Prime Minister John Key yesterday committed the nation to an ambitious transtasman and international agenda during the first speech to the Australian Parliament by a New Zealand leader.

Riding on the wave of mutual goodwill that has followed each leader's response to the summer of natural disasters, Mr Key and Australian counterpart Julia Gillard exchanged not only emotive affirmations of the Anzac "family" but also announced new measures and hopes for closer co-operation.

The leaders agreed to start a transtasman therapeutic products agency within five years to regulate medicines, medical devices and cutting-edge technologies such as cellular therapy.

The agreement excludes natural health products, which are subject to a separate New Zealand review on whether to maintain a separate regulatory scheme.

The leaders also exchanged commitments on the war in Afghanistan and policies to drive a return to democracy in Fiji and agreed to establish a senior officials group to work out how a transtasman carbon emissions trading scheme could work.

With Ms Gillard still struggling to introduce a carbon tax, Mr Key sidestepped questions on Australia's row, but said it made sense for the two economies to work together.

Ms Gillard said Australia had to accept New Zealand had taken the lead.

"But I think Australians will ask themselves, 'If the Kiwis have the guts to price carbon, why can't we?"' she said.

Mr Key's parliamentary speech, which forced a truce in the increasingly bitter battle between Government and Opposition by replacing question time, followed a 19-gun salute state welcome, a ceremony that has become increasingly rare as the working relationship across the Tasman has tightened.

Mr Key held talks with Ms Gillard and senior ministers as well as Opposition Leader Tony Abbott.

Ms Gillard said that when she became Prime Minister she was determined to strengthen relations with New Zealand, which she felt had not been given the attention they deserved.

"Like family, the temptation is to take the bond for granted instead of nurturing it," she said.

In a speech that received a standing ovation, Mr Key echoed Ms Gillard's sentiments: "New Zealand is committed to your country above all others and for all time".

He said that while New Zealand's military was smaller than Australia's, its commitment to the defence and security relationship with Australia was "absolute".

Mr Key said both countries remained committed in Afghanistan and had a responsibility to work together to ensure the stability of the immediate region.

He said the new Anzac ready response force would boost co-operation and the two countries were harmonising aid and development in the Pacific.

Mr Key said he and Ms Gillard were determined to push for progress on a single transtasman economic market and to drive work on the proposed Trans-Pacific Partnership.

"Together we can ensure that the [partnership] is the basis of a powerful integrated regional trade bloc linking Asia, Australasia and the Americas," he said.

Other key areas, also identified by Ms Gillard, included the Smartgate passenger processing system to speed up transtasman flights and an investigation into the competitiveness of mobile roaming rates.

Mr Key also pointed to more co-operation in science and innovation and the international aspects of climate change.

* The leaders agreed to start a transtasman therapeutic products agency.

* They exchanged commitments on the war in Afghanistan and policies to drive a return to democracy in Fiji.

* Agreed to establish a group to work out how transtasman carbon emissions trading schemes could work.