The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Wayne Swan

Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

14 July 2011

Joint Press Conference with
The Hon Bill English MP
New Zealand Deputy Prime Minister, Deputy Leader, Minister of Finance,
Minister for Infrastructure

Press Conference

Wellington, New Zealand

14 July 2011

SUBJECTS: Closer economic ties between Australia and New Zealand; carbon pricing in Australia and New Zealand; disaster relief; capital gains tax; global financial imbalances; strength of Australian banking system.

ENGLISH:

Well good morning ladies and gentlemen. Can I welcome Treasurer Swan and record our appreciation both for the support Australia has given us through the natural disasters we've had but also for him taking the time from what's been a fairly pressurised process over in Australia for their own significant political issues.

We've had a very constructive discussion this morning building on what's, I think, become quite a normalised close relationship with Australia. We've focussed on looking at the progress that's been achieved recently and the ongoing integration between the Australian and New Zealand economies. Just to mention a few significant ones, the agreement on the investment protocol which will be a process that will be finalised in the next few months.

We're well along the path on the portability of superannuation savings between KiwiSaver and the Australian Super Scheme. The Prime Ministers have recently made progress on it, and actually that's taken a bit longer, and that's around therapeutic goods regulation. And for many New Zealanders the most visible sign of further integration has been the changes in passenger processing at airports in Australia and New Zealand, something that Aussies and New Zealanders have taken to with much more enthusiasm than we expected.

We've also done a stocktake on what we call the Single Economic Market work stream, which is a wide range of quite detailed, unglamorous projects, none of which attract a great deal of political media attention, but all of which make a difference to businesses that are operating in both markets. Just by way of example, progress on converging accounting and financial reporting standards are a pretty critical part of the operation of any business, coordinating the enforcement of consumer laws, and one detailed one which is reasonably topical in New Zealand. If you're working towards a situation where a director is banned in New Zealand, they will also be banned in Australia and vice versa.

We've also had discussions today with – the Treasurer has also had discussions today with Gerry Brownlee around the administering of Earthquake Recovery and also detailed discussions with the Honorable Nick Smith around climate change policy.

We've added a new aspect to this particular bilateral. We brought in a group of business leaders from trans-Tasman businesses, some of which are New Zealand owned, like Fonterra or Fulton Hogan, a number of which are Australian owned like representatives of the banks, Telstra, and one or two others, to give them the option to talk directly with the Treasurer and myself about the next steps they want to see and if I could characterise that discussion, they were very positive about what the governments were achieving. Some of them surprised to see how much was actually going on, but keen to continue and there was two or three areas which they raised which myself and the Treasurer were interested to see if they can or should be progressed. One is around the fact that both countries were rolling out ultra-fast broadband, and the opportunities for a more competitive market there, further development of financial services, integration and of course the topic of disaster relief. So they are areas that we may explore further.

So can I hand over to the Treasurer.

TREASURER:

Well thank you very much Deputy Prime Minister. Can I say it's great to be back in New Zealand and I very much enjoyed the discussions that we had this morning not only with yourself, but of course with the Environment Minister, Nick Smith, and Gerry Brownlee.

For Australia, New Zealand is a very important trading partner, but it's more than that, it's a great mate and that spirit was there in the discussions today. Bill and I attend a number of international meetings together and I think we can say that we cooperate very closely in our international endeavours as well.

It was good this morning to talk about the progress that we've made on a single economic market, tearing down the trade barriers. Tearing down the barriers between doing business across the Tasman is a very important priority. So the single economic market remains a priority, more work to be done, but I think as the Deputy Prime Minister said, we've made some pretty important progress over time and this morning talking with the business leaders we identified a few other priorities as well for the future. So that's very good and that's pretty important, given the uncertain global economic environment that we face.

There are problems with running European economies which are daily in the press. It's very important that we work closely together in this part of the world because we're very confident that our part of the world has strong growth prospects and if we work together in the region, we are all the stronger for that.

So I'm an optimist about the Australian economy and I'm an optimist about the New Zealand economy because in the Asian century we do stand to benefit as a major supplier of goods to the growing middle class in Asia, and if we cooperate, we can all grow strong together. And of course we had discussions today about climate change, and as you will all be aware the Australian Government announced on the weekend our Clean Energy Future package.

