KEY POINTS:
As if Christmas and New Year weren't enough to organise, in just a couple of weeks New Zealand has a silver anniversary to celebrate.
On January 1, it will be 25 years since the Closer Economic Relations agreement with Australia came into effect. As we will no doubt be reminded more than once over the next year, CER was ahead of its time. Way back in 1983, few - if any - other countries had such a comprehensive free trade agreement.
A quarter of a century on, however, such deals are no longer uncommon. Australia now has a free trade agreement with the United States that in some respects is more favourable than its agreement with New Zealand. With the Doha round of world trade talks looking like a dodo, regional trade deals are de rigeur.
Kiwis glancing at our national mantelpiece can't help noticing that the silver is getting a little tarnished. And many of us are becoming increasingly suspicious that the Aussies might even have flogged some of it.
Not that we're blaming John Howard. In the history of transtasman relations, Howard and Helen Clark were more like Kermit and Miss Piggy than Punch and Judy. But with Howard, it was a case of "the Mandarin speaks". His successor, Kevin Rudd, speaks Mandarin - and that's got some people worried.
New Zealand could also be heading for a change of political direction next year. What might this new era mean for businesses simply wanting to flog their goods and services to a combined market of 25 million people?
New Zealand Post chief executive John Allen is likely to be one of those who will be reaching for a polishing cloth come New Year's Day. As co-chairman of the Australia New Zealand Leadership Forum - a business-led initiative that includes politicians, business leaders, academics and public servants - the former lawyer is well practised at glorifying the ghosts of Gallipoli and enthusing about the potential of the ties that could bind us even closer together.
In July, Allen was invited by the University of Auckland's business school to give his thoughts on how we might keep the Anzac spirit alive. While he applauded the work being done by officials to develop a single economic market, he admitted that such good work risked being wasted because most businesses were "extraordinarily timid" when it came to exporting.
Since 1983, New Zealand's exports to Australia have increased at a compound annual growth rate of 8.9 per cent. Despite that, we have lost market share, as over the same period Australia's imports from the rest of the world have increased at an even greater rate. And the situation has worsened considerably in recent years.
One of the problems, Allen believes, is that too many Kiwi businesses, and their boards of directors, are "extraordinarily risk-averse". They are far too cognisant of the experiences of The Warehouse, Telecom and Air New Zealand in Australia, and possibly not even aware of the success of companies like Kordia, EziBuy, Datacom, Freightways and Mainfreight.
Many of our businesspeople seem ambivalent about growth. But the main issue, he believes, is that most simply don't see the opportunity.
"In my mind, for us to take advantage of those opportunities, that requires us to do something that we're not really good at, which is taking a strategic or long-term view. Far too often, we think only in the short term, and we're polarised by responding to immediate issues. We're not prepared to compromise to deliver a long-term sustainable benefit to this country."
The single economic market, announced four years ago as a fresh goal to work towards, is an example of that sort of compromise, Allen believes.
To help prove that the public is not as averse to the idea as politicians seem to think, in April the forum commissioned the New Zealand Institute and Australian thinktank the Lowy Institute, to survey the attitudes of Australians and New Zealanders towards each other. The results, compiled by UMR Research from interviews with 1000 people in Australia and 750 in New Zealand, were overwhelmingly positive and appeared to show we have remarkably similar attitudes.
The only differences were that Kiwis were slightly more wary of Australia as a competitor, were more concerned about the brain drain and did not view Australian ownership of New Zealand companies particularly favourably.
So far, so predictable. But somewhat surprisingly, on each side of the Tasman exactly 75 per cent of those surveyed expressed a view that we have either stayed much the same, or become more similar, during the past decade.
And far more Kiwis than Australians said economic integration had not gone far enough. Just over 40 per cent of the Australians surveyed were keen to see a common currency. In New Zealand, the figure was 49 per cent - well up from 20 per cent seven years ago.
According to Allen, a single market doesn't mean we can't still capitalise on our differences. Back in July, he suggested New Zealand make the most of the fact that, unlike Australia, it had ratified the Kyoto Protocol and had not backed America's stance on Iraq.
