TRANSCRIPT

THE HON PETER COSTELLO MP Treasurer and HON DR MICHAEL CULLEN New Zealand Minister of Finance

JOINT PRESS CONFERENCE

Treasury Place, Melbourne
FRIDAY, 30 JANUARY 2004 12.00 noon E & OE SUBJECTS: Enhancing the Trans-Tasman Business Environment; framework for enhancing competition; advisory group on accounting standards; prudential regulation; tax information exchange; common currency; Latham’s speech gaffe TREASURER:

Today the Deputy Prime Minister and Minister for Finance of New Zealand, Dr Michael Cullen and I have had discussions on enhancing cooperation across the Tasman with the aim of developing a single economic market by harmonising business regulations between Australia and New Zealand.

Some of the important decisions that we have made today is a framework for enhancing competition – as you know there are from time to time takeover issues which involve competition questions on both sides of the Tasman - and we will be finalising terms of reference which will improve the coordination of authorisation processes and joint decision making in that area with the aim of closely harmonising our systems.

Now we are also announcing today an Advisory Group on Accounting Standards so that we can get a single set of accounting standards operating across the Tasman so that those companies which are doing business on both sides of the Tasman need not have separate accounting systems or standards. They can in fact have the one set of accounts.

In addition to that, we have announced a proposal for mutual recognition and harmonisation in prudential regulation of our banking systems. The four major Australian banks now have approximately 80 per cent of the New Zealand banking market with the recent acquisition of the National Bank of New Zealand by the ANZ. What that means is that the Australian banks have very significant positions in the New Zealand market and we would like to work towards a system where we recognise each other’s prudential regulation and harmonise so that banks which are conducting business on both sides of the Tasman reduce their transactional costs, have certainty and consumers in both countries are protected.

We have also progressed talks in relation to tax treaties. We have had discussions in relation to world trading organisations and we have re-emphasised the commitment that both our Governments develop the relationship that takes CER on towards further improvements for business with a common regulatory system promoting a single economic market.

Talks have been full, frank and very warm and I thank Dr Cullen for participating in them.

NZ MINISTER OF FINANCE:

Well just very briefly to reinforce what Treasurer Costello has said. For us of course, Australia is our most important economic partner both in trading and investment terms, and moving the CER relationship along to a higher level and moving towards a single economic market is important for the progress of both our countries.

So competition areas, accounting standards, bank deregulation, a range of issues are relevant to that, and what we have agreed today are a series of specific steps pointing us in that direction. A direction which is consistent with that overarching vision of strengthening that economic relationship between Australia and New Zealand.

As Peter said, they were very friendly, informal talks as well as formal talks. We look forward to continuing these talks on a regular basis.

TREASURER:

Now are there any questions on these talks first?

JOURNALIST:

The question of jointly negotiated tax information exchange. Is there an issue with people using banks in either country to avoid tax in either Australia or New Zealand?

TREASURER:

Well…

JOURNALIST:

What is it about?
TREASURER:

Well, let me say this. We think it is important that tax authorities cooperate so that if there is any evidence of Australians going outside Australia to New Zealand in order to seek a tax advantage that our authorities cooperate. In addition to that we recognise that both of our systems are pretty sophisticated and we have a level of cooperation. There are third countries which are known to be tax havens and together our countries are going to seek to negotiate with those third countries to get the same level of cooperation – tax treaties for the exchange of information. Our Government is very serious about getting cooperation from financial havens, to clamp down on tax evasion, financial laundering and in worst case scenarios, terrorist financing.

JOURNALIST:

Is there any evidence that this is being done…?

TREASURER:

I think there is evidence that some countries allow their jurisdictions to be used for tax avoidance purposes. Yes there is. And we are going to negotiate with those countries to get assistance and disclosure.

JOURNALIST:

What about the issue of currency, has that been discussed?

TREASURER:

Yes, we discussed the currency of our respective countries and as between our respective currencies from our point of view, as I have said earlier, the Australian dollar has appreciated 40 per cent over the last 12 months. That has put a brake on some of our export earners and that has made life more difficult for them. But a big part of the story, we think, is the US dollar story. That it is not just the Australian currency appreciating but the US dollar falling.

JOURNALIST:

What about the issue of a single currency – Australia and New Zealand?

TREASURER:

We, we, that wasn’t a large part of our talks today, no.

JOURNALIST:

Dr Cullen is this going to overcome, in the banking sector, this sort of David and Goliath relationship between the two nations?

NZ MINISTER OF FINANCE:

I am not quite sure you can overcome the David and Goliath relationship, and of course it is an unfortunate analogy if you think of the outcome of that particular struggle in this context. The reality is that the bulk of the banking system is owned from Australia now and therefore the Australian Prudential Regulation is actually crucial in terms of what happens within New Zealand. And we believe that we can make progress on Trans-Tasman recognition and harmonisation and obviously I will have to, when I get back home, talk through with the Reserve Bank of New Zealand, which has independent responsibilities in these areas, of how we can make that progress work.

JOURNALIST:

Can you give an indication of the time frame for getting these three major initiatives through? Are you talking one year, two years, three years? I mean, what sort of an acceleration is behind these initiatives?

NZ MINISTER OF FINANCE:

Well, I think we are looking very much in terms of about the middle of this year for a framework around the mutual recognition/harmonisation in the banking area. I would expect also a very similar timetable in terms of the terms of reference on the competition aspects. Accounting standards, I think we have already got a fairly well set timetable on that matter.

JOURNALIST:

And issues beyond this? To bring the single market further, I mean what’s the hierarchy of issues once you have knocked these ones off?

