4 August, 2011
Speech to Trans-Tasman Business Circle
Good afternoon and thank you for your welcome.
I enjoy speaking to the Trans-Tasman Business Circle because I always get a huge amount out of sharing ideas with you, at the coalface of the extremely vital trade relationships with our biggest trading partner.
Some of you have probably heard me say that I haven't met an Australian I don't like, but it's true.
And I suspect it's a sentiment that's reciprocated – not for me specifically, but for New Zealanders generally.
But it's what makes it both easier and more challenging to do business with our mates from across the ditch – that element of friendship mixed with competition – and I'm sure each of you has an interesting story to tell about that.
In the end it's the relationships that make it work.
Ladies, and Gentlemen, I'm going to talk today about the goal of this Government to enhance our business relationships with Australia and the progress we've made around creating a seamless trans-Tasman business environment – the Single Economic Market.
The political and economic ties shared by Australia and New Zealand are deeper, richer, and more multi-dimensional than those found between any two other countries.
No country other than Australia offers New Zealand a seat at the table alongside institutions such as their state/federal ministerial councils.
Australia is New Zealand’s most important market, particularly for our high-value manufacturing and services and processed foods.
In addition, approximately 50% of all foreign direct investment in New Zealand comes from Australia, while a similar proportion of New Zealand’s outward direct investment is made across the Tasman.
It's undeniable that in terms of growing higher-value New Zealand companies, Australia is a very important market.
It is, therefore, in New Zealand's best interests that we maintain and enhance these connections.
That's why the John Key-led Government has invested a huge amount of time and effort into SEM.
And I'm pleased to say that the senior members of the Australian Government are similarly committed.
And I'm convinced that it's been the relationships that ministers from both sides have formed that have helped push things along.
When Australian Treasurer Wayne Swan met Finance Minister Bill English in Wellington three weeks ago, he highlighted the opportunities for both countries in strengthening regional trade links in Asia-Pacific, as well as the potential to align our respective emissions trading schemes.
Both ministers also released an audit of the progress that has been made toward achieving the SEM milestones.
Under the SEM concept, both governments are intensifying efforts to remove the regulatory barriers to firms operating in both markets.
Good progress has been made under the SEM regulatory agenda agreed to by Prime Minister Key and former Prime Minister Rudd in 2009.
That agenda was subsequently incorporated into a revised ‘Memorandum of Understanding on the Coordination of Business Law’, which I signed with my Australian counterpart in June last year.
The areas covered by the MOU govern insolvencies, financial reporting, financial services, competition policy, business reporting, company law, personal property securities, intellectual property, and consumer policy.
Many of you will be aware that I have taken a great personal interest in advancing the SEM regulatory agenda.
In that regard, allow me to remind you of some of the achievements that have been made during the past 12 months:
• Since 1 July this year – when the New Zealand financial adviser regime came fully into force – individual licensed financial advisers are recognised through the Trans-Tasman Mutual Recognition Arrangement.
• Also since July 1, we have put in place harmonised financial reporting standards for publicly accountable businesses.
• The two countries now have the same structure for financial reporting standards bodies, making it easier for the organisations to work more effectively together and supporting their ability to align approaches in the future. This structure continues the practise of cross-appointments that began in 2005 with the chair of the Australian Financial Reporting Council being appointed to New Zealand’s inaugural External Reporting Board.
• Since last year, New Zealand has been a party to the Intergovernmental Agreement for the Australian Consumer Law which enables the two countries to co-operate on enforcement, share information, and to co-ordinate product safety interventions and initiatives to raise awareness of scams and frauds.
• Efficient enforcement of competition, consumer, and credit laws between the two countries continues to be enhanced by the close working relationship between the regulators.
• We now have members cross-appointed between the Australian Competition and Consumer Commission and New Zealand's Commerce Commission. Such efforts to align respective consumer laws are beneficial to companies and consumers on both sides of the Tasman.
• Also, my Australian ministerial colleague and I recently announced an implementation plan towards a single joint patent examination system. This is intended to deliver a single application process for both countries by early 2013, and a single patent examination by mid 2014.
It's also important to acknowledge there has been substantial progress in other areas which will come to fruition over the next three years:
• Mutual recognition of auditors will be delivered when the New Zealand legislation comes into force on 1 July next year.
• In the intellectual property area, in addition to the work on a single joint patent system, we are advancing toward a single regulatory framework for patent attorneys and a single trade mark regime.
• Work is also under way on harmonising the financial product disclosure regime.
There are other areas outside my portfolio area, where significant work remains to be done in the Single Economic Market space.
For example, New Zealand remains interested in advancing the harmonisation of imputation credits, and Australian Treasurer Swan announced that officials are to hold initial talks on our respective emissions trading schemes.
Deeper co-operation at the institutional level may also offer substantial long-term benefits as we seek not only to gain efficiencies, but to strengthen the trans-Tasman voice in a global context.
The recent announcement by the Prime Ministers of a joint Therapeutic Products Agency is indicative of this approach.
The Australia-New Zealand Therapeutic Products Agency (ANZTPA) will replace the present regulators of medicines and medical devices and will regulate medicines and medical devices, and provide a cost–effective means of achieving compatible regulatory standards in the medical sector.