Rudd's emphatic victory has all but erased those particular differences, which ironically could make it harder for New Zealand to get noticed on the world stage.
However, at least one Australian politician believes there is still a lot of potential for co-operation, particularly on environmental issues.
Bob Carr, the former New South Wales premier who fancies himself as an Australian version of Al Gore, visited New Zealand last month to speak at the Trans Tasman Business Forum organised by AUT University.
According to Carr, Rudd will be out to prove that Labor is just as hard-nosed fiscally as the Liberals. It will not retard tariff reductions and is unlikely to restrict private equity. The winners, he predicts, will be businesses with investments in renewables, those looking at public-private partnership opportunities in desalination, and the funds management sector.
Rudd's victory will also make it easier to align an emissions trading scheme across the two countries, says Carr, and for us to negotiate Kyoto Mark II together, where we will have a common interest in elevating forestry and waste treatment issues. It bodes well for the NZX's plans for a carbon exchange, he believes, and opens up opportunities for New Zealand and Australia to develop joint ventures to invest in China and other developing countries to clock up Kyoto credits.
Carr is less enthusiastic about the proposal for a single market. "It's better to have CER than not to have it," he says. But such agreements are always "a bit of an act of faith. It's hard to identify how Australia has benefited from its FTA with the US, for example".
Allen is not the only prominent business leader pushing the issue. In his farewell speech last year, former Fletcher Building chief Ralph Waters suggested there was "much to be gained" from a much closer relationship with Australia.
"Those that matter acknowledge this but, frankly, give it little impetus," he lamented. "It has ever been thus and New Zealand - not Australia - is the loser."
Waters described CER as "a very meaningful advance" but was pessimistic about further progress. "More's the pity, as I have firmly come to the view that a single Australian financial market, including a common currency, would be strongly beneficial to New Zealand."
Allen believes a common currency - most likely the Australian dollar or possibly the greenback or the euro - is inevitable as the world becomes more globalised.
Unsurprisingly, that's not the view of Reserve Bank Governor Alan Bollard, who remains concerned about the potential distortionary effects such a move could have. One problem, Bollard points out, is that Australia is likely to come under increasing inflationary pressure, with its resources boom showing no sign of busting any time soon. While New Zealand's dairy industry is thriving for similar reasons, our economy is much more vulnerable to the vagaries of the housing market and we can't guarantee that the two economies will always be in step.
And interestingly, Waters' successor, Jonathan Ling, does not seem to hold the same view as his predecessor. Ling told the Trans Tasman Business Forum he was sceptical about the benefits of a common currency, noting that for most large companies, translating profits was something that was done only on paper and could in any case be smoothed by hedging.
Nor did Ling seem particularly keen to see our stock exchanges merge. The problem, he noted, was that even large companies like Fletcher Building would become much smaller fish in a much bigger pond. And even more head offices would inevitably move west.
Meanwhile, another senior lawyer has publicly questioned the value of a single market.
Earlier this year in The Business, Chapman Tripp partner Nick Wells outlined the case against putting too many of our eggs in the Australian basket, in an article titled "No Bowing Down to Oz". His basic premise was "why follow, when you can lead?".
Wells followed that up with a paper that questioned whether a single market would in fact achieve its aim of raising our combined GDP to the level of Asean nations, and whether the cost of pursuing that might be too high for New Zealand.
Adding another 4 million people to Australia's already tiny population (in global terms) of 21 million is not, in fact, going to greatly boost our international competitiveness, he argues.
Given that New Zealand is already just a branch office for many Australian investors, Wells fails to see how it would help us to become the weaker party in a single market where our economy would be outranked by at least three Australian states.
While he sees KiwiSaver and a common corporate tax rate as helpful, he does not want to see New Zealand lose some advantages we already have. This year, Forbes ranked New Zealand fifth in the world as an attractive investment destination, while Australia was eleventh. And last year the World Bank ranked us second in the world for ease of doing business, while Australia was eighth.
Then, of course, there is the matter of our cheap labour, with wages on average a third lower than in Australia. It's not exactly something to be proud of, but it's questionable whether a single market would do much to improve the situation.
