Key Points:

New Zealand and Australian political and business leaders should continue exploring the idea of a common currency, National Party leader John Key says.

Australasian political, business and academic heavyweights gather in Sydney on Sunday for the Australian-New Zealand Leadership Forum.

The annual two-day closed forum, attended by 80 leaders in their field, attempts to develop economic and other links between the two countries.

Mr Key is one of several speakers at the event and today said he intended to highlight the importance of Australia to New Zealand's economy.

He was also likely to mention the long-floated idea of a shared currency, which he believed warranted further exploration despite strong popular opposition in New Zealand.

New Zealanders paid a risk premium of around 1 per cent on money borrowed as a result of having their own currency and the resulting drop in interest rates that would flow from a currency union would benefit homeowners and businesses.

However, those gains had to be weighed up against a loss of sovereignty, as the only realistic shared currency scenario was New Zealand taking on the Australian dollar, he said.

"It's one of those things where I would have thought some solid work on it makes sense," he said.

"But the political difficulties of it are not to be underestimated and I'm not suggesting its on the short-term agenda of either country."

Mr Key said the trans-Tasman relationship spanned trade, investment, defence and regional security and he would be raising defence inter-operability as one possible area where greater co-operation was possible.

"We can maybe share or at least buy similar equipment so when we are acting together essentially in the Pacific, but also when we find ourselves in places like Afghanistan that we can leverage off each other's strengths."

He said there was still a lot of work to be done on enhancing trade and moving towards a single economic market, but most of the easy gains had been made and what remained was either technically tricky or politically difficult.

In the former category were things like the streaming of imputation credits and greater alignment of companies law and tax law, while in the latter were "big issues" like a shared currency.

Mr Key said he believed in greater regulatory harmonisation between the two countries, but not necessarily right across the board.

" Australia's rules and regulations are sometimes more draconian than ours and we do always have to make sure what we are doing is in the best interest of New Zealand."

Others who will attend the forum include New Zealanders who head major companies in Australia, like Commonwealth Bank head Ralph Norris and Fairfax chief David Kirk.

Foreign Minister Winston Peters will make the opening address on Sunday.

Other New Zealand politicians attending include Finance Minister Michael Cullen and Commerce Minister Lianne Dalziel.

Australian Prime Minister John Howard will participate as a guest speaker at the forum dinner on Sunday night.

- NZPA