Gillard and Key agree to increase transtasman investment

Julia Gillard and John Key enter Parliament. Photo / Mark Mitchell

Prime Minister John Key and his Australian counterpart Julia Gillard have signed an agreement under the Closer Economic Relationship to increase investment between Australia and New Zealand.

The investment protocol will increase the threshold at which Australian investment in New Zealand business needs Overseas Investment Office approval from $100 million to $477 million and investment by New Zealand in Australian business from about A$230 million ($305 million) to just over A$1 billion.

The thresholds will be updated annually, based on changes in GDP.

However, there are fears Australia's greater wealth and investment capability may undermine New Zealand's control of strategic assets, and closer economic relations between the two countries will see New Zealand dominated by its much larger partner.

Ms Gillard told media after the signing that the trade relationship between New Zealand and Australia was of a "gold standard", and the changes to the threshold would mean "more prosperity and more jobs".

She said the bonds between the countries were strong and they were "like family".

In response to questions, Ms Gillard said work towards a single economic market was still ongoing, but easier rules for transtasman investment was a "significant piece of the jigsaw that has been missing".

"We both recognise we have more work to do and that is continuing," Ms Gillard said.

Earlier Julia Gillard became the first foreign leader to address the New Zealand Parliament. She used her speech to announce that Australia would obey the "global umpire" and allow New Zealand apples into Australia, in accordance with a World Trade Organisation ruling that has been long opposed by Australia.

At this morning's media conference, she again likened Australia's objections to a sporting match.

"People might give a bit of advice along to the umpire along the way, but we abide by the umpire's decision," she said.

"As a nation we would use those rules and appeal rights as they were made available. The umpire has now spoken we will abide by the decision. We believe in free trade and in its obligations."

But Ms Gillard could not provide any assurance that New Zealand apples would be freely exported to Australia next season, saying only that Australia would follow the WTO ruling.

Mr Key said the changes to investment rules were more steps towards a seamless transtasman business environment.

He rejected criticisms that the new investment rules would allow Australian investors too much freedom that could see them taking a large slice of New Zealand companies.

Australian companies have long invested in New Zealand companies and that had been beneficial, Mr Key said.

Ms Gillard also passed on her condolences to the New Zealand and to the family and friends of Private Kirifi Mila, who died in a road accident while on patrol in Afghanistan overnight.

Ms Gillard said the war was worth fighting.

"Yes, we're making progress ... but we expect there to be some hard days ahead. We need to see the mission through."

Mr Key stood by the decision to maintain a New Zealand presence in Afghanistan until the job there was done.

Staying put and continuing the work was a way of "honouring" Private Mila's death, he said.

Mr Key re-iterated the importance of Australia and its relationship with New Zealand, most importantly in its shared military history and ANZAC spirit.

Ms Gillard will later visit the National War Memorial.

She met with the Cabinet this morning to discuss, among others things, security issues and the economic conditions facing the countries.

She also briefed Mr Key this morning on Australia's plans to handle asylum seekers with a Regional Protection Framework, including a possible processing centre in East Timor.

Mr Key said he was happy to continue those discussions, but would not be drawn on whether East Timor would be an appropriate place.

"New Zealand is willing to continue to engage in that dialogue. We see this as regional issue. New Zealand is not immue from the issue of people smuggling," Mr Key said.