Australia and New Zealand are Oceania’s two largest economies and have strong links beyond a feeling of shared culture and geographical proximity. The two countries enjoy extremely close economic and trading ties underpinned by legislation including the 1983 Closer Economic Relations agreement, which allows for free trade in goods and services, while the 1973 Trans-Tasman Travel Arrangement is an informal agreement allowing free movement of citizens between the two countries. Despite these connections, both economies have different vulnerabilities to the winds of global economic change.
Australia
Both Australia and New Zealand’s economies can generally be described as healthy, although Australia, with its larger workforce and more favourable climate is a bigger global player. Predicated on a traditionally strong service sector with key industries including mining, manufacturing and agriculture, Australia was able to emerge from the global financial crisis in better shape than its European or North American counterparts. The near future however may prove more challenging, with several important sectors on which the economy is based being so reliant on the use of commodities.
Peter Lim, executive general manager for legal and corporate affairs at leading fuel supplier Caltex Australia can offer insight into this trend. Despite Caltex operating in the downstream and thus less affected, Lim acknowledges that record low crude prices have brought about a ‘difficult’ market situation which has ‘impacted a lot of Australian companies exposed to oil and gas prices’. These external market shocks require nous and foresight to deal with them effectively.
Carmel Mulhern is group general counsel of leading Australian telecoms and media company Telstra, which has had to undergo key changes to its core business to keep up with technological innovation. Such a ‘dynamic, challenging, constantly changing’ environment affects legal teams in terms of both guiding the strategic direction of the company and ensuring they are legally compliant, says Mulhern. Changing consumer demands have necessitated usage of existing knowledge and resources for ‘growth into new areas in addition to our core telecommunication business such as e-Health, network applications and services, and the cloud,’ says Mulhern, who also noted the growth of legal issues in areas such as privacy, data retention, the Internet of Things, cybersecurity and court-ordered website blocking as examples of expanding areas of in-house legal responsibility.
New Zealand
New Zealand is an internationally-focused trading nation and relies more heavily on imports and exports with its main trading partners Australia, China and the European Union. Similarly to Australia, New Zealand’s economic buoyancy was illustrated during the global financial crisis, bouncing back quickly after a brief 2009 decline by posting positive growth figures from 2010 onwards.
Nevertheless, being a trade-dependent economy that is exposed to the fluctuations of its partners, GCs operating in New Zealand are constantly at risk of external factors outside of their control. The value of currencies and trade volumes have a material impact, helping or hindering business depending on the nature of their transactions. Craig Mulholland, general counsel and company secretary of New Zealand’s largest bank ANZ, told GC how market forces including foreign investment flows, net migration levels, and all-time low interest rates have caused an indirect effect on his banks’ legal function. These factors affect ‘work volumes from different teams in the bank and the type of advice that is sought,’ challenging conventional economic planning as the team must constantly adjust its operations to reflect this dynamic environment. The plethora of interested parties to consider in their handling of matters include ‘customers, industry bodies, regulators and even competitors’ for Mulholland. Additionally, the banking sector in New Zealand is subject to ‘significant’ legislative reform, with securities law, consumer protection legislation and responsible lending requirements ‘driving a lot of change across the industry.’ This environment means Mulholland and his team must work ‘on the basis that our actions now will be tested in the future with the benefit of hindsight’, something he highlights as being both challenging as well as a measuring stick determining which in-house teams are truly adding value to their organisations, particularly in the financial services sector.
Conclusion
Despite the unpredictable nature of the markets, corporate counsel and their business partners in the region can look forward to greater cross-border integration prospects with their peers. The controversial Trans-Pacific Partnership (TPP), which Australia and New Zealand are both signatories to, is a major contributing factor towards this. The TPP, signed in February 2016 although not yet in force, has the goal of cutting import tariffs, facilitating easier trade and attempting to harmonise economic policy between the 12 countries involved – leading to a trading bloc larger than the European Union and encompassing approximately 40% of the world’s global GDP. In addition to these proposals, the deepening of Australia and New Zealand’s bi-lateral relationship via a customs union is being worked on by both governments, as is ongoing work to coordinate and standardise business law. The hope is that these agreements will increase the ability to deal with external shocks caused by global market forces, and both Australia and New Zealand can move forward together with more security, resilience and interdependence than ever before.