Common market a step closer

By FRAN O'SULLIVAN

Australia and New Zealand have taken major steps towards the formation of a single common market which will radically reshape business on both sides of the Tasman.

It will also dramatically boost the number of "domestic" consumers for New Zealand companies.

The move was announced at a joint press conference in Melbourne yesterday by Australian Treasurer Peter Costello and New Zealand Finance Minister Michael Cullen.

Top of the agenda are proposals to bring the competition regime on both sides of the Tasman together, a plan to reduce transaction costs by developing common transtasman accounting standards and work towards mutual recognition and harmonisation of prudential regulations affecting the banking industry.

At next year's annual meeting between the two politicians they are expected to discuss proposals to further integrate the international tax regime of both countries.

Cullen said: "It's like three steps at a time ... For the first time we have used language like a single economic market in this context."

Costello pointed out that although Australia's 20 million people meant New Zealand was "smaller than us", both nations were trading with countries that were much larger.

"If we can develop a common market that will give both of us an economy of scale, I think it is going to be in both our interests."

The announcement of a single common market is a political coup for New Zealand's Finance Minister.

Sources suggested yesterday that the personal rapport between Cullen and Costello was a major factor in getting plans on "an acceleration curve". Cullen's beam widened as Costello described the talks as "full, frank and very warm".

The major moves announced yesterday are:

* The integration of competition regimes which may include joint decision-making on transtasman issues by the Australian Competition and Consumer Commission and the New Zealand Commerce Commission. Terms of reference will be finalised shortly for this.

* A transtasman accounting standards advisory group which will look at ways of reducing costs and improving efficiency through a single set of standards.

* Investigation of common prudential standards for Australian and New Zealand banks.

Costello acknowledged that since ANZ's acquisition of the National Bank the foremost Australian banks now had 80 per cent of the New Zealand banking market.

"So banks which are conducting business on both sides of the Tasman can reduce their transaction costs and consumers in both countries are protected."

Cullen stressed that Australia was New Zealand's most important economic partner in trading and investment terms.

He downplayed concerns that the size difference might mean New Zealand was presented with a take-it-or-leave-it outcome in the three areas.

"The single market is important for the progress of both our countries."

He later acknowledged that some elements of the Labour Party might oppose the move. But Costello indicated that the two ministers would simply drive around any obstacles.