Forging economic and political links between New Zealand and Australia was always tricky business. We declined an invitation to join the Federation and become Australia’s seventh state back at the turn of the last century. For most of the first half of the 20th century our trading relations were characterised by economic indifference interspersed with bouts of tit-for-tat restrictions or embargoes that effectively cut one product or another out of each country’s market.
It wasn’t until the 1960s when first the prospect and then the reality of Britain’s entry to the European Economic Community (EEC) struck resonance, that we started rehearsing some common themes. Even then, as writer and Aussie watcher Ian F Grant pointed out in Management’s May 2003 cover story on trans-Tasman relations: “It took four and half years to craft the New Zealand-Australia Free Trade Agreement (NAFTA), with mutual suspicion eased by the good working relationship between the ministers, New Zealand’s Jack Marshall and Australia’s John McEwen.”
By the late 1970s NAFTA was “in trouble” because it had “reached the extent of its capacity to expand trade”. And so, despite lack of enthusiasm by New Zealand’s Prime Minister of the day Robert Muldoon, New Zealand took up challenge thrown down by Australia’s deputy-PM Doug Anthony at the March 1979 NAFTA talks to find way to either grow or widen the scope of NAFTA. Alternatively, Australia would “walk away from the agreement”.
New Zealand’s then Minister of Industry and Trade, Hugh Templeton, went to work on better arrangement but, as Grant also reported, “talks stuttered along, not helped by the distinct coolness that chilled relations between Muldoon and Australian PM Malcolm Fraser”. Then in 1983, when Muldoon was “finally ready to sign” but Fraser’s Liberal/National coalition had been swept from power by Bob Hawke’s Labour Party, the Australia-New Zealand Closer Economic Relations Trade Agreement (CER) was signed.
CER has been, in the eyes of most reasonable critics, successful. “More progress has been made in the freeing of trade in the first three years of CER than in the entire 17 years of NAFTA,” economist Peter Lloyd wrote in 1988. And more recently the World Trade Organisation (WTO) suggests CER is “recognised as the world’s most comprehensive, effective and multilaterally compatible free-trade agreement”.
“The intention of CER was to expand free trade by removing trade barriers and encouraging fair competition,” wrote Grant in 2003. “It achieved its specific objective of removing all tariffs and quantitative restrictions from trans-Tasman goods trade by 1990, five years in advance of the agreed deadline.”
But our politicians now believe more can be wrung from New Zealand’s relationship with Australia and that we must in order to foot it with the rest of the trading world. Coincidentally and conveniently, so do key Australian politicians including Prime Minister John Howard and Treasurer Peter Costello. Without their patronage an SEM agreement would struggle for traction. Australia’s middle level bureaucrats are traditionally uncooperative and bloody-minded when negotiating terms and detail of closer relations with New Zealand.
But not insubstantial and fairly influential group of business leaders are unconvinced, suggesting that CER and issue-by-issue negotiations are sufficient to build strong trans-Tasman relationship. They caution that getting too close to Australia will work against New Zealand’s economic interests in other markets, even deflecting chances of attracting more investment capital.
However, heavy agenda of SEM-directed activity kicked off in Wellington last month when Finance Minister Michael Cullen and Australia’s Costello met for their first get-together of the year. This was followed earlier this month by trade summit in Auckland designed to “prepare your business for the New Australasia”.
The ministers’ meeting is important. The contentious reform of trans-Tasman banking regulations and supervision will be discussed. New Zealand’s Reserve Bank is opposed to adopting the Australian Prudential Regulatory Authority (APRA) as the sole regulator and supervisor of Australian banks operating in New Zealand. And, surprisingly, Cullen has backed the RBNZ’s stance. Bankers, business leaders and no doubt Cullen and Costello agree, sorting out the banking relationship is critical to the future of single market.
And there are something like 20 different initiatives that New Zealand and Australian officials are working on that could surface for ratification this year. Little wonder SEM advocates like Kerry McDonald, chairman of the Australia New Zealand Leadership Forum, think 2005 is an “important year” for SEM.
“It is crunch year,” says Auckland Chamber of Commerce chief executive Michael Barnett. “A strong trans-Tasman political and business foundation supporting SEM is in place but we need to back up the rhetoric with transparent strategy programme to deliver SEM.”
That kind of talk has sceptics and more cautious business leaders, including some bankers, worried. They point to the banking regulation and supervision dispute as evidence of Australian moves to impose greater financial control over New Zealand and some see it as “back door approach” to gaining sovereignty.
So what is the banking regulation and supervision disagreement about?
Simply put, it is about harmonising the rules for regulating and supervising our banking and finance industries. At another level, however, it is about the political, cultural and emotional difficulties elephants and fleas have when they meet to dance. It is, therefore, at the heart of things such as, who will lead, how to avoid stepping on toes and, will the repercussions of slip be terminal?
Integrating banking regulation between New Zealand and Australia is at the core of SEM for number of reasons, not least of which is the irreversible fact that Australia owns 85 percent of New Zealand’s banking assets. And, as the Reserve Bank points out, this very high degree of foreign ownership has occurred despite Australia and New Zealand maintaining separate regulatory frameworks.
New Zealand’s Australian-owned banks are currently subject to two different regulatory regimes. Australia’s line-by-line prescriptive, costly and bureaucratic APRA regime and New Zealand’s more benign, less interventionist but generally effective RBNZ-managed supervision.
The banks want to cut costs and reduce this supervision to one regime. An official report last year suggested two models for harmonising banking regulation and supervision:
The first is simply step up on what already applies. The second is rather more radical, at least from New Zealand’s perspective. It would, effectively, hand ultimate control of the country’s banking and finance industry over to Australia. The Reserve Bank is opposed to the APRA-as-supervisor model, advocating instead enhanced home-host supervision, an internationally agreed model for supervising cross-border banks that already operates here. Cullen – staunch advocate of SEM – has, publicly at least, supported RBNZ on the issue.
The cost-saving argument put forward by the Australian-based head offices of ANZ-National Bank, the Bank of New Zealand, ASB Bank and Westpac doesn’t wash with RBNZ, or even some senior executives in the banks’ New Zealand offices.
The New Zealand view is that the APRA approach is excessively heavy-handed and not particularly effective. Australia’s record on regulation of the insurance industry for example which, when compared with New Zealand’s, is prescriptive in the extreme, has delivered regular insurance company collapses across the Tasman, including the country’s largest ever multi-billion dollar corporate failure with HIH Insurance. New Zealand’s last insurance company demise was Standard Insurance back in the 1960s.
RBNZ is understandably conce
Privacy Commissioner announces intent to issue Biometrics Code
Management Editorial Team
December 20, 2024
The Privacy Commissioner has announced his intention to issue a Biometrics Code, has released the Biometric Processing Privacy Code for consultation and is calling for submissions on the draft code
