Thank you for the opportunity to speak to your Forum.

I’m always very keen to talk to business people, because it's business first and foremost that drives the growth and prosperity we all enjoy.

I’m here in Brisbane en route to Cairns, where Prime Minister Kevin Rudd is hosting the Pacific Island Forum Leaders meeting.

Since coming in to office last year my government has made our relationships with the wider Pacific Islands region a key priority. 

Last month, I visited Tonga, Samoa, Niue and the Cook Islands, following an earlier visit to Honiara and Port Moresby.

I know your government is also investing considerable energy in the Pacific, and together we intend to work more collaboratively in the region to help deliver sustainable economic development and political stability.

Earlier in the year, Kevin Rudd and I commissioned a study on impacts of the global economic crisis on the region.

This report, which is available this week, is aimed at assisting our Pacific partners successfully navigate their way out of the recession.

As business people, I’m sure your minds have been squarely focused on the global downturn as well.

This downturn has had a profound effect on our economies, but it is worth noting that Australia and New Zealand have escaped relatively lightly, compared to many others.

There are a few reasons for this. Our banks are among the best rated banks in the world and have plain vanilla asset structures with little or no securitisation.  We are both stable, open economies with flexible product and labour markets, floating exchange rates, robust monetary policy, and had relatively low public debt before the start of the downturn.

But as open economies we cannot escape being exposed to the economic woes of our important trading partners, whether in Asia, North America or Europe.

They have a direct impact on the exporters, businesses, banks and consumers here in New Zealand and Australia.

A robust Single Economic Market gives us some extra economic weight to help us to weather the current economic storms.

And a strong, well-functioning and dynamic trans-Tasman market will also provide an important springboard for our companies to come out of the recession taking on the world.

So today I’d like to talk about what the New Zealand government is doing to respond to its economic challenges, and how our programme relates to Australians and to Australian businesses.

I’d also like to talk about how our two countries can work more effectively together.

Because New Zealand’s relationship with Australia is about as close as it gets – whether we’re talking people-to-people contacts, business, academic or political links, trade or economic issues, defence, the environment or foreign policy.

In particular, Australia is a vital part of New Zealand’s economic future.

You are our number one export destination. And in fact of all the States and Territories Queensland has grown the fastest as a trading partner with New Zealand. I’m told there has been an almost 50% increase in total New Zealand-Queensland trade between 2004 and 2008. 

About a million tourists travel in each direction across the Tasman every year, many to and from Queensland.

On that note, Kevin Rudd and I intend to make some announcements later this month about streamlining trans-Tasman travel, which will have real benefits for visitors, tourists and business people.

Of course Australia also has a very large business presence in New Zealand. Our biggest banks, for example, are Australian-owned.

A strong New Zealand assists Australia and vice versa. Open competition drives productivity and in the long run will ensure both nations are well placed to compete on the world stage.

So when my Ministers and I think about how we can lead the country through the tough times that the global economy is facing right now, Australia, and Australians, are a big part of the equation.

As a government we are working on six policy drivers to get the New Zealand economy up and moving again, so that we can emerge from this recession strongly and more competitively. These are:

• regulatory reform
• investment in infrastructure
• innovation and business assistance
• a world-class tax system
• better, and more efficient, public services
• and education and skills

In a number of these areas, we already work with Australia, or can share lessons from each other’s experiences. I’d just like to touch on a few of them.

Regulatory reform

Let me start with regulatory reform.

My government is taking steps to reduce the red tape which is stifling our economy. We are looking at how to streamline and simplify our Resource Management Act, for example, and reviewing a number of other existing regulations. 

For a good example of how that can be done, we have only to look across the Tasman at the major regulatory reform programme that has been underway here through the Council of Australian Governments and its several Working Groups.

I’m delighted to say that when I met with Kevin Rudd in early March, he invited New Zealand to participate in one of those groups, the Business Regulation and Competition Working Group. 

Our participation in that Group will usefully feed in to our own thinking about how best to reduce the regulatory burden. We’ll also be able to feed our own ideas into the Group.

That will benefit business on both sides of the Tasman.

It will also help to the process of doing business across the Tasman.

Investment and tax

As part of our wider work on regulatory reform, the New Zealand government is looking closely at overseas investment regulations, with the aim of reducing compliance costs for investors and making New Zealand a more attractive investment destination.  

