Ms Catherine King (Ballarat, Australian Labor Party, Shadow Parliamentary Secretary for Treasury) Share this | Link to this | Hansard source

The Corporations (NZ Closer Economic Relations) and Other Legislation Amendment Bill 2007 improves economic relations with Australia and New Zealand by giving effect to the treaty ‘Agreement between the Government of Australia and the Government of New Zealand in relation to the Mutual Recognition of Securities Offerings’ signed by both Australian and New Zealand ministers on 22 February 2006 and tabled in both houses of the Australian parliament on 28 March 2006. This is consistent with the Memorandum of Understanding on the Coordination of Business Law between Australia and New Zealand.

This bill continues the work which Labor initiated on the Australia-New Zealand Closer Economic Relations Trade Agreement in the early 1980s, an agreement that has been of enormous economic and social benefit to our two countries. Amendments to the Corporations Act 2001 will allow for the mutual recognition of the issue of securities and interests in managed investment schemes and provide for the mutual recognition of companies. This will reduce the compliance costs of business and encourage more business activity across both jurisdictions. Labor will support this legislation as it will increase opportunities for Australian businesses in the New Zealand market by reducing compliance costs without compromising Australian corporate standards.

Amendments will also be made to the Trade Practice Act 1974 with regard to the Australian Competition and Consumer Commission’s disclosure of information. These are consistent with recommendations made by the Productivity Commission report of 16 December 2004, Australian and New Zealand competition and consumer protection regimes.

Essentially the bill has four initiatives. Firstly, the bill will allow for mutual recognition of securities offerings. Currently, for security, Australian and New Zealand issuers cannot use their home jurisdiction offer documents when making a trans-Tasman offer of securities or managed investment scheme interests. Instead, issuers must comply with the relevant requirements in the host jurisdictions unless the issuer is operating under an exemption in the host jurisdiction. In New Zealand, relevant provisions are found under the Securities Act 1978. In Australia, offers of securities must comply with provisions under chapter 6D of the Corporations Act 2001.

Compliance costs for businesses that operate in both jurisdictions relate to legal and corporate advisory fees and the preparation, filing and disclosure of documents. Effects of the current system include the increased cost of raising funds—the ASX estimates that the cost of providing offer documents by Australian offerers to New Zealand investors averages between $10,000 and $30,000—and the decision by the offerer not to extend the offer to other countries, thereby reducing their access to potential investors. The objective in this part is to allow for mutual recognition arrangements to reduce the regulatory barriers faced by issuers of securities and managed investment scheme interests operating in New Zealand and Australia.

Three options for mutual recognition were proposed and the one adopted by this bill is supported by Labor, in light of a range of factors. The most significant of these include: the benefits of overcoming mutually exclusive regulatory requirements; providing regulatory outcomes which are consistent with the host jurisdiction; the impact on national and parliamentary sovereignty; and the extent of regulatory complexity. The option adopted requires compliance with substantive requirements of domestic law. It allows offers to be made in a host country in the same manner and with the same offer documents, provided that entry requirements are satisfied and the offerer complies with the ongoing requirements.

Lodgement requirements for certain foreign companies carrying on business in Australia will be reduced. Companies will no longer have to lodge information or documents with ASIC if they have been lodged with an equivalent authority in their home country. However, the bill will not remove the requirement for recognised companies to register with ASIC to operate in Australia.

Information-sharing between the Australian Competition and Consumer Commission and other agencies, bodies and persons will be improved. Disclosure of information by the ACCC is enhanced through amendments proposed in schedule 3 of the bill. This will allow the Australian Competition and Consumer Commission to share information with governments and other agencies, including the New Zealand Commerce Commission.

Finally, there will be additional protection of certain information which is given to or obtained by the ACCC, including information given to a foreign government body. ACCC officials will only be authorised to disclose protected information in the performance of their duties or functions or as consistent with the provisions of the Trade Practices Act.

The amendments made though this bill may also provide a basis for strengthening economic relationships with other countries in a similar way.

Labor supports initiatives to enhance economic relationships between Australia and New Zealand. This bill achieves this objective by allowing for the mutual recognition of the issue of securities offerings and companies to reduce costs associated with doing business. Labor also believes that provisions amending the role of the ACCC in terms of disclosure and protection of certain information are important to build the capacity to cooperate across the Tasman.

