In the 25 years since the CER signing, two-way trans-Tasman trade has grown at more than 8% a year on average (to be worth $A21.5bn last year) and NZ exports to Aust have grown at 7.7% a year. But how do the two countries forge even closer economic and investment ties? Addressing trans-Tasman CEOs in Auckland on Tuesday, Aussie Kevin Rudd suggested increasing the portability of retirement funds, reducing the screening of investment flows and plugging NZ into the Council of Aust Govts, where state and Federal Govts work together on harmonising regulatory frameworks. The challenge, Rudd says, is to build “a seamless economy between Aust and NZ of more than 25m people.”

Even Closer Relations. Bilateral work is already under way on the mutual recognition of dividend imputation credits and an investment protocol to reduce compliance costs for Aust and NZ investors, and Rudd endorses the two Govts expanding the relationship outwards, such as negotiating as CER with ASEAN (which represents 10 Asian economies). The case for this is underscored by its economic weight: the ASEAN-CER market would have a combined GDP of $US2.3trn (more than twice as large as India and nearly 75% the size of China’s economy).

But What About A Common CER Currency? It is a “hot potato,” Rudd told a business questioner, and smartly dropped it. An Aust House of Representatives standing Committee on legal and constitutional affairs two years ago, however, considered harmonising the legal systems of the countries and suggested Aust and NZ should consider introducing a common currency. Among the advantages: a common currency would lessen volatility in the cross rate with Aust, reducing the risk for business. Finance Minister Michael Cullen rejected the idea, noting “there’s no such thing as a common currency on the table and there never has been,” and “we are not going to do that.” He doubted it would lessen volatility with the rest of the world and said most of NZ’s trade is denominated in US dollars.

Never Say Never. But a survey for the Grant Thornton International Business Report last year found 60% of NZ business respondents favoured a common currency to ease transactions and help trade. National’s John Key says it’s worth exploring further, although he acknowledges there are political difficulties. Being willing to have a closer look doesn’t mean he would go for it. But having a closer look is smarter than deciding you’ve seen enough.

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