Saturday, December 29, 2012

CER talks to test trans-Tasman ties - Sky News Australia


CER talks to test trans-Tasman ties


Australian Prime Minister Julia Gillard has referred to New Zealanders as 'family' but how far she wants to stretch the welcome mat for Kiwi kin will be a test of the trans-Tasman relationship in 2013.


Ahead of next Tuesday's 30th anniversary of the Closer Economic Relations agreement taking effect, Ms Gillard and New Zealand counterpart John Key have committed to strengthening CER when they released a report aiming to do that.


The joint report of both countries' productivity commissions, requested by the two prime ministers at their last annual meeting, has come up with 28 proposals for them to ponder at their next scheduled meeting in February.


But, as well as promoting trans-Tasman economic integration, the commissions were tasked with producing options that improve economic outcomes.


There's the rub for Canberra, with the federal government struggling to balance its budget with a reduced tax take as the minerals boom winds down.


Don't expect any rush to extend Australian welfare and tertiary education rights to the legions of Kiwis who continue flocking across the Tasman.


Stopping double-taxing of dividends on trans-Tasman investments - another contentious option in the commissions' report - would also potentially reduce Australian tax revenue.


When Australia decided that newly-arrived New Zealanders would lose the full benefits of permanent residents in 2001, it's estimated that NZ citizens were receiving $A1 billion in Australian social security payments.


NZ's Ministry of Foreign Affairs and Trade has pointed out that New Zealanders paid $A2.5 billion in Australian taxes that same year.


The commissions' report finds qualification for Australian permanent residence - and thus entitlement to unemployment, sickness and other benefits, and student loans - are out of reach for between 100,000 and 144,000 New Zealanders living in Australia.


It says the plight of 'these indefinite temporaries' may develop into a point of irritation within the trans-Tasman relationship' and suggests policy change in Canberra to fix it.


The commissions were more circumspect about ending the long-running argument over the double-taxing of dividends on trans-Tasman investments.


Mutual recognition of imputation credits (MRIC) on dividends could cost Australia as much as $A800 million ($NZ1 billion) a year in lost tax revenue and NZ as much as $NZ220 million ($A178 million). The estimated economic gains for NZ would be twice as much as for Australia.


The Australia New Zealand Leadership Forum sees double taxation as the biggest unresolved CER issue for business and it - including Australian co-chairman Rod McGeoch - is urging both prime ministers to introduce MRIC in 2013.


Ms Gillard and Mr Key also face union opposition to proposals to cut remaining trans-Tasman tariffs and aviation market restrictions.


The impetus for change will probably be stronger from NZ because - as the productivity commissions say - NZ stands to gain more.


'Australia's economy is over seven times the size of New Zealand's, so the commercial significance of New Zealand for Australia is smaller,' the commissions noted.


'New Zealand is nevertheless a major market for Australia's manufactured exports and tourism industry, and Australians hold investments in New Zealand worth around $A74 billion.'



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