Across Australia, the young and talented children of expatriate Kiwis find their careers stunted when they leave school, cut off from higher education and government apprenticeships by costs and policies.
Increasingly, the impact of the 2001 changes to Australian social security laws and the flow of federal and state exclusions that followed are becoming clear in human, social and economic terms.
Griffith University and the Queensland University of Technology argue in a submission to a study on the transtasman relationship by the two countries' productivity commissions that Australia has a moral case to answer in its treatment of expatriates' children.
"While parents arrived knowing they couldn't get entitlements, this is not so for their children ... Young New Zealanders who have lived in Australia for most of their lives are fully integrated members of society with emotional, cultural and psychological connections that bind them to Australia."
Dr Judith Kearney, a senior lecturer at Griffith's school of education and professional studies, says blocking capable and motivated students from higher education is incongruous, entrenching social exclusion "that diminishes us all".
"The consequences are not just the social exclusion of a disadvantaged community, with costs of isolation and social disengagement," she wrote in a paper on policies restricting New Zealanders' access to higher education.
"Australia at large deprives itself of the benefits of productive engagement through social inclusion ... Instead, both sides suffer the consequences of this exclusion and alienation, which destabilise and disrupt the shared life of the nation."
The 2001 policies designed to block the "backdoor" migration of Pacific Islanders and Hong Kong Chinese through New Zealand and to lower the cost of social security payments to expat Kiwis bar access to most of Australia's welfare safety net, including the dole, disability and other payments, apprenticeships and student loans and scholarships.
The states have added their own exclusions to the list, ranging from discounted student travel to emergency housing and aid for victims of domestic violence.
The only way out for New Zealanders is to return home. Non-government welfare groups have paid the fares of homeless Kiwis or helped them to gain permanent residency, which is barred for many by restrictive skills requirements or the Catch-22 of being denied the education needed to gain them.
The Australian belief that its welfare system is a "pull" factor which, if available to New Zealanders, would further encourage transtasman migration is belied by the facts.
Studies have repeatedly shown that work, higher wages, lifestyle and opportunity are the main reasons Kiwis cross the Tasman to live.
The Australian Immigration and Citizenship Department says that since the 2001 rules came into effect, the expat Kiwi community has grown by more than 40 per cent, with 500,000 estimated to be living there permanently.
Most are hard workers. Their workforce participation rate is significantly higher than for Australian workers, and they are more likely to be employed full-time. Most work in construction or as technicians and tradespeople, with many others employed as social workers and in healthcare.
Most of their skills do not meet the skills criteria for permanent residency.
Griffith University says that only 40 per cent of the approximately 240,000 Kiwis who arrived between February 27, 2001, when the new rules came into effect, and June 2011 might have been eligible for a permanent residency.
Fewer than 11,800 were granted permanent residency between June 2006 and May 2012. Citizenship numbers have also plummeted for New Zealanders, especially those born in the Pacific Islands.
Higher education for most is an impossible dream, even if they complete school.
They are blocked from student loans, grants and scholarships, putting universities and colleges beyond their reach. Low-paid, low-skilled jobs are the best many can hope for.
The federal Government's Multicultural Council, launched by Prime Minister Julia Gillard last year, warns of a "permanent second class of people".
"The emergence ... of an economically disadvantaged group, which also identifies as socially marginalised, appears not to have been considered [in the 2001 policy]," it said.By Greg Ansley Email Greg