Thousands of Kiwis who arrived in Australia after it tightened its immigration rules in 2001 will now be given an easier path to seek Australian citizenship under certain conditions.
If they earned A$53,000 over five consecutive years ($57,000) between 2001 and today, they will eventually be able to apply for permanent residence and eventually apply for citizenship.
Mr Key estimates that up to 100,000 of the 305,000 Kiwis who arrived to live in Australia between 2001 and today could meet the criteria and get a new pathway to citizenship.
Australian Prime Minister Malcolm Turnbull made the announcement in Sydney today after talks with New Zealand Prime Minister John Key.
Treatment of Kiwis who arrived in Australia after 2001 has been a growing point of contention in an otherwise very close relationship between the two countries.
The changes in 2001 withdrew several types of benefit (unemployment, youth and sickness) for New Zealanders - who enter Australia on a Special Category Visa.
But the most significant change was to make it much harder to get citizenship.
It required Kiwis to compete with other immigrants for permanent residence - which is capped - instead of being able to skip that and apply directly for citizenship.
Some research has estimated that fewer than 10 per cent of New Zealand arrivals between 2006 and 2012 were granted permanent residency.
Advocacy groups which have lobbied for expats' rights in Australia had mixed feelings about Mr Turnbull's announcement.
Oz Kiwi chairman Timothy Gassin said he had reservations about the new policy.
While "something was better than nothing", the amnesty for expat Kiwis was more prescriptive than it first appeared, he said.
"It's not really a change to citizenship law. It is a slight loosening of permanent resident requirements. It's still very much a toothache process."
New Zealand expats who arrived after 2001 would still have to go through a costly, two-stage application to get citizenship.
The process cost around $10,000 for the average family, Mr Gassin said.
The A$53,000 threshold for applying for permanent residency excluded the people who were bearing the brunt of the 2001 rule change -- students, people with health issues or those with disabilities.
"There are plenty of people who are earning less than A$54,000 who are making good contributions to society and aren't looking for a hand-out," Mr Gassin said. "All of these people are out."
He said the conditions on permanent residency would affect Maori expats more than others, because they were more likely to be in lower-income work.
Duncan Sandilands, who runs the lobby group Fair Go 4 All, said the agreement between Mr Turnbull and Mr Key was a step in the right direction.
"Anything that gives long-term Kiwi residents a pathway to citizenship can only be good," he said.
Mr Sandilands, a retired mining engineer living in Perth, said the A$53,000 cut-off was not a particularly strict threshold, as it was below the average wage.
"If it's a gross figure, I think it's fair. I don't think it will exclude too many people."
Mr Sandilands said Mr Turnbull appeared to have made the issue more of a priority than his predecessor Tony Abbott.
The 55-year-old former territorial soldier began campaigning for expats' rights after discovering that Kiwis were being denied access to the Australian military because they were not permanent residents -- the minimum threshold for joining the forces.
He hoped that today's announcement would now remove this obstacle.
Labour Party foreign affairs spokesman David Shearer said the rule change amounted to a "small shift" which created a shorter pathway for citizenship for 30 per cent of Kiwis paying tax in Australia.
He noted the Labour Party's role in putting pressure on the Australian Government. Leader Andrew Little headed across the ditch to directly lobby Australian MPs on the issue last year.
Mr Shearer now wanted Mr Key to go further and try to restore the reciprocal rights that New Zealanders had before 2001.
He also said the Government should aim to have the amnesty extended to new arrivals, not just those already living in Australia.
"There is still a wide inequity in the way New Zealanders generally are treated across the Tasman, including the fact we have no access to social services despite paying taxes there," he said.
"This small concession should be just the start in restoring a more equal relationship with Australia."
1973 -- Transtasman travel arrangement was formalised allowing the free flow of citizens from Australia and New Zealand to travel and work without restriction and have full and immediate access to all social security payments and public health.
1986 -- Both governments require a six-month waiting time for unemployment benefits.
1994 -- Introduction by Australia of the temporary Special Category Visa (SCV), required for New Zealanders visiting, living, working or studying in Australia. Plus six-month wait extended to New Zealand solo parents living in Australia. But SCV holders can apply directly for citizenship without needing permanent residency.
2000 -- Both New Zealand and Australia introduce a two-year waiting period for any unemployment benefit. Australia extends the two-year wait to widows and partners of age and disability pensioners who do not qualify for those pensions in their own right.
2001 -- Australian government removes access to unemployment benefit, youth allowance and sickness benefit to holders of Special Category Visa (known as non-protected SCV holders). But all SCV holders, protected and non-protected, remain eligible for child-related social security and family assistance payment, concession cards and Medicare. All SCV holders must now get permanent residency before being eligible for citizenship.
2015 -- Australia says New Zealanders who arrived between February 26, 2001, and February 19, 2016, who have earned more than A$53,000 a year for five consecutive years will be able to apply for permanent residence and citizenship, from July 1, 2017. The pathway will be made available within the skilled independent category of the general skilled migration stream.
Those who arrived five years ago will be able to apply from next year. Those who arrived last week will take five years to qualify. Those who arrive tomorrow will have to use a different pathway to citizenship.
The A$53,000 threshold is equivalent to the temporary skilled migration income threshold and qualifying period for permanent residence and citizenship.
AUSSIES IN NZ -- Are entitled the main benefits: Jobseeker Support, Sole Parent support and Supported Living after a two-year waiting period; extra assistance such as accommodation supplement and disability allowance if they are resident in New Zealand, working for family tax credits, student loans after a two-year wait and are eligible to vote after 12 months of continuous residence.
Sources: Joint study by NZ and Australia Productivity Commissions; and today's announcements.
- Additional reporting by Isaac Davison