Trading with New Zealand
With Chris Simpson
In the midst of a trade rush to the East, don’t forget old friends. Just ‘across the ditch’ (the Tasman Sea) is New Zealand, an almost entirely middle class society with a sophisticated marketplace and the buying power of nearly 4.5 million people.
Australia has a strong history of trade with New Zealand, based on similar backgrounds, culture, language and environment. According to Austrade New Zealand business development manager Sharl Gedye, New Zealand is a relatively safe test market for new exporters. For established exporters, a move into New Zealand expands the domestic market by 20 percent (equivalent to adding another Queensland) with relatively small investment.
Australia/New Zealand background
Australia and New Zealand were both adversely affected by Britain joining the European Economic Community in 1973, losing preferential trade with the ‘mother country’. From the mid-1970s the New Zealand economy contracted as the oil market bottomed out, trade fell and inflation rose. The government increased taxation and foreign borrowing to control consumer prices and maintain employment levels, and in the 1980s a Labour government program of sweeping liberalisation devalued and floated the NZ dollar, introduced a goods and services tax and abolished agricultural and consumer subsidies. The new government sold off banks, commercial forests, telecommunications and infrastructure assets, effectively privatising much of the economy.
Since the 1983 Australia New Zealand Closer Economic Relations Trade Agreement (ANZCERTA, or CER) reduced trans-Tasman trading barriers bilateral trade has grown rapidly, averaging 6.2 percent growth each year since 1991.
The current picture
Trans-Tasman trade in goods and services was valued at $20.6 billion in 2009. By value New Zealand is Australia’s eighth largest trading partner and third largest investment market. By volume, however, New Zealand is Australia’s most important trading partner, the export destination of over 17,000 Australian businesses in the 2008-09 financial year, according to the Australian Bureau of Statistics.
Australian products form 17.8 percent of New Zealand’s total imports. With New Zealand’s economy based on primary industries (wool, meat and dairy), Australian exports are concentrated in manufactured goods, services, infrastructure and machinery that supports primary industry. Australia’s biggest exports to New Zealand are medicaments, computer parts, petroleum and motor vehicles.
Due to the Trans-Tasman Travel agreement (1973), travel between the two countries is virtually unregulated, with limited immigration controls and virtual freedom of employment between the two countries. There are large populations of Australian and New Zealand expatriates in each country, and inter-country tourism is an important revenue stream for both.
New Zealand also recently signed a free trade agreement with China, which may give Australian businesses the opportunity to leverage access to the Chinese market.
Single economic market
In 2009, New Zealand Prime Minister John Key travelled to Australia to meet with then Prime Minister Kevin Rudd to develop a framework for a single economic market. During the past 18 months each government has been working to streamline economic relations between Australia and New Zealand, reforming and reducing regulations so that the New Zealand framework for business operation more closely mirrors Australia’s, and vice versa. The aim is to reduce the time businesses have to spend duplicating information and on bureaucratic processes in each market.
Outcomes will include closer cooperation between the Australian Competition and Consumer Commission and New Zealand’s Commerce Commission to allow sharing of information and mutual decision-making for mergers affecting both markets. A single economic market will establish cross-border insolvency processes, supported by the streamlining of accounting and financial reporting standards in each country, and will also coordinate intellectual property regulations with a single IP licence.
Australian export success stories range from infrastructure powerhouse Leighton group, which employs 9,000 people across the Tasman, to smaller organisations such as Cobbett Technologies which has been selling animal nutrition products and infrastructure technologies to New Zealand for 27 years. Cobett’s commercialisation director Jenetta Russell says there is a huge market in support products for primary industry.
She says New Zealand is a sophisticated market. “I have a high respect for Kiwis because they’re conservative but they’re not naïve. They’re really streetwise, so you have to be your absolute best to succeed over there. You have to work hard to gain their respect but once you do, you have a friend for life.”
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