Thursday, 17 February 2011

Customs union, common market and a common currency

It’s not every day I feel the need to congratulate a politician—even a retired one.

But the Australian award presented by Julia Gillard yesterday to retired Muldoon-era cabinet minister Hugh Templeton deserves respect, since the positive effects of what he did are still being felt, and still need to go further.

CER In Muldoon’s nine-year reign, there were only two real forward steps his tyrannised cabinet ever made.* The greatest of these was the Closer Economic Relations deal with Australia, which liberalised trade relations between the two countries, increased the prosperity of both countries, and began the process of moving us closer together.

That deal was driven by Hugh Templeton, who said yesterday the deal was necessary and the process he began really needs to continue.

_Quote"It was strategically the number one issue for New Zealand," Mr Templeton said.
    "We had to get it. We had to do it ... we had to get this as the basis for broadening the basis of our economy and giving our manufacturing sector a decent market."
    Without it, our fate would have been to become "a little New Zealand getting littler in the South Pacific."

In his thank you speech yesterday,

_QuoteMr Templeton called on Ms Gillard to use the Anzac centennial in 2015 to complete "unfinished history" by creating a customs union, a common market and a common currency.**

It makes sense, he said. And as he said it I thought, “He’s right.” “It does.”

_Quote ... if we had a full-scale economic union with a common currency etc with Australia we would be much better protected from the rather vulnerable position in which New Zealand is. It's as simple as that."
    But a decade of economic good times had encouraged governments to put off hard decisions and fail to make the most of opportunities that CER presented. Both countries should have moved towards a common market in the 1990s and economic and currency union in the 2000s.

And why can’t we?

It’s somewhat astonishing to contemplate the irony that European enemies who have been shooting, bombing and barbarising each other for centuries can now enjoy open borders with each other, and share a common market and a common currency,*** but Australia and New Zealand—who are family—can not.

Are we really that provincial?

Are we?

PS: Hugh Templeton spoke to Mary Wilson on Checkpoint last night about his award, and the importance of further progress on the project he started. LISTEN HERE.

PPS: Incidentally, Hugh Templeton is now involved with a group called the Foundation for Economic Growth who are unflinching in supporting free markets, sound money and REAL Economics.  I thoroughly recommend them, and would suggest you sign up for their weekly newsletters.

* The other forward step was taken by George Gair, who removed the arcane restriction on transporting things more than 100km by road. This ridiculous piece of protectionism was supposed to protect failed rail from competition. Instead it strangled local industry, and left their goods hostage to the inefficiencies and thieving of rail “workers.”.
Of course, the Muldoon government did also scrap Labour’s government superannuation scheme, a forerunner to Kiwisaver. But that was an election pledge, and driven by Muldoon. It didn’t involve the cabinet.

** Yes, Virginia, a common free banking system would be preferable.  But there are too many hurdles presently lying lying that road. There is only one lying along the road to a common currency: New Zealand’s provincialism.

*** Not without problems, I’ll grant you. But none that couldn’t be solved by throwing out the statism.


  1. Yes, good work Mr Templeton.

  2. No way. Let's join the Euro.

  3. Have you paid any attention to problems in the Euro currency area due to the debt and productivity imbalances between countries?

    NZ+Aust plus other neighboring countries can have a relatively integrated market with common regulations etc, without losing the ability of having a domestic monetary policy.

  4. I think the gimlet eyed Aussies will ignore us. Why should they take the Southern Hemisphere equivalent of Greece or Ireland under their wing?


  5. Agree on the other points, but a common currency would be disastrous for NZ. One need only look at the continued economic deprivation of the former East Germany to see what the effects of that would be. Or the PIIGS. It would leave NZ unable to favourably compete with Australia in terms of wages and prices of goods and services. The flight of people and capital to Australia would accelerate.

    The world needs more currencies, not less.


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