Cooler Economic Relations

The relationship was becoming cooler, rather than closer, although the prime ministers of the two countries dutifully meet each year to discuss issues of mutual concern and Australia remains this country’s biggest market for exports.
This year, the prime ministers signed new social security agreement, designed to deal with an imbalance in trans-Tasman migration. Since the original social security agreement between the two countries was signed 30-odd years ago, there has been surge in numbers of New Zealanders emigrating to Australia.
Their numbers and the lifestyles of some give rise to Aussie grumbles about Bondi Bludgers, the unemployed Kiwis who surf and booze at the expense of Australian taxpayers. The cost of benefits paid to New Zealanders and the much smaller direct reimbursement from Wellington, combined with socio-economic impact that has been distorted by Australian media, made matters politically intolerable for Australian governments. Thus there has been toughening of eligibility rules for benefits for Anzacs who cross the Tasman.
In the year to November, 26,400 more New Zealanders moved permanently to Australia than Australians came to live in New Zealand. Whether their demands on Canberra’s tax coffers is as severe as media imagery suggests is unlikely. breakdown of official Australian household spending statistics shows the average weekly consumption of New Zealand-born shoppers pumps more money back into the economy ($791) than Australian-born ($698) or British-born ($706).
This implies New Zealanders living in Australia generally are better paid and higher skilled than Australians or other emigrants and their taxes probably amply cover whatever dole payments are made to their relatively few countrymen without jobs. Anzac camaraderie was struck another blow by Australian Treasurer Peter Costello, when he confirmed on February 7 that Canberra would not consider trans-Tasman currency that is the subject of government-to-government talks. This scuttled the idea of an Anzac dollar, favoured by 80 percent of New Zealand businesses surveyed last year by the Institute of Policy Studies at Victoria University. Costello presumably reflects Australian business sentiment on the matter.
Support for an Anzac dollar is much weaker in Australia than in New Zealand, according to Greg Ansley, the New Zealand Herald’s Canberra Bureau chief, although he notes that several commentators are talking more seriously about such move and seeing benefits. So far as Costello is concerned, however, New Zealand must dump its dollar and adopt Australia’s currency, if it wants single currency for the CER free-trade area. And there can be no tinkering with arrangements at Australia’s Reserve Bank, to give New Zealand some sort of say in the shaping of monetary policy.
If Wellington authorities want to dump their currency and join Australia, Costello is telling us, that’s fine with him, but any currency union will be set up strictly on Australian terms. While Costello was snuffing notions of an Anzac dollar, stock exchange negotiators were halting talks on single share market. Merger talks started last August looking at the best ways to combine the markets to offer advantages on both sides of the Tasman, New Zealand Stock Exchange managing director Bill Foster insisted. The objective was single body to run the market and the question was where the benefits would fall.
“We always said that we had to have commitment to the New Zealand capital market,” Foster said. “That was important to the local market here.” But the ASX couldn’t make that commitment and it became increasingly apparent it was intent on takeover, offering benefits to Australia but none to New Zealand.
Among the attractions of merged stock exchange, were that it was part of trend towards global securities trading and would create strong regional exchange. Exchanges all around the world were merging and the New Zealand market would be marginalised if it tried to swim against the tide. The cost of capital for bigger companies listed on the ASX would be lower, too, and some of our bigger companies were said to be threatening to move their formal listing to the ASX, if the exchanges did not merge.
Counter-concerns were that single stock exchange based in Australia would encourage corporates to move their head office there. big chunk of our financial infrastructure would follow. There were so many concerns, in fact, that majority of New Zealand exchange members seemed opposed to the merger. They have set their sights instead on demutualisation of their organisation. It looked as if CER stood for confused economic relationships.

Bob Edlin is Wellington-based economic commentator and journalist.

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