The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Peter Costello

Peter Costello

Treasurer

11 March 1996 - 3 December 2007

Transcript of 22/02/2006

TRANSCRIPT

Of

THE HON PETER COSTELLO MP
Treasurer

and

THE HON DR MICHAEL CULLEN
Minister of Finance, New Zealand

and

THE HON LIANNE DALZIEL
Minister of Commerce, New Zealand

Joint Press Conference
Treasury Place

Wednesday, 22 February 2006
12.00 noon

 

SUBJECTS: Treaty on mutual recognition of securities offering, harmonisation of business law, single currency, AWB, Victorian Liberal Party, inflation

TREASURER:

Today, Minister Dalziel the Commerce Minister of New Zealand and I on behalf of Australia are signing a Treaty between Australia and New Zealand which will govern the mutual recognition of securities.

What this will mean is that securities that are issued to raise funds in Australia will be recognised in New Zealand and securities which are issued in New Zealand to raise funds in New Zealand will be recognised in Australia. That there will be seamless recognition of securities across the Tasman, that the consequence of that is it will make it easier for Australian companies to raise money in New Zealand and New Zealand companies to raise money in Australia, will significantly cut red tape and will contribute to reducing trade and investment barriers between our two countries.

This is a wonderful achievement and I want to thank the New Zealand Government for its co-operation in doing this and to thank our officials for all of the work that they have done and invite the Minister to sign an Exchange of Treaty.

We will formally exchange our Treaties now.

MINISTER DALZIEL:

Congratulations.

TREASURER:

Thanks very much.

Now the second document that we are signing today is a Memorandum of Understanding between Australia and New Zealand on the coordination of business law. This is to take the coordination of our law and our regulation further steps. It has a very strong work programme set out in this Memorandum to deal with matters such as cross-border insolvency, disclosure regimes, coordination of insurance, information sharing, disqualification of directors and coordination of anti-money laundering across the Tasman. This is an ambitious programme that we have set ourselves and we are going to sign an Agreement to keep ourselves up to the mark and make progress.

And again, thank you very much.

MINISTER DALZIEL:

All done, okay.

TREASURER:

Thank you.

Well ladies and gentlemen today, Dr Michael Cullen, the Deputy Prime Minister of New Zealand and the Minister of Finance for New Zealand have been here having discussions with me, our annual trans-Tasman discussions as Finance Ministers together with the Minister of Commerce in New Zealand, Lianne Dalziel and my Parliamentary Secretary Christopher Pearce.

Talks have been very fruitful. We have exchanged discussions about the state of our respective economies, the regional environment and the international environment.

Particularly pleasing has been an announcement which we were able to make today, a breakthrough I believe in trans-Tasman banking markets. Each of our countries has announced that we will be amending legislation to require our prudential and central banks to assist each other in banking and prudential regulation. We have set a joint framework of assistance which could be applied in relation to a financial problem in either of the countries and welcome announcements out of the Reserve Bank of New Zealand in relation to its outsourcing policy which I believe will enable the harmonisation of banking regulation across the Tasman.

The banking industry is probably the most integrated industry of all across the Tasman and to achieve breakthroughs in relation to regulation is very warmly welcomed.

In addition to that we have as you have seen, just signed a Treaty in relation to securities offerings and a Memorandum of Understanding in relation to the harmonisation of business regulation generally.

I am pleased to say that relations between Australia and New Zealand are very close indeed. That there is a very strong relationship at the Government level, on a person-to-person level, on a personal level between Dr Cullen and myself – we have become good friends over the years and the only level on which the relationship is not so friendly is the sporting relationship where we look forward to doing New Zealand over at the Commonwealth Games in a few weeks time.

MINISTER CULLEN:

We are happy to come second.

TREASURER:

But can I just reiterate again, it has been a very, very successful series of meetings beginning last night and continuing through the day. We will go from here to a lunch with significant business leaders in both New Zealand and Australia and we will be discussing the business environment further.

But thank you Dr Cullen for coming and thank you for the achievements that we have had today.

