'We're up for it,' says business to transtasman market

Finance Minister Michael Cullen gets a qualified tick for a transtasman single market. But full nuptials? Forget it, writes FRAN O'SULLIVAN.

Finance Minister Michael Cullen's vision for a transtasman single market meets overwhelming approval from business.

Cullen put an integrated competition law regime, joint accounting standards and banking prudential supervision on his 2004 policy agenda at a meeting with Australian Treasurer Peter Costello in February.

A Herald survey of 120 chief executives and company chairpersons has found more than 85 per cent favour proposals for a common competition and accounting platform and want a raft of other policies included in the single market.

But political union with Australia is definitely off their agenda.

Restaurant Brands chairman Bill Falconer argues New Zealand needs a reality check. "We are part of Australia economically," he said.

"I'm very pleased to see what the Government is doing on that front. We can have all sorts of national feelings about whatever we want from rugby to tourism, but many of our larger companies are subsidiaries of Australian companies and most of the best people feel as comfortable either side of the Tasman."

Australia already has its footprint well-cemented over New Zealand business. All five major trading banks, the two dominant newspaper companies, big supermarket chains - these are just some sectors dominated by "Aussie" ownership.

"Just look at the last six months - Tranz Rail bought by Toll Holdings, ANZ buying National Bank, Fairfax buying INL," said Telecom's Theresa Gattung.

Added an Australasian finance company head: "Dingo got my baby long ago."

But beneath the hoopla is a real concern that New Zealand and Australia "get the single market right".

Carter Holt Harvey chairman John Maasland warns New Zealand must not do it on the basis that "we're the poor relation and accept everything that has been said".

"That would be fatal."

Maasland's stance is replicated by many players who want Cullen to ensure his officials push for the retention of much of this country's light-handed regulatory approach during forthcoming negotiations.

But ANZ-National Bank chairman Roderick Deane warns New Zealand is getting into "high-risk territory" negotiating with a country which is substantially larger than our own.

Deane questions "conventional wisdom" that the single market is "a good thing".

"To the extent we can further reduce barriers to movements of traded goods, capital and people then that presumption is certainly true," said Deane. But he questions whether major economic gains will be made. "My fear with securities ... and competition regulations and things like that is the Australians are much bigger than us.

"They are more powerful ... they have a great belief in their own rightness and I think there is a real risk we'll get the lowest common denominator."

Ralph Waters, an Australian heading up Fletcher Building, is another sceptic. "Sure it is trendy, but I can think of some negatives - can you tell me the positives?"

Waters says much of the agenda is being driven by local subsidiaries of Australian banks. "You need to be cautious; that's where they're all owned - and send their dollars back to."

Waters is particularly against any move to combine the two stock exchanges, which could damage capital-raising efforts for New Zealand companies. "We're in the top 10 on the exchange here but we're about 90 by market capitalisation in Australia and we're not in the ASX 100 Index."

Westpac chief executive Ann Sherry counters, saying people are already "behaving as [if] it's a single market".

"We're operating in a world where 60 per cent of New Zealand's exports are going to Australia and lots of people are also buying holiday homes.

"There's actually a level of activity that's completely unrecognised in some of the structures that sit around banking transactions - we've made it very difficult for people to do business."

Bank of New Zealand chairman Kerry McDonald argues there may well have to be trade-offs as negotiations continue. "It's an issue we've got to be careful about," said McDonald. "But at the end of the day there may be a trade-off here where we say 'Yes, there are some areas where we've got to compromise'."

"We've got to accept what we think is a less satisfactory regulatory environment for the benefits of the more integrated economy.

AMP's Rosanne Meo says the critical issue is the need to form an Australasian economic unit to compete globally. "That must take precedence over Australia-New Zealand sibling rivalry."

McDonald is driving an inaugural Leadership Forum between New Zealand and Australia. On the agenda are "big-picture strategic issues" - the background to the relationship and external factors including the economic, political and security environment.

One negative issue raised by opponents of the single market is the struggle New Zealand firms claim they experience across the Tasman.

McDonald said the real issue is to have people of the right calibre leading the businesses. "There's a very clear track record that when good people are put into Australia - regardless of whether they're New Zealand, Australian, Chinese or American - they do a good job and largely succeed.

"Where average people are put in they often struggle ... New Zealand companies have been very slow to learn that lesson."

Some are concerned New Zealand's paltry defence commitment may hamper progress. Gattung, who attended Costello's lunch for Cullen in Melbourne, believes foreign policy differences between Canberra and Wellington do not matter. "We wouldn't have got this far otherwise." The survey also shows strong business support for a single aviation market and common corporate tax to be added to the policy agenda and growing support for a common currency and combined stock exchange.

But full political union, on the table since the Australian Federation came into being in 1901, is out: nearly 80 per cent want the two countries to remain separate.

"Sovereignty is important," wrote an SME respondent. "Today our population limits our independence. This will change over time. Don't give up our independence easily."

Auckland's Rob Challinor is one of a few who believe political union will eventually come - in 30-50 years. "Treaty of Waitangi issues need to be resolved first."

SMEs have also strongly endorsed economic union with Australia, with around nine in 10 backing a common tariff regime and joint accounting standards, securities law and competition rules.

Nearly eight in 10 support a common corporate tax rate and nearly two-thirds want a common stock exchange, single aviation market, common currency and liberal rules of origin - although some manufacturers had concerns on the last point. They share top table concerns over Australia's regulation. "They're often not as good as New Zealand's, contrary to what the Government seems to think," said one.


TASMAN TIES

The politicians

Peter Costello, Treasurer, Australia: Costello has charged the Australian Treasury to negotiate the single market deal. Says Telecom chairman Roderick Deane: "My fear is the Australians are more powerful negotiators than us - there is real risk we will get the lowest common denominator."

Michael Cullen, Minister of Finance, NZ: Business applauds Cullen's determination to see a transtasman single market emerge. But there are fears that new Commerce Minister Margaret Wilson will not bring a pro-business determination to sorting out regulatory issues.


The businessmen

Kerry McDonald, Chairman, Bank of New Zealand: The long-time transtasman businessman debunks claims that Australia is more difficult than New Zealand. "I don't agree with that ... I think the issue is normally one of not having the right calibre of people leading the businesses in Australia."

John Maasland, Chairman, Carter Holt Harvey: Maasland is closely involved with two major transtasman businesses. "It's very important that Australia and New Zealand move to a consensus on single market issues - but we mustn't do it on the basis that we're the poor relation." "


The diplomats

Allan Hawke, High Commissioner, Australia: Hawke cannot understand why New Zealand business has been so slow to get into the debate on the transtasman market. He warns they should get into it now to make sure all the wrinkles are ironed out before the deal is put together - hopefully by June 2006.

Simon Murdoch, Chief executive, Ministry of Foreign Affairs & Trade: The former New Zealand High Commissioner to Canberra experienced a bitter taste when transtasman relations soured over the Ansett collapse. He is now working with McDonald on a Leadership Forum to rebuild the relationship at all levels.