Come on, mate - the shopping's great

By FRAN O'SULLIVAN


Former All Black captain David Kirk is used to taking it to the Aussies.

But the man who captained New Zealand to victory in the 1987 World Rugby Cup finds the Australia business environment much tougher than the Wallabies.

Kirk, now living in Sydney where he is chief executive of PMP - Australia's largest magazine and commercial printing and media services company - says: "It's just hard going, you've got to keep plugging."

Kirk took up the reins at PMP early last year after a tumultuous period in which the company's share price was savaged in response to profit downgrades.

His turnaround strategies recently earned him a half-million-dollar bonus. But shareholders have been warned not to expect a dividend yet.

Kirk, who once worked in Auckland in senior executive roles for the former Fletcher Challenge, has plenty of experience making a buck on both sides of the Tasman and would prefer to operate his transtasman businesses under common rules.

He says New Zealand faces some problems, particularly with long-term energy supply, but that will not deter Australian investors.

Total Australian investment in New Zealand - through direct, portfolio and other means - had risen to $51.3 billion in March.

"Many Australian companies find it easy to make money when they come to New Zealand," says Kirk.

"The tax system is simpler - no capital gains or payroll taxes - and margins are slightly better, particularly in the domestically driven publishing sector where consumer demand is sparked by strong economic growth."

Certainly competition in the New Zealand news media industry has hotted up since Australia's Fairfax bought INL last year.

The cosy duopoly under which the former INL and Wilson and Horton - now APN New Zealand - carved up the market has gone.

In its place are "Aussie Rules" with each company fighting to maximise its leverage.

Toll Holdings chief executive Paul Little, who orchestrated his company's acquisition of a 90 per cent stake in the beleaguered Tranz Rail last year, has introduced a new level of competition in the transport industry.

Little says Toll is still being "held to ransom" by minority shareholders in its quest to get 100 per cent".

"But we've got control of the board and the company and most importantly control the cash that's coming out through significant loans."

ANZ chief operating officer Bob Edgar, who helped his bank buy National Bank against competition from other Australian banks, says New Zealanders worry about the ownership of their large businesses.

"Until recently I managed the 'top end' companies that bank with the ANZ in Australia and New Zealand," Edgar told the Herald.

"It is a fact that some 66 per cent of our business with New Zealand is with companies controlled from Australia.

"However, more than 50 per cent of the companies we bank at the 'top end' don't have their ultimate head office in Australia or New Zealand. It is North America, Europe and more recently Asia."

The "big four" of Australian banking - ANZ, Westpac, ASB-owner Commonwealth and BNZ-owner National Australia Bank - dominate the New Zealand market.

Edgar warns that any difficulties in the Australasian market are "small beer" compared with the problems banks face in a global banking market which is also rapidly consolidating.

"It is fashionable to portray debate being about banking profitability ... scale and regulation are the principle drivers of efficiency and capability in Australian and New Zealand banking."

The banks have recently been slugged with huge tax bills by Inland Revenue after investigations suggested they had short-circuited tax rules.

Plans to harmonise banking rules across both countries - which could cut the banks' compliance costs - have stalemated.

Three big Australian takeovers - ANZ- National Bank, Fairfax-INL, and Toll-Trans Rail - have brought "hot issues" to the fore. Such acquisitions are rapidly changing the face of the New Zealand marketplace and the way we do business here.

When an Australian company moves in, it frequently lines up the same supplier - such as banks, accountants, airlines, or telecommunications providers - for both sides of the Tasman.

Sometimes that supplier is a New Zealand contender - particularly with telecommunications where Telecom's dominant position enables it to make good deals.

But often the Australian company simply turns to its existing supplier. The result is that the rate of economic integration is accelerated, and more decisions affecting New Zealand's future are made from Sydney, Melbourne or Brisbane.

Australian companies do plough more money than most New Zealand businesses back into developing their assets through research and development.

But the Council of Trade Unions wants more of that investment to end up in employees' pockets to close the income gap between New Zealand and Australian workers.

CTU president Ross Wilson and ACTU president Sharon Burrow are working on common labour market issues for discussion at a joint Leadership Forum in Melbourne next year.

Australia's rapid move on Kiwi companies has caused mixed feelings among influential New Zealanders.

Mark Weldon, who came back from a career with McKinsey in New York to head the New Zealand Stock Exchange, is among those urging the Government to consult widely about its plans to form a single market with Australia.

Weldon has set out some draft terms of engagement for any moves to align the way business is done in Australia and New Zealand.

He says any

changes must be in both countries' best interests, and must not result in more "hollowing out" of head offices, the tax base or talent.

He worries about the Australian view"that New Zealand and Australia are too small to be independent and as a matter of survival must work together".

But Weldon's suggestions will probably be over-ridden in the interests of expediency.

The Ministry of Economic Development, which is spearheading the single market process from this end, also believes New Zealand is too small to go it alone without Australia.

Australia's top competition regulator Graeme Samuel is "delighted officials on both sides have taken up the cudgels" and are examining common rules and institutions.

Samuel says it was nonsensical that he could not talk to his New Zealand counterpart, Paula Rebstock, about the details of the Qantas bid to get 22.5 per cent of Air New Zealand while it was before their respective commerce commissions.

The New Zealand and Australian governments are still learning to waltz together.

Australian senior public servants say transtasman trade integration has gone just about as far as it can. They want to press on with the single market programme.

But there are still strong rivalries.

Officials at Australia's Department of Foreign Affairs and Trade have disclosed that they bowed to American wishes to ensure that Fonterra, New Zealand's dairy giant, would not be able to benefit from the Australian dairy industry's increased access to the US market under their free trade deal.

Officials claimed their research showed New Zealand would not be significantly disadvantaged by its exclusion from the deal. But Herald inquiries show the dairy and meat industries believe they will be seriously affected.

In eight weeks, Prime Minister Helen Clark and her Australian counterpart - Liberal John Howard or Labor's Mark Latham - will sit down as the "CER countries" to talk free trade with the Asean block.

So far, each country is playing to its own advantage. But if they want business to fall in line, they might considering "negotiating as one".

* Disclosure: Fran O'Sullivan received travel assistance from the Australian High Commission to explore the single market.