MINISTER CULLEN:

Thank you very much. It is a great pleasure to be here. As Treasurer Costello has indicated we have had two major deliverables if you like in terms of banking regulation and securities offerings. We are really over the next year to have a number of other deliverables in place in terms of development of a range of policy issues but also some quite specific ones for example progress on a (inaudible) investment protocol, issues around the barriers arising from financial reporting requirements and a number of others.

We are really focussing very much on things where we can make progress in terms of removing barriers to business activity across the Tasman rather than getting diverted off on to other issues which can in fact hold up progress in the areas of most concern both to the two Governments and to much of business on both sides of the Tasman.

So we see this as a very progressive series of measures that we are outlining today. Plus of course to take the opportunity to talk about issues around the two economies, what they are doing, how they are moving forward and the wider relations particularly in the Asia Pacific region of importance to us.

TREASURER:

Right. Well, we will take some questions on trans-Tasman matters first if we can.

JOURNALIST:

Mr Costello you said at the start of this whole process that you would regard a single banking regulator as the ambitious outcome, that was an endpoint, this stops way short of that. I guess, do you feel you have fallen short of that ambition?

TREASURER:

Well the banking market is highly integrated. I think Australian banks own something like 90 per cent of the banking industry in New Zealand. Now we could have two separate stand-alone prudential standards across the Tasman or you could have one regulator. Obviously there are sovereignty issues involved in the latter alternative and I feel that we have progressed way beyond two separate stand-alone regulators to a harmonised system with two regulators operating a common understanding of prudential requirements and a recognition of each others jurisdictions. And so I think within the requirements of sovereignty this is an optimal outcome. Who knows what may happen in years to come but we have certainly taken great strides.

JOURNALIST:

Do you think that actually addresses the issues of compliance costs which were at the heart of the (inaudible)?

TREASURER:

Oh absolutely. I have no doubt about that. Because now the two prudential regulators will have a common understanding of capital requirements so the capital requirements in accordance with Basel standards will be the same and the outsourcing policy of RBNZ will be such as to not require complete duplication of everything in the two jurisdictions and that will dramatically reduce compliance costs.

JOURNALIST:

Mr Costello will this, can you give us some examples of how it will cut down red tape with companies doing business across the Tasman?

TREASURER:

Yes. If an Australian company wants to raise money, go to market for example in Australia it will be able to use that prospectus in New Zealand after appropriate notification, it will not have to do an entirely separate prospectus, it will be able to use the one document which will reduce duplication. Similarly if a New Zealand company wants to come into the Australian market to raise money rather than completely duplicating its prospectus for a security offering it can do it on the New Zealand document. Both regulators will enforce that document and there will only be one requirement for both sides of the Tasman. That is a major reduction in compliance.

JOURNALIST:

I just wondered if I could direct a question to Dr Cullen.

MINISTER CULLEN:

You may.

JOURNALIST:

You raise the issue of the investment protocol, is that an intention for instance to open the doors in Australia to New Zealand companies on perhaps the same level that Australia has with the United States and (inaudible) in its FTA. Do you get that kind of parity back into (inaudible)?

MINISTER CULLEN:

Well that is obviously one potential outcome of the discussions and what we have agreed is that Australia will be making an offer to us and we will be responding with a counter offer we can consult with our colleagues on that in that regard. But yes we are trying to move towards a stronger investment framework between the two countries as is consistent with our other external relationships.

JOURNALIST:

So Dr Cullen could you please explain that a little bit more, are you saying that you don’t have to get Foreign Investment Review Board approvals or could you just explain it please sir?

MINISTER CULLEN:

No, I am not saying that.

JOURNALIST:

What is the nature of…

MINISTER CULLEN:

The question that rises here is should we move to free up investment arrangements between the two countries which will be in a more favourable position than our general investment protocols across other countries – third countries in the rest of the world, given the increasing integration of the two economies and a desire to move towards a single economic market.