A staged approach is proposed to allow both countries' regulators, MEDSAFE and the Therapeutic Goods Administration, to increase joint operations to deliver early benefits, such as a strengthened New Zealand regulatory practice and enhanced capability of MEDSAFE, while working towards the end goal of establishing the single agency.
There's no doubt that if we are to maintain progress in these areas we will have to continue to exercise a strategic focus based on longer term calculation of what the benefits of deeper regulatory co-ordination might bring.
Considering the future of SEM inevitably prompts the question ‘Can we create a seamless trans-Tasman economy by focusing on business regulation alone?’
My answer is that we must take an ambitious view of the SEM concept.
I believe it has the capacity to encompass a wider and wider ambit of economic harmonisation and integration beyond the existing framework, while continuing to realise long-term benefits to both economies.
Prime Minister John Key and former Prime Minister Kevin Rudd recognised this when they identified the net trans-Tasman benefit principle.
That principle is an important factor in seeking to broaden the construct of SEM beyond business regulation alone.
It's designed to encourage both sides to address co-ordination issues in the longer-term context of the New Zealand and Australian economies becoming more deeply integrated, and our respective national interests being more deeply linked to the health of the Australasian economy.
This requires an approach that goes beyond an issue-by-issue assessment of cost and benefit, and invites a balance of benefits approach across a broader set of calculations.
As well as an Australasian focus, we want to work together in a regional context.
The CER-ASEAN free trade agreement is perhaps the most significant example of this.
That agreement saw negotiators from both governments work side-by-side to forge a mutual agreement with the ASEAN countries.
This bloc is already our third-biggest export market, representing a market of more than 600 million people with a combined GDP of NZ$3.2 trillion.
Building on the success of the agreement, the first CER-ASEAN Integration Partnership Forum has just been held in Kuala Lumpur with a total of four forums expected to be held over the next two years.
As you are no doubt aware, the 10 countries that make up ASEAN – Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Myanmar, Cambodia, Laos, and Vietnam – have a combined population of 600 million or about 9% of the world population.
This forum was initially proposed by New Zealand Prime Minister John Key in discussions with ASEAN leaders in October last year.
The idea was further developed by Prime Minister Key and Australian Prime Minister Julia Gillard in February this year.
The purpose of the forum is to share the Trans-Tasman experience of Closer Economic Relations with senior ASEAN officials responsible for ASEAN regional integration.
The forum recognised that regional economic integration is fundamental to fostering opportunities for business, and that a strong and dynamic integrated ASEAN region is good for Australia and New Zealand as well as for ASEAN.
Ladies and Gentlemen, I conclude by noting that SEM continues to strengthen a regulatory environment that will reduce costs and enable trans-Tasman business to thrive.
However, removing barriers to market participation is only half of the story.
The creation of a favourable regulatory environment is in itself not enough.
New Zealand companies may have historically tended to take the Australian market for granted.
Although Australia is very similar to New Zealand in many ways – and is becoming more so through SEM – it's a much more demanding and difficult market than many New Zealanders realise.
Aggressive competition is the Australian way. The Australian states compete aggressively with each other to attract growth and investment.
Though we co-operate with Australia in removing regulatory barriers, we must compete directly with individual Australian states if we are to achieve economic growth.
To complement the on-going work on SEM, New Zealand also needs to proactively promote itself as a destination for investment for foreign companies looking to access the Australasian market.
The minerals boom in Australia represents a once-in-a-generation opportunity for New Zealand companies to provide supporting services and to participate in large-scale projects.
In looking to the future, a new strategy will be needed to encourage New Zealand companies to thrive in the environment being created by SEM.
New Zealand's forthcoming strategy for Australia – known as NZ Inc – will encourage companies to seek that competitive spirit which Australian companies display.
This strategy will set out high-level goals to be achieved by 2015.
Goals include supporting growth in exports, encouraging investment, enhancing science and innovation linkages, and strengthening bilateral and regional relationships.
The strategies also identify key sectors and key activities for agencies to proactively target in their work, and priority actions to be delivered in the short-term (such as improving market access, growing high quality science and technology collaborations with other countries, building the capability of New Zealand companies to export, and attracting and retaining skilled migrants.
The purpose of the strategy work is to enhance the contribution that our key country and regional relationships can make to New Zealand’s future economic growth and development.
The New Zealand Inc strategy work will also aim to:
• Build a stronger common purpose across government agencies.
• Strengthen engagement with New Zealand business and other stakeholders.
• Improve co-ordination of the operations that New Zealand Inc agencies have offshore and in New Zealand.
• Pick up and draw on emerging trends offshore, and identify opportunities and constraints.
• Help prioritise where New Zealand Inc agency effort and resources are placed in the short and medium-term.
The strategies have a strong trade and economic focus, and set out ambitious, high-level, five-year goals and the steps and actions required to achieve them.
Just as a stronger, more integrated trans-Tasman economy will put New Zealand in a better position to address challenges and opportunities in regional and global markets, an integrated all-of-government approach by New Zealand agencies will more effectively maximise the opportunities to grow high-value businesses serving both countries.
I’m very keen to hear today about what opportunities you see, as well as what, if any, impediments there might be.