I was very pleased to have an extensive discussion about how the ETS is working here, and of course it is working well, and much of the commentary that was made in New Zealand prior to the introduction to the ETS is now being made in Australia prior to the introduction of our ETS, and I have been pleased to see that that scaremongering has not actually matched the facts in terms of the New Zealand ETS and nor will it match the progress of our ETS when it begins next year.

So I think a lot of Australians will be comforted to see that there is an emissions trading scheme which is working very well in New Zealand. The sky hasn't fallen in and the economy has continued to grow. We had a discussion this morning about linking the schemes at some time in the future. We look forward to discussing those issues with the New Zealand Government in the years ahead because both governments recognise just how important it is to reduce carbon pollution and to do something about dangerous climate change. Over to you.

CONVENOR:

Thank you Treasurer. Any questions?

JOURNALIST:

Can you go into a bit more detail Minister, about opportunities for cooperation on broadband?

ENGLISH:

Well, we didn't have a detailed discussion. The business group simply raised the issue because we had both Telstra and Telecom who are the main players in this Trans-Tasman. They raised the prospect that was a natural cooperation could rise between the companies that are carrying out government policy. In the first place it's about looking at how much they can standardise the networks and drive down purchase costs and just simply raise the issue about the prospect of altering regulatory regimes to see if we can get better Trans-Tasman competition. And that's about as far as the discussion went, but I think it went far enough that both the Treasurer and myself thought it was worth pursuing to see whether it fits the SEM framework and when we can realise that some of the benefits that, on reflection, look reasonably obvious.

JOURNALIST:

Sorry, the what framework?

ENGLISH:

The SEM framework. That's just the officials' process which grinds on month after month, year after year, knocking off all these issues that create more economic integration. So we'll be looking into the question of whether the telecommunications market is something that we could work on together.

JOURNALIST:

What was the nature of the discussion with Gerry Brownlee, and was it about skills (inaudible) recovery?

TREASURER:

Well, we had a general discussion about the challenges in New Zealand of the reconstruction. We talked a bit about mutual experiences because, as you know, I'm a Queenslander and I've been very much involved with the reconstruction effort across my state, not just in my home city of Brisbane but also in those areas which were affected by Cyclone Yasi.

We did talk a bit about the whole process of ensuring that we could meet the capacity to rebuild and that is an issue in Australia as it is an issue here. But we didn't go into any detail about specific skill shortages, if that's your question.

JOURNALIST:

Obviously tax has to be a big issue in discussions around a Single Economic Market. Was that the subject of the discussions this morning and were there any discussions around New Zealand's current status without a capital gains tax? Also, mutual recognition of taxes as paid on dividends by companies in each country where the shares are held by…

TREASURER:

The issue of imputation credits was raised. As you may well be aware, the review in the taxation that we commissioned which reported last year recommended against any further change in that area and I made that point to the business leaders that we were talking to this morning.

JOURNALIST:

And on capital gains tax, do you see New Zealand's lack of a capital gains tax as an issue in terms of developing a Single Economic Market?

TREASURER:

Well, it's not for me to buy into domestic political issues. I just make the comment that capital gains tax has been part of the Australian system for well over 15 years and in our country it's been accepted by both sides of the politics.

JOURNALIST:

And what are the benefits Treasurer, of having a capital gains tax in Australia? What have the benefits been?

TREASURER:

Well, I'm not going to buy into any domestic debate on taxation thanks very much. I'm a guest in the country and I'm very much enjoying my visit.

JOURNALIST:

Treasurer, on the matter of the ETS, how do you see the future compatibility of New Zealand's scheme with the one that is proposed in Australia, given the emission profiles of the countries? The two countries are very different.

TREASURER:

Well, I think that linking both schemes makes an enormous amount of sense economically and I think it would work for business across the Tasman. But I don't want to comment on the future course that we've taken here in terms of ETS. I understand there's a review underway but I would have thought, given the outcomes of that review, I can see no obstacle to the fact that we should be able to strongly link these schemes to our mutual benefit.

JOURNALIST:

Minister, what is the timeframe for linking the two ETSs and has the Australian Treasury done any modelling of how they would do it?

TREASURER:

Well, first of all we will get our legislation through the Parliament and then we will get our scheme operating. And secondly, the New Zealand Government will review its scheme and make its announcements in good time. But I think there is a very, very bright future to link both schemes to our mutual benefit. The scheme here is working well – that's what Ministers have told me this morning. The sky didn't fall in when the scheme was introduced here. The sky will not fall in when the scheme is introduced in Australia, and it makes a lot of sense for both countries to closely cooperate, to firstly reduce carbon pollution, and secondly, to grow our economies strongly because we can continue to grow strongly with an ETS, as well as reducing carbon pollution.

