The Smartraveller.gov.au web site advice for New Zealand gives some more details of why you'd want travel insurance, such as medical expenses outside New Zealand, or medical evacuation following an accident:
Australians seriously injured in accidents in New Zealand may suffer
significant financial losses from loss of income or medical expenses
on return to Australia. New Zealand’s Accident Compensation Act 2001
generally removes the right to sue for losses arising from personal
injury sustained in accidents in New Zealand (e.g. motor vehicle or
adventure sports accidents). The Act also excludes Australians from
obtaining the ongoing income support provided to New Zealanders and
from coverage of any medical expenses outside New Zealand. Also not
covered is illness, medical evacuation following an accident,
disrupted travel plans, lost deposits, assisted emergency travel home
or travel for a relative to visit you. For more information visit the
Accident Compensation Corporation (ACC) website.
We strongly recommend that you take out comprehensive travel insurance
when travelling to New Zealand. We also strongly recommend you obtain
separate personal accident or income protection insurance policies
that will cover lost income or medical expenses in Australia arising
from accidents in New Zealand. You should understand what activities
and circumstances are covered by your insurance policy.
Ensure the travel insurance covers any overseas medical costs,
including medical evacuation, before you depart. Confirm that your
insurance covers you for the whole time you'll be away and check what
circumstances and activities (including adventure sports / activities)
are not included in your policy. Remember, regardless of how healthy
and fit you are, if you can't afford travel insurance, you can't
afford to travel. The Australian Government will not pay for a
traveller's medical expenses overseas or medical evacuation costs.
New Zealand and Australia are signatories to a reciprocal health care
agreement. The agreement provides Australians with access to
government medical facilities and care but does not provide for
ongoing treatment of existing health conditions. In addition, the
agreement does not cover additional accommodation costs, flights for
family members or medical repatriation to Australia. The Reciprocal
Health Care Agreement does not replace the need for travel insurance.
See Medicare Australia's website for more information.