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KEVIN RUDD: First of all, could I welcome Murray McCully the Foreign Minister of New Zealand to Canberra for what is part of our regular six monthly dialogue at Foreign Minister-level between Australian and New Zealand. For us this is a very important relationship, the trans-Tasman relationship.

We all know its history but what we've be talking about today is not its past but its future and our engagement together bilaterally, what we do together within our region and the Southwest Pacific. And then what we do of course more broadly in the councils of the world.

A few basic economic facts are always worthwhile starting with. We've had a close economic relationship now with New Zealand for the last 27 years. And across that 27 years our two way trade has grown at an average rate of about eight per cent. This is significant. It's been good for the economies on both sides of the Tasman.

In 2009 trans-Tasman goods and services trade was valued at about $20.6 billion. Australian merchandise exports to New Zealand totalled nearly 8 billion and imports from New Zealand were valued at $6.6 billion. Two way trade-in services amounted to $6.1 billion.

Australia is also the largest source of foreign direct investment and largest destination for outbound investment. New Zealand is the third largest market for Australian investment abroad. Two way accumulated investment between Australia and New Zealand now stands at $110 billion.

The purpose of the run through of the stats is to remind everybody in this town and in Australia that this is for us. It's a very significant economic relationship. Therefore what we do together in strengthening the economic relationship between the two of us but also our cooperation at the foreign policy level within the region and more broadly within the councils of the world is really important.

Murray and I spent a lot of our time today talking about the Southwest Pacific. And it is in this area where we see so many challenges, so many development challenges and the need for us as Australia and New Zealand to work increasingly closely together. Together our aid budgets are the dominant contributors to official development assistance flows into the countries of the South Pacific.

Therefore we've resolved today to work even more closely in dealing with the specific development challenges across Micronesia, Melanesia and Polynesia. Of course we also touched on the continuing challenges in Fiji as well.

Beyond that and beyond the Southwest Pacific we also discussed at length our continued cooperation together in the field in Afghanistan. I would salute the contribution of New Zealand's soldiers in Bun Yung and the work they're doing there in provincial reconstruction work. This has been good work, strong work, solid work, over a long period of time.

New Zealand also recently lost a soldier in the field. Therefore our cooperation there is important. The Foreign Minister will be travelling to Lisbon next weekend for the NATO ISAF Summit Meeting on Afghanistan policy. As you know the Prime Minister and Defence Minister will be travelling from Australia.

So our combined position there in support of NATO ISAF strategy is important in both Canberra and Wellington. And on behalf of our combined and collective efforts in the field there. Well broadly we're active of course within the United Nations. We're working closely together on our cooperation there including in support of Australia's candidature for the United Nations Security Council.

We're working closely together in the Commonwealth where of course we'll be hosting the next Commonwealth Heads of Government meeting in Perth at the end of next year.

And New Zealand next year becomes chairperson of the Pacific Island Forum. This will be an important year in the forum's history, I think it's the 40th am I right? And therefore we look forward very closely to working with New Zealand in its leadership in the Pacific in the year ahead. Murray I might turn to you and then we'll happily take some questions.

MURRAY MCCULLY: Thank you very much. Can I start by thanking Kevin Rudd for hosting these talks today. The relationship that New Zealand has with Australia is its most important. The backbone of that relationship is the six monthly discussions that we have from which numerous work programs spin out. And today's talks have been constructive and forward looking.

We've given ourselves a fairly ambitious agenda of work for our officials to do over the coming months and look forward to picking that up early in the new year. As Kevin Rudd has indicated we spent some time looking at the bilateral relationship. And a strong flavour of those discussions was around the scale of the economic relationship and Mr Rudd has traversed some figures which I won't rehearse to demonstrate the scale of that and the significance of it for both countries.

We've still got some aspects of that to work on and we've picked those up today. We did spend a lot of time talking about our joint and shared responsibilities within this region. And again to underline our commitment to the Cairns Compact which Mr Rudd was I think the author of, which set a basis in place for increased cooperation between the key players within the region.

