Relax. We are not going to fold into Australia. The two countries’ Productivity Commissions have let their Prime Ministers off the hook of deciding on a step-change or not. Our independent foreign policy is not at risk on that score.
Julia Gillard and John Key requested the commissions to jointly explore policy initiatives to mark the thirtieth anniversary of the 1983 signing of CER, the closer economic relationship agreement. Essentially in their draft report issued today the commissions say: stay on the same track.
Now hailed as the deepest such deal in the world, CER was New Zealand’s first serious step away from the “mixed-economy-in-one-country” model adopted in 1938, replacing fiddly, footling and frustrating yearly negotiations under a precursor agreement over what could be traded and whether to add an item to a laughable duty-free list.
By 1988 the fourth Labour government had frog-marched us from the paddling pool to the high dive. The result, the commissions’ charts say, has been to boost our economy but also westward migration.
CER is now focused tightly on detail and there are signs of frustration and uninterest in Canberra which is fishing in far bigger pools to its north and north-east. Trans-Tasman trade is near free, except for differences in laws and taxes, particularly affecting services and investment, and rules of origin — minimum levels of New Zealand content — to defend some protected Australian products from backdoor competition through this country.
For a decade ministers have focused on SEM, the single economic market, which aims to make doing business in each other’s country closely similar to doing business at home. Essentially, that is also the Productivity Commission’s focus. The thirtieth will be celebrated with small beer, not big bubbly.
But there is a lot of small beer on the bar.
Under “unfinished business” the commissions focus on delays in fixing business law, occupational licensing, Australia’s implementation of the agreement on portability of retirement savings so eastward migrants can transfer their loot here, getting the joint Therapeutic Products Agency up and running to regulate medicines and equipment (with which National played politics in opposition) and implementing last year’s protocol to allow unimpeded investment up to a certain level (the commissions would like investment fully freed).
The commissions have a range of “proposed initiatives”. One is to remove rules of origin by cutting the for tariffs of 5 per cent or less on third-country imports and then each country reducing all tariffs to that rules-free zone. Another is to “continue to develop common systems and processes for quarantine and biosecurity”, which might twitch a few nerves on this side.
More work is needed to get a genuine free aviation market and prod the Australians into full adoption of SmartGate, get a common tourist visa and free up trans-Tasman and coastal shipping. Mobile phone ripoffs need fixing. Westward job-seekers should be warned they won’t get social security and health benefits and there should be “alternative pathways” to them getting full citizenship.
The commissions have dumped into the “further investigation” box business’s biggest hope, mutual recognition of dividend imputation, despite a report showing gains to both economies. Australia won’t wear the tax revenue loss. The social security, health and superannuation access issues need real study (not least because some expats who haven’t paid tax here return for free health care and the pension).
But no step-change. Some have pushed a customs union but the commissions say that is a step too far. They say that follows from ruling out political union which also takes out a common currency, the perennial media fixation.
So the Prime Ministers can relax. And, when ministers get over their mild bout of Americaphilia, this country can get on with the independent foreign policy that got us the China trade deal — when the foreign service is put back together.
* Paula Bennett last week took the next step down the actuarial/investment route which is arguably the Key government’s most important policy initiative: she published a world-first actuarial calculation of future benefit costs on unchanged policies. Used well, it could sharpen policy thinking and get better results for people (as distinct from the fiscal bottom line).
Labour and the Greens attacked it, in part because Bennett had earlier laid more stick on beneficiaries to get kids to pre-school and school. But Labour has not wholly rejected it: it fits with, and justifies, the half-developed 2007 “child-centred” policy which Jacinda Ardern is reworking. Intercepting bad very early childhood starts yields the highest return on investment.
So far, ministers won’t go there, except for the “most vulnerable”, which misses the large numbers disadvantaged by general poverty and parental deficiencies. “Investment” is good policy. “Stick” is better politics.