Fran O'Sullivan: Australia, NZ need to find more ways to work together

Brad Haddin of Australia celebrates the wicket of Black Cap Grant Elliott. Photo / Getty Images

When the Black Caps played Australia at the Melbourne Cricket Ground last night it was a perfect example of the aggressive transtasman competitiveness which can spur on extraordinary sporting triumphs for either New Zealand or Australia.

But the successful hosting of the ICC Cricket World Cup is also a triumph of the collaborative spirit which (at times) persuades the two countries to pursue their joint interests - although obviously not in the final - and symbolises the value that can be created when the two countries choose to work together in their engagement with the rest of the world.

It's the kind of approach that some business leaders at the recent 10th annual Australia New Zealand Leadership Forum (timed to coincide with the joint hosting of the world's third largest sporting event) reckon should be taken further than sporting.

Sir Graeme Harrison - who chairs the NZ International Business Forum - says the mentality remains that Australia and New Zealand are competitors in Asia.

Harrison supports Prime Minister John Key's call for a bolder approach with both parties being prepared to take risks and have trust in each other.

"There is more to the relationship than Closer Economic Relations," Harrison says.

"The real competition in the agribusiness sector for both Australia and New Zealand comes from protectionist internal market arrangements, North and South American suppliers and the lack of a large domestic market in either country to provide a strong commercial springboard," he says.

"The best way of overcoming market access barriers in Asia is to operate through public-private partnerships. Business and government need to work closer together here in New Zealand and then or at the same time collectively with Australia."

Air New Zealand chief executive Chris Luxon suggests mutual benefits could be realised if "we present ourselves as one to the world".

Luxon cautions there is a need to be honest and pragmatic about where New Zealand and Australia would co-operate, such as with tourism, and where they would likely compete, such as with dairy.

The Air NZ chief points out that already there is joint promotion of the two countries as a dual destination citing the way Tourism Australia and Tourism NZ work together in foreign markets. Using the Cricket World Cup as an example he suggests more use of a single visa for visitor markets.

The New Zealand-Australian relationship is said to be worth A$24 billion ($24.5 billion) based on its economic value and significant political, economic, cultural, and people-to-people exchanges. Australia is NZ's largest economic partner; some 17,000 Australian businesses export to New Zealand.

But a McKinsey Global Institute report shows that while few countries were as deeply tied as New Zealand and Australia, neither country was participating fully in the fastest growing global flows - those connecting global value chains, emerging markets and knowledge-intensive flows.

The report, "Companions Abroad - Australia and New Zealand's participation in global flows", measures the two countries' participation compared with other countries on metrics ranging from goods, services, finance, people or data.

Australia ranks 17th on an index on global connectedness in global flows and New Zealand ranks 43rd.

The McKinsey report says geography puts Australia and New Zealand at a disadvantage to participate in global value chains which now constitute more than half of the value of world exports.

It's an area of focus for Australian Trade Minister Andrew Robb.

Robb, who led an Australian trade mission to NZ coinciding with the forum, told the Herald there was no superior free trade agreement in the world than CER which was signed 32 years ago.

"No matter what's going on, in good times and bad - we've had this average 8 per cent increase in two-way trade between our two countries. It is spectacular."

But while there had been enormous progress, the overall global trading environment had changed with the exponential growth in value chains and supply chains.

"Before we used to be almost totally focused on tariff levels and restraints on exports," Robb says. "Now because so many of us are dealing with intermediate goods coming in as imports there is now a really critical need for each country to look at how their barriers to imports are affecting their own producers of exports and services."

This is an area which both countries can pursue through the Trans Pacific Partnership and other trade deals.

But despite a suggestion from the forum that Australia and New Zealand combine forces on outstanding trade agreements, Robb indicated that was unlikely in the case of India.

Chief executive participants in a McKinsey survey identified several areas of opportunity to make joint changes in policy and business practices, maximise productivity, market investment in infrastructure, further streamline transtasman travel, become "Asia fit" and tell the success stories from foreign direct investment.

As Luxon notes, through CER the big, obvious levers have largely been pulled and the big benefits achieved.

"We could invest lots of time and effort in mindless harmonisation of standards and regulations between the two countries that frankly wouldn't add value."

The question of whether New Zealand and Australia should "compete at home" in the business and policy arena, but "collaborate offshore" is a vexed one and likely to remain a subject of debate.