"As a lawyer practising on both sides of the Tasman, I firmly believe New Zealand's pragmatic and less bureaucratic approach to regulation should be protected and enhanced," says Wells.
Any single market that favours Australian policies - and let's face it, we're not the ones who are going to be calling the shots - would remove that competitive advantage, he says.
Wells is a member of the New Zealand Institute. That's not entirely immaterial, as it appears the debate over the transtasman relationship is lining up as the old guard versus the new guard. While the Business Roundtable has generally been in favour of stronger ties with Australia, the New Zealand Institute seems lukewarm at best on the idea of a single market.
The institute's chief executive, David Skilling, published his thoughts on the issue in March. In a nutshell, the report urged New Zealand businesses to boost their exports to Australia, but also to be more ambitious than that and not ignore the rest of the world.
Most businesses seem to be either complacent or fatalistic about New Zealand's future, says Skilling. The problem with both those views is you end up doing nothing.
While Skilling is not overly pessimistic, it does worry him that New Zealanders' incomes are slipping behind the rest of the developed world and that we are losing so many of our best and brightest to other countries.
It pays to remember that New Zealand is to Australia what Fiji is to New Zealand. We've got to be careful, he warns, that we don't end up as "Fiji with snow".
"It's not just how we grow our transtasman relationship, it's how we partner with Australia," he told the business forum. "One of the opportunities is for Australia and New Zealand to add value together. I'm not so much interested from the perspective of how we stimulate exports and investment between Australia and New Zealand - I'm interested in whether it will help New Zealand to better compete beyond Australia."
Pumpkin Patch chairman Greg Muir could not agree more.
"Sure, Australia is nice and close and you feel you understand the market because it's a country with a language and culture similar to ours but, at the end of the day, it's only 20 million people. The US is closer to 300 million people," he enthuses.
Muir doesn't believe New Zealand businesses should ignore Australia but he would also like to see more of them explore other markets, particularly in Asia, which now have relatively large middle classes.
"I definitely think for the longevity of New Zealand we want to retain a distinct financial market. My personal opinion is if our stockmarket and basic financial markets were amalgamated with Australia, you'd just see the capital markets almost disappear."
While Skilling agrees the discussions going on between officials on both sides of the Tasman are "broadly positive", none, he believes, are radical enough to make much difference.
While a senior government official predicts we will have a common border with Australia in 10 years, there are still some particularly tricky issues to be worked through, such as our rather different immigration policies, our radically different superannuation schemes, and our completely different personal tax rates.
That said, Skilling could see the advantages of a transtasman agency to regulate therapeutic products. One of the arguments in favour of a joint agency was to present a united - and therefore more powerful - front internationally.
"It strikes me that the arguments weren't just about harmonisation with Australia but about a small country competing in global markets."
In fact, Labour's failure to sell the issue at a political level is seen by some as a body blow to CER - let alone a single market - along with our Government's rejection of Australia's system of mandatory country-of-origin labelling on imported food.
As Foreign Affairs and Trade head Simon Murdoch has noted: "Goodwill will take you so far but, at the end of the day, as is the case with most of the world, countries are judged, like people, more on what they do than what they say."
Click Clack group chief executive John Heng can certainly understand the Australians' point of view.
According to Heng, it's time for New Zealand to "either sell out or get out". Australia's constitution still includes New Zealand as a potential seventh state, he notes. "Maybe we should think about it from that point of view."
Heng is sceptical that CER has ultimately achieved much at all.
"It's all very well for governments to blow their trumpets and for Foreign Affairs to say 'haven't we done well' but, underneath, I don't think so. Apart from taking some duty out and getting some harmonisation, we've never got to where we should have."
In fact, in some areas, such as welfare and border control, Australia has withdrawn privileges previously available to Kiwis, Heng notes. But the real problem, he believes, is that the two countries are "planets away" politically.
As he sees it, Australia is now benefiting from some hard decisions made 20 years ago, such as compulsory superannuation funded by employers. In Australia, he says, his employees don't mind putting in long hours because they can see the huge benefit they will get when they retire. In contrast, he claims, many of his staff in New Zealand average only a 34-hour week, because they know they will get a top-up from the Government in the form of Working for Families.