And because we're the dominant providers of development assistance within the region, that means we have to set the pace and set the example. We've taken the opportunity today to identify a number of areas in which we can lift our game together. We've spent some time looking at the emerging architecture of the Asia Pacific region and again both welcome the fact that the United States and Russia have joined the EAS. And that we've got US aid moving back into the Pacific to partner us in some of the important work that we do there.

We spent some time looking at Timor and Timor-Leste and the Solomons. We both have made some definite commitments in recent times, shared notes on Afghanistan and looked forward to some of the discussions that will take place over the coming weeks and months about that transition. So that's been very fruitful from our point of view.

The next six monthly talks we'll have the opportunity to host in New Zealand. It's an important year for us, we will host the Pacific Forum Leaders Meeting the 7th and 8th of September, we host the opening game of the Rugby World Cup on 9 September and we'll be having the Post Forum Dialogue on that day.

It's an opportunity for us to provide some leadership within the region and we want to work, as we do, very closely with Australia in assuming that leadership mantle within the Pacific Forum.

So I look forward to our next six monthly talks in New Zealand, which we're setting some dates for, and also look forward to the opportunity to host Prime Minister Gillard in New Zealand next year too.

KEVIN RUDD: This close and convivial relationship between the two of us will be reflected on the pitch between the Wallabies and the All Blacks as well.

QUESTION: What does New Zealand think about the regional processing centre plans for East Timor? Are you any closer to supporting that and do you think it's a good idea for the region?

MURRAY MCCULLY: Well our position is quite simple, we tipped - and this is a regional challenge - that any proposal for a regional solution is one that we should engage in discussion about. So we stand ready to have those discussions as the Australian Government is ready to talk to us.

QUESTION: Mr Rudd, in relation to the aid review [indistinct]?

KEVIN RUDD: Well the first thing is one whereby we are linked up as much as possible. As Murray has said, and I said earlier, the two of us represent the vast bulk of the inflow of ODA into the 13 island economies of the South Pacific.

So us working as much as possible in tandem, in an integrated aid strategy towards the South Pacific, is really important.

Second of course, Murray mentioned, was the Cairns Compact, this was agreed at the Pacific Forum held in Cairns a year or so ago, whereby we had all external governments to the region, who were developed economies, agreed to transparency of their aid engagement with the economies of the South Pacific as well.

This is the first time we've done that, prior to that basically everyone has been out there doing their own thing and we need to do better on that so that the aid flows from Australia, from New Zealand, from the European Union, from Japan, from the United States, from Korea and elsewhere are coordinated on the ground. There is a genuine challenge on the ground in terms of the ability to receive aid given the limits of capacity, infrastructure and governance on the ground.

Finally, within the Australian aid budget itself, what we want to make sure is that both the geographical focus of what we currently invest, our $4.3 billion each year and the program distribution between education, between health, between agricultural development, between governance and humanitarian assistance best gives effect to our commitment to reduce poverty and create the conditions for sustainable economic growth within the region consistent with the Millennium Development Goals.

No one's looked at this for about 15 years, it's time we did.

QUESTION: [Inaudible question].

KEVIN RUDD: Well as it was at the Cairns Pacific Island Forum as well, of course we discussed China's aid relationship with Pacific Island countries and as I said at the Cairns Forum, a year or so ago, we welcome the possibility and the prospect of greater transparency from our Chinese friends in their aid relationships with various Pacific Island countries. As we said back at the Cairns Compact.

QUESTION: [Indistinct] Australia would be better concentrating on [indistinct]?

KEVIN RUDD: Remember our organising principal here is reducing poverty. That is the organising principal of the Millennium Development Goals, reducing poverty by effective investment in primary healthcare, effective investment in universal primary education and effective investment in the basic levels of governance and infrastructure necessary for growth to occur.

Obviously, given that we have such a large number of countries in our immediate region, who are among the least developed countries in the world, that will remain our continued predominant focus.

About 50 per cent of our ODA now goes to the nations of South East Asia and the Southwest Pacific. Beyond that, we have something like, I think, a further five per cent heading in the direction of South Asia and about another five per cent heading in the direction of Africa and about another five per cent in the broader region the Middle East and, I think, one per cent in Central and Latin America.

