KEY POINTS:
Australian treasurer Peter Costello will no doubt sample some of our finest wines during his personal tour of Wairarapa this weekend.
His tour will be hassle-free. There will certainly be no heckling at any of the Martinborough vineyards or restaurants he chooses to visit.
He might even get in the odd toast or two himself if he decides to celebrate John Howard effusively naming him this week as the "only serious contender" for leadership of the Liberal Party, "if I (Howard) were to be suddenly removed" or "departed this world or this scene".
Vineyard owners will be toasting Costello after his decision to legislate and extend a special rebate to the Kiwi wine-exporters which enables them to compete on equal terms with smaller Australian vineyards. The deal was small change - worth about $10 million annually to the Kiwis - but millions more in goodwill.
It's not even likely to get a mention when Costello and Finance Minister Michael Cullen have a private one-on-one meeting today in preparation for their annual bilateral in Wellington tomorrow.
But, like the legislation which both countries passed late last year to facilitate trans-Tasman cooperation in the regulation of banks and other financial institutions, it was in fact yet another path-breaking step along the road towards their ambition to create a single Australasian economic market (SEM).
Their private tete-a-tete will be reasonably relaxed. They have already managed-down expectations by business leaders who wanted a more radical SEM agenda. It even seems likely both will attend this year's meeting of the Australia New Zealand Leadership Forum in Sydney - which they snubbed last year due to the pressures of their upcoming budgets and a reaction against the private commercial agendas waged by some firms at a previous meeting.
Officials are billing this year's formal meeting as a stock-take, a bit of a pause to check what's working and what's not among measures already on the SEM agenda. Everything from cross-border insolvencies, bans on business delinquents, harmonisation of business laws and regulations.
Some of it seems mind-numbingly dull but the behind-the border work, also below the public radar, is making trans-Tasman business simpler.
There won't be any focus on thorny issues such as mutual recognition of franking of dividend imputation schemes.
The agenda for the formal bilateral does, however, foreshadow another step-change in the relationship. Climate change is now up for discussion.
With Australia facing a one-in-a thousand-year drought, the implications of climate change on its economy are profound.
Costello is a proponent of market measures to reduce the speed of climate change, such as international carbon trading.
But even before he touched down in Wellington, the Greens were urging Cullen to kick Australia's butt over its refusal to sign the Kyoto Protocol.
Cullen - who says he prefers a "consensual approach" - will not be buying into the Greens' agenda. But it is quite possible that their tete-a-tete may range over issues such as whether to ultimately set-up an Australasian carbon trading system.
Cullen could also ask Costello to ensure New Zealand gets an invitation to join the Climate Change Partnership set up by Australia and the United States that endeavours to use new technology to cut down harmful emissions.
That offer, according to Australia's Foreign Minister Alexander Downer, would have been extended New Zealand's way if National had won the 2005 election. It has yet to emerge.
With climate change, along with other contentious issues such as a proposal to form a Free Trade Area of the Asia-Pacific likely to be on the agenda during Australia's 2007 year as APEC host, there is room to form some useful joint positions that will have implications far beyond our own borders.
Right now New Zealand is assessing Australia's formal offer to free up its foreign investment regime to make it easier for NZ companies to buy Australian assets. In Melbourne last year, Costello said Australia would like to offer New Zealand treatment "as favourable as it does to the US" with which it also has a free trade deal. US companies get enormous advantages when they go shopping across the ditch. NZ companies have to get approval from Australia's Foreign Investment Review Board to buy shares or assets in businesses valued at A$50 million or more.
US investors don't need FIRB approval unless they plan to spend more thanA$800 million or buy a sensitive asset.
Costello did say that Australia would want a "quid pro quo" if it extended the more favourable investment regime to New Zealand. What's not clear yet is whether Australia has already booked that concession through the changes Cullen made to corral Australian investments from last year's move to impose quasi-capital gains taxes on offshore investments, or whether Costello thinks there should be more to come.
The issue is increasingly urgent from New Zealand's perspective. Australia is "buying up the farm" at a furious clip. Australian investments in New Zealand increased from $32.4 billion to $68.7 billion in the five years to March 2006 - a virtual doubling.
But New Zealand investments in the other direction expanded by a mere 25 per cent from $20.5b to $25b.
What will also be on their minds is the buying spree by international private equity funds, which are fast gobbling up Australasian icon companies.
Australian diplomats have been concerned at a growing anti-reaction here to the extent of the Aussie buy-up. A similar sentiment has emerged in Australia as the private equity funds target icons such as Coles Myer and Qantas.
The politics are manageable.
But what may not be is the implications for either economy if the funds simply load up the target companies with too much debt, leadingly to increasingly leveraged Australasia.
With Australia's big four banks controlling 89 per cent of the New Zealand banking system, there is the potential for "spillover" if things get out of hand before a self-correction process kicks in.
Another issue that will be touched on is non-resident withholding tax, a particular bugbear for Australia, which wants it sorted out as part of the double taxation review.
