Prime Minister John Key does not expect much progress in his talks with Australian counterpart Tony Abbott today in the key issues of discrimination against expatriate Kiwis and the major supermarkets' move to shed New Zealand products.

Mr Key, a group of his ministers and business leaders are in Sydney to meet the country's political and corporate elite as Mr Abbott buckles down to rework his economy.

The discussions, including one-on-one talks between the two leaders, a joint cabinet meeting and business talks, will cover a range of topics.

Mr Key and Mr Abbott will both address a Transtasman Business Circle lunch.


Mr Key said that he would discuss the issue of New Zealanders in Australia with Mr Abbott, with some hope of making progress in the provision of student loans available to young Kiwis.

The previous Labor Government had agreed to make the loans available, but the legislation did not reach parliament before last year's election that swept the Coalition to power.

Before the meetings this morning Mr Key said that the provision of student loans would be one of the logical steps Australia could take because they would provide what were essentially young Australians with access to higher learning.

But Mr Key said was "not overly hopeful" of any change of heart by Australia towards the rules introduced in 2001 that cut New Zealanders off from most Government services, programmes and welfare and effectively denied expatriates the means to gain permanent residency or citizenship.

He said that there may be some room for improvement in areas of legitimate concern and meetings such as today's offered the chance to seed ideas about changes the Australians could consider in the future.

Mr Key confirmed that the possibility of ending the transtasman travel arrangements that allowed free movement and residency in both countries had been raised by the Australians during negotiations for a new social security agreement ahead of the 2001 changes.

"The advice I was given (by officials who had been involved) was that that was one of the options on the table," Mr Key said.

He said he had asked officials who had taken part in the negotiations what had actually taken place and had been told that two aspects had been raised by the Australians.

One was possible restrictions on free access for New Zealanders. The other was a significantly bigger cost burden for New Zealand taxpayers.

Mr Key said that Helen Clark, who was Labour Prime Minister at the time, was no fool and she would not have signed up for the new agreement unless there was nowhere else to go.

He said the possible ending of free travel "is not being thrown at us today", but that apart from the policy implications Australia was heavily focussed on its own domestic agenda and the question was where New Zealand's concerns ranked in their order of priorities.

"Ultimately if (new arrangements for expatriate Kiwis) came at the cost of closing access to New Zealanders on an unfettered basis we wouldn't like that," Mr Key said.

"We're trying to do a balancing act."

Mr Key said he would be raising the issue of the big Coles and Woolworths supermarkets chains dropping New Zealand products in favour of Australian goods.

Asked how the closer economics agreement could be invoked to goods that were allowed open access but not chosen on commercial grounds, he said there were a range of views on the issue.

Hs said the "top line message" was that both governments saw Australia and New Zealand as one economy and that while a buy Australian campaign at the cost of New Zealand products could be legally correct, it did not fit the spirit of CER.

"In the end it is a commercial decision, but that doesn't stop us raising it," Mr Key said.