We already have more than $122 billion in trans-Tasman investment.  Australia is New Zealand’s number one source of investment. We want to make it as easy as possible for capital, just like people, goods and services, to flow freely between the two countries – that’s one of the fundamental pillars of the CER relationship.

We are also making significant progress on negotiating an Investment Protocol to the CER Agreement.  Kevin Rudd and I agreed back in March that we should aim to get it done by the end of this year.  This new Protocol should make it even easier for Australians to invest in New Zealand, and for New Zealanders to invest in Australia. 

We’ve also taken steps to enhance labour mobility across the Tasman by freeing up retirement savings between our two countries.

When our Minister of Finance, Bill English, was over here in Brisbane three weeks ago for his annual meeting with Treasurer Wayne Swan, they signed an arrangement that will allow people to consolidate their financial affairs and take their retirement savings with them when they move across the Tasman after working in the other country.

Tax

Another thing our governments have in common at the moment is that we are both looking carefully at our medium-term tax policies.

In New Zealand we have established a Tax Working Group to consider the medium-term tax policy challenges facing New Zealand.

And here in Australia the Treasury Secretary, Ken Henry, is leading a review of Australia’s Future Tax Policy.

New Zealand is keenly interested in what that review recommends, because tax decisions made in Australia can have a profound effect on how business operates across the Tasman.

An important element for us will be the decisions taken on your system of franking credits, or what we call imputation credits.

Our two countries are the only two developed countries in the world which have such a system, but we have never got organised to recognise each others credits.

The New Zealand Government has made a submission to the Henry Review making the case for mutual recognition of imputation credits. We await with interest the findings of the Review and the Rudd government’s reaction to it.

There are other ‘trans-Tasman’ tax issues that are of concern to business too, of course.

I’m pleased to report that six weeks ago, the New Zealand and Australian trade ministers signed a revised Double Taxation Agreement which will help in a very practical way by lowering withholding taxes on dividend and royalty payments between Australia and New Zealand.

Investment in Infrastructure

Another major policy driver for the New Zealand government is investment in quality infrastructure.

Underinvestment over many years has meant that New Zealand’s infrastructure has become run down and in many areas is not serving us well at all.

One of the first actions my Government took was to signal an increased investment of $7.5 billion over the next five years in schools, roads, housing, hospitals and telecommunications. Nearly $500 million of that spending is already underway.

There is scope for huge synergies when it comes to infrastructure investment in Australia and New Zealand.

Many of the companies involved in infrastructure projects are trans-Tasman companies, or employ skilled engineers, designers, architects, builders or technicians from both sides of the Tasman. 

Through the Industry Capability Network there is enormous potential for companies in both countries to contribute meaningfully to the infrastructure work that both countries are keen to get underway.

Single Economic Market

I’d like to talk now about the work programme that’s been underway for some years to create a “Single Economic Market” in Australia and New Zealand.

The aim is to make it as easy for any of you to do business in Auckland as it is for you to do business in Brisbane.  It’s about breaking down barriers at the border, like investment screening.  But it’s also about looking behind the border at things like regulation, tax, or anything else that raises the cot of doing business trans Tasman.

Many of you will already do business in New Zealand.  And I am sure in some areas it is not as easy as it could be.  I would be interested to hear from you where you see the biggest barriers are to us achieving that aim. 

A vibrant and robust trans-Tasman economy will position us strongly to grow and prosper together when the worst of the global recession has passed, and will serve as an important springboard into Asia and beyond.

I am coming back to Australia for a State Visit in a couple of weeks’ time, and one of the priorities for my discussion with Kevin Rudd is how to inject new momentum into the Single Economic Market. 

We’ve already come along way, but together Kevin and I are keen to take this to the next level.

The dynamism, economies of scale and innovation potential offered by the Single Economic Market is enormous.   It gives us a combined market of 26 million people. It exposes us to new ideas, new skills and new competition.  All of that enhances our export capacity – and Australia’s, too, in the other direction.

The New Zealand government also wants to help firms to connect with overseas markets more effectively – and ensuring that those markets remain open. With strong trans-Tasman businesses, we’re in a better position to access those markets – whether directly or in partnerships.

And with a strong and united trans-Tasman push for keeping markets open, we have a much greater potential for a more liberal global trading system.

New Zealand, like Australia, is an ardent supporter of the WTO Doha Round.

We also have an active agenda of Free Trade Agreements under negotiation, particularly in Asia.

