Flight of the Conchords

The greatest Kiwi export to hit the world stage is The Flight of the Conchords, a TV show featured on the US cable station HBO about two New Zealand buskers – Jermaine and Bret – making their way in the USA.

The Kiwi pair are also “helped” by their hapless manager, Murray (a sort of wannabe Brian Epstein of Kiwi music) who also happens to be the New Zealand Deputy Consul General in New York in his day job.

In a recent episode, one of the Conchords, Jermaine had a fleeting relationship with an Aussie girl Keefa (which shocked Jermaine as he thought it sounded like a female version ‘Keith’ as in Keith Urban). The next morning, Jermain then goes through the terrible shame of dating an Australian and asks Keefa many questions about her past (“Was your dad and mum Australian, your grandparents?), in the hope there’s some New Zealand or at least non-convict gene in her ancestry somewhere.

This Flight of the Conchords episode got me thinking about how New Zealanders really view Australians and whether Australian-New Zealand alliances work well on the international stage (unlike Jermain and Keefa’s).

Well, according to Bill English, New Zealand’s Deputy Prime Minister and Finance Minister, he thinks there’s a lot than NZ and Australia can do together. When I interviewed him in Sydney he said: “The New Zealand Economy partially relies on the Australian economy for its own success. The Australian stimulus package is helping New Zealand, as 25% of our exports got to New Zealand, and we’re looking after NZ$87 billion (AUS$70 billion) worth of Australian investment. Accordingly, I am here in Australia with an unusual quotient of goodwill towards Australia’s economic efforts!”

English points out that the timing of the Kiwi and Aussie stimulus packages has been different. “Our stimulus was started before the global financial crisis and was not just a response to the crisis like the Australian stimulus. Our stimulus was a mixture of tax cuts and infrastructure spending,” he explained.

In rugby unions terms (and after all the All Blacks and Wallabies are soon to face each other in the Bledisloe Cup), the respective stimulus packages can be explained in terms of the styles of the two teams doing battle on the rugby pitch. Whilst the NZ Government has taken a “rolling maul” approach (i.e. staggered stimulus) to fiscal policy, Australia has undertaken a larger, bolder stimulus (more like David Campese inspired forward move than an gruelling All Black forward pack).

However, as English points out, the strong fiscal stimulus in Australia is boosting the Kiwi economy and he believes that the Australian stimulus will peak before the NZ package. In fact, it’s the post-crisis period that English thinks will offer great challenges to both economies.

“The question is what both countries do after the stimulus – which has lifted confidence in consumption and housing – as is customary with stimulus spending on domestic economic activity. A rise in middle class unemployment or rising interest rates is a big challenge for both central banks and for governments in terms of economic management. A big issue for NZ is still our current account deficit and the fact that whilst the fundamentals would point to a lower NZ dollar than the current rate, it should be lower.”

English is also keen to team up with Australia and push through more Trans-Tasman economic reform, as a package of ‘new generation’ Closer Economic Relations (CER) reforms.

“In my talks with Australian Treasurer Wayne Swan, I am keen to get moving on a whole range of measures, including an investment protocol, portability of superannuation funds across the Tasman, reform of the overseas investment act and reform of business law. I am particularly adamant that New Zealand be seen as being “open for business”, and accordingly, we will speed up processing through Auckland airport and improve out transport and business infrastructure.”

Gareth Camplin, Chief Economist NZ Trade and Enterprise agrees that much can be done between the countries and that closer ties with Australia fits together well with NZ’s own agenda for economic development, as it winds out of the stimulus measures, post-crisis: “New Zealand, needs to move up the OECD ranks, and lift our average rate of productivity growth that has been 1% over past three to four years. It needs to be three and a half, or more as NZ needs to ‘trade up’ to ‘earn’ our social benefits. We can’t be ‘comfortable’ with our OECD ranking, if we want to improve our livings standards,” he says.

Camplin believes developing NZ’s export culture is an important part of the agenda. “NZ needs to be more conducive to building businesses and strengthening our export culture. Just 188 NZ businesses earn just over 79% of our export revenue, so we need to broaden our base and strengthen our long-term economic fundamentals.”

Camplin names six “planks” of economic reform needed to drive longer term growth including: “regulatory reform, investment in infrastructure, providing better public services that are ‘value for money’, improving education and skills, attracting investment and providing better business services, and developing a world class tax system”.

Camplin believes that there’s nothing fancy to the shopping list of reforms that are required and nothing wrong with ‘sticking to the basics’. “We know NZ is good at food, it’s one of our competitive strengths, we know NZ never will run out of water (for example, Canterbury only uses 4% of NZ’s water) and we know that our traditional industries like dairy farming, environmental management and hospitality and tourism will deliver for us. And there’s plenty of industries and businesses that are complementary to Australia’s,” he explains.

As Bill English says: “New Zealand and Australia are still just corks in the ocean of the global economy. You may be a big one and we’re just a small one, but we’re still corks none the less. Accordingly, I am looking closely at Australia in terms of tax reform, investment reform and regulation, and even taking a look at your Productivity commission, to see how much we can learn from each other, and how much we can collaborate on. New Zealanders, like Australians, are now used to living in an open economy, and unlike past recessions, they are rolling up their sleeves and getting on with the job of recovery. They know what to do and I expect they will be doing a lot more with Australians as our economies move closer together.”

So unlike the Jermaine and Keefa, Australian-New Zealand relationships really do work when it comes to trade and investment. In short, in a business sense, Emus and Kiwis both can fly! And their economies are beginning to do so thanks to their respective stimulus packages so far on both sides of the Tasman.

Tim Harcourt is Chief Economist with the Australian Trade Commission and the author of The Airport Economist (www.theairporteconomist.com). 

To read more Gone Global blogs, click here.