Folks,
Firstly, this is nothing to do with a CASR Part 129 Foreign Airline AOC, FAAOC. Part 129 is about operating into and out of Australia, not within Australia.
It is all about using the Trans Tasman Mutual Recognition Treaty and Agreement between Australia and NZ, the TTMRA has existed for many years, from late 1980s??
In general, CASA and Australian unions hate it, and exploiting "air safety", back in the day Keating was persuaded to suspend the operation of the TTMRA in the aviation industry for many years.
Frankly, given the Vincent example many years ago, I am surprised this has not happened before, anybody who voluntarily operates on an Australian AOC, when the NZ AOC and the TTMRA is a commercial option, want their heads read. In the days of their Beech 1900, Vincents were forced to get an Australia AOC by dint of union pressure on various Commonwealth politicians/bodies to require an Australian AOC to tender for Commonwealth funded contracts.
The NZ CAA policy on the matter is more or less covered by the popular T-Shirt, that says "I support the All Blacks and anybody else playing Australia", in this case for "Australia", read CASA.
If you look at the Australian CAAct 1988, you will see how CASA has tried to legislate away the intent of the TTMRA ( surprise, surprise) but there is a limit, and what is there that is contrary to the TTMRA Treaty is probably unconstitutional, ie: beyond Commonwealth power.
Tootle pip!!