Politics first hurdle to NZ-Aust merger - expert

Australian Prime Minister Julia Gillard. Photo / Getty Images

Politics and regulation are the biggest challenges to New Zealand and Australia forming a single economic market, a visiting business expert says.

Alex Malley, chief executive of Australasian accounting industry body CPA, will host Australian Prime Minister Julia Gillard today in New Zealand at a transtasman business lunch.

Gillard is in New Zealand on her first official visit and Prime Minister John Key has made it clear that a single market is at the top of his agenda.

Malley, whose organisation has 700 members in New Zealand and 130,000 worldwide, said the first challenge with closer economic relations was political, but he believed there was support for it at the moment. "Any debate against it would struggle. What is key to this is to engage business. I don't think business has become a big part of it yet."

Malley said the accounting profession was central to getting business to take a transtasman focus. Accounting was one of the few professions that had globalised through the international financial reporting standards.

He said another challenge would be regulations, which had been growing in complexity over the past few years in the wake of the global financial crisis.

"In any merger you want to be clear on what the rules are. At the moment Australia has got an enormous amount of red tape, particularly across state borders."

Malley said there was work to be done in Australia on regulation before the markets could be brought together.

"Australia has been about principles and practices around reporting, but because of the GFC [global financial crisis] there is now a culture of over-regulation."

The Australian markets regulator, the Australian Securities and Investments Commission, was in the process of employing more staff which would mean even more focus on regulation, he believed.

Malley said that was going to separate Australia even further from emerging markets where there was a lot less red tape and more time was spent on entrepreneurship.

"Of course we need a balance but no set of regulations is going to stop the isolated incidents that set off the reactions that led to GFC. To suggest that a whole new set of regulations is going to stop things happening is just nonsense."

Malley said one of the biggest advantages of a single market would be allowing New Zealand and Australia to tap the emerging markets in Asia from a stronger position.

"That is one area where we could potentially see benefits. The other thing about New Zealand is that it is an interestingly sized market. New Zealand has the ability to test and try different things quite quickly. Australia is of a size that means it doesn't have that flexibility."

Malley said if the two Governments were serious about a single market the first step would be putting together a timeline to help achieve set milestones.