CER benefits ‘uncertain’

CATHERINE HARRIS
Last updated 13:59 13/12/2012

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Thirty years of CER between Australia and New Zealand had made a big difference to trade barriers when it was first implemented but its overall benefits are harder to quantify, a joint report between the two countries' Productivity Commissions says.

The report, timed to coincide with the 30th anniversary of the Closer Economic Relations agreement, also recommends Kiwis living long-term in Australia be granted better access to welfare and citizenship rights.

The report found that the magnitude of the benefits from CER were "uncertain".'

But Murray Sherwin, chair of the New Zealand Productivity Commission said, CER, which had started out effectively as a free trade deal, had been "a very important component of the way the New Zealand economy has developed". It was not redundant, he said.

"It's just hard to analytically disentangle what gains have come out of CER versus what was going to happen anyway...I don't think we had any doubt in both commissions at the end of the day that CER has been a positive influence for us."

Changes to the report since it was released in draft form three months ago include a greater focus on the trans-Tasman labour market, and on whether imputation credits should be allowed between the two countries.

Sherwin said the commissions had met with Kiwis who had entered Australia after visa changes in 2001 and were having trouble accessing welfare and higher education benefits available to citizens.

He said the issue "was on the verge of becoming a serious irritant" and the commissions felt it was better that ministers headed it off before it become a greater problem.

A lot of work had also been done on mutual recognition of imputation credits, which effectively means dividends from a company in one country get taxed twice if the shareholder is across the Tasman.

The commissions recommended mutual recognition be further investigated, noting it relied on political will and technology to make it happen.

"Yes, there is a net benefit from moving to mutual recognition on imputation credits. it's small and the distribution becomes all-important, and working through that is a challenging issue."

Sherwin said the technological difficulties might be such that Australia and New Zealand might have to consider giving compensation instead.

"We suggest the two countries should explore that, but explore it with a defined timeframe. If they can't get to a resolution quickly, take it off the agenda. It's been haggled about for 20 years and if it's not going to progress, let's make that judgement cleanly."

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The commission's recommendations will inform the next leadership meeting of Australia and New Zealand's prime ministers early next year.

- BusinessDay.co.nz

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