Australian Treasurer Joe Hockey has taken a tentative step towards removing one of the thorns in the paw of transtasman businesses by pledging to make the vexed issue of mutual recognition of dividend imputation credits a part of next year's White Paper on Taxation.

It is unclear whether transtasman investors will be any better off as a result of the Treasurer's intention.

Hockey - like his predecessors Peter Costello (Liberals) and Wayne Swan (Labor) - concedes mutual recognition of dividend imputation credits (or franking credits as they are called in Australia) is a big-ticket item from a Federal Government perspective.

In the day when Costello ruled the fiscal roost in Canberra, his Treasury officials would often respond to Australasian businesses' requests for mutual recognition to be part of the transtasman single economic market agenda, and just as frequently find a fistful of reasons why the federal exchequer shouldn't forgo about A$1 billion of tax revenue simply to keep New Zealand sweet.

This week Hockey made good on his pledge to visit New Zealand within 12 months of becoming Treasurer.

That was the "true purpose" of his visit, he told me yesterday.

"It's too often the case that we look north rather than look to our mates," he said.

"Because John Key and Bill English agreed to see me when we were in opposition in some of our darkest days, I thought I should thank them personally and do what I could as Treasurer of Australia."

At their informal meeting, Key twigged Hockey, saying he thought the Australian Treasury had overstated the fiscal impact. There were other issues at play - including bond markets effects - and it was important from a closer economic relations perspective that the politicians did not lag too far behind businesses' ambitions.

Hockey believes the transtasman relationship is deep enough to easily withstand political divisions. But what gives the relationship a stronger cachet now is the "genuine closeness" between members of the Liberal- and National-led Governments.

"It's been forged out of years of relationships and having the same political party basically in operation".

That's his rationale for being prepared to go the extra yards and have a look at whether New Zealanders should get dividend imputation credits for investments in Australian shares.

"The relationship is deep and sophisticated, and that allows us to think about how we can challenge our own public servants on making things happen rather than just simply accepting their advice that some things can't change.

"I'm prepared to look at it in a whole new way as part of our tax white paper."

The Treasurer concedes that the issue is complicated by the financial system inquiry, at which chairman David Murray has raised the prospect of changes to dividend imputation in his interim report.

In essence Murray believes the mere existence of dividend imputation creates a bias in the system against alternative investments such as bank deposits and fixed-interest income investments which do not offer the same tax concession.

It's a big issue made complex because Hockey is concentrating on closing the deficit.

For him, it is a balancing act.

"Sometimes you've got to challenge the assumptions behind the numbers to see how robust they are, and that's what I'm prepared to do."

Hockey is clear the visit is "not a jolly". He's holding a roundtable meeting with business leaders in Wellington this morning and will later address a business lunch with Finance Minister Bill English.

He's keen to hear directly from New Zealand businesses about the barriers to two-way trade.

Working groups from the Australia New Zealand Leadership Forum have come up with priorities - implementing the Joint Productivity Commissions' recommendations on transtasman business, exploring the Asia opportunity in tourism, trade and investment, and driving up foreign investment in both countries.

At the B20 meeting in Sydney last week, a New Zealand team led by Fletcher Building chief executive Mark Adamson supported Australia's G20 leadership.

Hockey said the B20 was incredibly successful and despite the "tragedy and heinous crime" of the Malaysian aircraft disaster, Australia still had an "obligation to keep the wheels of the world turning and bring the people responsible for it to justice".

The G20 is focused on a target of an additional 2 per cent of GDP growth for each country over the next five years.

Unlike other commentators he is not bearish on China, citing the insights he has gained into that nation's reform agenda through its G20 growth plan.

"China is right out there aggressively ... sending the message they will do whatever they have to to get to 7.5 [per cent growth]."

Australia is making free trade agreements. South Korea and Japan are in place. He hopes to do a better deal with China than New Zealand secured in 2008.

"We also want to create a new benchmark - we're catching up to you guys, right. That's what we're trying to do [draw ahead]."

The elements of Hockey's agenda are four fold - fix the Budget, reduce the deficit and debt, set up an asset recycling programme by using $5 billion to encourage assets sales and reinvestment in new infrastructures, and get rid of taxes such as the carbon tax.

Hockey is keeping a close eye on the competition. With the US going to 21 per cent for company tax and Hong Kong and Singapore on 16 per cent, Australia's 30 per cent (reducing to 28.5 per cent) is an issue.

"We are an open economy and very exposed to global volatility. We have to be competitive - there's no choice."

The one area he isn't tackling this term is the employment regulatory setting.

"We're very mindful we do not have a mandate for widespread reform - and if we are going to undertake that reform, given our past experience, we're going to have to take that to the election."

It's an approach that could have been taken straight from John Key's playbook.

- NZ Herald