Editorial: Risks in rush to embrace neighbour

Today's Herald special report on "The Mood of the Boardroom" provides graphic evidence of the business community's enthusiasm for a transtasman single market. Finance Minister Michael Cullen says New Zealand and Australia are galloping towards that goal "three steps at a time". Yet most business leaders clearly regard even that rate of progress as somnolent. As much is suggested by the overwhelming number who favour the introduction of common corporate tax rates and common tariffs, joint securities and competition frameworks, and joint accounting standards.

There is, of course, nothing too controversial about those aspects of the business wishlist. Transtasman frameworks and standards have been moving progressively closer. And if the Government has yet to recognise the eminent good sense of a common corporate tax rate, it has not escaped the National Party. However, the 120 chief executives and chairmen of New Zealand's leading companies want to go much further. Fully 60 per cent want a common currency, a wish that places them far in advance of the Government's agenda.

As recently as last month, following talks with the Australian Treasurer, Peter Costello, Dr Cullen reiterated that a common currency would not be part of his vision for a "single economic market". Presumably, he sees that bond as a threat to New Zealand's sovereignty. Australia has no plans to change its currency; New Zealand would, thus, have to adopt the Australian dollar, and submit to the control of the Australian Reserve Bank - with all that implies for monetary and fiscal policy.

This does not, apparently, faze most business leaders. Yet they are most definitely opposed to the next potential step, political union. Seventy-nine per cent say they could not countenance such an abandonment of New Zealand's sovereignty. It is a telling vote, perhaps owing more to patriotism than a clear understanding of the possible consequences if a "common market" were blundered into. Above all, it calls into question the level of support for a step as dramatic as a common currency.

History suggests that single economic markets are often the forerunners of political linkages. The development throughout the last half of the 20th century of what has become the European Union is a clear case in point. It has seemed like a natural, almost inexorable process, despite popular opposition in a number of member states.

It is easy to see why the business community is so keen on cementing economic ties with Australia. In the first instance, it wants to be able to operate as easily and effectively as possible on both sides of the Tasman. But it is also motivated by the logic that has underpinned the development of the European Union. Regional economic blocs promote a collective power that makes life difficult for small independent nations. The formation of an Australia-New Zealand economic unit would give both countries a greater global clout. And for that to happen, both would have to play by the same rules.

Exactly how far that process should go is the key issue as the overlaying of the CER trade agreement with common regulatory platforms gathers pace. At the moment, much of the stimulus seems to be coming from Canberra. As much as that suggests a welcome change of attitude, it also implies a degree of risk. A single market recognises that a strong relationship with Australia is pivotal to our economic interests. But New Zealand must not be stampeded by its bigger neighbour, or succumb to terms that favour Australia. Or risk surrendering its identity. The Government clearly has concerns about how far a union should proceed. Business, likewise, should not let its enthusiasm blind itself to essential questions.