Two countries diverging

Australia is dispatching troops, planes and ships for George Bush’s war. This country has offered the SAS, fullstop. Yet again the two nations are diverging, a now familiar fact in a relationship of critical importance to business.

There is another familiar fact: apart from to companies with business or subsidiaries here, New Zealand doesn’t seriously matter to Australia, except when things go wrong.

Then the veneer of politeness peels off. The ferocious abuse, including from leading politicians, that followed the Ansett debacle, is explicable only by an underlying contempt. A “mate” would have been — or at least tried to be — more understanding.

When the chips are down, Australia will see to its own interests ahead of joint interests.

Example: In January Australia launched a bid for a bilateral free trade treaty with the United States without telling New Zealand, even though this country was already seeking one and had for years been trying to interest Australia in a three-way deal or a five-way deal involving also Chile and Singapore.

Example: In February Helen Clark, under heavy pressure, signed away the right of New Zealanders to automatic permanent residence in Australia and with that automatic rights to welfare — despite rational arguments that the benefits to Australia of a supply of educated people who on average earn more and pay higher taxes than native Australians outweigh the costs of social assistance to those who don’t.

Example: Last month, as part of a tax deal with the United States, a rule change was proposed for the Australian Stock Exchange which would have the effect of stripping the top off the stock exchange here.

Example: Australia maintains a ban on New Zealand apples, even though science has long since discredited the excuse for it, fireblight.

Example: Despite brave words last year of progress in the offing on a range of policy matters that impede free business across the Tasman, principally disadvantaging businesses here, discussions proceed excruciatingly slowly. One exception — on partial treatment of imputation credits — has been held up until the election is over.

And that’s just one year’s haul.

This is the fate of the smaller in an unequal match. Australia matters far more to New Zealand than this country does to Australia.

All the ritual things are said in Canberra when protocol requires. There has also been a great deal of business-smoothing harmonisation of administration since CER, the free trade agreement, was signed in 1983. The Australia-New Zealand Food Safety Council both harmonises rules in a fraught area and saves money for both countries.

And occasionally this country does figure as an important market — for example in Gold Coast tourism, hence last month’s desperate fence-mending by Brisbane Lord Mayor Jim Soorley after the Labor Queensland Premier, Peter Beattie, had heaped ordure on New Zealanders over Ansett.

But otherwise Canberra’s economic preoccupations are almost entirely with the north-east and north (North America and Asia). We are a mature market, offering only modest prospects. In fact, one of Australia’s recurring strategic worries — and the original stimulus to negotiate CER — is that we will turn into an economic basket case.

Which means, as former Canadian Prime Minister Brian Mulroney said here in July of his country’s relationship with next-door United States, nearly all the running must be made from this side of the Tasman.

Ask a Mexican, whose economy, like Canada’s, is integrated into the United States, and you will get the same answer. Mexico has to push and push to get on the agenda in Washington.

It also means fitting in with the bigger partner. That means (a) doing things the Australians want, (b) not doing things the Australians don’t want and (c), when we want policies harmonised to smooth business interaction, doing most of the adjusting.

Commerce Minister Paul Swain has taken item (c) to heart, aligning competition law with Australia’s.

But governments have repeatedly transgressed (a) and (b) by reducing defence spending as a percentage of GDP during the 1990s and, since 1999, disbanding the air force fighter wing and canning a military upgrade of the Orion surveillance aircraft.

Moreover, even when New Zealand does make the running, this is not a once-for-all-time affair. The eager Mr Swain might well find himself wrong-footed and having to reverse on competition law if he is to stay aligned.

He will be fine if Kim Beazley’s Australian Labor party wins the election on November 10 because it does not intend major competition law change.

But John Howard’s governing Liberal-National coalition is promising to reshape its competition law so large entities can be formed, capable of playing in the big league in the international economy.

And what happens if, as expected, Mr Howard does not see out the whole of a third term and Treasurer Peter Costello steps up. Our Trade Minister, Jim Sutton, says Mr Howard “has proved to be a friend of New Zealand”, intervening with cabinet colleagues when things go wrong.

An analyst of trans-Tasman affairs agrees, putting it down partly to Mr Howard being a politician of the old school for whom “mates are mates” and grateful for New Zealand’s larger-than-expected troop contingent which has been crucial to Australia in East Timor and for Helen Clark’s bail-out over the Tampa refugees. “He makes room for New Zealand in his consideration and in his cabinet,” this analyst says.

But Mr Costello is a different generation and hard-nosed. He might turn out dismissive or unfriendly, as was Mr Howard’s Labor predecessor Paul Keating, who pulled the plug on the single air market in 1994 and forced Air New Zealand into Ansett. Mr Beazley, who was on the rough end of protests here as a hawkish Defence Minister in the 1980s, is also no friend of this country’s — though his shadow trade minister, Peter Cook, is.

Is there a lever? Mexico maybe points the way. “Latinos” are a large and growing proportion of the United States population and beginning to develop real clout. The bigger that clout, the greater the prospect Mexico can exploit it to get a hearing in Washington. At least, that’s how Mexicans see it.

Some support for that notion is in Samoa’s use, according to a foreign affairs analyst, of the large and growing local Samoan population here to good effect with our politicians. Mr Sutton calls the nearly half a million New Zealanders in Australia an “attached vote”, which he thinks politicians take note of and which therefore can “lubricate the conversation” with his counterparts.

Is that true? Many expatriate New Zealanders simply blend in, make Australia home and over time owe their primary loyalty to Australia. This goes for business executives, pop stars, movie makers, journalists and plain ordinary folks. We’re a feeder province.

Moreover, immigration is a source of friction. Around 30 per cent of long-term migrants to Australia from this country are not New Zealand-born. In other words, this country is a backdoor into Australia for Pacific islanders and Asians. Especially after Tampa that is an electoral problem.

Actually, it is not a problem for this election. The Tampa affair has enabled Mr Howard to occupy One Nation’s Pauline Hanson’s anti-migrant hunting ground. But that is only for the peculiar circumstances of this election.

For business what does the election hold?

There is no great difference on macroeconomic policy between the Coalition and Labor. The Coalition would like to cut taxes a little and Labor to spend a bit more (plus some minor fiddling with the GST). There is little room for either: Mr Howard’s shameless spending to claw back votes this year has left the budget skint.

The difference would be in micro policy.

A re-elected Howard government would push on with modest deregulation, including of the labour market, and even more modest asset sales, with the government’s remaining holding in Telstra high on the list but not urgent.

A Beazley government would emulate the Clark government and more. There would be no more micro reform or asset sales, which would leave micro policy roughly where Ms Clark has taken it here. But there is one important exception: Labor would abolish individual employment contracts and curtail workplace agreements. That would make the Australian labour market more regulated than here.

There is one other important difference. Both parties in Australia have pragmatic attitudes to genetic modifcation, untrammelled by the sensitivities to indigenous peoples and Greens that have tied the government here in political knots.