A six-month trial will begin in July to allow Australian and New Zealand employers to check criminal records from each other's countries before taking on an applicant.
New Zealand employers' access to background checks will be limited to Queensland for the trial, but it could be extended to all Australian states after the measure is reviewed.
Justice Minister Judith Collins signed a memorandum of understanding with her Australian counterpart, Jason Clare, on Wednesday as part of a wider programme on border control and law enforcement between the countries.
The issue was prioritised by Prime Ministers John Key and Julia Gillard in January, as law enforcement officials sought to keep pace with the growing transtasman labour market.
New Zealand showed a net loss of 3500 migrants to Australia in April, a record for the month, and nearly 40,000 migrants in the past year.
At present, New Zealanders and Australians can enter each other's countries as long as they have not spent more than a year in prison.
But serious criminals can slip through immigration controls by lying on entry documents.
Privacy and legal obstacles allow people with criminal records to avoid background checks when applying for jobs.
Ms Collins said the new measure would improve disclosure of crim-inal records. Employers would have to get the written consent of a job-seeker for a background check.
"This is a significant step in implementing the agreement to enhance criminal history information sharing between New Zealand and Australia," she said.
"The scope of the trial strikes the right balance between in-cluding agencies that can benefit most [because they already operate in potential high-risk sectors, and with vulnerable individuals], and the need to ensure robust operating procedures are in place before consideration is given to extending the arrangement."
The information-sharing in-itiative was sparked by the case of expatriate New Zealander Joel Hohepa Morehu-Barlow, who was charged with stealing more than $A16 million ($NZ20.5 million) from Queensland Health.
Morehu-Barlow gained a job in Australia in 2005 despite a criminal record in New Zealand which included the theft of $55,000 from the tax office.
A subsequent investigation found New Zealanders had entered Australia despite convictions for manslaughter, rape, burglary, and kidnapping.
Ms Collins said New Zealand agencies that carried out high-risk employee checks through the police - Ministry of Social Development, Child, Youth and Family, the Teachers' Council and IHC New Zealand - would extend their checks to Australia.
She said the trial similarly enabled Queensland state government employers to extend their checks to New Zealand.
