Treaty on mutual recognition of securities offering, harmonisation of business law, single currency, AWB, Victorian Liberal Party, inflation – Joint Press Conference, Treasury Place, Melbourne

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Treaty on mutual recognition of securities offering, harmonisation of business law, single currency, AWB, Victorian Liberal Party, inflation – Joint Press Conference, Treasury Place, Melbourne





Minister of Finance, New Zealand


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


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.




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.


All done, okay.


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


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


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


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.


We are happy to come second.


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.


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.


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



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



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.


Do you think that actually addresses the issues of compliance costs which were

at the heart of the (inaudible)?


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.


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?


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.


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


You may.


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)?


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.


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?


No, I am not saying that.


What is the nature of…


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.


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…


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.


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


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.


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…


Do you want me to take this one?


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


Okay, all right.


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.


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.


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


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.


Doctor can I put that currency question to you?


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.


Mr Costello, can I ask you as the senior Liberal in Victoria what you think

about the ructions in the local Liberal Party?


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.


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


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.


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

doing enough?


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.


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


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.


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?


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.


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?


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.


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?


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.


Does this mean that the wage pressure has some heat?


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



Mr Costello, just on AWB, do you think that AWB’s monopoly of a single

desk arrangement is sustainable?


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.


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


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.


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



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.


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

that is appropriate?


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


Mr Costello, on Singapore Airlines, is Virgin Blue being set some kind of deadline

to meet, to increase traffic on that route?


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.


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


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.


Oh it is a domestic New Zealand…


Oh okay.


Well there you go.


It is still the last question.


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?


Why what?


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


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



Is that prior to funding…


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.


Thank you very much.


Thank you.