NZ MINISTER OF FINANCE:

It does sound like the New Zealand Herald, we are not going fast enough as usual. Let’s take it three steps at a time. I mean, these are all major steps we are announcing today. I think for the first time we have used language like a single economic market in this context. So there is a lot of work to be done, there are quite complex issues within some of these matters, and obviously as we move forward, and come to next year’s talks, no doubt other issues will start moving onto the agenda in this respect.

JOURNALIST:

The aviation market?

NZ MINISTER OF FINANCE:

I think one of the things that both Treasurer Costello and I are aware of is that the existing CER relationship sort of froze around the trade context for a long time, and we are both keen to see now a progressive movement over time, of course the strengthening of that and the deepening of that relationship.

JOURNALIST:

Would the aviation market be another area likely to come into play?

NZ MINISTER OF FINANCE:

You know very well Fran that as the shareholding Minister of Air New Zealand that I can’t comment on regulatory issues and (inaudible).

JOURNALIST:

I will put the question to Mr Costello.

TREASURER:

Look, we are looking at the business environment because of our particular portfolio responsibilities. But let us suppose we could have competition assessed in a unified way. Let us suppose we could have harmonisation in corporate regulation and let us suppose that our prudential regulation is done in a seamless way. That would be an enormous step forward. I think after that, we would start looking at harmonisation in some tax areas. We had a big breakthrough in triangular taxation last year. We will keep on working. I would like to see a situation where in terms of business regulation you had a seamless exchange between Australia and New Zealand and I think it would be better for both economies.

JOURNALIST:

Will this seamless exchange require a common currency?

TREASURER:

Look, different countries will have different views in relation to the currency and I will let Dr Cullen speak for New Zealand. Now our view is, and I have said this before in Australia, we are not looking at any new currency from the Australian point of view.

NZ MINISTER OF FINANCE:

And we don’t see the currency issue as one which is on the agenda at any foreseeable time in the future, you look at the European situation, vast progress made towards a single market before the issue of the Euro came up and then of course (inaudible) outside the Euro area (inaudible). So it is not an issue which consumes our attention but we think there are far bigger gains to be made in other areas of the single market approach.

JOURNALIST:

When you talk about the harmonisation of standards and working towards joint standards, Mr Costello pointed to the currency, that there was no intention, basically, to get rid of the Oz dollar in favour of such a union, so would we see a similar hierarchy of whose standards, and whose competition rules, or would there be a sort of clean slate approach?

TREASURER:

Look, I think wherever possible we ought to try and have unified standards. I don’t think the differences between the countries are so great that we need vastly varying. There may be local sensitivities and if there are in particular areas I don’t think we should stop the drive I think we should just move around those road blocks and start driving in the areas where we don’t have them. The point I would make is this; we are a country of some 20 million people, New Zealand is smaller than us, we are trading with countries which are much larger, if we can develop a common market that will give both of us some kind of economy of scale, then I think it is going to be in both our interests.

JOURNALIST:

Dr Cullen can I ask about the recent rise in the New Zealand dollar versus the Australian dollar, and what sort of impact that is having on your export markets?

NZ MINISTER OF FINANCE:

Well, it has been up down, up down, up down, up down, and up slightly yesterday, down again slightly this morning I think. We are still above what you regard as long run equilibrium rate against the Australian dollar. It is sitting around 87, 88 at the moment, I think it was just under 88 this morning, an equilibrium rate is probably a little bit lower than that. But it is within the range of normal expectations of fluctuations over time. We are probably getting much more stress obviously from the fall in the value of the US dollar and the same as Australia the rise therefore against the US dollar of the Kiwi and that is placing much more stress on exporters than the Australian cross rate is at this time. In part because the rise against the US on the input cost side is offsetting for many exporters to Australia, the fall in New Zealand dollar terms that they have had as a consequence. Generally speaking over the last year, we have gone up slightly against the Australian. We peaked at the time of the big drought and fires et cetera, we peaked at about 93 at that point. So over the last year the story has not been one of appreciation, much more one of fluctuations around the sort of 87, 88 cent mark.

TREASURER:

Okay, thank you very much.

JOURNALIST:

Treasurer, can I just ask you about the Federal Labor Party before we go?

TREASURER:

Oh, very quickly Brendan.

JOURNALIST:

What is your read on the direction that……

NZ MINISTER OF FINANCE:

I’ll stand well aside on this one.

TREASURER:

I think you had better, Dr Cullen.

JOURNALIST:

What is your read on the direction of the Conference under Mark Latham and also, what do you think of the Prime Minister’s sort of tougher stance taken this morning on radio against Mr Latham?

TREASURER:

Well, yesterday I released the draft speech which Mr Latham didn’t deliver. And the words which he couldn’t bring himself to say yesterday were these words: “I will solve problems without forcing up taxes, deficits or interest rates”. That is the pledge he couldn’t give. Those words were in his draft speech and they were taken out. In fact, we can actually tell you when they were taken out they were taken out on the 27th of January. Under the name of the user which went by the description of CREANS because that appears on the document. Now it is just totally disingenuous to say oh some poor staffer took some words out of my speech without my authority. The words were taken out on the Tuesday. The Tuesday morning on AM I pointed out that Labor’s so-called savings didn’t exist. And that morning they took out their pledge not to put up taxes, not to put up interest rates and not to go into deficit. Now the hidden text tells you the hidden agenda. All of these promises cannot be paid for unless Labor puts up taxes, interest rates and goes into deficit. The most important document at the ALP Conference is the document which was never read. Thank you very much.

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