Don't fear Australia's strength - Gillard

John Key and Julia Gillard. Photo / Greg Bowker

Australian Prime Minister Julia Gillard says New Zealanders should not "fear Australia's strength" ahead of the signing of an investment protocol between the two countries.

Ms Gillard is on the second and final day of her first trip to New Zealand as Prime Minister. Later today she will sign the agreement with Prime Minister John Key under the Closer Economic Relationship, which seeks 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.

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

Speaking to Radio New Zealand this morning, Ms Gillard sought to allay those fears.

"I think a strong economic relationship between our two countries benefits both of us. We both get stronger together. And that's why over 30 years New Zealand and Australia have pursued greater economic integration and partnership," she said.

Ms Gillard said the signing of the investment protocol today was the next step in a "vision that has been 30 years in the making" since the two countries first sought closer economic ties.

Australia has a strong economy and had not suffered the affects other countries had during the global financial crisis, Ms Gillard said.

"A strong Australia is good for New Zealand. We are so closely tied that the stronger each of us is, the better it is for the other," she said.

"So I don't think it is about fearing Australia's strength, it is about a genuine partnership where Australia and New Zealand work together to give each other economic opportunities - including job opportunities. And there will always be a big two-way exchange of people between our two countries.

"I think New Zealand has a strong sense of itself, a really strong sense of its future and how it wants to grow its economy. There have been some tough times in New Zealand in economic terms and I know everyone is looking forward to turning the corner.

"So I don't think it is a question of big dominating small, I think it is a question of partnership and a sense of family and working together - which our two countries have."

Ms Gillard said it also made sense for the countries to bring their trade regulations closer in line.

In the future, Ms Gillard hoped to continue to make transtasman travel easier.

"We've got this aim of travel between the two countries feeling like travel between two Australian states - that is essentially borderless."

Ms Gillard said she had no current proposals to bring about in a common currency.

"I don't think that is on the agenda because there is so many things we would need to do to bring our economies closer together."

Julia Gillard will today deliver a speech in Parliament outside sitting hours at 11am - the first by a foreign leader on the floor of Parliament.

She indicated yesterday that New Zealand's emissions trading scheme would feature in her talks with the New Zealand Government.

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She is at a critical stage in negotiations with other parties at home to put a price on carbon, with announcements possible on Friday.

"We seek to follow New Zealand in putting a price on carbon," she said.

"[It is] an outcome that will not only allow us to meet our environmental obligations but also drive decades of innovation and investment that will fundamentally redraw the shape of the Australian economy."

But the major aim of her visit is to extend the economic partnership begun 28 years ago under the Closer Economic Relations agreement.

She and Prime Minister John Key will today put their seal on changes to the investment protocol which will lift the thresholds at which business investments require official permission - from A$231 million ($306 million) to just over A$1 billion in Australia and, in New Zealand, from $100 million to $477 million.

That gives New Zealand the same preferential treatment that United States investments are given.

The changes don't affect New Zealand rules on sensitive farmland or strategic assets.