Ten per cent is currently allocated to humanitarian assistance, that is wherever the need arises. We'll be looking very carefully at the recommendations from our panel of independent and external reviewers, these are people of considerable experience. But remember, the key thing is, where do we most effectively reduce poverty? Where do we most effectively create the conditions necessary for self generated economic growth in the future? That's what we're committed to doing under the Millennium Development Goals and they apply as much regionally as they do globally.

QUESTION: Are you expecting that the Lisbon conference to redefine what that July 2011 drawdown date [indistinct], will they redefine that or will they [indistinct]

KEVIN RUDD: Is that a question to me or to Murray?

QUESTION: [Inaudible question].

KEVIN RUDD: Okay, well Murray is free to chime in as he so chooses, given that he'll be there.

I think it's quite clear from our discussions with our American ally, that on the question of 2011 the critical point is: what benchmarks are established? In terms of security and stability across the country, province by province, the state of preparedness of the ANA and the ANP - they're both the army and the police - and the level of governance achieved in each of the provincial governments of Afghanistan as well. And for that to form a credible, shall I say, ISAF-wide set of benchmarks for how we consider our own future troop deployments.

Secondly, I believe that you are going to see a dominant and significant US military presence for some years yet. I think people who are out there expecting some radical drawdown to occur in the US troop presence as of the middle of 2011, I don't think that reflects the likely reality.

QUESTION: Mr Rudd, should sanctions on Burma be eased now that they've freed Aung San Suu Kyi?

KEVIN RUDD: Well the discussions I had yesterday with Aung San Suu Kyi, she emphasised her commitment to the process of reconciliation, and her commitment to the processes of engagement. I reiterated to Aung San Suu Kyi yesterday, the fact that we had significantly increased our own overseas development assistance to Burma in the last 12 months. We've effectively increased it by about 100 per cent.

She was very appreciative of that, the bulk of that's gone into maternal and child health where Burma has among the worst stats in the world. On top of that, she was very pleased about the fact that a year or so ago we introduced a Burmese language service for Radio Australia, which she was able to use for the first time yesterday to get a message out.

Now, on the future of our targeted sanctions regime against members of the regime, as I've said in recent days, we, the Australian Government, will be very attentive, very, very attentive, to the wishes and aspirations of democratic political leaders within Burma itself.

It's those people whose lives are literally on the line and we've got to be very respectful of therefore the leadership roles which they occupy, not just Aung San Suu Kyi but other democratic political leaders as well.

So we have an open mind as to how we engage in the future. We intend to maintain a very close working relationship with these leaders and we will maintain our contact with them.

The key thing is to bring about material change on the ground to what is one of the poorest countries in Asia, tens of millions of people whose livelihood prospects are very thin and where the flame of democracy burns in a very vulnerable way as of today.

QUESTION: The Nobel Peace Prize ceremony is coming up in Sweden, has there been any representations from China to either country about sending ambassadors to the ceremony? And will Australian and New Zealand diplomats be going to the Peace Prize ceremony as usual?

KEVIN RUDD: No and it's a while since I've been in Stockholm, let me think, it was my first diplomatic posting in the early '80s. I think our normal practice is that someone rocks along and I think that's always been the case.

So we would simply apply normal practice and whatever that's been in the past. Speaking with absolute confidence of the practice between 1981 and 1983 when I was there, we used to send somebody, assuming that's kept up since then, we would do exactly the same as we did last year.

MURRAY MCCULLY: We will do exactly the same as we would normally do. To the first part of your question, no we haven't received any representations from China as to how we should deal with the ceremony itself.

The Prime Minister and I both made some comments at the time that the award was made, which the Chinese Government took the opportunity to convey a message to us about, they conveyed their displeasure at the message of congratulations that we extended but there has been no communication that I'm aware of since that time.

KEVIN RUDD: Yes and folks, having said all that, I've got to zip, the reason being that Parliament is about to get going. I've got to go. See you folks.

END

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