The federation game, Colin James

Waltzing with Matilda: Should New Zealand join Australia?
Bob Catley
Dark Horse Publishing, $29.95,
ISBN 0958214611

A chilling graph presented to Auckland business leaders on 14 May undermines Bob Catley’s thesis. Auckland, the graph showed, lost 3.4% in GDP per capita in $US terms between 1990 and 2000. A good reason, you might think, as Catley does, to throw in our lot with Australia. Except that the graph shows Sydney, Melbourne, Brisbane and Adelaide all also falling, by amounts from 1.3% to 2.0%.

Catley wants New Zealand to become a state of Australia. His argument boils down to this: over the past 20 years, Australia’s economy has grown faster because of superior political and economic management and there is now a big and growing gap in average incomes. The Labour/Alliance Government has widened this gap by undoing the liberalising reforms of the past 15 years. It is in any case “now questionable whether any mix of policies could sustain a high income economy in a distant, small nation with few valuable natural resources”. So join up quick before the Aussies shut the door.

The graph puts a new cast on this: by joining Australia we would slide more gently. The business media this year have been full of fears of a descent into “branch office” status, to which the phrase “like New Zealand” is often added. Head offices are moving out; bright young people are leaving (and New Zealand’s brightest head past Sydney for real cities in the northern hemisphere); large, old Australian businesses are disappearing into the maws of multinationals. Join the club, big boy.


Better, one might think, to apply to the United States – after all, Eastern Samoa is in the union. The free trade so conferred would give us lucrative access for dairy products and end the “free-trade”-promoting Americans’ periodic bans, quotas and tariffs on our successes. The cost would be negligible, given our open investment regime and our already low tariffs. And our brightest could work in Silicon Valley or on Wall Street without hindrance.

We would also be using a real currency, in which we already trade a high proportion of our exports – more than three-quarters of which do not go to Australia. Joining Australia would sign us up to another tiddler currency.

We would of course lose our free trade agreement with Australia, which, as Catley notes, has contributed to a huge increase in trans-Tasman trade. So manufacturers, the strongest advocates of a common currency with Australia, would not be pleased. But would manufacturers want all the trimmings of Australian federation? A lower company tax rate, for sure. And, maybe for some lucky ones, huge subsidies from Canberra. But would they want the compulsory superannuation and other add-ons and the compliance costs of a shambolic GST, which far outweigh the tax differential? And would they want a Labor (ALP) Government with plans for a vast extension of the bureaucracy?

Moreover, would we automatically acquire Australia’s higher economic growth rate and average incomes? Ask Tasmanians if they share Sydney’s affluence. Ask South Australians how well they are doing as industry moves out.

Catley says Tasmania would have been worse off outside. And, though he does not take us through the calculations, he reckons that in the federal-states’ divvy-up of Canberra-monopolised income tax, New Zealand would get a net transfer from New South Wales and Victoria. But even so, this would not be the magic pudding that membership of Europe has been for Ireland, at one stage equalling 9% of GDP in subsidies from Brussels.

And are Australia’s policies better for growth? Catley seems to want it both ways. Australia’s more measured “economic rationalism” carried the populace along with it whereas New Zealand’s radical Rogernomics left too many disgruntled, who then gave us MMP. But he mourns the passing of radical Ruth Richardson as the last liberal reformer and blames the 2000 economic slowdown entirely on the Labour/Alliance Government’s reversal of some 1990s liberalisation (though what would he make of the late-2000 pickup?). That (rather modest) reversal is in the opposite direction to most of the democratic world, including Australia, and it increased business costs, which slows economic growth. But it has occurred partly to align New Zealand policy with Australia’s – and in any case is not the open-ended ideological stampede Catley seems to think it. Once completed, it will broadly leave New Zealand to the right of Australia, even before Kim Beazley takes over. Contrary to Catley’s assertion, New Zealand Labour remains to the right of Australian Labor.

But even if Catley is right on policy and even ignoring that we do not do most of our trade with Australian states, as the Australian states do, should we federate on the strength of one 20-year period? There have been times when New Zealand has done better than Australia. Australian economic historians, for example, blame Australia’s experience during the 1930s Depression (which was worse even than ours) on higher Australian protection. From the late 1940s until 1967, the Australian currency was worth the equivalent of 80 New Zealand cents. Conversely, at least some of New Zealand’s slower-than-Australian economic growth of the past 20 years can be put down to our insulated, over-protected economy which required more radical, and therefore more costly, treatment than Australia in the 1980s.


