By Alex Tarrant
New Zealand's Finance Minister Bill English has thanked his Australian counterpart Wayne Swan for the Australian government's influence at G20 discussions on global banking regulation, saying the trans-Tasman banking system did not need the same rules expected to be applied to European banks, as it had withstood the global financial crisis relatively well.
Swan was in Wellington for discusions on a single economic market between New Zealand and Australia, which included talks on linking the two country's carbon pricing schemes.
Asked whether he had any concerns about risks being faced by the Australian banking system, Swan replied confidently he did not.
“It is beyond dispute that the Australian banking system is one of the strongest in the world, and that is further underpinned by the reforms that we are currently putting in place to lessen our dependence on overseas wholesale funding,” Swan told journalists in the Beehive on Thursday.
English said New Zealand’s government appreciated the role that Swan and the Australian government took in advocating in the international debate around financial and banking regulation.
“As the Treasurer puts it, we don’t want to have a set of European rules imposed on a banking system that has actually weathered the global financial crisis pretty well," English said.
"We’re not at the table at G20, where these issues are discussed, but the Australian government makes sure we’re kept up to date, and their point of view reflects very much our own point of view about the way we expect our banking system to operate," he said.
“We’re not the problem. The problem is actually in other larger markets, and we want rules that suit us.”
Meanwhile, when asked about the strengthening Australian currency, and whether he was worried about the effect it was having on the export sector, Swan replied:
“The fact is that our currency and its strength reflects the relative strength of our economy, vis-a-vis other developed economies, and in particular reflects our very high terms of trade and the fact that our commodity prices are at 140 year highs.
“Of course, that means that the rest of the world thinks that our economic fundamentals are strong,” he said.
Swan was not concerned by the actions from the US Federal Reserve of quantitative easing, a move that was devaluing the US dollar against other currencies.
“The issue with many developed economies is that they must engage in fiscal consolidation so that they can bring their levels of debt under control over the long-term," he said.
“I’m very much involved in the discussion through the G20 about the framework for strong, sustained and balanced growth. This is the context of the debate at the moment in the United States about what they do in the immediate future about their debt ceiling.
"But that is much more fundamentally in the longer-term about a discussion about their fiscal sustainability - so underpinning that discussion about their debt ceiling is a discussion between the President and parties in the Congress about what they do to make their fiscal position sustainable over time," Swan said.
“It’s critical that if we are to do something about the global financial imbalances, then developed economies that are running large deficits and carrying large levels of debt have to fiscally consolidate. On the other hand, in those countries which are in surplus, it’s very important if we are to have some impact on the global financial imbalances, that they deal with structural imbalances in their economies as well, and they vary from country to country," he said.
'Need to work together'
Swan said it was important for New Zealand and Australia to work together economically-wise in the face of the sovereign debt crisis in Europe and economic weakness in other parts of the world, such as the US.
“I’m an optimist about the Australian economy, and I’m an optimist about the New Zealand economy. Because in the Asian century we do stand to benefit as a major supplier of goods to the growing middle classes in Asia, and if we co-operate we can all grow stronger together," he said.
Swan and English discussed linking the Australian carbon pricing scheme with New Zealand’s emissions trading scheme sometime in the future.
Swan would not be drawn in to discussion in New Zealand about a capital gains tax, saying it was not for him to enter debate on New Zealand’s political issues, but said:
“I’ll just make the comment that a capital gains tax has been part of the Australian system for well over 15 years in our country, and has been accepted by both sides of politics."
He would not answer questions on what benefits the Australian economy had from a capital gains tax.
“I’m not going to pie into any domestic debate on taxation thanks very much. I’m a guest in the country, and I very much enjoy my visits,” he said.
Agriculture in ETS?
Neither would Swan be drawn into discussion about the government not yet placing agriculture under New Zealand’s ETS, acknowledging the review currently underway that may see the entry date for agriculture pushed back from 2015.
“I’m not buying in to a discussion about the domestic future of the ETS in New Zealand,” he said.
There was no formal set timeframe for linking the two schemes. Linking them would give businesses certainty on carbon pricing, and create a large market for emissions trading.
English and Swan both noted the two country’s schemes would not need to have the same and prices and the same sectors in order for them to be linked up.
“We don’t quite know how exactly how similar they will be,” English said.
“We’re doing a review right now, the Australian government’s got its own political discussions going on, and I think over the next 12 months we’ll get a clearer picture of the degree of similarity,” he said.
“But I think, regardless of the either political or environmental differences between the two countries, there’s pretty clear will from the governments to make it work as effectively as possible for those businesses that operate on both sides of the Tasman. And I think another theme that’s come through is that business values certainty of knowing what the rules are. In the case of both countries we’re moving to a position where we will be able to provide a bit more long-term certainty.”