Australia has boosted its aid and eased restrictions on defence cooperation with Myanmar as Thein Sein became the country's first head of state to visit the country since 1974.

Canberra said it was increasing its support to recognise reforms made as Myanmar approaches the second anniversary of a quasi-civilian government led by former general Sein taking power.

Prime Minister Julia Gillard said $20.7m would be provided over two years for "strengthening democratic institutions, promoting human rights, improving economic governance and advancing the rule of law".

"As a close neighbour, Australia will benefit from a more open and prosperous Myanmar that is fully integrated into the region," she said on Monday.

"Australia's commitment to expand its constructive engagement with Myanmar recognises the unprecedented process of change under way there towards political freedom and the new opportunity this brings to help promote the prosperity of Myanmar and its people.

"It also recognises President Thein Sein's leadership in driving these critical reforms."

Al Jazeera's Andrew Thomas, reporting from Sydney, termed the meeting "a symbolic moment".

"The normalising of economic relations between Australia and Myanmar is very high on the agenda.

"Julia Gillard reiterated that $100 million will be spent on strenghthening trade links and economic ties between the two countries."

Arms embargo

While Canberra said its arms embargo would remain, it announced an easing of restrictions on defence cooperation including humanitarian and disaster relief activities, as well as peacekeeping.

"I hope that you appreciate that what we are undertaking has no equal in modern times. This is not just a simple transition... but a transition from military rule to democratic rule."

- President Thein Sein

It will also appoint a defence attache to Myanmar as well as a trade commissioner.

Sein said he was proud to be the first head of state to visit since 1974.

"I know that Australia and Myanmar are destined to be good partners and more importantly the people of Myanmar and Australia are destined to be good friends," he said.

"I hope that you appreciate that what we are undertaking has no equal in modern times. This is not just a simple transition... but a transition from military rule to democratic rule." 

Some organisations including "Burma Campaign Australia" were critical of Australia welcoming Sein, saying it would undermine Canberra's ability to pressure Myanmar to end human rights abuses.

Western nations have started rolling back sanctions since Myanmar implemented a series of reforms, including releasing most of the country's political prisoners, following the end of nearly half a century of military rule in 2011.

Australia last year lifted all its remaining targeted travel and financial sanctions against the country.

Gillard met Thein in Laos in November, in the first meeting between leaders from the two countries for nearly 30 years.