The NZ in Anzac and Rudd's challenge to this country

Friday is Anzac day: time to think about past war and the Australian connection, which for growing numbers of New Zealanders these days is very much about mates, sons, daughters and other relatives who have gone there to live and bring their kids up as Aussies.

The Australian vacuum’s impact on families and workforces here is a central talking point in the gathering election campaign. Don Brash made much of it in 2005 when the flow was a stream. Now it is a flood.

It is a flood because Australian wages and salaries are a third higher than ours. A waitress from Taumarunui can earn big bucks serving workers in Western Australia’s mining bonanza. Why stay here when a richer living is to be had for a $400 airfare?

Even recent immigrants scarper once they’ve got citizenship.

The political parties will argue about who is to blame.

Michael Cullen says, correctly, New Zealanders’ gross wages took their big fall relative to Australians’ in the 1990s, when the highly deregulated labour market incentivised employers to add workers rather than make productivity-enhancing investments while Australia’s heavily regulated labour market encouraged investment. National led governments here then.

Bill English says, correctly, tax changes in Cullen’s 2000s have lowered the net which New Zealanders get from their wages and salaries relative to Australians’ net. Cullen’s 39 per cent rate and his love of fiscal drag have pushed up personal tax as a proportion of incomes. Australia has offset fiscal drag and lowered some rates.

Now what?

As an economy, New Zealand is a state of Australasia. New Zealand economic policymakers’ options are constrained not just by a need for international competitiveness in an interconnected world but also by the choices Australian policymakers make.

Would Cullen have granted Peter Dunne’s wish for a 30 per cent company tax rate if Australia hadn’t gone there first?

This constraint is all the tighter for the fact that New Zealanders don’t see Australia as foreign. Moving there requires little more adjustment than did moving from Gisborne or Gore to Auckland in the 1960s.

So comparing the much higher proportion of graduates who leave New Zealand with the proportion who leave Australia is misleading. The real comparison is of the proportions of graduates from each country who leave Australasia.

New Zealand policymakers might be able to take actions which reduce New Zealanders’ exodus from Australasia but for as long as Australia remains hugely richer, in part thanks to the mining bonanza, there is not a lot they can do about the trans-Tasman transfers — just as there is not a lot Australian state policymakers can do about transfers from New South Wales to Western Australia and Queensland.

National will pretend it can stem the flood but actually there are no quick fixes; tax is a minor factor in the wage gap. New Zealand First’s desire for a lower dollar is a blueprint for an even bigger gap.

Given this poor-cousin economic status, it is small wonder that in Canberra New Zealand is an afterthought, albeit a warm and friendly afterthought.

And that is important because one thing policymakers here can do is try to make doing business in each others’ countries “seamless” and thus lift business opportunities: that is, they can push along the single economic market (SEM) process.

With Kevin Rudd’s advent, a lot is potentially on the SEM plate. Last month Rudd and the states’ premiers agreed a sweeping programme to review and fix internal regulatory variations. At his “2020 summit” of notables over the weekend, Rudd promised a “seamless national economy”.

Under a trans-Tasman agreement a year ago, when Australia initiates regulatory changes it is supposed to take New Zealand into account and give New Zealand the opportunity to join in the process and maybe influence the outcome.

But will there be space for that in Rudd’s reform stampede? Rudd’s style, imported from his days heading the Queensland Premier’s office, is to set goals and timetables to achieve them, with intermediate goals, then drive his ministers and officials hard.

Set aside the political risk to Rudd of falling behind his own timetable. If New Zealand is to be more than a warm afterthought in his helter-skelter drive for change, our senior ministers and officials will have to work very hard. Rudd does see the relationship through a strategic lens but he has more pressing strategic concerns.

Turn the lens east on to the no longer pacific South Pacific. Rudd has a subtler and more strategic take, particularly on Melanesia, than did John Howard, a perspective closer to New Zealand’s. He accepts Australia will need to emulate New Zealand’s temporary work visas for Melanesian workers and has struck an accord with Papua-New Guinea.

Will he assume New Zealand is alongside, its caveats fused into a fraternal frame? Or will he hear and heed those caveats? Will it be Anzac with the NZ voiced or muffled? Food for thought on Friday.