Asylum seekers in Australian detention centres could be shipped to New Zealand under a new deal expected on Saturday.
Prime Minister Julia Gillard is taking part in bilateral talks with her New Zealand counterpart John Key in the picturesque resort town of Queenstown, in New Zealand South Island, with new arrangements to combat people smuggling set to top their agenda.
The two countries are marking 30 years of close economic ties, with a number of topics up for discussion, including security and defence, the status of New Zealanders living in Australia and the asylum seeker issue.
New Zealand is expected to announce it will allocate some of its annual 750 refugee quota to take asylum seekers from recently reopened Australian detention centres on Manus Island and Nauru.
Mr Key says it's important New Zealand helps with "regional solutions" to what he calls an "Australasian issue".
He reiterated his past comments that it's only "a matter of time" before asylum-seeker boats started arriving in New Zealand waters.
In 2001, New Zealand accepted 150 refugees from the boat Tampa, which sparked the original opening of the Nauru detention centre.
Its reopening has not been without controversy. Earlier this week, veteran Dutch-born Australian nurse Marianne Evers likened the Nauru centre to a concentration camp, while both the United Nations High Commissioner for Refugees and Amnesty International have criticised its conditions.
Another contentious issue on the leaders' agenda for Saturday is the entitlements of an estimated 280,000 New Zealand residents on temporary or special category visas in Australia who, despite paying taxes for years, are denied voting rights, access to welfare benefits and student loans.
A joint productivity commission report last year recommended the Australian government make changes.
Mr Key said he will raise the topic, but does not expect any changes to Australia's policy "in the very short term".
That was echoed by Ms Gillard, who talked up Australia's "generosity", which includes unrestricted access to the labour market, Medicare, a family tax benefit and baby bonus.
"It is a relationship we don't accord to any other nationals, to any other part of the world," she said.
The leaders are expected to make announcements regarding cutting mobile roaming rates and cyber-security co-operation following the talks.