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Wednesday 23 Aug 2017 | 08:32 | SYDNEY
Wednesday 23 Aug 2017 | 08:32 | SYDNEY

A union with New Zealand for a larger Australia?


This post is part of the A larger Australia debate thread. To read other posts in this debate, click here.


17 March 2014 11:03

This post is part of the A larger Australia debate thread. To read other posts in this debate, click here.

There are various possibilities for a Larger Australia. Michael Fullilove's path is to put more of our national resources into defence and diplomacy, as well as growing our population through increased migration and fertility, creating an Australia which walks taller on the world stage.

A very different path to bulking up physically would be to get together with New Zealand to make one country with 28 million people. First, let's see what this would look like and why it would be a good idea. Then the hard part: how it might happen.

Raising the population to 28 million doesn't make us stand out in world population ranking: it shifts us from around 50th place to around 45th, still smaller than Peru and Malaysia. Measured by GDP the placing sounds better, but adding New Zealand doesn't change the rankings much. Using purchasing power parity (the fashionable method) to compare countries, we currently come 17th or 18th, and adding New Zealand takes us up a place or two, around the same as Indonesia but still behind South Korea, Spain, Turkey and Canada. Still well outside G7/G8 territory.

Thus we wouldn't merge in order to elbow other countries aside with sheer physical heft. We'd mainly do it because of its intrinsic logic. Countries and economies do best with a mixture of diversity (to avoid putting all our eggs in one basket) and homogeneity (so that we don't use up too much energy getting along with each other). Putting Australia and New Zealand together would improve the mix.

Looking first at our external positions, Australia has (sensibly) followed its comparative advantage into heavy dependence on resources and on a single customer: China. New Zealand's comparative advantage is in growing grass, so it dominates the global milk trade, again with China as main customer. This specialisation creates vulnerabilities which could be reduced by aggregating our export mix.

Perhaps because New Zealand, being less well endowed, has to try harder, it often seems to make more of what it has. It produces entrepreneurs: a residual New Zealand accent is common among Australia's top businesspeople. Fonterra, the milk cooperative, has become a globally powerful national champion in a way that eludes Australia in agriculture.

This sort of entrepreneurship turned the Chinese gooseberry into the Kiwifruit and re-branded a wine-making fault (grassiness) into the eminently desirable 'herbaciousness'. It looks like the New Zealanders might even beat us to getting a decent flag.  

Again, perhaps because it has less to work with, New Zealand has often been more ready to push the boundaries on ideas and overturn old ways. With fewer checks and balances (New Zealand has a unicameral parliament, for example) it's not surprising that some of these ideas were carried too far (the Lord of the Rings trilogy is eight hours too long). When 'free markets' became the economic vogue, New Zealand switched from inward-looking socialism to open-slather 'leave it to the market' without missing a beat.

Closer exposure to this 'just do it' attitude might embolden the same sentiments in Australia, to our benefit. The extra checks and balances of a larger economy and more inertia from complex governance might keep the ideas anchored to reality. The extra scale would help both sides. Think of the talent you would draw on in selecting the national cricket and rugby teams! The America's Cup would be a Down Under perpetual monopoly.

Similarities are crucial to success. To start with, successive Lowy Institute Polls show New Zealand to be by far our favourite country, with the thermometer so hot it borders on the indecent.  With a few minor tweaks, we face the outside world with the same foreign policy outlook. Again the differences on immigration are minor, and Australia is coming to share New Zealand's acceptance of heavy responsibilities in the Pacific. On economic policy, it's hard to tell the difference. New Zealand invented inflation targeting, but Australia improved it so that our now near-identical model is global best practice.

With essentially interchangeable legal systems, this would be one of the easiest amalgamations of all time. Australians shouldn't dwell on the fact that we offered New Zealanders the opportunity of inaugural membership of the Federation and for more than a century they haven't felt the need to take up our offer. The constitutional paperwork is still there, just waiting to be dusted off.

Some will argue that, as far as the economy goes, we already have seamless union through the CER Agreement . It's true that much has been done here: after a ninety-year wait, New Zealand apples have begun to infiltrate our markets. But just to give one counter-example, New Zealand's banking system is totally dominated by Australian banks, yet the difference in regulatory regimes is not just in the detail, but about the philosophy.

Of course, a union wouldn't be easy or quick. For a start, New Zealand is significantly poorer than Australia, and many Australians would fear that New Zealand would be a larger version of mendicant Tasmania. On top of this, amalgamations always produce redundancies, most notably in this case a whole parliament, though New Zealand might be content to make its Beehive the equivalent of a state parliament. 

Despite the compelling logic, neither side shows the slightest enthusiasm for union. The 2012 Lowy Institute Poll showed that most Australians are against it and almost as many New Zealanders agree with them.

The key is to see this as an evolutionary process rather than a revolution. And the way to maintain progress is to be ready when opportunity presents itself.

Here's an example: unifying the currency would be a huge step, unlikely to be taken under normal circumstances and not being recommended by anyone. But in a real crisis (the Kiwi dollar going well over parity?), it might well be seen as sensible.  In 1997, when the Reserve Bank of New Zealand handled the Asian crisis with less finesse than its Aussie counterpart, there was a strong interest among New Zealand businesses in linking the currencies. Our then Treasurer, Peter Costello, told them they could adopt the Aussie dollar but an Anzac currency was not on.  

To build a Larger Australia, why not start by declaring a contest for the new currency design, drawing on icons of shared heritage to decorate the new notes? The list is endless: Phar Lap, Russell Crowe, Crowded House and the pavlova for a start.

Photo by Flickr user South Canterbury NZ.

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