JOURNALIST:

If I could just get some clarity on that perhaps from Peter Costello? Clearly you know the arrangements with the United States are obviously of significance is the issue really, what sort of issues do you have to take into account when you consider whether New Zealand should be able to have higher threshold in front of it than…

TREASURER:

Well Australia would like to offer to New Zealand a treatment as favourable as it does to the United States. We would like to offer that. Of course we would also like to get a quid-pro-quo in offering that and if we are able to get an advice, hopefully that will come about. I don’t think there is any reason at all why New Zealand should have a more restrictive policy applied to it for Australian investment than the United States. And let me put that conversely, there shouldn’t be any reason why Australians should find it harder to invest in New Zealand than they do in the United States. And so if we can take that to a new level we would like to do so. But these things all involve negotiation and local conditions and so we will see if we can make some progress in that area in the next 12 months.

JOURNALIST:

Mr Costello do you ever see the day when we will have the one currency?

TREASURER:

Let me tell you what Australia’s position on this. We are happy with our currency. We do not want to introduce a new currency. People from time to time put the proposal to us – would you like to get rid of your currency and join some new currency yet to be established? And our attitude is – not really. We are quite happy with the way things are. And other countries will speak for themselves no doubt but that is our position here in Australia.

JOURNALIST:

Minister your press release talks about some discussion over taxation, can you expand on that and also (inaudible) in leadership forums do you move on mutual recognition of banking credits and…

MINISTER CULLEN:

Do you want me to take this one?

TREASURER:

Oh well, I want to talk about the last one.

JOURNALIST:

Okay, all right.

TREASURER:

Look can I say this, sovereign countries have their own taxation systems, obviously the taxation system between Australia and New Zealand diverges in important respects. We both have a GST, the New Zealand base is broader than the Australian base, the New Zealand rate is 12 per cent, the Australian rate is 10 per cent and that illustrates the fact that as sovereign nations there are important differences. The idea that the tax systems can be harmonised is aspirational but not realistic. And the reality is that in a situation where we have different rates, different places, you can’t just take one area of the taxation system and apply it to both countries. What we would like to do with New Zealand is, in our double tax agreement, we would like to modify them. We think that is the way to progress taxation issues through improving the double tax agreement. We in Australia have done that recently with the United States, we have done it with Britain, and if New Zealand are interested in that model we would be very, very keen to pursue that.

MINISTER CULLEN:

The issue for us obviously is that for a full renegotiation of the DTA with Australia we would need to move on our non resident withholding tax rate which is relatively high by international standards. That in itself is probably partly linked to our general review of the structure of business and taxation and changes around there. So I have given the undertaking to Treasurer Costello that we will be moving on those considerations and then we will come back. Because obviously we are keen to have a renegotiated DTA with Australia updated as much as possible because this is the most important economic relationship to New Zealand particularly at that company-to-company, investment-to-investment kind of level.

JOURNALIST:

Does that actually get over the issue the business community (inaudible)

MINISTER CULLEN:

Well some of the business community keep coming back to, and I said before to you Fran that is an issue which is not on the agenda as far as Australia is concerned. So if we want to keep banging our head against that brick wall it is a fairly large brick wall from the New Zealand perspective, then we won’t make progress on other issues. And the Treasurer is pointing out it is not just a simple matter of rate differentials, there are structural differentials in our taxation system which have to be taken into account in that regard and New Zealand business would not thank me to introduce harmonisation with some of the Australian features in that respect.

JOURNALIST:

Doctor can I put that currency question to you?

MINISTER CULLEN:

Well you have heard what the Treasurer says, it is a reiteration of the position that has always been there. Which is, that essentially that New Zealand is free to adopt Australia’s currency. Putting aside economic rationalist argument we prefer our dollar coins to be smaller than our two dollar coins and a (inaudible) sovereignty level New Zealand is not giving those kinds of issues away. So it is not an issue which is on the agenda at all. And again I think it is unfortunate in terms of this trans-Tasman harmonisation issue and the move to a single economic market that we keep disappearing off into side issues such as a single currency or a fully common border, one of which is not on the agenda and the other of which is actually impossible. Neither country would accept that once you have entered New Zealand or the other countries (inaudible) immigration services you have automatically got access of no further processing across the Tasman for all sorts of very obvious reasons. We are 2,000 km apart, have quite different flora and fauna and all sorts of things which are (inaudible), most of our biosecurity threats come from this side of the Tasman either directly or indirectly.

