NZ, Queensland trade dispute ramps up

Treasurer Curtis Pitt has denied the state government's "Buy Queensland" procurement policy breaches its free trade commitments, as New Zealand vows to continue fighting the controversial plan

The policy, which officially starts on Friday, gives preference to local suppliers for state government contracts.

Announcing the policy in July, Premier Annastacia Palaszczuk said her government wouldn't be "bound" to free trade agreements, and promised to "ignore restrictions that go against our interests".

The move angered the federal government and New Zealand, which say it breaches Australia's free trade obligations.

But Queensland Treasurer and Trade Minister Curtis Pitt gave a more moderate appraisal of the policy as it came into effect.

"The Buy Queensland policy isn't about tearing up free trade agreements, nor is about not meeting our trade obligations," Mr Pitt told ABC radio.

"We are able to meet our obligations under FTA, but also use exemptions available under those agreements to put Queenslanders first."

New Zealand Trade Minister Todd McClay has hinted at possible retaliation, saying the country "would not stand by" as the policy began to affect NZ companies.

"Initiating consultations sends a strong message that the Bill English-led government will not stand by whilst an Australian state government undermines our mutually beneficial relationship," he said on Thursday night.

"Queensland companies continue to provide millions of dollars worth of goods and services to our government. New Zealand businesses must be shown the same courtesy in Australia."

Mr McClay said New Zealand has begun formal consultations with the Australian government over the policy.

His Australian counterpart, Steve Ciobo, accused the premier of putting Queensland jobs at risk.

"Queensland exports are worth $70 billion a year. The Queensland Government procurement market is worth $14 billion. Did Premier Palaszczuk fail maths?" he said on Friday.

The policy has won the support of the Queensland Chamber of Commerce and Industry, but the head of the Export Council of Australia, Lisa Mcauley, said a policy of "protectionism" could wind up hurting businesses in the long run.

"Whilst it might help some in the short term, how is it going to help Queensland companies in the future? Ms Mcauley told ABC Radio.

"Surely we should be looking at long term policy settings that support trade and investment for businesses but also help them grow overseas."