Although the 'underarm incident' in cricket was once described as the lowest point in Trans-Tasman relations, it was actions by Australian Minister of Transport, Laurie Bremerton, in 1994, that took things close to that point.
In 1988, the Closer Economic Relations (CER) agreement between Australian and New Zealand added the Trade in Services Protocol, but Australia expressly excluded aviation. That was in part because Australia's domestic aviation market was still heavily regulated (the "Two Airline Policy"), but New Zealand had already removed capacity restrictions in 1983.
In 1992, both countries concluded a Memorandum of Understanding (MOU), which lifted capacity restrictions across the Tasman, introduced multiple designation and a double disapproval tariff regime, and set out a phased liberalisation towards full trans-Tasman market access and greater beyond rights by 1994. The MOU also contained a commitment to consult on the subsequent full exchange of beyond rights and cabotage rights. In effect it would mean Air New Zealand could fly domestically in Australia, which was reciprocity for Ansett New Zealand operating domestically in New Zealand (and of course Qantas could fly domestically in New Zealand as well, if it wished).
Australia withdrew in 1994, through a fax sent to the New Zealand Minister of Transport, Maurice Williamson. The reason was because the Australian Treasury recommended withdrawal because it would affect the price to be obtained for the pending privatisation of Qantas. Australia would sign a single aviation market agreement in 2001.
After Australia withdrew, Air New Zealand bought this full page ad to comment.
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