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Australia and New Zealand’s slow and steady move towards economic integration

In March this year Australia and New Zealand will celebrate the 30th anniversary of a trade agreement known as Closer Economic Relations (CER). Few Australians and New Zealanders are likely to notice…

Will stronger economic integration test the resilience of the Australia-New Zealand relationship? AAP

In March this year Australia and New Zealand will celebrate the 30th anniversary of a trade agreement known as Closer Economic Relations (CER). Few Australians and New Zealanders are likely to notice. Yet the agreement has fundamentally changed the relationship. It has had significant domestic implications, and has paved the way for an advanced single economic market.

Over the weekend, Prime Minister Julia Gillard met her New Zealand counterpart John Key in Queenstown. Economic integration was on the agenda, but it was the announcement that New Zealand had agreed to re-settle 150 refugees subject to Australia’s offshore processing regime that stole the headlines.

Perhaps the other meeting outcomes – on trans-Tasman travel, the implementation of an investment protocol, measures on superannuation portability, and the empowerment of regulators to tackle exorbitant trans-Tasman roaming charges – seemed underwhelming. In fact, the outcomes are consistent with the incremental approach, which has been typical of trans-Tasman relations over three decades. It has served the integration process well.

Conspicuously absent from the meeting outcomes, however, was any response to the recent joint Productivity Commission report on the economic relationship. When Gillard and Key met in February 2012, they agreed that the two Commissions should scope out possibilities for further steps in the relationship. The terms of reference were broad, and the final report largely endorsed the incremental approach. It proposes 30 measures to reduce remaining barriers to the movement of services, capital and people across the Tasman.

It also notes that the “end point” of integration cannot be specified in advance. It recommends further consideration of two issues with distinctly political implications: mutual recognition of dividend imputation/franking credits and Australia’s decision 10 years ago to limit social security for New Zealanders living here.

Business and investors’ representatives have raised the issue of mutual recognition of imputation and franking credits since the original discussions leading to CER. It concerns whether income earned on investments in the other country is subject to double taxation.

Presently, investors can deduct corporate taxes from taxes they pay on distributed corporate income for domestic investments. Income earned from investment in the other country, however, is subject to double taxation. This situation distorts the return on capital and, therefore, obstructs creation of unified trans-Tasman capital markets.

Mutual recognition would be an important step toward completing the single market. It would provide a clear benefit to investors. As the report states, it could also lead to a net transfer of income from Australia to New Zealand.

Now consider the impact integration has had on New Zealanders living and working in Australia. Since 1973, the Trans-Tasman Travel Arrangement has permitted citizens of one country to live and work with few restrictions in the other country.

In 2001 Australia introduced restrictions to resident New Zealanders’ access to certain social benefit payments and naturalised citizenship. These policies disadvantage many New Zealanders drawn by employment opportunities to Australia. Many find themselves without a social safety net.

The barriers to citizenship are prohibitively high. Labour market integration and welfare segregation potentially institutionalises their status as second-class citizens in Australia. There is no easy way for either of these issues to be resolved.

We have heard a lot about economic integration lately, especially in Europe, where the implications of it failing are far-reaching. Australia and New Zealand have never created a customs or currency union. They are unlikely to do so any time soon. However, they have quietly removed many barriers to the movement of goods, services, capital and people. Integration across the Tasman has so far proven resilient – although not immune – to political conflict.

As the single market project advances faster than the two political communities unite, the mix of distributional politics and national identity is likely to test this resilience.

The recent report presents both governments with an opportunity. Without discarding the pragmatic approach that has worked so well, it is time to acknowledge that economic integration has consequences.

It impacts the distribution of wealth within and between the two societies as well as the rights of citizens. If one lesson can be drawn from European experience it is that economic integration has a habit of turning political. The agenda might not look riveting, but it might be time we started paying attention.

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19 Comments sorted by

  1. Timothy Gassin

    PhD candidate, University of Melbourne

    The current residency and citizenship arrangements for NZ citizens in Australia are entirely inappropriate, applying the requirements of a structured, selective migration programme to a situation in which there exists free movement of people.

    For quite possibly hundreds of thousands of New Zealanders legally residing in Australia, this means that they will never be able to apply for citizenship, access welfare in times of need, access student loans to advance their careers, work in the federal…

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    1. R. Ambrose Raven

      none

      In reply to Timothy Gassin

      Compare that with the similar exploitation of Enterprise Migration and s457 visa workers.

      As Resources and Energy Minister Martin Ferguson emphasised, Labor's Enterprise Migration Agreements are designed to cut wages, import sweatshop coolie labour, and discourage training. Far from enforcing conditions, relevant DIAC staff had in 2010 actually provided advice to NW Shelf contractor McDermott International about using s456 rather than s457 visas to avoid Australian pay rates - the former do not…

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  2. Russell Walton
    Russell Walton is a Friend of The Conversation.

    Retired

    The easiest and most equitable way of removing "anomalies" in the status of New Zealand citizens in Australia is to treat them like any other foreign national. What's the point of a selective immigration scheme if unrestricted entry is allowed from one country and not others.

    The Trans-Tasman Travel Arrangement seemed like a good idea at the time--it isn't.

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    1. Mark Naber

      logged in via Facebook

      In reply to Russell Walton

      You seem to ignore the fact that Kiwis are and even at the time of the 2001 changes are the most successful group in Australia in terms of labour participation. More so than any skilled migrant group or Australian born. Bet you didn't know that.

      Australia earns 3 Billion in profits from New Zealand's banking sector per year.