New Zealand’s historic FTA with China and our joint Australia-New Zealand FTA with the countries of South-East Asia have paved the way, but we’re also talking with Korea, Hong Kong, Malaysia, India and potentially even Japan.

Asia will increasingly become a global economic powerhouse.

For New Zealand and Australia, Asia offers exciting markets for tourism, education services, our high-quality agriculture products, the resource sector and many more.

In the year since we signed the FTA with China, for example, trade in both directions has grown, despite the state of the global economy.

Two-way trade between China and New Zealand grew by 19% to more than $9 billion New Zealand dollars in the year to February 2009.  

Last year we had 30,000 students from China studying in New Zealand, and I know there were many more studying here in Australia.

New Zealand and Australia have also signed an FTA with ASEAN, which is known by the tongue-twisting acronym AANZFTA.

It offers opportunities for New Zealand and Australian firms to benefit from the removal of a range of barriers to trade and the establishment of frameworks to facilitate the flow of services and investment.

By way of example, within twelve years up to 99% of current New Zealand exports to ASEAN and up to 96% of Australian exports will be duty free – representing a significant competitive advantage of other countries operating in the region.

The agreement also provides additional incentives to producers in the region to source New Zealand and Australian products.  And it provides ‘state of the art’ protections for investors and investments.

Climate Change

Just as the ‘Single Economic Market’ has provided great opportunities for trans-Tasman cooperation and exchange, I also see the potential for harmonisation between New Zealand and Australia’s climate change policies.

It makes sense for both Australia and New Zealand to impose similar costs on greenhouse gas emissions and to reward those who make reductions. It is essential that the many companies that operate in both markets are encouraged to reduce emissions in both countries.

I have met with Kevin Rudd to discuss harmonising our responses, as have our climate change ministers Dr Nick Smith and Senator Penny Wong. We have set up the Australia-New Zealand Bilateral Climate Change Partnership so that our officials can work together to identify areas where our policy settings can be harmonised.

The New Zealand Government favours a balanced, practical approach to climate change that has us doing its fair share towards this global problem. It is Government policy to reduce emissions to 50 percent of 1990 levels by 2050 and we’re committed to achieving that target. 

This goal is a challenging one as New Zealand’s emissions have grown sharply in recent years and as at 2007 were 22% above 1990 levels.

With regard to a 2020 target, which New Zealand will be tabling in Bonn next week, the Government has invested in economic analysis, scientific research and public consultation to inform the target setting process.

We have also looked at Australia’s target, which gives three levels of target dependent on international signup levels on a new climate change treaty.

New Zealand’s target will balance both the economic risk from climate change, the cost of emissions reduction and the risk to the environment. We will nominate a balanced but achievable target that reflects the international settings and commitment.

In setting a target we have examined New Zealand’s greenhouse gas emissions profile which is unique in the developed world and far more similar to a developing country.

While Australia’s biggest emission producing sector is coal fired power plants at a third of emissions, our agricultural sector is responsible for almost half of our gross emissions. To deal with these two quite different problems both countries are engaging in extensive scientific research.

Australia is taking the lead in encouraging commercial deployment of carbon capture and storage technology internationally.   New Zealand has joined as a founding member of the Global Carbon Capture and Storage Institute to support this initiative.

To address our major emissions source, we have set up the Centre for Agricultural Greenhouse Gas Research which will research ways to reduce emissions from a range of farming sectors. The Centre will be linking with other countries to produce globally beneficial research just like Australia is doing with its Global Carbon Capture and Storage Institute.

As we move into the next phase of international negotiations to establish a successor climate change treaty to the Kyoto Protocol I hope that we can work closely with Australia to reduce emissions and find a durable solution to the global problem.

Conclusion

These days of global economic challenge – like all crises – give us the opportunity to develop new trans-Tasman business models.

The modern economy isn’t just about selling goods and services to each other – important as that is – but on developing those complex value chains that deliver a range of integrated products, services and investment across a number of markets.

We are already strengthening the integration of our two economies by building on where we have complementary skills and experience such as biotechnology, food and beverage product development and marketing, and clean technology.

But with the combined determined leadership of our two governments and the business sector, we should be able to give real meaning to the Single Economic Market.  

If we can collaborate much more vigorously at the business level to compete jointly against the rest of the world – to produce genuinely Australasian firms that are innovative and world leaders.

That is the challenge for us, and one which I’m looking forward to discussing with Kevin in Canberra later this month.

Thank you and I look forward to your questions. 

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