• Paul East


I would like to thank the Institute for giving me the opportunity to address you today, and hope that time permitting, I can field a few questions on conclusion. The scope of the issue I am addressing today is much broader than my own key portfolio of Defence. That is a challenge, but one I am very happy to take up.

"New Zealand and the Trans-Tasman Relationship: Future Policy Directions under the Coalition Government." The inference in the title is perhaps that major changes are afoot as a result of the coalition arrangement. The nature of New Zealand politics has without doubt changed irrevocably. Political compromise between coalition partners and consensus building are essential elements in coalition forming. Our MMP system of Government demands it.

While it is still early days there is room for more than quiet confidence in the process. The New Zealand public showed, both in terms of turn-out on election day, and in the way that so many voted strategically, that they were not confused by MMP.

They may not have been certain what the election result would be, but they did not hesitate to vote. And that is the first important point I want to make - in case there is any lingering doubts in your minds. New Zealand is, like Australia, one of the oldest and most vigorous parliamentary democracies in the

world. The people of New Zealand have not abandoned that fundamental principle. MMP is a different system of electing parliament from the old British-based model of "first past the post". But New Zealand is, and will continue indefinitely, as a parliamentary democracy.

The coalition agreement between National and New Zealand First reflects what the two parties saw as a desire by the electorate for a balanced focus upon economic and social priorities, building on the sound economic base achieved over the past 12 years.

There were no major philosophical difficulties with this. Election manifestos were certainly "tweaked", but not, in my view, compromised. Inevitably, some policy issues were negotiated. There was rigorous debate over approach - a rigour that has carried on, in a positive manner, into caucus and cabinet. From my point of view, it has been a pretty good start.

You obviously want to know how the coalition Government and MMP will impact upon New Zealand's relationship with Australia, now and in the future. Anyone who anticipated a major policy reorientation with regard to trans-Tasman relations, will, I am afraid, be largely disappointed.

In fact most informed commentators are firmly of the view that it would be much harder to make dramatic changes under MMP. One of the main reasons that the New Zealand public voted for MMP when the referendum was held was that they were exhausted by the amount of change that had taken place over the previous nine years. An added factor was that the benefits of such major economic change was not yet clearly evident. If the referendum had been held just a year later it may well have produced a very different result.

Although MMP takes from the hands of the voter the power of forming a government and gives this task to political parties, there is also a fair measure of transparency once negotiations are concluded. The 10 weeks of negotiations that followed the last election resulted in a comprehensive coalition document which sets out a blueprint for the next three years of government. There is nothing in this document to suggest that there will be major changes in the relationship with Australia.

So at the risk of giving away my conclusion immediately after my introduction, I can say with confidence that the general nature and direction of the increasingly close ties between Australia and New Zealand will continue to be accorded the highest priority and impetus by New Zealand. Mr Howard's visit to Wellington last week confirms that the dialogue between us will continue to be a two-way process.

The very fact that in the first two months of 1997 there has been so much trans-Tasman Ministerial activity is an indication of this. Our Prime Ministers have met in what has been agreed will be an annual meeting. They also get the opportunity to meet regularly in other contexts such as APEC, CHOGM and the South Pacific Forum. Foreign Ministers met in January in their regular six monthly bilateral. Transport and now Defence Ministers have also met. By the end of the year I would expect the number of direct trans-Tasman Ministerial contacts to be well into double figures.

The breadth and depth of the relationship is such that I am able to talk for 20 minutes on the trans-Tasman dimension of almost any New Zealand Ministerial portfolio. That is the nature of the Australia/New Zealand relationship in the late 1990's.

In looking towards the future of the Australia-New Zealand relationship, we need to be mindful of the way the relationship has developed over time.

We are all products of history. While the twists and turns of national electoral politics can significantly influence the direction and manner in which any one country makes its way in the world, they are for the most part destined to move within certain parameters. New Zealand has, for example, faced greater economic and social change since 1984 than almost any other developed economy in recent times. Our relationship however, with Australia, continues to be bound by longstanding economic, social and strategic ties. We are two independent nations bound by shared values. These have deepened with the passage of time and increased globalisation.