      Australia is doing very nicely out the Trans Tasman arrangement and your current governments have rigged everything in their favour.

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    2. Russell Walton
      Russell Walton is a Friend of The Conversation.

      Retired

      In reply to Mark Naber

      None of those facts are relevant to the argument that New Zealand citizens should be granted special status in Australia compared with the citizens of other nations.

      As I commented earlier, in the interests of fairness, the solution might be to scrap the TTA, presumably that would eliminate the current anomalous situation which is a scandal because it effectively discriminates against Kiwis.

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  3. Gavin Moodie
    Gavin Moodie is a Friend of The Conversation.

    Adjunct professor at RMIT University

    I don't know the details, but I think giving Kiwis easier access to Australian citizenship may be somewhat more complicated than it is presented here.

    Australia used to make it very easy for Kiwis to gain citizenship, but as I recall of the time that Australia removed that concession, Aotearoa New Zealand made it relatively easy for Pacific Islanders to gain Aotearoa New Zealand citizenship. So increasing numbers of Pacific Islanders were getting Australian citizenship via Aotearoa New Zealand.

    The implication was that Australia would relax citizenship requirements for Kiwis if Aotearoa New Zealand increased citizenship requirements for Pacific Islanders.

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    1. Timothy Gassin

      PhD candidate, University of Melbourne

      In reply to Gavin Moodie

      There were, indeed, some problems with back door migration through NZ. However, these have often been exaggerated and, anyway, since 2001 NZ has tightened its migration and citizenship rules to be much more like Australia's.

      There is no reason why giving NZ citizens access to Australian citizenship should be a great problem - it was open to them continuously until 2001 without major problems.

      My own suggestion on how to resolve this issue would be to maintain the restrictions on welfare access…

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    2. John Shannon

      Inventor

      In reply to Timothy Gassin

      Just so people understand New Zealanders living in Australia who arrived after 2001 have NO access to social welfare payments - ever!!!

      We contribute to Australian Taxes for the benefit of all Australian citizens and residents, yet cannot claim any social welfare.

      Is that fair?

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    3. Russell Walton
      Russell Walton is a Friend of The Conversation.

      Retired

      In reply to John Shannon

      John Shannon,

      "Is that fair?"

      Yes. If New Zealanders want to be treated as Australian citizens they should become Australian citizens, the expectation is that New Zealanders in Australia should be entitled to be treated as Australians---why?
      If there are anomalies that prevent New Zealanders from becoming citizens they should be removed, otherwise the status of NZ citizens should be the same as any other foreign national.

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    4. Frederika Steen

      logged in via Facebook

      In reply to John Shannon

      aaah, the Howard legacy of us and them... no it is not fair John.

      Tax payers are taxpayers...and treating your cousin from across the Tasman, our ANZAC brothers , as unequal is no way to have good relationships.These potential users of welfare have paid their way as tax paying residents.

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    5. Russell Walton
      Russell Walton is a Friend of The Conversation.

      Retired

      In reply to Frederika Steen

      Frederika Steen,

      "aaah, the Howard legacy of us and them..." yes, of course, assume the moral high ground and smugly play the race/xenophobia card without examining any other factors that are relevant.

      (1) Actually it's essentially a legacy in regard to the rights and obligations of citizenship in a democratic society--citizenship is not a financial arrangement or some kind of insurance policy.

      (2) Why should our "cousins" enjoy favourable access to Australia when other nationalities don't…

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    6. Timothy Gassin

      PhD candidate, University of Melbourne

      In reply to Russell Walton

      You say that New Zealanders should become Australian citizens if they want access to civil rights and government - that is exactly the problem, they can't.

      A New Zealander could have lived in Australia for years, identify as being Australian, be passionate about all things Australian, be highly educated, have been in continuous full-time employment, have spent twenty hours per week on top of that doing community service, and paid hundreds of thousands of dollars of Australian taxes, but still be denied the ability to even apply for citizenship, because they were not able to fulfil the government's arbitrary age or skill requirements for a PR visa.

      How could this possibly be considered fair?

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  4. Frederika Steen

    logged in via Facebook

    As a former Immigration Officer (1984-2001) I suspect that the culture which brought in this tough love policy towards our cousins from across the ditch, and compromised the original Trans Tasman Agreement, had much to do with the xenophobia and fear of uncontrolled arrivals, specifically the "boatpeople" arriving from 1999 onwards.

    The people movement across the Tasman was ( and is) of uncontrolled numbers, and the TT Agreement was regarded by many in Immigration as the "soft underbelly" of…

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  5. Steve Jeffery

    Project Manager

    I am a New Zealanader and have been living permanently in Australia for almost 12 years. I am now married to an Australian Citizen & have 2 Australian children. Contrary to popular opinion I did not move here for better unemployment opportunities. I have always worked and paid tax in Australia, and I would like Australian Citizenship for 2 reasons: 1) So I can vote and feel like I have some say in how my tax is spent and 2) So I can truly call Australia home with the rest of my family.

    Being married…

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    1. Timothy Gassin

      PhD candidate, University of Melbourne

      In reply to Steve Jeffery

      My fiancé is a New Zealand citizen and, indeed, it is difficult to justify the time, effort, and expense. When we contacted the immigration department, we were literally told 'why would you bother?' - if even people in the immigration department think the process is ridiculous, how can the government justify it?

      The process of having to
      i. apply for a temporary spousal visa (which accords fewer rights than an SCV)
      ii. then apply for a PR visa (giving the same residence rights as an SCV)
      iii…

      Read more