KEY POINTS:
Australian Trade Minister Simon Crean has upped the pressure on New Zealand Finance Minister Michael Cullen to make real progress on forging a potential controversial investment agreement between New Zealand and Australia.
Crean used a ministerial statement to the Australian Parliament on Monday to signal the strategic emphasis the Rudd Government is now placing on the addition of an investment protocol to the long-standing Closer Relations Agreement between the two countries.
It was not a formal quid pro quo: An investment protocol in return for the removal of double taxation of dividends which Cullen forcefully staked out at last weekend's Australia New Zealand Leadership Forum.
But a direct signal from Crean - who was a star performer at the forum - that the Australian Government also wanted to attend to "unfinished business".
While there were healthy levels of bilateral investment, the lack of specific CER provisions enshrining a "liberal regime" for transtasman investment flows offered prospects for improving the model agreement so that it could be exported to the region as a benchmark.
Cullen had already signaled he looked forward to discussing the matter as a "matter of priority" with his counterpart, Treasurer Wayne Swan, during their formal bilateral in Wellington next month. Cullen pointed out that historically there has been a strong investment relationship under CER. But agreeing specific screening thresholds would build even closer economic relations in this important area.
But other signals given during the forum - which was held under Chatham House rules - suggest a measure of impatience had been built-up on the Australian side over the length of time it has taken Wellington to respond to prior approaches and the clear view that domestic political concerns had got in the way.
Cullen has been sitting on this issue since October 2006 - the date the previous Australian Liberal Government lobbed in its own "offer" to match the investment threshold provisions in its free trade deal with the United States. Under the US-Australia FTA, US investors enjoy (in most circumstances) the right to establish, acquire and operate investments in Australia on an equal footing with local investors and those of other countries.
* All US investment in new businesses - other than where it involves the US Government - is exempt from policy screening under Australia's Foreign Investment Review Board (FIRB).
* Thresholds for acquisitions by US investors in nearly all sectors - including non-residential commercial property - were raised significantly from $A50 million to $A800 million.
* A screening threshold of $A50 million was established for sensitive sectors like media, telecommunications, transport, military goods, security systems and the extraction of uranium or operation of nuclear facilities.
Despite public jaw-boning by former Liberal Treasurer Peter Costello, the investment issue remained bogged down while Australia waited for the NZ Treasury to respond. This became a behind scenes bone of contention given the previous Australian Government's desire to reach agreement by February 2007 so legislation could go through both Parliaments before the Australian election.
But with a new Government in place in Australia there now appears to be greater willingness to tackle each other's "non-discussables".
My soundings suggest that mutual recognition of dividend imputation and franking credits - something that Cullen has been trying to get onto the agenda for some years - will be seriously explored by the two Treasuries. There are reasons Cullen will want to tread carefully.
Foreign investment has become a political hot-potato in the past twelve months ever since the Government changed the rules to prevent a 40 per cent stake in AucklandAirport going offshore. With an election approaching there is no guarantee that Winston Peters - wearing his NZ First leader's hat - will not stake out political reservations. In the past Peters has raised concerns over the level of Australian investment in New Zealand. A measure of the sensitivity on the NZ side is that neither Cullen, nor his officials, want to say much ahead of the Swan meeting.
Much of the recalcitrance seems to be bound up in domestic politics - particularly the need to keep Labour's political allies onside while it works through what its public response should be. But given that New Zealand has signed investments provisions with China, our longest partner can hardly be left aside much longer.
It is also unclear to what extent Australia wants NZ's investment rules liberalised in its favour.
The forum has now succeeded in pushing both governments to tackle promptly the low-hanging fruit in relation to building a single economic market. It is now into the hard yards: Bold strategic shifts like the adoption of a common border which there was general agreement is an "aspirational target."
