A cautionary tale: The Australia-India free trade agreement

Tuesday, 23 December 2025

An over-riding concern of the Indian government, headed by Prime Minister Narendra Modi, is the free movement of its professionals around the world.

ANALYSIS: Free trade talks between India and Australia started back in 2011, but stalled in 2015. The reasons: Australia wanted more access for its dairy into India and India wanted a liberalised visa regime for its professionals into Australia.

Between 2015 and the final signing of the India-Australia Economic Cooperation and Trade Agreement (ECTA) in 2022, the dial was moved towards a deal, mainly by both countries’ hardening of attitudes towards China. India-China relations soured after frictions at the two behemoths’ borders, while Australia’s then-PM Scott Morrison infuriated China by calling for an independent investigation into the origins of the Covid virus.

Meanwhile, the US was also “shirt-fronting” China by creating groupings of countries designed to work together to reduce Chinese aspirations in the Indo-Pacific. Australia and India were part of the “Quad” from 2017 (along with the US and Japan) and Aukus, from 2021, did not formally include India, but the latter was the beneficiary of some of its advanced defence technologies.

The closer political and military co-operation between India and Australia dovetailed with an appraisal by Australia (and almost every other country on the globe) that the Indian consumer market was highly alluring. A fast-expanding middle class, comprising almost a third of India’s 1.45 billion-strong population, powering the world’s fastest growing GDP, equalled catnip for exporters from all countries.

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The interim trade pact the two countries struck in 2022 was hailed as a great step forward for both countries, and promised to boost trade by A$20 billion a year (the figure has been more like A$12 billion, but has still doubled the overall quantum of trade between the two).

But there have been sticking points. Australian dairy was explicitly excluded from the initial deal, and when Australia tried to bring down the walls of India’s dairy industry this year, it was rebuffed again. Australian wine also faces extremely high tariffs with no current prospect of reduction.

And, the free movement of Indian professionals into Australia, an absolute bedrock of any free trade agreement with India including the one New Zealand has just signed, has not gone entirely smoothly.

Looking great on paper, it has proven a lot harder to implement, both logistically and politically.

The initial deal allowed more skilled Indian workers access to visas allowing them to stay in the country for up to four years and a fast track to permanent residency for skilled migrants. A year later, and leading on from the free trade agreement came the Australia-India Migration and Mobility Partnership Agreement (MMPA), which allowed Indian graduates a special track to stay and work in Australia for eight years.

Numbers were capped, but surged regardless, with the country’s export education sector going gangbusters. But authorities said they were concerned about a number of “non-genuine” student applications, and alongside that came a dangerous growth in anti-Indian and anti-immigration sentiment. SBS reported that in some cities, Indian students stayed off the streets during the rounds of protests, fearing physical attacks, while their parents back in India became anxious hearing about the threat of violence and intimidation against their children.

Whipsawing immigration settings will be familiar to a New Zealand audience. Visa approvals for Indians into Australia suddenly plummeted as the system attempted to rebalance things, causing further ructions when some Australian universities imposed unofficial, temporary bans or stricter application requirements on students from certain Indian states, including Punjab, Haryana, Uttar Pradesh and Kashmir among others, fuelling charges of discrimination.

Despite everything, almost two years later Indian enrolments in Australia remain at an all-time high, even though overall they are dropping. In the January to September period, 139,720 Indian students were enrolled in Australian institutions (across sectors) – up +4% over 2024. Ironically, New Zealand is one of the countries that is benefiting from a high rate of visa refusals in Australia, particularly within its vocational education sector.

New Zealand would be wise to take the lesson of Australia’s FTA (and, to be honest, New Zealand’s first chaotic introduction of large-scale migration in 2013) on board. Our FTA creates a new employment visa specifically for Indian citizens, like the Australian FTA did. That is certainly beneficial overall to this country if well managed, but potentially not so much, if not.

Our government needs to try to come to a firm landing on its immigration quandry. It wants a cheaper and more flexible workforce for business, more business for the export education sector, and the ability to use residency as a lure for the world’s best and brightest, including aspiring middle class families from China and India among others. But it finds it politically dicey to say so - a reluctance Winston Peters is currently exploiting.

On the flipside, the reality is that New Zealand is not able to offer the work or, frankly, lifestyle and enrichment opportunities that other countries can. While the Australian post-Covid jobs boom is over, and like everywhere, things are tightening, the country’s 4.4% unemployment is still historically low whereas New Zealand’s 5.3% unemployment rate sits at a nine-year high. As Peters points out, this could be problematic.

Immigration can not be an after-thought to logs, niche dairy products or honey in an FTA with India. If the Australian example is anything to go by, it should pretty much be the main consideration.