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Home / Business

Fran O'Sullivan: Economic issues deserve PMs attention

Fran O'Sullivan
By Fran O'Sullivan
Head of Business·NZ Herald·
24 Feb, 2015 09:30 PM4 mins to read

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Fran O'Sullivan
Opinion by Fran O'Sullivan
Head of Business, NZME
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Australia's trade deal with China and Kiwis' welfare rights ought to share billing with Iraq when leaders meet.

Iraq will inevitably dominate Friday's talks between John Key and Tony Abbott - but it should not obscure progress on the vital transtasman economic agenda.

Key yesterday confirmed that New Zealand will send a non-combat training mission to Iraq - alongside Australia's military forces - to the Taji Camp north of Baghdad.

New Zealand and Australia may be "family". But when it comes to fielding questions over Iraq - or any other issue - journalists will find themselves limited to just a few questions at Saturday's press conference.

From a New Zealand business perspective this is a pity.

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Because there's a number of transtasman issues that are important to New Zealand that ought to be on the agenda for the inter-governmental talks.

First up is the free trade deal that Australia has recently signed with China.

On this side of the Tasman there are real concerns that New Zealand exporters will find themselves facing stronger competition in China as a result of the Australian FTA. The affected exporters - particularly in the dairy and education areas - want to know just what's in the fine-print of the FTA.

Australian Trade Minister Andrew Robb - who will join his counterpart Tim Groser on a panel at the 10th Australia New Zealand Leadership Forum in Auckland on Friday - is in the position to shed some light on just what sits within the schedules of the FTA.

On this side of the Tasman there are real concerns that New Zealand exporters will find themselves facing stronger competition in China as a result of the Australian FTA.

Fran O'Sullivan

Robb has boasted that the Australia deal is significantly better for Australian exporters than the NZ free trade agreement is for ours. In the spirit of "family" - and because New Zealand must quickly press the Chinese Government to ensure our exporters gain parity against Australia via the most favoured nation clause in our own agreement - it would be good to get a detailed heads-up.

There's also a couple of outstanding niggles.

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First - as NZIER points out in a paper "Transtasman relationship close, but could be closer" - there are opportunities for further economic integration between the two economies through the mutual recognition of imputation and franking credits and narrowing down the extent of exemptions from the Trade in Services Protocol.

"These are tough areas - analytically and politically - but they need to remain on the table for further discussions. Short-term fiscal or operational concerns should take a back seat to longer term efficiency objectives," NZIER says.

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Trouble is with the Australian economy in a relative slump off the back of the collapse of the mining boom, Treasurer Joe Hockey's fiscal coffers are squeezed and he does not want to fund the expected A$800 million which will be lost from his Budget if there is a policy change.

While the issue is to go on to the agenda for the Australian Tax Review, most informed pundits do not believe this perennial issue at the transtasman talks is due for a breakthrough.

Second, social security entitlements for New Zealanders in Australia. The lack of parity with Australians makes Kiwis feel like second-class citizens.

What is clear is that there is also a lot that's working on the single economic market front to create a more level playing field for business in the transtasman arena.

Australia has not been slow to make the most of its greater business clout.

It is the biggest player in foreign direct investment in New Zealand - the upshot of which has been the relative reduction of New Zealand to branch office status. Or as Finance Minister Bill English puts it - a "suburb of Australia". This is not entirely tongue in cheek.

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English also refers to Australia as a province of China.

But the tide is turning.

The fiscal books are in better shape this side of the Tasman. Corporate balance sheets are strong. The NZ dollar is nudging parity with the Australian (worth 96c yesterday).

Time then for NZ companies to think again about investing in Australia.

Saturday's clash at Eden Park between the Black Caps and the Baggy Greens (aka New Zealand and Australia) will add an unusual frisson to this year's annual meeting of the two prime ministers.

Let's hope a strong performance on the cricket pitch will invigorate our businesses.

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