ANZ's New Zealand chief tells Australian audience that NZ and Australia must work together to 'get our fair share of the global pie'

The Australian-born head of this country's biggest bank has told a business audience in Sydney that Kiwis and their trans-Tasman neighbours need to work much more closely together, including perhaps sharing some diplomatic posts, so that both countries can get "our fair share of the global pie".

However, ANZ's NZ chief executive David Hisco stopped short of suggesting a currency union, saying today that the Eurozone crisis, "particularly the debate about stricken countries like Greece needing their own currency to devalue", had put paid to the idea of an ANZAC currency.

But Hisco, who is on his second stint in New Zealand, and who extended his stay last year, said in his speech to a Trans-Tasman Circle lunch that our "two small countries, rich in resources", should "stand together" to be heard as the world’s more populous nations "grow larger and faster than we could ever hope to".

Such a joint approach was needed for New Zealand and Australia to be relevant on the world stage in 30 to 50 years’ time, he said.

"I would encourage both prime ministers to look for ways to show our people that working together can deliver better outcomes. Maybe start with simple things like sharing some diplomatic posts.

"I’d like to see us, as New Zealanders and Australians, do more together to help each other get our fair share of the global pie. But we’ll need to be nimble, and we’ll need to think outwardly if we are going to succeed. And we have to trust each other."

Referring to the notorious underarm bowling incident of 1981, Hisco said it "probably did more to hurt New Zealand-Australia relationships than anything else I’ve seen".

"It’s something that I and I know many other Aussies feel very embarrassed about.

"People still talk about it in New Zealand. So we just can’t have any more of those sorts of stunts. You just don’t do that to your mates and as I said earlier, Kiwis like to play by the rules and they expect the same in return.

"That said, we need to move on, and I truly believe we will need to work more closely together, or risk being swamped or considered irrelevant to larger nations in years to come. There’s a lot Australia could learn from New Zealand, but there’s still more work for New Zealand to do."

Hisco themed his speech around the idea of Australia being the "lucky country" and New Zealand the "plucky country". And he described himself as: "An Aussie who has become a lover of New Zealand, someone who deeply cares about both countries’ futures and a person with a foot on both sides of the Tasman who can offer some outside perspective to each."

He extolled the virtues of New Zealand's "No 8 Wire" ingenuity, while suggesting Australia as the "lucky country" with abundant mineral resources hadn't made enough of its natural advantages.

Making the most

Kiwis on the other hand didn't "dig up their wealth".

"Instead, they have to make the most of what they have."

He said that like Australia, New Zealand had always been a nation of exporters.

"...But let me make the point: in New Zealand government and business and the community - including the farm sector - work together to make things better for the whole country."

As an example he cited the fact that New Zealand now has free trade agreements in place with 29% of the world’s population and was in negotiations with another 26%.

"Australia is lagging New Zealand on that score, and still doesn’t have an FTA with the country of this century, China."

Hisco said there was "still plenty of upside" for the New Zealand agricultural sector, with Asia, particularly India and China, rapidly expanding export markets.

He cited a report ANZ released in 2012 on the future of agribusinesses in Australia and New Zealand. The "Greener Pastures" report, on which there are articles here and here and here, showed:

• Rising incomes and changing diets in developing countries mean the world will demand at least 60% more agricultural output by 2050 compared with 2005–07; and
• What this means for New Zealand is that we could sell an additional $550 billion in agricultural exports between now and 2050. This could increase to $1.3 trillion with favourable conditions and targeted actions.

'Doing things better here'

"While the New Zealand domestic economy doesn’t have the scale of Australia, it does seem to be doing a lot of things better," Hisco said.

"I’m an accountant, not an economist. So, perhaps I’m not qualified to comment here, but one thing that puzzles me is this: New Zealand has about 4.4 million people, yet it survives with a 33% top tax rate, no capital gains tax, no payroll tax, and a GST rate only 5% higher than Australia’s.

"New Zealand really is open for business.

"Australia has over 23 million people, a 47.5% top personal tax rate … let me spell it out - that’s 14.5% higher than New Zealand … capital gains tax, stamp duties, and a raft of other taxes.

"Australia, once again, had the benefits of a resources boom … the longest economic expansion and the largest rise in incomes ... that a developed country had ever known.

"But you would have to ask: what has Australia got to show for it?"

Hisco said he applauded Australian PM Tony Abbott for announcing on election night that Australia is open for business.