JOURNALIST:

The sky might fall in though when the agriculture is brought under, which is why the Government is delaying bringing the agriculture under. Would it have to be a comprehensive…

TREASURER:

Well, I'm not buying into a discussion about the domestic future of the ETS in New Zealand.

JOURNALIST:

You talked about the benefits for both countries in linking the ETS. Can you give us a few more details on what some of those benefits would be?

TREASURER:

Well the benefits would be certainty for business. I mean this morning we have met with businesses, most of them operate in both countries. There would be very strong synergies available to companies that were operating in both countries. The market would be bigger. It's the same argument that we make in terms of the free trade agreement, and the single economic market is a market, and the more efficiently it operates, the better. And joining the markets will mean that we get the least cost abatement. That will bring efficiency. It will create a bigger market. It will create a more efficient market, and I believe would benefit both countries.

JOURNALIST:

But if you do integrate the two schemes, would they have to be exactly the same, and then it gets back to the question of agriculture in or out?

MINISTER:

As I said, I'm not going to buy into the discussion here about what's in and out, but no, they would not have to be exactly the same.

ENGLISH:

And then it's we don't quite know how exactly, how similar they'll be. As the Treasurer said, we're doing a review right now. The Australian Government's got its own political discussions going on, and I think over the next 12 months we will get a clearer picture of the degree of similarity. But I think regardless of the, either political war or environmental differences between the two countries, there's a pretty clear will from the governments to make it work as effectively as possible for those businesses that operate on both sides of the Tasman. And I think another theme that's come through is that business values certainty of knowing what the rules are and in the case of both countries we're moving to a position where we will be able to provide a bit more long-term certainty.

JOURNALIST:

(Inaudible) be the same?

ENGLISH:

Well there's no particular aspect that has to be exactly the same in both countries, but I think partly as a result of quite intensive interaction at the policy and officials' level over the last probably seven or eight years both in Australia, both domestically, but also in the international stage where Australia and New Zealand are often arguing similar points of view, you've got a reasonable degree of common thinking about it. So that does provide a unique opportunity in the future.

JOURNALIST:

But in the nearer term, does it create a problem Mr Swan, that the New Zealand effective carbon price is considerably lower than what you're proposing?

TREASURER:

Well, our scheme has not commenced as yet and your scheme is operating and under review. I can see no obstacles into the future to anything other than a very successful linking of the two schemes but the question you ask, asks me to predict the outcome of the review here, and I don't intend to do that.

JOURNALIST:

But what if that review accidentally ends up...

TREASURER:

Well I'm not going to deal with what ifs. I'm not going to speculate about the outcome of discussions in New Zealand.

JOURNALIST:

The different price of carbon between Australia, what Australia is proposing and what we have in New Zealand isn't a 'what if'. We've got a clear difference. So how do you get round that?

TREASURER:

Well because you have a pathway over a number of years.

ENGLISH:

Both the schemes were going, ours has only been running a year. The Australian Government is yet to implement theirs. Both of them are likely to have a transition period where there'll be maybe differences in any number of respects. But again, I think the general point is not so much about the detail of the schemes because both of those have yet to be finalised with certainty, but that there's a clear will from the respective governments to run these schemes in a way that is going to serve the interests of the larger market, the trans-Tasman businesses, and the economic growth opportunities that come out of it.

JOURNALIST:

Mr Swan, are you able to explain why Australia offers a higher price [inaudible]?

TREASURER:

Well we've set a price which is a price which reflects the international price, and particularly the European price. So we've settled on a price which reflects future expectations about carbon pricing, particularly in the European Union. That's our starting point.

CONVENOR:

Any other questions?

JOURNALIST:

Treasurer, was there any discussion of research and development and its different tax treatments in Australia and New Zealand?

ENGLISH:

No, we didn't cover that. As the Treasurer indicated, our economic discussion focussed to a large extent on the similar position in which New Zealand and Australia finds itself, as you get these very large shifts in economic patterns globally and we are both in a strong position with respect to the growth opportunities. In fact the Treasurer used the phrase similar to the one I would probably use myself, which is that our only limitations really are our ability to get ourselves organised enough to take those opportunities, because they're so significant. And I think in both cases we're somewhat insulated from the effects of other events like the European financial problems, and are increasingly seen as something of a safe haven in Australasia as those problems unfold.