Bruce Baird (Cook, Liberal Party) Share this | Link to this | Hansard source

It is my pleasure to rise to support the Corporations (NZ Closer Economic Relations) and Other Legislation Amendment Bill 2007. I am wholly supportive of this legislation, which will help us to build a strong economic relationship between our two countries. It builds on the strength that has been developed from the Australia-New Zealand Closer Economic Relations Trade Agreement, forged in 1983, which has governed and shaped Australia-New Zealand relations. That agreement has been of great benefit to both countries, and this legislation will further develop that closeness, in an economic sense, that has been developed over the past 20-odd years.

Last June-July, the Trade Subcommittee of the Joint Standing Committee on Foreign Affairs, Defence and Trade, of which I am chairman, travelled to New Zealand to look at the various implications of this agreement and, more broadly, the economic and trade relations between the two countries. The first and most important comment to make on our review is that we found how successful the CER between the two countries has been, the great achievement it has produced and how everyone is looking towards the ways in which we can further develop the relationship. We looked at how we could remove some of the regulatory complexities between the two countries and at questions of accreditation. Overall, it was seen as a great success; we did have some areas to move in but we covered over 80 per cent of the key areas that needed to be addressed.

A need was seen for a central body to oversee the CER. That arose from one of the criticisms made by the committee. Because of the diversity of operations between various portfolios, whether they be telecommunications, treasury, trade or transport, we needed some central body to be brought together to deal with the concerns that people were addressing in the CER. That was one of the recommendations that went forward to cabinet.

In July this year the House of Representatives Standing Committee on Economics, Finance and Public Administration, of which I am the chairman, will be visiting New Zealand. We will be looking at some of these elements of our economic relationship. We will be meeting with representatives of New Zealand’s central bank and various other leaders of its economic and financial community. This committee will certainly be looking at ways by which the CER can be developed and improved.

The purpose of this legislation is effectively to work towards a single economic market for Australia and New Zealand with common regulatory frameworks. On the legal side, there is currently a memorandum of understanding on the coordination of business law between Australia and New Zealand. This legislation in part implements some of the aspects of that MOU.

The report by the Trade Subcommittee last July was unswerving in its endorsement of the 1983 agreement with New Zealand, our first ever free trade agreement. Since then we have gone on to have free trade agreements with Singapore, Thailand and the United States. In fact, the United States agreement received the highest ever vote in the US House of Representatives and Senate to endorse any free trade agreement. Now we are negotiating possible free trade agreements with Japan, China and the Gulf countries. Also, initial discussions are taking place with Mexico.

The agreement with New Zealand is our first and undoubtedly our most successful. There are a number of dimensions to our economic relationship but the major areas are tourism, trade and people, whether through migration or personal links. The CER has fostered these personal links and built strong cultural exchanges between our countries, not the least of which—as you, Madam Deputy Speaker Bishop, would know—is the Bledisloe Cup, which brings our two countries together very strongly. The movement of professionals between the two countries, for example, has allowed for an endless stream of opportunities. One area that has taken advantage of this arrangement is the film industry. Films like Lord of the Rings and King Kong have had significant Australian participation. The CER has facilitated and assisted this development.

The New Zealand trade relationship is crucial to Australia. There is no doubting the importance of this. New Zealand is Australia’s third largest investment destination and our fifth largest trading partner. At the end of 2005, the total stock of Australian investment in New Zealand was a very significant $58.9 billion. Certainly that level of investment in our closest neighbour is important in our overall economic framework. New Zealand is also our third largest destination for exports and our eighth largest source of imports. In 2005-06, two-way trade in goods and services with New Zealand amounted to almost $20 billion.

This legislation contains initiatives to help continue building this relationship, building synergy in our respective regulatory frameworks and reducing red tape. I especially want to acknowledge the Parliamentary Secretary to the Treasurer, the member for Aston, whose area of responsibility includes the CER and whose work has moved its regulatory aspects forward. The first aspect of these initiatives is the mutual recognition of securities offerings. The current arrangements for offering securities beyond the issuer’s borders mean they must comply with two substantive fundraising regimes. This increases the cost of raising capital. This often leads to matters preventing an offer being extended to investors from the other country. As part of our greater coordination of business law, Australia has entered into a treaty with New Zealand to mutually recognise securities offerings. Clear, positive economic benefits will flow out of this reduction in duplication and compliance costs. Investors can also manage their risk more effectively through diversification of their investments.

