There are several ways for New Zealand to benefit from Australia’s booming economy. The ANZAC dollar and the trans-Tasman trade are just two examples. China’s presence in the South Pacific is another reason for the country to benefit from Australia’s thriving economy. And if you’re a New Zealander, you can enjoy the ANZAC dollar’s low value and Australia’s growing economy at the same time.
Trans-Tasman travel arrangement
Both countries have free trade zones and allow Australians to live and work in New Zealand with limitations. The Tran-Tasman Travel Arrangement(TTTA) came into effect in 1973 and allows for the free movement of citizens to travel between the two countries to live and work indefinitely. Residents of each country moving to New Zealand or Australia benefits both countries as it allows for skilled migrants to be shared amongst the two countries. Every year, moving companies in NZ and AUS see an uptick of moving house quotes due to migrants across the Tasman. Both countries also have reciprocal agreements in certain areas, such as investment.
A thriving Australian economy will help New Zealand’s economy, and vice versa. Both countries have been in the process of flotation of their currencies. The Australian dollar floated in December 1983, and the New Zealand dollar followed in March 1985. Australia’s thriving economy is a huge boom for both countries. But New Zealand is not yet ready to adopt the Aussie dollar, which will mean that it will need to wait until at least 20 years before it will be fully functional in the New Zealand market.
Australia’s economy has grown steadily for decades, largely due to the nation’s strong financial backbone and low unemployment rates. This growth is also driven by increasing demand in China and Asia, and New Zealand will be able to benefit from Australia’s booming economy by exporting its agricultural goods. However, New Zealand has also had to face its own problems, which has resulted in slow economic growth.
Growth in Trans-Tasman Trade
The Australasian nations benefit from each other’s economies. Both countries have an impressive track record of international trade, accounting for around 18% of GDP. Both countries have excellent logistics systems and take advantage of free trade agreements. Despite this, New Zealand is struggling to recover from the devastating Christchurch earthquake. Growth in trans-Tasman trade will benefit New Zealand from Australia’s booming economy.
Free trade between the two countries was first facilitated by the Australia-New Zealand Trade Agreement (ANZCERTA), which was signed in 1922. The ANZCERTA facilitated trade in goods that met its rules of origin. Since 1 July 1990, goods meeting the ANZCERTA rules of origin have been duty-free and subject to no quantitative import restrictions. A recent review of ANZCERTA ROOs recommended that the rules be changed from Product Specific Rules to Change of Tariff Classification-only rules. In addition, New Zealand and Australia officials recently negotiated an Investment Protocol, with details to follow during the normal treaty making process.
Growth in U.S. goods exports to New Zealand
The U.S. and New Zealand have strong commercial ties. In 2010, U.S. exports to New Zealand totaled $10.8 billion, including $5 billion in goods and $5.7 billion in imports. In 2020, U.S. goods exports to New Zealand were expected to reach $3.2 billion, a decrease of 19.1% from 2019 levels but a 23% increase from 2010 levels. U.S. goods exports to New Zealand were led by aircraft, machinery, and special other (repairs and returns).
FDI between the two countries is growing rapidly. FDI from New Zealand to the United States will reach $12.9 billion by 2020, primarily in the manufacturing, wholesale trade, and financial services sectors. In the last year, U.S. firms invested in New Zealand totaled $3.4 billion. U.S. firms invested in New Zealand through joint ventures and local agents.
China’s presence in the South Pacific
The Chinese have long been a dominant development partner in the South Pacific, but recent developments have made their presence there less attractive. Pacific governments are increasingly familiar with China’s development model and have stepped up engagement in response to China’s growth. At the same time, concerns about China’s debt have increased, with Pacific governments increasingly scrutinising Chinese investments for sub-standard quality and inflated pricing. In addition, the region has limited debt space, making it difficult for China to provide budget-support to its own economies.
While Australia, New Zealand, and other countries in the region have a common interest in preserving their sovereignty, the rise of China’s influence has caused confusion in the region. While the US and other western nations have largely opposed China’s presence in the region, the two countries have also been pursuing a range of free trade initiatives and security interventions. These recent initiatives are welcomed by the PICs, as they keep China from becoming a hegemon in the South Pacific.
Changes in trade agreements between Australia and New Zealand
The Closer Economic Relations (CER) Agreement between Australia and New Zealand was first signed on 14 December 1982 and came into force on 1 January 1983. It governed free trade in goods and services. The two countries had annual trade of over AUD16 billion
The two countries share a long history as colonial powers and were founding members of various regional organisations. Both countries have historically played a major role as regional powers in the Pacific. Despite their geographical differences, they have remained close allies, sharing similar interests and concerns about decolonisation and state fragility.