Finance Minister Nicola Willis says the government needs to criticise China's missile test in the South Pacific, but also keep trading with China because it's New Zealand's biggest trading partner.

On RNZ's Morning Report, Willis said Pacific countries should stand together against the test. "We as Pacific countries need to stand together and say uh-uh, not in our backyard, not okay," she said. But she also made clear the government can't just focus on security. "We have to walk a careful path of our own, where we do speak up for our values, speak up for our interests, but also recognise that those interests are multiple. We do have economic interests, we do have trade interests, we do have interests in a nuclear-free Pacific," Willis said.

China tested a long-range missile carrying a practice warhead in the South Pacific on Monday. China said this was normal and allowed under international law. New Zealand's leaders disagreed. Prime Minister Christopher Luxon called it unacceptable, unwelcome and concerning. He said the government had told China directly what it thought. Deputy Prime Minister David Seymour said the test was "extremely unwelcome behaviour".

Willis said the test showed why New Zealand needs to work more closely with Australia on military matters. Luxon agreed, saying the two countries' armed forces would work together more over time, and that this was already happening. Neither leader said when this would happen or what exactly it would involve.

Something unusual happened: Labour and the government agreed on this. Labour's deputy leader Carmel Sepuloni said both sides were handling the test the same way. "Our priority is the protection of our Pacific region, and I think that we're on the same page," Sepuloni said. On most issues, Labour and this government argue sharply with each other. But not on this.

The problem Willis described is not new, but it is more visible now. China is New Zealand's single largest trading partner. This matters for dairy, forestry and fruit exports — things New Zealand depends on. Governments have not wanted to risk this. At the same time, New Zealand has said since the 1980s it wants a nuclear-free Pacific, and now sees China's military activity in the region as a concern it shares with Australia and other Pacific countries. Willis said out loud what officials usually leave unsaid: the trade relationship and the security relationship pull in different directions.

What is not yet clear is whether the government will do anything concrete about the test. Luxon used strong words — unacceptable, unwelcome, concerning — but did not say what New Zealand might do in response, such as trade penalties or working through the Pacific Islands Forum. Willis kept her remarks general rather than specific.

The next few weeks will matter. Whether Pacific countries will make a joint statement, act together through the Pacific Islands Forum, or just say similar things separately will likely be sorted out soon in talks with Australia and Pacific Island governments. Luxon's comment about militaries working together builds on an older idea about closer defence cooperation with Australia. There has been past talk of New Zealand joining part of an agreement called AUKUS, though neither leader mentioned it in these comments. The timing — a few days after the test — suggests the government sees the incident as backing up an argument it already wanted to make about working more closely with Australia.