fair elections in Malaysia.
But the Australian Trade Minister, Craig Emerson, says agreements should not be used in areas such as the political system that applies in particular countries.
"We do have provisions in trade deals and will increasingly have this in relation to the environment and labour standards - these are not meant to be trade restricting provisions," Dr Emerson said.
"But insisting the countries change their political systems in order to a deal with Australia, I think, is pretty silly.
"Should we really say to our farmers 'sorry we won't trade with - and reduce our trade barriers with - countries whose political systems we disagree'.
"That would be an extraordinary constriction on the capacity of Australian farmers, manufacturers and service industries to be able to gain access to markets overseas."
Malaysia has committed to allowing majority Australian ownership of service providers in a range of industries, including telecommunications, insurance, education, tourism, research and development, accountancy and mining-related services.
Australia has also agreed to provide a three-year package of up to 21 short and long-term scholarships, fellowships, awards and exchanges to support Malaysia's economic reform efforts.
The Australian Government says the deal with Malaysia is an early outcome of the white paper on Australia in the Asian Century.
It says the deal is "a vote of confidence in the Malaysian people, in their economic reform process and in the importance of the Asian region to Australia."