CER was not the start of the economic relationship, but a natural extension of close trade and economic links extending back to the late 18th century. There was a strength and vitality even in the days when we were both fundamentally protectionist economies - New Zealand more so than most. Things certainly have changed in that regard.

CER has unshackled the potential for greater economic integration and growth in both economies. This is the case not just in relation to the economies of scale and comparative advantage generated by two economies essentially joining together, but as a platform for wider trade both into the region and internationally.

Key aspects of our defence history continue to underpin the relationship. The commemoration of Gallipoli, for example, which is now beyond living memory of all but a small handful of veterans, appears only to be strengthening in people's minds as an historical forge which moved two countries along the paths of nationhood.

The ANZAC tradition which was borne in an era of wars of attrition over three generations ago, has endured and developed, and is as relevant today in a high tech military era as it was then. We are still working together.

The "people to people" or social connection, likewise has evolved from a very early period when Australia was effectively a "feeder service" for many UK migrants to New Zealand.

There was a period in the 1970s and early 80s when the level of net migration from New Zealand to Australia was high. Both economies were suffering as a result of the global recession, but the fundamental weaknesses of the New Zealand economy of that time meant that we suffered to a greater degree, with many New Zealanders leaving to find work across the Tasman.

Today the number of New Zealanders living in Australia and vice versa is, on a percentage basis, about even at 1.5% of total population. This much more even balance continues to be facilitated by the longstanding Trans-Tasman Travel Arrangement, which allows for the free flow of New Zealand and Australian citizens across the Tasman, with minimal restrictions.

These three key areas of focus: economic, defence, and social or "people to people" continue to underpin the bilateral relationship.

The manner, however, in which we deal with the first two in particular, has a significant influence on what really is the fourth leg of the relationship, that of broader - foreign policy.

While New Zealand is the smaller [not junior] partner in the relationship, we are inclined to resist the perception that others sometimes have of "Australasia" as being a single entity. It is however hardly surprising that our similar stances on so many international issues can sometimes create such a perception. What many outside observers fail to see so often is that in a large number of issues, where we can convey a united front, there has in fact been considerable brokering of respective positions in Wellington and Canberra.

Having touched on four areas in a cursory manner, I would like to home in on two in particular, Defence and CER.

Australia is without doubt New Zealand's most important defence and security partner and ally. Under the programme known as Closer Defence Relations (CDR), both Governments are committed to the closest possible defence relationship. We recognise that the security of New Zealand depends ultimately on the security of Australia. CDR aims to foster close working relations between the Defence Forces and Ministries of both countries. The overall objective is to coordinate our policy approaches and enhance the ability of both forces to operate effectively together.

This morning Minister McLachlan and I had an opportunity to review the overall defence relationship. I think we are broadly happy with progress under CDR but we also agreed that it is important not to let individual force development studies in either country take attention away from the need to consider the ability of both forces to work effectively together, augmenting each other's capabilities as required.

We both recognise the role that effective military capabilities play in underpinning the defence relationship.

At the New Zealand end, the Coalition Agreement between National and New Zealand First, in which I played a part, acknowledges a commitment to `maintain a skilled, professional and well equipped Defence Force to protect New Zealand's sovereignty, provide national security and make an appropriate contribution to regional security'.

The Coalition Agreement also recognises that further funding for Defence is likely to be required from 1998 onwards. No Government however has an open cheque book. Defence expenditure decisions will naturally be taken in the context not only of the Defence outcomes we seek to achieve, but also the Government's overall priorities.

Defence policy under MMP continues to be underpinned by the 1991 White Paper. This focussed on two key ideas: Self Reliance in Partnership and the concept of the Credible Minimum.

Self Reliance in Partnership is the underlying strategy around which we organise our defence policy. The strategy recognises that New Zealand needs to be able to look after its own immediate low level requirements in and around New Zealand and the South Pacific island territories for which we retain defence responsibilities and for which we may need to act alone, if necessary. This is the Self Reliant part of the strategy. Beyond New Zealand and the South Pacific, we recognise that we have a series of interests which we wish to enhance and protect, and that the most effective way of doing so is in partnership with friends and allies. Hence the concept of Self Reliance in Partnership.

