Trantasman single economic market: What's on the agenda for tomorrow's talks?

1. Breaking the deadlock on transtasman banking regulation. The Australian side - pushed by banks with major investments in New Zealand - wanted the Australian Prudential Regulatory Authority (APRA) to supervise Australian banks operating in New Zealand. With 98 per cent of the New Zealand financial system owned offshore, the NZ Reserve Bank argued the APRA option would see the country relinquish the ability to set prudential policy and respond to a banking crisis.

The central bank has promoted a "home host" option to harmonise regulation and remove any duplication of activity.

2. A joint political response to the Australian Productivity Commission's timorous recommendation to enhance co-operation between the Australian Competition and Consumer Commission and the NZ Commerce Commission but retain separate regulators for the time being. The two treasurers will either lift the level of ambition and issue directions to speed up the integration process, in line with their initial press statements, or take an approach that is unlikely to galvanise progress.
3. Progress by the Transtasman Accounting Standards Advisory Group to align standards so companies active in both countries need only a single set of accounts. Seemingly straightforward but made more complex by the fact that Australia still has two institutional accounting bodies.

There are also differences over whether New Zealand companies should sign up to standards which are more geared to America's more onerous compliance regime than our relatively free-wheeling platform.

4. Mutual recognition of securities so companies issuing shares can use a single prospectus in both countries. Again, relatively straightforward.

The major issue - which gets Australasian boards worked up - is how to ensure dividends from companies acting on both sides of the Tasman are taxed fairly. This issue plays directly into the two treasurers' own ability to gather funds for their governmental budgets - which is probably why it has received a low priority.

5. New agenda item: An open investment regime so Australian and NZ companies can make major investments in each other's countries without major regulatory hurdles.

Right now, Australian companies have to pass muster with NZ's Overseas Investment Commission when making sizeable investments here. Over "the ditch", NZ companies must submit their proposals to buy Australian assets to the more protectionist Foreign Investment Review Board.

When NZ tried to get an "investment chapter" added to the Closer Economic Relations Agreement in the mid-1990s, Australian politicians shied away over fears the move would contravene the existing Nara Agreement which gives Japan "most favoured nation" status with Australia.

Now Australia has short-circuited the Nara Agreement in its recent bilateral free trade deal with the US, NZ officials feel it's time to test the waters again.

Calling the shots

* Peter Costello Australian Treasurer

Single market vision: "Australian and NZ companies will be able to operate in a seamless fashion across the Tasman - goods and services with people and qualifications will move in much the same way as they now move across the Victorian and New South Wales border."

Warning: "If it is not something that is a high priority - we move on to something else."(Herald interview 2004)

* Michael Cullen NZ Minister of Finance

Single market vision: "I've believed for a long time that NZ's economic interests are tied up with a strong relationship with Australia - but we don't need to surrender anything about our identity and separateness as a nation in doing that."

Warning: "It's important for us to have runs on the board where people can feel confident that [change] has not actually been to the detriment of their own national interest."(Herald interview 2004)