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The ties that bind – Print 21 magazine article

Wednesday, 12 September 2007
By Print 21 Online Article

We all know what separates us (don’t mention the rugby) but what about the things we all share in common? Hagop Tchamkertenian examines some of the trans-Tasman economic ties that help to bind together Australia and New Zealand, starting with Australia’s first free trade agreement.


Recent free trade publicity has focused on our Free Trade Agreement concluded with the USA (AUSFTA), which came into force on 1 January, 2005, and those currently under negotiation with China and other Asian-based economies. Very few printing business owners probably realise that the free trade agreements concluded with New Zealand are not only one of the most comprehensive free trade agreements concluded to date, but that their origins can be traced back to the 1960’s when free trade agreements were not as topical as they are in the current environment.

The Australia New Zealand Closer Economic Relations Trade Agreement (ANZCERTA,) commonly known as Closer Economic Relations (CER), came into effect in 1983 after it was argued that a new free trade agreement was needed to govern trade relations between Australia and New Zealand. The proponents of the concept argued that such an economic relationship would benefit the international competitiveness of both countries and boost living standards.

The predecessor to ANZCERTA was the New Zealand and Australia Free Trade Agreement (NAFTA) which came into effect in 1966. By the late 1970’s, NAFTA had succeeded in making up to 80 percent of trans-Tasman trade free from tariffs and other restrictions. The objectives of ANZCERTA were to further expand free trade by eliminating barriers to trade and promoting fair competition. By 1990, five years ahead of schedule, all tariffs and quantitative restrictions had been removed from trans-Tasman goods trade.

In a subsequent World Trade Organisation review, ANZCERTA was recognised as the world’s most comprehensive, effective and multilaterally compatible free-trade agreement, and it has been credited as assisting in building up momentum for trade liberalisation.

Certainly, analysis conducted by the Australian Department of Foreign Affairs and Trade shows impressive gains flowing from ANZCERTA. Total trade in goods increased by more the 568 percent from 1983 to 2003 reaching $13.2 billion in Australian dollar terms. Two-way investments between Australia and New Zealand have also increased from $1.5 billion in 1983 to $56.7 billion in 2003.

Australia’s best customer
Official data on trade flows released by the Australian Bureau of Statistics (ABS) for the most recent calendar year show that New Zealand is Australia’s largest export market for printed matter.

During calendar year 2006, almost $202 million worth of printed matter was exported to New Zealand, which accounted for more than 63 percent of all exports of printed matter. Imports from New Zealand were more modest totalling almost $37 million during calendar year 2006 and accounting for just 3.5 percent of total imports of printed matter coming into Australia. Australia thus enjoyed a trade surplus of $165 million in printed matter with New Zealand during that year.

The following table outlines in more details the trade in printed matter between Australia and New Zealand. Australia enjoys substantial trade balances in the categories of books, booklets, brochures and leaflets, newspapers, journals and periodicals, postcards and greeting cards, and labels.

The only printed matter categories in which Australia has a trade deficit with New Zealand are calendars, plans and drawings, and educational, scientific and cultural catalogues.

Smaller but more profitable
The total income generated by the printing, publishing and recorded media industry in New Zealand is about $3.9 billion when expressed in Australian dollar terms. This compares to $22.5 billion for the Australian industry. In terms of share of the economy, the New Zealand industry accounts for almost 1.1 per cent of New Zealand’s Gross Domestic Product (GDP) compared to 1.2 per cent in Australia.

The industry in New Zealand produces pre-tax profits of approximately $441 million in Australian dollar terms compared to almost $2.3 billion in Australia but, compared to Australia, the pre-tax profit to sales ratio is 10.8 percent higher in New Zealand.

More than 2,000 businesses operate within the New Zealand printing and associated industries compared to approximately 5,000 within Australia. These businesses employ more than 21,000 people in New Zealand and about 110,000 in Australia.

The following diagram shows the printing industry demographics if we combine the Australian and New Zealand printing industries. The Australian printing industry represents 85.2 percent of combined turnover for the two economies, 83.9 percent of pre-tax profits and 83.7 percent of employment but only 71 percent of the businesses.

Besides the printing industry being less profitable in Australia, the diagram also shows that the number of printing businesses relative to the size of the industry is significantly lower in Australia compared to New Zealand.

Ever closer ties
In recent years there has been a surge in activity across the Tasman with key New Zealand-based printing organisations such as the Blue Star Printing Group and Geon engaged in acquisition activity in Australia.

Commencing with the acquisition of Merritt Madden in 2004, the Blue Star Printing Group has purchased a number of printing industry icons such as J S McMillan Printing Group which also owns Canberra-based printing company, Pirion, National Capital Printing, Link Printing, Kings Mailing Services and Craftsman Press.

Blue Star Printing Group’s rival, Geon, has also been active in industry consolidation efforts on both sides of the Tasman, picking up industry jewels such as Penfold Buscombe, Scanlon Printing, Graphic Printworks, Agency Printing, Graphic World, Impact Printing and AP Mail.

While there is currently talk of more private equity funded acquisitions in Australia over the next 12-18 months, the extent of activity will be influenced by future movements in official interest rates. The current surge in private equity activity is being driven partly by the low cost of debt (due to low interest rates) relative to returns on equity, but if official interest rates begin to rise over the next 12 months, as is being anticipated by many economic commentators, then such a development is likely to have a significant dampening effect on private equity activity in Australia.

In recent years, these printing organisations from across the Tasman have played a pivotal role in industry consolidation and rationalisation efforts in Australia. The special bond that was developed initially between Australia and New Zealand during the Gallipoli campaign has spread from the military arena to encompass the economic and printing industry arena.

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