The concept of the Credible Minimum Defence Force has come in for its share of criticism but we continue to find it useful as a means of focusing our defence planning on what we most need to achieve, namely capabilities which meet our own immediate requirements, which are valued by our friends and which can be sustained over the longer haul.

The concept recognises that while New Zealand does not need to maintain all the capabilities found in larger forces, those military capabilities which it does retain need to be sufficient to demonstrate our national resolve, be militarily effective and professional and interoperable with the forces of allies and likely partners.

The Defence Assessment will give the Government a forward looking, comprehensive view of the capability and funding options which are open to it. The focus will be on the sustainability of our defence effort over the longer haul, recognising that the choices we make need to take into account changes in military capability in the region as well as the impact of technology.

You will be interested in where the Government is likely to end up on the question of purchasing additional ANZAC frigates. Until we have had a chance to look at the options currently being developed by officials, it is too soon to say. But as some of you will know, I have made no secret of my personal view that to meet our security requirements we will need to seriously address the purchase of one and quite possibly two more ANZAC frigates. Moreover, with the attendant industry benefits, there is a significant economic spin-off for New Zealand business that other expenditure options may not capture. We retain our current option on additional vessels until November this year. Mr Bolger made it clear in Parliament only last week that in addressing the question of additional frigates he saw the Defence relationship with Australia as a `fundamental factor' in the decision making process.

It may be worth saying a little about the size of our defence effort. Off-shore commentators sometimes overlook the fact that we are a nation of some 3.5 million people - much the same size as the city of Sydney or Toronto. Obviously, there are clear limits to what we can seek to sustain. But in saying this I also agree with those commentators who point to the New Zealand capacity to achieve, and even excel, when we set ourselves a goal worth achieving.

The America's Cup is a case in point. We didn't win the Cup by throwing more money at it than anyone else....we won it by setting clear goals, finding the right mix of technology and skills, and designing a yacht that wouldn't break in half. Perhaps there is a lesson here for our defence planners!

This brings me to CER. New Zealanders in general are in no doubt that CER, combined with broad domestic economic restructuring, has been good for New Zealand business. Of all our bilateral trade and economic relationships the one with Australia is our most important.

Bilateral trade in 1996 totalled $9.45 billion (compared to $2.39 billion in 1982). Our exports to Australia were worth $4.25 billion while we imported $5.188 billion from across the Tasman.

Australia is our largest export market and we import far more from Australia than we do any other source. Australia is the major investor in New Zealand and we also share a very healthy trade in services of around $2.5 billion a year.

It is clear from that brief outline that the flow of benefits however is far from one way. Australia exported almost $1 billion more to New Zealand than we exported to Australia.

We have become Australia's third largest market and one of its fastest growing export markets. Off an already large base, Australian exports to New Zealand grew 13.2% in 1996.

We are each other's largest market for manufactured exports. Bilateral trade has grown 370% since CER came into force while the stock of bilateral investment has grown by almost $25 billion.

We have in CER, the world's cleanest and most extensive bilateral trade agreement. Full free trade in goods is a reality, we have a single labour market, and with the establishment of the Single Aviation Market, we are on course to achieving free trade in services. Capital flows across the Tasman are also very free.

1996 was a particularly good year for CER. In 1997 we are in a period of consolidation. This should not be construed as meaning that all possible achievements for CER are behind us. This period of consolidation refers mainly to the work that will need to be carried out in order to bed down two major initiatives from 1996.

These were the establishment of the Australia New Zealand Food Authority with responsibility for harmonising trans-Tasman food standards, and the Trans-Tasman Mutual Recognition Arrangement which will see the mutual recognition of other standards and professional registrations.

I know that my colleague, the Minister for International Trade, is keen to see resolution of a number of longstanding issues in the trading relationship - areas such as access for New Zealand apples and salmon into Australia - presently blocked by quarantine bans - and access for New Zealand television programmes to the Australian market.

