John Key’s almost insouciant style of political leadership masks an iron determination to “get things done.” In Aust last week, he achieved more in creating an efficient trans-Tasman trade and economic relationship than any of his predecessors did in the last 25 years. After major initiatives to free up the movement of people and capital as well as the portability of savings across the Tasman, he exploited the enthusiasm of Kevin Rudd to embrace the NZ relationship with proposals for a joint approach to offshore trade promotion and a special Anzac ready reaction defence taskforce. He doesn’t under-estimate the inertia inherent in the bureaucratic empires, which can advance 100 reasons why things should stay as they are.

When Rudd cracks the whip he expects immediate action: and Key, too, is not to be fobbed off, as he showed when officials sought to tell him of all the obstacles in the way of a common border. On July 16 and subsequently, Trans-Tasman flagged the strides Key intended to make towards a single economic market – what he calls a “seamless business environment,” and use it as a springboard into third markets. Key reckons the dynamism, economies of scale and innovation potential offered by the SEM is “enormous,” and the CER economy can “soar to new and loftier heights.”

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…What Sharing A Partnership REALLY Means…
So, put aside the rhetoric, what does it all mean? The political leaders are agreed on moving ahead more quickly on a shared partnership. The move towards streamlining trans-Tasman travel has the ultimate objective of making travel between the two countries a domestic experience to reduce travel costs. Having removed barriers at the border for goods (tariffs, import licences), people and capital, the task now is to deal with barriers behind the borders, reducing the transaction costs of doing business. Climate change policies should be aligned as closely as possible. This will offer a platform for clean technology innovations, with the objective of making sustainable energy a “future brand” for the region.

In defence, inter-operability of the armed forces can be enhanced and a joint Anzac taskforce is a logical objective. Aust and NZ working on joint promotion of trade and services (another logical outcome of a single economic market) enhances the influence of the two countries in international trade policy and advances the concept of Aust with NZ, as a globally significant “middle” economic power. Since he became PM, Kevin Rudd’s strategic aim has been to cement Aust’s place through the G20 as a global player. With the extra weight from NZ, he bulks up Aust’s presence. This is why he has embraced more warmly than any other Aust leader in the modern era the ideas for closer trans-Tasman co-operation.

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…But Not All Plain Sailing On The Tasman
It’s not going to be plain sailing all the way in this new era of trans-Tasman co-operation. Business optimism tax harmonisation will be accelerated may be misplaced. The Rudd Govt has the Henry inquiry on tax due to report later this year but has indicated it will not consider variation of Aust’s GST. There is also speculation Aust’s dividend franking system may be discarded. If a land-based tax is considered as a means of broadening the tax base, it could raise complications too for harmonisation proponents. The proposal which emerged from last week’s joint Cabinet meeting for a co-operative thrust on trade promotion may hit turbulence because of traditional rivalries.

Economic Development Minister Gerry Brownlee is reported to be frustrated many of the business grant programmes aimed at increasing exports don’t appear to have yielded the kind of gains in export receipts envisaged. There is also concern the cost of trade promotion abroad has got out of hand. Some thought may be given to restoring Trade Commissioners to diplomatic missions abroad, rather than seeing duplication of offices and services. One sector where Ministers believe positive gains can be achieved is in a joint effort in delivery of development assistance particularly in the Pacific. As one insider put it: “what has been a close working relationship could become significantly more than that.”

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