Is there another case for federation? If so, Catley leaves us to infer it from a breezy, incomplete and occasionally inaccurate scan of our two histories. The message seems to be: we are in many ways closely similar; while we grew apart in the first half of the 20th century (for, may I add, transport technology and trade reasons, among others), we are growing together again (also for, among others, transport technology and trade reasons); our economies and societies and even our cultures are deeply and inextricably intertwined; so why not join up constitutionally and politically?

This resonates with me. When I am in Sydney or Canberra or Melbourne, I feel almost as much an Australian as I do a New Zealander. The quality of debate is higher in Australia – even this year on indigenous rights, where we have presumed to be superior. And if I want to retain some surrogate shaky-isles nationalism, I could always root for the All Blacks and Silver Ferns.

Moreover, if you delve into the political and bureaucratic connections – as Catley does not, beyond noting that ministers meet their Australian counterparts in the federal-state councils – you will find a rich web of trans-Tasman consultation and interaction reaching several levels down some departments. There is a dense, though mostly slow-moving, project gradually to harmonise laws, particularly those affecting business, or respect each other’s laws. The supranational food safety authority is likely to be a forerunner of other such bodies.

So we are in a sense federating without going through the formalities. Over time, “why-not” sentiment is likely to grow. But right now there are some reasons not to federate, which Catley only partly addresses. I will mention four.

One is that we would lose dual citizenship, a useful attribute for citizens of small countries (and Australia, though it likes to puff itself up as a “middle power”, is small).

A second is that even some Australians acknowledge sometimes (and Catley quotes one example) that our different approaches in foreign affairs work to both countries’ advantage, especially in South-east Asia. As a tiny non-threatening country with no pretensions, we can go where the Australians cannot.

And in at least two instances during the past 30 years we would have been poorer if Canberra had been negotiating for us: in getting a life-or-death deal from the Europeans in 1972 (Australia, running a confrontational line, got short shrift); and in initiating the Singapore free trade negotiations in 1999 in diametric opposition to Australia’s insistence on multilateral deals only, which the Singapore deal prompted it to abandon.

On defence, you can take two views of the fact that for at least 85 years the two countries have seen their strategic interests from different viewing platforms. Helen Clark now aims to convert militarism into
humanitarianism; Catley joins the defence establishment here in condemnation. Federation would sign us up to Australia’s strategy and spending levels.

Another major reason not to federate is the Treaty of Waitangi. Catley acknowledges it as an issue but sees it in multicultural terms – Maori as a large ethnic minority underclass – and not in bicultural terms, involving issues of mana, power-sharing and “partnership”, and implying constitutional and administrative adjustment, which will vex our politics for the next 10 or 20 years.


The fourth reason not to federate is the Australians themselves. We don’t count. Any application to federate would confront formidable obstacles of incomprehension and lack of interest from Australia.

Paul Kelly, Australia’s leading political commentator, visits and writes about New Zealand at least annually and, when editor in the 1990s, appointed The Australian’s first full-time correspondent in Wellington. But his book of his ABC television series on Australia’s century mentions New Zealand only three times: once in parenthesis, once as a Keating putdown and once in a reference to Britain’s policy on Papua New Guinea. CER, the free trade agreement that is central to trans-Tasman business and trade, is not mentioned, and New Zealand is entirely absent from his discussion of ANZUS, the bulwark of Australia’s defence policy for 50 years.

That someone as regularly attentive to New Zealand as Kelly (who based a column on Catley’s book) can so comprehensively overlook our inconsequential archipelago – even as an occasional nuisance – is a salutary reminder of how much we (don’t) count in Canberra and among the Australian commentariat, let alone in the pubs and clubs, except as someone convenient to beat in minority sports.

The result is that when Australians do momentarily pay us attention, they often get things wrong. The giveaways in Catley’s book are in the spelling – “programmes” are “programs” – and in the terminology – “party room” for “caucus”. This is a book for Australians.


Colin James writes a weekly column on politics in the New Zealand Herald. In 1982 he wrote The Tasman Connection: A New Path.


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