JOURNALIST:

Mr Costello, can I ask you as the senior Liberal in Victoria what you think about the ructions in the local Liberal Party?

TREASURER:

You mean the announcement by Victor Perton? There has been an announcement by Victor Perton that he won’t be contesting at the next Victorian State Election. I have known Victor for a long period of time, I thank him for the service that he has given to the Party. If a person loses their appetite for politics then you can’t make them continue. And Victor has got other things he wants to do with his life now and we wish him well in relation to that. The most important thing now is to get a good candidate in the seat of Doncaster. It will be a very tough fight. It is a very small margin and the Party will now look at the question of ensuring it has got a good candidate and well placed to contest that seat.

JOURNALIST:

Do you think the Liberals can win the State Election in November?

TREASURER:

Let me make this point, back in 1999 there were many people that thought that Steve Bracks would never be able to topple then Premier Kennett. And he did. And there are unexpected results that happen in politics and the only thing I would say to the Party in this State, is concentrate on the things that Victorians are concentrating on – think about services, think about where Victoria is going, come down with policies which are important to the people of this State and argue your case and hold the State Government accountable. Because there are a lot of Victorians that are out there looking for better government in this State. And if you direct yourself to and talk about the things that are important to the electors of the State you can sometimes surprise yourself as to what the outcome will be.

JOURNALIST:

Are you saying Sir that they should be lifting their game – is Mr Doyle doing enough?

TREASURER:

I think they should be focussing on the issues here in Victoria. No point in always focussing on themselves. The important thing is to focus on the issues that are important to the electors because Victorians want to see good government and they expect an opposition to be holding the Government accountable and giving them the opportunity to vote for a better government.

JOURNALIST:

Mr Costello the Singapore Airlines decision, was that a protectionist decision?

TREASURER:

The decision which has been made in relation to Singapore Airlines is that Singapore will not be allowed on to a Pacific route in the next few years, particularly to give the option for Virgin to enter that route. And if Virgin does enter that route that will heighten competition and if it doesn’t then you would have to look at other ways to heighten competition in a few years time.

JOURNALIST:

What message does it send, Singapore Airlines has been lobbying for a number of years to get on to this route, why did you give them the flick this time?

TREASURER:

No, the decision that has been made is to give Virgin Blue the opportunity, or Virgin International I guess they will call themselves, the opportunity to come into that market which would actually heighten competition. As I say, if that didn’t actually occur then you would have to revisit the decision.

JOURNALIST:

So Singapore Airlines, sorry if I could just finish on this point, they are saying, well there are suggestions that the execution of Van Nguyen maybe had something to do with it?

TREASURER:

No. I can say to you that we don’t link executions to aviation policy. Aviation policy stands and is considered on its merits. Our policy in relation to the death penalty stands and is considered on its merits. We do not link the death policy to aviation policy.

JOURNALIST:

Treasurer the labour cost index is out today and it is running at an annual rate of 4.2 per cent, do you have any concerns about that and what do you, how do you see inflation, impacting on inflation going forward?

TREASURER:

Well, our forecast is for inflation to continue at moderate levels. It is consistent with our target which is 2-3 per cent. I have repeatedly warned that we do not want to see higher petrol prices cause second round effects, get back into the general economy. And if we can make sure that we are able to separate the effect of prices on petrol which feeds into transport, from prices in the general economy that will be consistent with continuing low inflation and that is our objective.

JOURNALIST:

Does this mean that the wage pressure has some heat?

