Bill English Speech to Trans Tasman Business Circle Luncheon
Sydney, Australia

“The future of the trans-Tasman relationship”

Recently a New Zealand enterprise struck at the very heart of Australian competitive advantage and I was there to see it.

At the NRL final, an Australian official told me the Warriors were the best thing that had happened to league for a long time because the Warriors had guts and style.

I gracefully accepted the first sporting compliment I have heard from an Australian in my life.

Then I realised the Aussies were almost as disappointed as I was when the relentless Roosters rolled over the Warriors, in a triumph of structure over style.

This event brought together fans from the suburbs of Sydney and Auckland, and in our box, the Prime Minister’s of both countries, political leaders and large corporates operating in and sponsoring major sports in both countries

In the warm glow of corporate box affinity it would be easy to believe that Australia and New Zealand had so much in common that the rest didn’t matter.

This sense of commonality is underpinned by the ANZAC story, the closeness of blood brothers.

It’s underpinned continuously by 75,000 seats a week on trans-Tasman flights.

But sporting clichés and historical myths aren’t enough for New Zealand and Australia to maintain a robust strategic relationship.

The Bali bombing has had a huge impact here in Australia, much greater than in New Zealand

Many New Zealanders have felt from a distance the trauma of that event in this country. Speaking simply as one of them can I extend our condolences and support to the families of victims and to victims still recovering from injury.

Can I also thank the Australian people for picking our people out of the ashes, taking them to safety and caring for them in their time of need.

It is vital for New Zealand to understand the substantial impact the Bali bombing has had on Australia’s thinking about internal security, its role in the Asia Pacific region, and its contribution to the War on terror.

Our interests also lie in the Asian region with a strong Muslim presence and we share with Australia a common interest in securing the future of our children by helping moderate Muslim tendencies to succeed over extreme tendencies.

And that is the main reason we are here - to take another small step to understanding the Australian point of view on a whole range of domestic and strategic issues, rather than presuming we know it, just because we are neighbours.

It is a simple fact that Australia is our neighbour, our largest trading partner, our most important ally and a trusted friend.

Australia will continue to have an important impact on our economy, our defence and even our demographics

Australia can imagine a future where New Zealand isn’t that important but New Zealand can’t.

Let’s start by examining the economic impact of Australia on New Zealand.

Both countries are reaping the benefits of 15 years of economic change. Opinions differ over issues like the pace of reform and monetary policy, but in recent years our economies looked resilient and absorbed currency depreciations, droughts and an Asian downturn.

This is how open competitive economies should perform.

The New Zealand Treasury quotes a study of our economies which show Australia became an open competitive economy some 20 years before New Zealand.

The net result is living standards in Australia are significantly higher than in New Zealand. Our per capita GDP is about $14,000 USD, yours about $20,000. That amounts to about $250 extra per week for an average Australian worker. That’s a lot.

We want to close that gap. As our populations age we will be competing for skilled people like health professionals even more than now. New Zealand’s reputation for lifestyle will not overcome the economic gravity that tugs at aspirational Kiwis from across the Tasman.

The gap exists despite the foresight of CER, 20 years old next year

CER was a model for accelerated trade. It still works. In the last 10 years trans Tasman trade has grown at 9% per annum, faster than the trade of either country with the rest of the world.

There have been continuing efforts to further integration, the latest an agreement in 2002 to harmonise business law.

I don’t regard harmonsiation as inevitable or necessary. We shouldn’t push it too hard. Your rules don’t always fit our small market. Some New Zealand markets are brutally competitive - others can be easy prey to monopoly behaviour. We need to be selective about where we push.

We will be pushed along together by other forces like continued globalisation of accounting and securities law probably further than CER on its own account

The next step in growing the business relationship is for New Zealand firms to get a better understanding of how to succeed not just in selling to this market, but operating in it. Some do succeed, too many don’t.

As a start, I believe our two Governments should be able to resolve the triangular tax issue that has dogged New Zealanders and Australians investing in each other’s economy. Our business communities should expect Government to have enough political will to sort this issue out in the very near future.

This would send a political signal that we were serious about making it easier to do business between us.

It would also signal a political desire to address a small number of long-standing issues between our countries which have inhibited the progress of CER.

A practical way to break these deadlocks would be to hold a Prime Ministerial Forum to acknowledge the 20th anniversary of CER in 2003. A Prime Ministerial Forum would be good for both countries and would give real momentum to push harder issues like biosecurity and non-trade barriers.

One business issue that is commanding attention on both sides of the Tasman - though probably a little more on our side - is the issue of Qantas buying into Air New Zealand.

This deal seems to be regarded as a foregone conclusion here. In New Zealand the Government has not taken a position. The competition authorities will have to give their opinion but my party believes this deal will reduce competition and make it hard for new entrants. It ultimately will leave the New Zealand taxpayer carrying the risk of a meaningless stake in a company operating in a volatile industry.

