Fran O'Sullivan: Howard's way offers hope

By FRAN O'SULLIVAN


Prime Minister John Howard's election victory is a huge fillip for New Zealand Prime Minister Helen Clark.

Howard's victory shows that longevity as Prime Minister is no deterrent to re-election, provided the economy is humming.

Clark must be luxuriating in Howard's success. Like Howard she also presides over a strong economy. Like Howard she faces an unproven opposition leader.

But that is about as far as Clark should go in any (even private) orgy of self-congratulation before getting on the telephone and assuring Howard her Government still wants to form a single transtasman market.

The single market proposal - which Clark and her Finance Minister Michael Cullen have put their imprimatur on - is in the balance, with two of three major single market agenda issues in trouble: banking regulation and competition policy.

After years of New Zealand whinging at Australia's propensity to ignore this country while it cosies up to the rest of the world, Clark's Government made a huge breakthrough when Howard and his key ministers made the single market agenda a policy priority this year.

Clark and Cullen argued that a single Australasian market is a necessary defensive move to ensure New Zealand does not slip into irrelevance.

But there has been precious little public leadership on the issue recently.

As the Business Herald reveals today, New Zealand companies and business organisations, which responded to an Australian Productivity Commission study, are unenthusiastic about proposals for common rules in the competition arena.

This is in sharp contrast to the Herald's Mood of the Boardroom survey this year where 86 per cent of the company chief executives and chairmen surveyed wanted joint competition frameworks.

The survey result and the recent failure of a joint transtasman working group to reach agreement on common banking prudential supervision measures, will be seen negatively in Canberra.

Somewhere along the line there has been a failure to sell the Government's objective.

Across the Tasman, a powerful troika, Howard, Treasurer Peter Costello and Foreign Minister Alexander Downer, are driving the single market policy.

Cynics says there are $50 billion reasons for this new priority by the Howard Government.

They are right. That's the level of Australian investment here (up $20 billion since 2001) and Canberra wants action. But this should not stop both nations leveraging an unusual confluence of key drivers to their mutual self-interest.

Costello does not shy away from admitting this.

When I interviewed him earlier this year, he talked about his ambition for a single market and the "gravitational pull" which meant Australia (and New Zealand) would inevitably have to adopt international standards.

But now his pet project - a transtasman banking regulator - has been scuttled.

In Australia, the Australian Prudential Regulatory Authority oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, friendly societies, and most members of the superannuation industry.

Opposition by the New Zealand Reserve Bank to hiving off the prudential supervision aspect of its role stopped this happening here.

The Reserve Bank has valid reasons for keeping the Australian banks - which own 80 per cent of the New Zealand system - under its domain here.

However, the Australian Treasurer will take some comfort that National Finance spokesman John Key has come out in favour of a joint banking regulator.

In the past, Cullen has privately indicated some preparedness to take on the Reserve Bank on this issue, but has done nothing in public to indicate whether he will follow this through.

With the four major Australian banks lobbying him hard, Costello will want the issue revisited when he comes to New Zealand for his annual meeting with Cullen next year.

In the raft of submissions to Australia's Productivity Commission the objections are familiar - harmonisation is the slippery slope leading to loss of sovereignty, more dominance by Australian companies, and the eventuality that New Zealand will simply end up with Australia's inferior commercial laws.

What the naysayers neglect is the reality that the Australian takeover has happened.

Costello - with his hard-nosed ethos - makes the point that Australia has also had to modify its own commercial regime to ensure it is compatible with major international investment centres like the United States.

Costello will still be in the Treasurer's seat at next year's annual meeting of the two Australasian finance ministers. But his ambitions are for the prime ministership.

Howard says he will hold the Prime Minister's job for "as long as the public and my party want me to, and that covers every contingency".

If Howard does step aside, Australian media speculation suggests that Foreign Minister Alexander Downer will likely take Costello's shoes if Costello achieves his aim of becoming Prime Minister.

Downer - who has a well-developed sense of poppycock - is also somewhat impatient at New Zealand "naivety' on foreign issues, particularly this country's anti-nuclear policies.

He is not shy of showing it. Arriving at the first Australian New Zealand Leadership Forum in Wellington this year, he theatrically looked around the room before calling out "Where's the mushroom cloud?"

All three senior Australian Cabinet Ministers are pushing greater regional economic integration and both Governments need to find a way to overcome narrow private sector self-interest with the big picture reality of economic survival downunder.

Cullen and Clark must exercise skilful political management on this score.

Costello - who has warned that "Australia will simply move onto something else if New Zealand does not want it" - will not waste his political capital on initiatives that look set to fail.