More than 100,000 New Zealanders living as "indefinite temporaries" in Australia may finally gain rights to Australian welfare and student loans following a landmark joint transtasman inquiry.
The nine-month inquiry by the Australian and New Zealand Productivity Commissions into further transtasman integration has found that denying full rights to Kiwis on indefinite temporary visas in Australia "may develop into a point of irritation within the transtasman relationship".
The commissions have urged Australia to create a new "pathway" for New Zealanders to gain permanent residence and Australian citizenship, and to let NZ citizens get Australian student loans after "an appropriate waiting period" such as two years' residence.
Submitters told the inquiry the current rules barring Kiwis from welfare, student loans and voting rights had created an "underclass" of disfranchised people, many of whom had paid Australian taxes for many years.
Prime Minister John Key and Julia Gillard, Australia's Prime Minister, both acknowledged the problem when they announced the joint inquiry in January.
Ms Gillard said then: "We need to keep working on it, obviously it's got money implications and that's something that we've always got to be very careful about. So we'll keep working it through."
The problem dates back to 2001, when Australia reaffirmed the right for Kiwis to stay in Australia indefinitely, but only on "special category visas" which do not include any right to vote or to most welfare payments.
Kiwis on special category visas have also been unable to get Australian student loans since 2005.
The inquiry found the number of New Zealand citizens in Australia had increased from about 450,000 in 2001 to 647,863 on June 30 this year, of whom between 506,000 and 546,000 were "ordinarily resident" in Australia.
About half of those, 240,000, had arrived since the 2001 changes but only 40 per cent to 60 per cent of these were eligible to apply for permanent residence under the normal points system based on skills, employment and being under the age of 50.
"This suggests that the balance of non-protected special category visa holders, or between 100,000 and 144,000 people, would be ineligible for a number of safety net payments and social policy supports," the inquiry found.
NZ Productivity Commission chairman Murray Sherwin said the exact pathway for those people to gain Australian citizenship would be up to the Australian Government, but "it could be based on employment history".
A Wellington researcher who has studied the issue, Paul Hamer, said the commissions recognised it was "inherently unproductive" to create an "underclass" of Australian workers who had no social protection and whose children were effectively shut out of higher education.
"This is the most explicit recognition by any arm of the Australian state since 2001 that these things are unfair," he said. "I think it's quite a step forward."
• A pathway for NZ citizens to gain Australian permanent residence and citizenship even if they don't qualify under the normal points system.
• Let NZ citizens get Australian student loans after a waiting period, such as two years.