Many Kiwis just can’t imagine Qantas using its influence in the interests of our travellers, no matter what the rules are. You can call it a healthy respect for Australian business methods.

I want to step back now and have a look at the wider relationship between Australia and New Zealand.

I place a great deal of importance on a friendly, integrated relationship with Australia. New Zealand has developed a mindset that different aspects of international relationships can be treated as separate and discrete - different boxes for different issues and none connected to the other

This tendency developed in the late 1980s as New Zealand dealt with the effects of passing anti-nuclear legislation on defence and economic relationships with our Australia and the US

New Zealand like Australia has nuances in its national interests on trade, defence, foreign affairs, welfare, immigration, security and intelligence. The pieces don’t always fit, but they are part of the same jigsaw.

But we should acknowledge the connections between these issues.

Because that’s how other countries see it.

In the late 90s, New Zealand and Australia were involved together in a 5-way free trade process with America. We were both very near the top of the list.

That’s changed now. Australia is still near the top - listed as high priority in the US 10 point Trade Action Agenda detailed by Trade Ambassador Robert Zoellick recently. New Zealand is not.

The current New Zealand Government has performed reasonably well on free trade issues - often in the face of opposition from their coalition partners and within their own caucus and party.

The US has now made a clear linkage between New Zealand’s status as a friend, not an ally, and our low priority on the FTA list.

We want an FTA with the US. We will have to consider the implications of the new US view.

From New Zealand it looks like Australia will face some difficult issues completing an FTA with the US whenever it starts. A US CER agreement was the ideal but is now unlikely. It’s vital for NZ that we do achieve an FTA, including agriculture, if we are to grow our economy at least as fast as Australia.

I want to turn now to defence.

I have already referred to Bali and its significance in Australia. Just as New Zealand needs to understand that significance, so we need to understand better Australia’s strategic view, and its defence policy.

Recent decisions to scrap our air combat wing, to not upgrade our Orions and to move to a two-frigate navy have earned criticism here. Greg Sheridan, writing in “The Australian” said "Kiwis are taking their allies for a ride: New Zealand should be condemned for abrogating its defence responsibilities".

"Cancellation of the F16s will also re- establish Wellington's reputation as an utterly unreliable, flakey player in security, with no strategic compass, no grip, no sense of responsibility."

This doesn’t convey respect, and it wouldn’t be hard to find an equally robust New Zealand view of Australia.

We need to build more mutual respect, deeper then the diplomatic official language.

Hugh White, of the Australian Strategic Policy Institute gives a different point of view

In a speech in New Zealand, he recently pointed out the obvious - that we can overstress our closeness when in fact our size and geography mean there are real differences.

So we should expect to see differences in defence policies. New Zealand is in effect shielded by Australia. New Zealand’ can afford its cheaper defence policy only because Australia carries so much of the regional burden. I can’t imagine an Australian using words commonly used in New Zealand; for instance that New Zealand occupies “an incredibly benign strategic environment”

This assumption continues to operate in a post-September 11 and post-Bali world although New Zealanders are more concerned than they were about the danger of terrorist attack at home.

Australians see this as a narrow definition of our strategic environment. They feel our world and our region is a more dangerous place since September 11.

It also seems to Australians that New Zealand assumes someone else will back us up.

Now, it is likely that someone will - and it will probably be Australia,

New Zealand needs to understand this point of view, that we might covered by insurance but not paying the full premium.

It’s for that reason that my party advocates a closer defence relationship with Australia and commitment to a credible contribution to regional defence. We should take account of Australia’s role, and its point of view even if we our location means we don’t have to.

New Zealand’s contribution to East Timor shows we can make a credible commitment that reflects our common strategic interests.

In the War on Terrorism, we are a single strategic entity with Australia. A threat to one is a threat to both. An attack on one is an attack on both.

If something serious happened in Australia, like a terrorist bombing - and I hope it never happens - every New Zealander would want us there and supporting you strongly.

I agree with Hugh White who says that we can have a common view on significant issues in our region.

He argues that Australia and New Zealand had broadly similar views on the three key issues in our region, namely:

· A constructive relationship between the US and China

· the importance of democracy working in Indonesia, and

· the need to support island states which are currently struggling.

There are some differences in the sense that Australia’s emphasis is likely to be more on Indonesia, while we will tend to focus on the Pacific Islands.

It is certainly in New Zealand’s interest to understand more about Australia than the way the NRL finds its grand finalists. Our economic strategic and demographic interests could diverge, or we could work our together.

We both need to get under the cliché’s and the assumptions if we want to achieve closer co-operation.

With better understanding and mutual respect Australia and New Zealand could work more closely together than we do now on matters which will preoccupy this part of the world for the next few decades.

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