TREASURER:

Maximising the opportunities that flow from growth in the region is the central purpose of domestic policy in Australia, and I'm sure here in New Zealand.

JOURNALIST:

But there's markedly different tax treatments of things like R&D. Doesn't this create a distortion?

TREASURER:

Well, we are moving towards a single economic market. We will not necessarily have identical policies in every area, but we do aim to harmonise what we do, and where we can have closer integration, we do.

JOURNALIST:

Treasurer, we're both in the same boat of our exporting centres having a bit of a headwind from strengthening currencies as the US devalues. Is there any talk in Australia about doing something to control the Australian currency, or perhaps keep it down?

TREASURER:

No. The fact is that our currency and its strength reflects the relative strength of our economy, vis-à-visother developed economies, and in particular reflects our very high terms of trade, and the fact that our commodity prices are at 140 year highs. That's what the Australian dollar reflects. And of course, that means that the rest of the world thinks that our economic fundamentals are strong.

JOURNALIST:

Does the US Fed's action and their monetary policy there concern you, like with quantitative easing they're devaluing the US dollar? Are you concerned about that?

TREASURER:

No, I don't have that concern. The issue with many developed economies is that they must engage in fiscal consolidation, so that they can bring their levels of debt under control over the long term. I'm very much involved in the discussion through the G20 about the framework for strong, sustained and balanced growth. This is the context of the debate at the moment in the United States, about what they do in the immediate future about their debt ceiling but that is much more fundamentally in the longer term about a discussion about their fiscal sustainability.

So underpinning that discussion about their debts is a discussion between the President and parties in the Congress about what they can do to make their fiscal position sustainable over time. It's critical that if we are to do something about the global financial imbalances, then developed economies that are running large deficits and carrying large levels of debt, have to fiscally consolidate. On the other hand, in those countries which are in surplus, it's very important if we are to have some impact on the global financial imbalances if they deal with structural imbalances in their economies as well and they vary from country to country.

JOURNALIST:

Did you have any discussions about the Australasian banking sector's ability to withstand a worsening situation in Europe since the debt crisis?

TREASURER:

The Australian banking system is strong. No we didn't have a discussion about that. It is beyond dispute that the Australian banking system is one of the strongest in the world, and that is further underpinned by reforms that we are currently putting in place to lessen our dependence on overseas wholesale funding.

ENGLISH:

One matter that did come up, is we appreciate the role that the Treasurer, in particular and the Australian Governor takes in advocating in the international debate around financial and banking regulation. Where, as the Treasurer puts it, we don't want to have a set of European rules imposed on a banking system that has actually weathered the global financial crisis pretty well.

So we're not at the table at G20 where these issues are discussed but the Australian Government makes sure we're kept up to date and their point of view reflects very much our own point of view about the way we expect our banking system to operate. And we're not the problem. The problem is actually in other larger markets, and we want rules that suit us. We'll just take one more question because we've got a lunch to get off to.

JOURNALIST:

Just quickly Mr English, your reaction to the 0.8% growth in GDP in the March quarter?

ENGLISH:

Well, it was a positive surprise, not just the 0.8% in that quarter, but also the upward revision in the previous quarter. So it is significantly better than we expected. I think when the economy is just starting to build a bit of momentum, tax and spend policies are not the way to build on that momentum. We need to constrain our spending, cut our taxes, and go with the resilience and the aspiration that we New Zealanders are building about confidence in the economy.

JOURNALIST:

You're both there talking about new carbon and (inaudible)?

TREASURER:

No, we're talking about pricing carbon and sending a price signal to drive the investment in renewable energy. That's what we're talking about.

JOURNALIST:

Excuse me, can I just ask…

ENGLISH:

Last question.

JOURNALIST:

The apple trade. The latest developments in the apple trade.

TREASURER:

Yes, I can. We are complying with that decision and it is going through all of our official mechanisms as we speak.

JOURNALIST:

So there's a move by the, I think, the Opposition put forward a Private Member's Bill.

TREASURER:

Not as yet, and I don't control what the Opposition does.

CONVENOR:

Thank you very much. See you at the lunch.