Heng doesn't mind the worker-friendly labour laws in Australia, because national agreements keep things simple, and workers recognise the 9 per cent extra employers are putting towards their super, he says.
"One of the things about a common economic market is you've got to have common economic fundamentals and we don't have that. We never made that decision early enough in our history to be part of Australia and therefore I don't think we can catch up now."
He is only half joking when he says we could do worse than observe the reunification of Germany.
"I would say we're not that far away from where East Germany and West Germany were. I spent some time in East Germany in the early '70s at the height of the Cold War and when I start to see some of the things here like the Electoral Finance Bill, it's not that much different," he chuckles.
Some might wonder why Heng remains in New Zealand. The answer, he says, is family. And the old cliche - that New Zealand is still a great place to bring up kids. But at the age of 65, he admits he's disillusioned.
"I spend a lot of time working with different organisations, voluntary and so on, to try to get people spurred into debate and thinking and try and get things moving, but sometimes it's really banging your head against a brick wall.
"It's a 30-year debate that's going nowhere - that's exactly how I feel about it. We've missed all these opportunities because no one's been prepared to compromise. It's always been a nationalistic point of view. You get idiots like Winston Peters telling Alexander Downer that our apples have got to go in. If there had been a bit of give and take 30 years ago, we wouldn't be there now. We should be doing things together, rather than against each other."
Christchurch-based academic Philippa Mein Smith wouldn't put it quite like that, but she does believe that we can have our pavlova and eat it too.
Mein Smith is a historian who is so passionate about our relationship with Australia that together with Peter Hempenstall, she recently founded the NZAC (New Zealand Australia Connections) research centre at Canterbury University. She is working on a book, Remaking the Tasman World, due out next year.
She observes that the debate appears to be dividing into two camps: those in favour of a single market and those who believe we'd be better off concentrating on the rest of the world.
Most businesspeople she's seen seem to be joining the latter camp. However, the only reason they can afford to be so sceptical is because of the close integration that already exists, argues Mein Smith.
"We're much closer than 20 years ago, but the question is where to from here, and it could go either way. This is where strong leadership is essential from both governments."
Mein Smith is not one of those who's worried that Rudd could be considerably cooler towards New Zealand than Howard. "I'm expecting for the moment it will business as usual in that respect but, as always, New Zealand needs to be vigilant."
As for National leader John Key, "what I really hope is that he has a strategy", she says. "We do need a strategy for dealing with Australia. I think it's really quite counterproductive if people are saying, 'It's too difficult to deal with Australia, let's move on'." RATHER than fear Australia as the runaway train that might plough into the jigger that is New Zealand, says Mein Smith, we should instead see our neighbour as the locomotive that could help pull our carriage along. For example, we could both work with the European Union in dealing with Asia.
"We need to keep to the forefront of our minds that Australia is our most important relationship and that we need to take care to nurture that. Okay, we're different - we're together and apart - but what else are we going to do? Why join with America when the dollar is going down?"
There's no reason we can't manage a double act where we sometimes behave like a state of Australia and sometimes as a sovereign nation, she says. But in her opinion, a major breakthrough is unlikely unless Australia changes its federal system.
CER was strongly supported by Australia partly because its Prime Minister at the time, Malcolm Fraser, hoped it would help sort out the state system of preferences, she notes.
"We have a kind of consultancy role in helping Australia deal with their states. That's where we're useful to them. If we're going to deal with the rest of the world and that's easier, fine - but I don't think we should dismiss Australia. It's still important to maintain close and warm links with our historical partner."
While Mein Smith does detect a backlash from business, scepticism about the relationship is not as deep as it was in the late '90s, she believes.
"I think there were very important moves made in 2002, 2003 and 2006. There's always an inevitable moving forward and moving back ... so I'm prepared for another round of scepticism, but the bottom line is we still have to get on."
After all, Australia and New Zealand are family, she observes.
You don't always love your family - and in fact families are often harder work than friends.
But 25 years of marriage is a rare thing these days. In this age of political promiscuity, a silver anniversary is still something to be proud of.