Unlocking the doors

"...But it seems to me there are still a few doors that need to be unlocked before people can get in to DO business."

He said that "unlike New Zealand", some people might be tempted to view Australia as being a little complacent.

"I certainly get the feeling there is a lack of a sense of urgency by the average Aussie in the face of a completely new game that both countries face. What’s going on globally is not business as usual - we are just a little way through what will be looked back on as a period of great transition."

Hisco said it seemed Australia had some really tough issues to tackle - issues that New Zealand was forced to deal with "a long time ago".

"And I would argue that Australia hasn’t had to deal with similar issues because the mining boom papered over those cracks."

'No sense of doom'

The problem the new Australian government had was that unlike New Zealand in the 1980s - "when, I’m told, the economy was closeted and on the verge of catastrophe" - there was now no sense of "impending doom" in Australia.

"There’s no 'burning platform' to rally the public around and to drive through change in a short period of time.

"The Australian public doesn’t yet have a narrative in front of it - a clear view that there is a need for significant economic change and tough decisions rather than business as usual with the belt done up a few notches.

"In New Zealand I actually think people are more sympathetic to the concept that a government has to do what’s right for everyone in the long run. New Zealanders are far more alert and cynical towards politicians bearing gifts, or pork barreling as it’s often called.

"In New Zealand we’ve had the quadruple whammy of the GFC, a collapsed non-bank financial sector, a dollar at record highs and the country’s second biggest city, Christchurch, devastated by earthquakes.

"As well as being a terrible human tragedy, those earthquake rebuild costs – excluding disruption costs - are about a $20 billion impact on the public purse, or about 10% of New Zealand’s gross domestic product.

Bouncing back

"But the New Zealand economy is now bouncing back strongly because of the work done to strengthen its foundations.

"Our ANZ economists are predicting 4 percent growth this year.

"And unlike Australia, a surplus is around the corner."

Hisco said although New Zealand still needed to keep an eye on its spending, it would be in a great position in coming years to determine what it does with its surpluses.

"Things are going really well for New Zealand, but the country still needs to ensure it has a compelling vision.

Choosing how best to compete

"New Zealand can compete on the world stage, but we need to choose how best to do that.

"Education is obviously very important, and we need to continue to invest in that.

"But what is truly unique in New Zealand is freedom … freedom in the sense of wide open spaces.

"And I think this is why we get so much creativity coming out of New Zealand.

"I doubt we can compete with the sheer number of PhDs coming out of overseas universities, but we can focus on producing adults that have a worldly outlook, a positive and creative outlook – one that matches our plucky country stance.

Punching above our weight

"Kiwis can and do punch above their weight on the world stage and we need to continue to engender that confidence. After all, it got us to where we are today."

Hisco cited in his speech a number of examples of New Zealand creativity and ingenuity.

"Its creativity more than being able to reproduce the next widget at a cheap price that will see New Zealand prosper. And future Governments need to really focus on how to foster, support and monetize that. 

Hisco addressed the talk about possible economic union between New Zealand and Australia, as noted earlier dismissing the possibility of a combined currency.

"As for political union, things are complicated enough as they are, although I’m sure John Key would front up to the challenge of running Australia as well as New Zealand if asked," he said - presumably tongue in cheek.

"...So if New Zealand is to stand alone Kiwis need to acknowledge and accept that over a 200-year period New Zealand has always prospered as a result of foreign investment and by being an attractive trading partner.

Enormous investment needed

"If you read that ANZ Greener Pastures report, it talks not only about the great opportunity for New Zealand agriculture but the enormous investment needed – some $340 billion - if we’re to realise that potential.

"Sadly, as poor savers, all that investment isn’t going to come from within New Zealand.

"Even as the country’s biggest bank, ANZ New Zealand, can fund only about two-thirds of our lending from New Zealand sources.

"The rest – for New Zealanders wanting to buy houses or set up or expand their businesses – has to come from borrowing offshore.

"But foreign investment can be an emotional topic in New Zealand, particularly if it’s stoked during an election year by politicians appealing to the worst in people’s characters.

No fortress mentality

"The better side of our characters must argue against a fortress New Zealand mentality because it’s morally wrong and just plain dumb business. Taking on the world, and embracing it, will make New Zealand stronger and sustain its sovereignty." 

Hisco said there was a lot Australia could learn from New Zealand, but there was still more work for New Zealand to do.

"If we can accelerate the rate of investment in New Zealand so we drive further towards our potential, then we truly will be the plucky country."