Transtasman union is more than economics

EDITORIAL

The Productivity Commission’s latest task could be its most important yet. It has been commissioned, along with its much more experienced Australian equivalent, to identify ways to create a more integrated transtasman economy.

This long-overdue project comes at a time when the reform process in both countries has run out of steam and their economies are badly in need of a boost, Australia’s mining industry excepted.

The scant coverage of this “joint scoping study” suggests many observers think it will be either be an exercise in futility, given that over 30 years of CER politicians have failed to make the most of opportunities, or is so worthy it hasn’t occurred to anyone that the public might be interested.

For argument’s sake, we will reject the former notion. Healthy economies are important to every citizen and attempts to improve them are highly desirable, politics not withstanding.

So what reform programme is likely to emerge when these two government-funded commissions get together?

The initial report says it will look at a 15-20 year horizon, which is way too long to be of any use, except as an excuse to do nothing at a time when some reforms might have an impact.

Admittedly, the preliminary report is seeking the views of business on the major barriers to doing business across the Tasman (as if these weren’t already well known) and what should be done about them (also well known).

For many outsiders (of both countries), CER has been an acknowledged success. The world has few such examples.

But there are still just as many, in academia as well as those who protest on the streets, who scoff at the benefits of free trade, even when the evidence is produced that a globalised economy works both ways.

The failure of CER to achieve more than it has is not just as case of political cowardice; it also  demonstrates the difficulty of putting theory into practice.

At the individual company level, failure occurs just as readily as success. This cannot just be put down to a limited (or limiting) set of rules. Some Australian companies have performed spectacularly here when they bring goods and services that Kiwis have previously been denied.

Sometimes the reverse has happened. But more often you hear of takeovers that have gone wrong because of “cultural clashes” within organisations, customers and employees being ignored or taken for granted, and management changes that have achieved the opposite of what was intended.

Productivity Commission reports, no matter how well intentioned, cannot change these outcomes. But a worthwhile report will identify ways in which common rules apply, unnecessary variations are eliminated and the business environment is as “seamless” as possible.

Behind the scenes, much progress has been made on a wide range of laws and policies. Outstanding examples are food standards, company reporting and consumer information.

But there have also been examples where both countries have diverged significantly, usually because of vested interests having the final say.

Relative size has an impact. New Zealand is not as important to Australia as the other way round – Australia remains New Zealand’s biggest overseas market while New Zealand ranks only fifth for Australia.

The fact remains that the most pressing case for integration is not each country’s complementarity – both produce a similar range of products and services – but their similarity. As an integrated economy, the whole could be much larger than the parts.

Recent events in the eurozone have highlighted the need to have the economic, political and legal foundations, among others, sorted before embarking on others such as a common currency.
If the joint commissions can identify these issues, their work will be welcomed and worth the effort.


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