Compete or collaborate: the trans-Tasman question

Compete or collaborate: that is the Australian question. Our government’s goal of catching up by 2025 says “compete”. Much talk among the trans-Tasman elites says “collaborate”.

History might turn out to be on the side of collaboration. That was the message to two forums last week.

How this turns out matters a lot less to Australia than New Zealand. That is a factor of size. In what many, including Australian Prime Minister Julia Gillard, call a “family”, New Zealand is the smaller sibling, always feeling it must push for its share of the food at the table, to use Bill English’s analogy drawn from his own family.

But if a family is to operate well, smaller siblings must not languish. That drove Australia’s push for the closer economic relations (CER) free trade agreement in 1983 and now for a single economic market (SEM).

Australia did not, and does not, want an economically weak neighbour on its eastern flank. It sought CER to bind New Zealand in to its stronger economy. SEM, in which Australia only really got interested in the mid-2000s, has the same motivation for Australia.

In short, Australia sees the trans-Tasman relationship in security terms: both economic and general security. It wants its neighbourhood secure.

That, critically, includes the Pacific islands. The Australian government characterises the region as a problem, a source of destabilisation. As China has pushed into the region, beefing up aid to figures that match New Zealand’s, Australia’s security worries have climbed. Internal ructions in Fiji, the Solomons, Bougainville jangle nerves in Canberra.

Moreover, Canberra’s security worry curves round to Indonesia which is large and uncomfortably close to Australia’s sparsely populated parts and has at times threatened the peace.

New Zealand’s nerves jangle for a very different reason: a 2010s version of the 1960s Gisborne-to-Auckland syndrome. Forty years ago Auckland’s higher wages sucked talent and youth out of the provinces. Now Australia’s higher wages suck people west out of this province of Australasia. Just as families were once split between the provinces and Auckland, now they are split across the Tasman.

So for a decade politicians here have pretended to voters they have the answer to the splitting of families between the two economies. In 2008 John Key set a cloud-nine goal with Rodney Hide of catching Australia’s wages by 2025.

There is a big difference between the 2010s and the 1960s. In the 1960s one government and one fiscal system covered both stay-at-homes and fortune-seekers. Now the movement is between two national governments and two national fiscal systems.

The 2010s fortune seekers’ taxes do not educate or heal New Zealanders or build roads here or fund superannuation.

There are two ways out of this trap. One is to join up with Australia and get a slice of the fiscal goodies which are massively swelled by taxes from the resources bonanza. The other is to compete for foreign and Australian investment to build the economy slowly back to something nearer the equality of earning-power of 40 years ago. That was English’s awkward outburst on Friday at the seventh meeting of the Australia New Zealand Leadership Forum (ANZLF).

English’s focus highlights the two countries’ different interest in the ANZLF.

For Australia, the interest is more political — security-oriented — than business. The business contingent has been consistently thin at the forum but Australian politicians have paid the forum real attention from time to time, most notably in Sydney in 2009.

For New Zealand the interest is more business than political. The politicians are there to buttress business. That reflects the original primary aim of the forum: to build a business constituency on both sides for the relationship and for policies and government action that embed the relationship.

In fact, the forums have had some effect in prodding bureaucrats and politicians towards faster action on SEM. SEM is intended to make doing business in the other country as easy as doing business at home, that is, to make a single Australasian economy.

Another dimension occasionally peeps through the curtains: joint response to international opportunities and challenges. The National party has kept the curtains shut on a joint therapeutic goods agency the Australians hoped might set standards for south-east Asia. Australia won’t budge on tax.

But go out 20 or 30 years, as Australian strategic seer Hugh White did at an academic forum on Thursday on how the two countries might respond to a big, rich, super-strong China. For all Australia’s middle-power pretensions (which it can manage for now only under the United States’ wing), in a China-centric Asia it will be not a lot bigger than New Zealand. Add India, which Lowy Institute director Michael Wesley argued to both forums will also be big in time, and both countries look tiny.

Compete of collaborate? In 20 years that question might sound plain quaint.