TREASURER:

Look, in some areas of the Australian economy where they are taking advantage of high commodity prices, where investment is extremely strong, there are labour shortages. And labour is sharing in the commodity price boom. The important thing however is that you do not transmit labour costs from that area to the economy generally because if you were to take wages from the commodity sector and apply it back into the general sector where you are not getting those price benefits, that would be a real problem for business and that would be a problem for inflation. That is why it is important that we don’t have centralised wage fixation. In previous terms of trade booms in Australia what happened is you transmitted prices out of the hot sector of the economy to the whole economy and it gave us the problems. This is the importance of individual wage negotiations – negotiations based on the profitability of a particular company and a particular sector and if you like, a particular geographic area of the Australian economy.

JOURNALIST:

Mr Costello, just on AWB, do you think that AWB’s monopoly of a single desk arrangement is sustainable?

TREASURER:

Look at the moment there is a Royal Commission in relation to AWB. The Royal Commissioner is asking this question – did AWB break Australian law by offering bribes and did AWB circumvent UN sanctions? And if he makes a finding in relation to that, well prosecutions will be brought. And I have said before and I will say it again, if AWB broke UN sanctions and engaged in bribes that is a disgrace and they should be prosecuted. The structural question of Australia’s wheat export marketing arrangements is a different question. That is not on trial in the Cole Royal Commission and I wouldn’t want to run the two issues together.

JOURNALIST:

But would the Government consider opening up to several traders? I mean…

TREASURER:

Well I think the, as I said earlier, the Cole Commission should run its course, the outcome of the Cole Commission should be known, the recommendations of the Cole Commission should be acted upon and separate from that, well separate from that, should be any consideration of our wheat marketing arrangements.

JOURNALIST:

But do you have a view on the wheat marketing arrangements, Treasurer, as they stand?

TREASURER:

Oh you know, the funny thing is I have lots of views on lots of things but now is not the time to give you an exposition on all of them.

JOURNALIST:

Should the AWB Chairman be going on this mission to Iraq though? Do you think that is appropriate?

TREASURER:

Oh well, let’s just see how the mission develops.

JOURNALIST:

Mr Costello, on Singapore Airlines, is Virgin Blue being set some kind of deadline to meet, to increase traffic on that route?

TREASURER:

It has been given an opportunity. It has talked about wanting to come into the Pacific route, it is being given the opportunity to do so. If it doesn’t come on to the Pacific route then you would have to look at other competitive possibilities. But that is the possibility that we are looking at at the moment. Okay last question.

JOURNALIST:

What about tougher laws for aged care in light of recent events in Victoria?

TREASURER:

Well look, nobody would be glad at the appalling conduct that seems to have occurred in some isolated cases in the aged care sector. And the Minister I know will ensure that we get to the bottom of it and that people are brought to account. Now we have a system by which people can make complaints about care which is inappropriate and it will be investigated and that system will be activated in this particular case. Last question. Because I know it is trans-Tasman, we will go home on this one.

JOURNALIST:

Oh it is a domestic New Zealand…

TREASURER:

Oh okay.

MINISTER CULLEN:

Well there you go.

TREASURER:

It is still the last question.

JOURNALIST:

Dr Cullen, in Auckland the Government today has announced that Transit New Zealand must go back to the drawing board at the blow out in the cost of the Auckland (inaudible) Project. Can you just expand why?

MINISTER CULLEN:

Why what?

JOURNALIST:

Why they have been told, why the Government has told the banks to go back?

MINISTER CULLEN:

Because you must complete that (inaudible) Programme. I think blow out is a bit of a strong word, it is some $600 odd million out of $12 billion over the 10 year programme and it is driven by a number of factors including in fact a direct impact of oil costs on road, construction costs so we have got to make sure that we meet that 10 year programme. We should of course will have to look at whether we need to find ways of enhancing funding over the coming 10 year period.

JOURNALIST:

Is that prior to funding…

MINISTER CULLEN:

Well there is a range of possibilities in that respect, I have already talked about the tendering mechanism for transit users and the issues around getting more competition in the sector. There are of course other areas which may have to be looked at in that regard. But having announced a 10 year programme for completion of the Auckland (inaudible) Network we cannot now back off that because of short run changes around forecast economic growth, prices etc.

TREASURER:

Thank you very much.

MINISTER CULLEN:

Thank you.