From the pre-blog archives, I was reminded of the following article I wrote when a friend posted this article about New Zealand immigrants protesting in Australia. One person commented “Kiwi’s protesting because they can’t access welfare in another country. Sick.”

In fact, these New Zealanders are complaining to the wrong government. The reason Australia restricted the right of Kiwis to access welfare and other benefits was that the New Zealand government didn’t want to play ball with the Australian government on immigration. The Aussies were rightly concerned that New Zealand was relaxing its immigration policies and as a result, because New Zealanders receive preferential rights in Australia, New Zealand would become a back door for immigrants to enter Australia.

Faced with Prime Minister Helen Clark’s refusal to address Australia’s concerns, the government there had little choice but to make New Zealand immigrants’ rights less attractive in order to reduce the risk of this obvious loophole. I touched on this and more in the article. Most of what I wrote then is just as applicable today.

NZ pays price for letting mateship die

Australian Financial Review, June 13, 2002

Should the NZ Labour Party, led by Prime Minister Helen Clark, win enough support to govern alone, the paths of New Zealand and Australia look set to keep diverging. A strong showing by the Green Party would result in more isolationist policies. A National government would put New Zealand more on course with Australia, but it could be too little, too late.

Australia and New Zealand have a rich shared history as comrades on the battlefield, rivals on the sports field and traders across the Tasman. We also have a history of pushing each other forward in reforming our economies.

However, in recent years the relationship has dimmed. As New Zealand dropped the ball on reform, Australian policy makers have had to look further afield for inspiration. New Zealand businesses have been hampered by a muddling economy, providing fewer opportunities for Australian investors.

Meanwhile, Australia has pressed ahead with reforms at federal and state levels, regardless of the parties in power. Its companies have grown at home and abroad, and it has been more than a token friend when allies such as East Timor and the US needed it.

The result is that New Zealand, despite offering a market the size of Queensland, has become less relevant to Australia, except as an irritant. With the scrapping of its air force Skyhawks, New Zealand now implicitly relies on Australia and the US should it come under attack.

New Zealand’s immigration poilicy has been relaxed, leading to the charge of being a back door for immigrants wishing to enter Australia.

The collapse of Ansett under the ownership of Air New Zealand and the mess over the hosting of the 2003 Rugby World Cup have done nothing to improve ties. One newspaper summed up the state of our relationship: “Rock-solid mates become distant acquaintances”.

As a result of these perceptions, we are also paying a price. Last year, Australia removed many New Zealand rights to permanent residence, citizenship and social security. The Australian Stock Exchange is changing the rules for foreign companies with dual listings and, in spite of CER, looks likely to make no exception for New Zealand companies.

Most strikingly, however, Australia is negotiating free trade agreements with the US, Japan and Thailand on its own. In the past, it was taken for granted that the two countries negotiated in concert.

Sadly, it’s not just its relationship with Australia that New Zealand has to worry about. The US, the third leg of ANZUS, has also tired of New Zealand’s impertinence over a wide variety of issues. The past has finally caught up with us. Many of George Bush’s top advisers or appointees worked for Ronald Reagan when the Labour Government imposed its ban on nuclear ships, infuriating the US.

Nor will they have forgotten Helen Clark’s decision to bail out of a deal to lease 28 F-16 jets from the US in 2000.

In the past, the costs of these sorts of actions were limited to poor diplomatic relations. However, the current likelihood of Australia striking an FTA with the US ahead of New Zealand will bring home to all New Zealanders the price we are paying.

The New Zealand Institute of Economic Research estimates gains of $NZ1 billion ($860 million) from such an agreemwent. Brian Mulroney, Canada’s former prime minister, put it more colourfully to Helen Clark when he said that the US-Canada free trade agreement was “like falling down a gold mine”.

John Howard’s visit to Washington this week contrasts strongly with Helen Clark’s earlier this year. Despite the shared tradition of mateship, Australia is reaping the rewards, while New Zealand is paying the price for ignoring its reciprocal obligations.

Howard was invited to address a joint session of Congress and pushed forward his FTA agenda. During her visit, Clark was reminded in no uncertain terms that New Zealand is not now an ally of the US and even before the visit, she admitted that the country’s prospects of an FTA looked slim.

Based on current polling, Labour looks set to be returned to power. Whether or not it is forced to form a coalition with the Greens, the country is likely to underperform relative to Australia. Last month’s Budget forecast five-year average annual growth at about 3 per cent, compared with Australia’s forecasts of 4 per cent.

A National government could conceivably deliver a better economic performance, with stock-standard prescriptions such as tax cuts and limited privatisation of state assets. However, it is questionable whether such limited reforms would be enough to regain its relative dynamism of the early 1990s, What the country needs is an extended period of consistent and non-partisan reforms, such as its old mate Australia has adopted.

Nicholas Kerr is a New Zealander working as a business consultant in Sydney