We are making progress on these issues. A final decision by the Australian Government on apples is due by the end of April. Work has commenced in Australia in considering New Zealand's latest request for salmon access. The issue of broadcasting access is before the Australian High Court.

While trade is not my portfolio I can see why it is important to keep the CER momentum going, and to address in a rational manner, bottleneck issues which can potentially undermine the process.

We have achieved great things bilaterally under the CER umbrella. While we will continue to expand CER's scope, we cannot forget that the barriers to goods, services and capital flows which we have broken down through CER are still common in other parts of the Asia Pacific region and throughout the world.

Australia and New Zealand are working closely to tackle these problems and assist the process of globalisation and economic integration which is developing. We have important joint dialogues with AFTA (ASEAN Free Trade Association) to our north and the MERCOSUR countries of Latin America to our East. We are both active members of APEC and the WTO. It is these great challenges that will occupy increasing levels of our joint resources in the years to come. The example we have - and can - set in CER is an important element in our approach to others. It shows them the real benefits of free trade.

The growing importance of APEC, our relations with the ASEAN countries, and the wider region goes well beyond the purely economic. While there is undoubtedly a strong economic focus upon links with our dynamic, fast growing neighbours, a rapid expansion of our relations with Asia at the social, political and security levels is also achieving prominence. I can only see this process quickening.

This increasing orientation toward Asia at the political as well as economic level is not restricted to Australia and New Zealand. Both Europe and the United States are placing increasing importance on the Asia region. The emergence of China and Japan as key influences upon the balance of world diplomacy are central to this process. With the passing of China's paramount leader Deng Xiao Ping last week, we all watch with interest as to how the new leadership handles the continuing process of internal economic reform as well as China's increasing influence on the world stage.

I note that Mr Howard will visit Beijing in March. As one of the first foreign leaders to visit in the post-Deng era we will be interested in his impressions.

I would like to touch briefly on an issue, or should I say event, which looms large on the Australian calendar - Sydney 2000.

New Zealand will approach the Sydney Olympics with, if perhaps not quite the same fervour as Australia, a still considerable degree of anticipation.

This comes from the realisation that this is probably as close as we will get to an Olympics ourselves. For most New Zealand residents, Sydney is at least as accessible as for many Australians.

The Sydney Olympics will provide an opportunity to showcase not just Australia but also New Zealand as a tourist destination and as a good place to invest and do business. Both countries have already developed reputations in this regard, but a once in a generation opportunity like Sydney 2000 should be grabbed with both hands.

There is also of course the sporting advantage in having the games in the Southern Hemisphere in that our athletes are in season and on home territory.

It is undoubtedly "Australia's Olympics" but we intend to contribute to and perhaps even bask in a little of the glory.

In many ways the sports relationship between Australia and New Zealand encapsulates so many other aspects of the relationship.

The healthy and good natured rivalry which characterises most of our social contact goes up a level of intensity when we meet on the sports field. This competitive edge keeps us both sharp and world class in so many codes.

Trans-Tasman business competition under CER, serves in a similar way to ensure our international competitiveness in the trade sphere.

The rivalry across many codes but particularly in the likes of cricket and rugby, where I would argue we have world ascendancy covered between us, is probably as intense as between any two nations with such strong sporting traditions.

Being beaten by Australia in any code - rugby or croquet - is tough on the New Zealand psyche. Yet when Australia went up against England in the 1991 Rugby World Cup Final, there was probably no more than a handful of expatriate poms in New Zealand barracking for an English victory. Likewise, when Australia fell at the semi-final hurdle of the last World Cup in South Africa, almost the entire Australian supporting party stayed on in order to lend weight to the All Black cause.

For countries with such a focus upon sport, this says a lot about the relationship and, has parallels I believe, in so many other facets of that relationship.

Mr Bolger hit the nail on the head earlier this month when he said: "New Zealand and Australia are natural allies, probably as no two other countries can be". This stands true in every context I have covered today and I don't see the fundamentals of the relationship changing.