The new, Australian elephant in the room

Jacinda Ardern's visit to Australia has been sold as a chance to promote New Zealand's attractiveness to investors - but if the country's banks and financial press are any guide, she may not find a receptive audience. Sam Sachdeva reports from Melbourne.

“New Zealand is open for business.”

It’s a simple line, bordering on simplistic, but one that Jacinda Ardern was determined to ram home on the first day of her trans-Tasman visit.

She used it on the Kiwi press pack, she used it on a group of current or aspiring investors into New Zealand, and she used it while posing for a photo with Victoria Premier Daniel Andrews in front of a heaving throng of Australian media waiting on her every word (just one example of the Prime Minister’s popularity transcending national boundaries).

The primary purpose of Ardern’s visit is ostensibly to deliver a speech to the Australia New Zealand School of Government, postponed in the wake of the Christchurch terror attack, as well as catch up with Australian counterpart Scott Morrison.

But it has also become a chance to sell New Zealand as a place for innovation and investment. Speaking to a group of 15 investors, Ardern plugged the Budget announcement of a new, $300 million venture capital fund to fill what she described as a gap in the market for medium-sized companies looking to grow.

She also spoke about the second tranche of reforms to the Overseas Investment Act, assuring the crowd that the introduction of a national interest test for foreign investors would merely put New Zealand in line with Australia and other like-minded partners.

A battle with the banks

 But the biggest business worry between Australia and New Zealand is one that went unmentioned.

The Reserve Bank’s recent moves to clamp down on Australian financial institutions operating in New Zealand have created clear unease on this side of the Tasman.

Proposed capital requirements for the big Australian banks have led ANZ and others to threaten pulling out of New Zealand, while a RBNZ decision to block a takeover of insurer AMP by a Bermuda-registered firm due to concerns about its riskiness have also caused a stir.

In a column about the decision, the Australian Financial Review’s Tony Boyd questioned what it saw as the lack of transparency from the RBNZ about its tougher stance.

“It makes no sense whatsoever for shareholders and policyholders of AMP to be told about a change in a 150-year-old regulatory practice for life insurance companies in New Zealand through an out-of-the-blue ASX announcement,” Boyd said.

That sentiment was further amplified in a piece on the front of The Australian’s business section on the day of Ardern’s arrival in Melbourne, about a visit to Australia by RBNZ governor Adrian Orr – labelled as “the most feared person in finance”.

The “More shock and Orr” headline, accompanied by a cutting cartoon of the man in question readying himself to put on his Grim Reaper’s outfit, did not do much to suggest there was any real empathy towards New Zealand’s approach.

The Australian's cartoon about RBNZ Governor Adrian Orr as the grim reaper demonstrates the unease felt by some Australian financial observers about the new, tougher approach he has taken. Photo: Sam Sachdeva.

Ardern was quick to brush off any suggestion the topic would overshadow her visit, saying it would “not necessarily” come up in her meeting with Morrison and had not been raised in her conversations with investors.

“As we’ve continued to reiterate, this is ultimately an issue for the Reserve Bank of New Zealand, they’ve undertaken consultation on the issue and it’s not a matter for us.”

She pointed to Bill English, her predecessor as Prime Minister, who she said had called the Australian banks’ threats “scaremongering”.

“Call their bluff,” came the half-correction, half-chirp from the back of the room, with Annette King stirring up memories of her previous political life in her new role as New Zealand’s High Commissioner to Australia.

There is little sympathy for Australian banks within Labour’s coalition partner New Zealand First, with Winston Peters and Shane Jones both taking shots at the institutions in the past for wringing every last cent out of Kiwis.

It was a line Ardern adopted, albeit in a more gentle way: “Of course the Australian banks, they do quite well out of the New Zealand market - all the Reserve Bank is looking at is whether or not enough safety mechanisms are in place to ensure that there’s enough protection there for the consumers who are banking with them.”

Tough topics to navigate

Having maintained regular contact with Malcolm Turnbull during his stint in the hot seat, Ardern’s communication with Morrison has taken things up another notch.

The pair are quick to text each other with updates on trans-Tasman issues, while Morrison’s advocacy for a statement at this year’s G20 summit on holding social media networks to account helped to maintain momentum from the Christchurch Call, spearheaded by Ardern.

With both leaders set to attend the United Nations’ Leaders’ Week later in the year, Ardern expects some discussion about how the two countries can push for meaningful action from UN members.

Of course, there are far more contentious topics which Ardern will have to navigate with Morrison.

Chief among those is the deportation of Australians to New Zealand due to their Kiwi citizenship, even if they have little to no connection to the country – an issue which Ardern said “comes up every single time”.

Having spoken about flagging business confidence within New Zealand as "the elephant in the room", the Prime Minister can ill-afford another pachyderm slouching across the ditch towards Wellington.

She said there was a continuum of deportations, with some “totally legitimate”, but others more questionable. With Australian Foreign Affairs Minister Marise Payne sticking by Australia’s policy during a recent visit to New Zealand, it’s safe to expect little change any time soon.

Where Ardern may hope to make some wins is on streamlining the “pathway to citizenship” secured for Kiwi expats in Australia under the last government, but whose prohibitive costs and tough cut-off date has made it hard for many to make the grade.

But Ardern’s problems with Morrison would pale in comparison to a full-scale war with the Australian banks if that was to eventuate.

Having spoken about flagging business confidence within New Zealand as "the elephant in the room", the Prime Minister can ill-afford another pachyderm slouching across the ditch towards Wellington.

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