This mutual recognition will also allow New Zealand entities to offer securities in Australia as long as they comply with New Zealand’s fundraising requirements. As a result of this bill, there are minimal additional requirements that we will now impose upon them under Australian law. And of course with mutual recognition Australian entities will be able to offer securities in New Zealand under the same terms. This bill is all about mutual recognition. I think the point that we have reached in the relationship between our two countries is that if something is acceptable in one country it should be acceptable in the other, and I certainly know the parliamentary secretary has recognised that. It makes doing business between the two countries a lot easier.

The regime is based on equivalent regulatory outcomes for equivalent disclosure to investors. However, as there are differences between New Zealand and Australian securities, investors must receive a warning statement in general terms with the offer document. There is certainly protection for investors as they will be aware of the nature of their investment. Other protection remains. Certain existing obligations of the Corporations Act will continue to apply—for example, the continuous disclosure requirements and the maintenance of a dispute resolution scheme for managed investment schemes.

The Australian Securities and Investments Commission and New Zealand regulators are responsible for enforcement of the regime. ASIC will have primary responsibility for taking action against foreign issuers who fail to comply with the requirements of the regime, while the relevant New Zealand regulator will have primary responsibility for supervising a cross-border offer. ASIC has stop-order powers for New Zealand offers in Australia—for example, if an offer document is misleading. ASIC can ban a person from future use of the regime, and there are criminal penalties for breach of regime requirements. So, effectively, investors will be getting greater access to a foreign market but adequate protection of their investment will remain. The regime will apply to the issue of securities—shares and debentures—and interests in managed investment schemes but not to financial advice. There will be fewer compliance costs and less duplication but strong regulation through the involvement of both ASIC and the New Zealand regulator in the enforcement of the scheme. This is crucial for investor confidence in any cross-border security offering.

The second initiative in this bill is the reduced filing requirements to be implemented—so the first part is mutual recognition and the second part is less filing, which we are all in favour of. This will enable closer integration of company laws, in particular managing cross-recognition of company registrations, whereby companies in Australia and New Zealand can do business in the other jurisdiction without complying with all of the filing requirements applicable to other foreign companies. Currently New Zealand companies wishing to operate in Australia must comply with the filing requirements applicable to foreign companies. This is a fairly arduous task that only acts as a further disincentive to cross-border investment. The new minimal requirements acknowledge the closeness of our relationship. New Zealand has enacted exemptions so that reduced filing requirements apply to Australian companies operating in New Zealand, and it is only fair that we should reciprocate this arrangement. This is part of the government’s broader long-term commitment to reducing red tape and avoiding unnecessary compliance costs. The national reform agenda developed as part of COAG is an example of this commitment as the government have moved to simplify corporate and financial services laws.

The ACCC information-sharing powers also form a major part of this legislation. It is crucial to promote sensible measures to help facilitate a functioning global market place and this includes information sharing by regulators. Under the current arrangements, the ACCC is prohibited from sharing information with any other regulators. This bill will change that premise by allowing the ACCC and other bodies to share certain limited information with other agencies. The amendments are closely modelled on similar information-sharing powers used by ASIC. They specify the limited circumstances in which information can be disclosed and the conditions that apply to that disclosure. There are strong privacy safeguards in the bill, and the amendments protect against any inappropriate disclosure of sensitive information. Protected information must not be disclosed unless permitted by a relevant law or in the course of duties as an ACCC official.

This bill is technical in nature. In a very practical fashion it is helping to reduce the red tape, duplication and compliance costs for business trying to operate across the Tasman. This is an important step in our growing economic relationship with our closest neighbour. I am a strong supporter of the government’s moves to synergise business laws and regulatory frameworks between the two countries. I commend the Parliamentary Secretary to the Treasurer for his efforts. It will encourage further investment—already at $60 billion—and will lead to a variety of interrelated consequences such as increased cultural exchange. I also hope to see increased business and trade opportunities stem from the introduction of this legislation. This bill is an important step forward in the development of the economic relationship between our two countries. I commend the bill to the House.

Duncan Kerr (Denison, Australian Labor Party) Share this | Link to this | Hansard source

I congratulate the member for Cook on his contribution to this debate on the Corporations (NZ Closer Economic Relations) and Other Legislation Amendment Bill 2007. Observers of this parliament rarely note the effective working relationships within the House. The relationship that the member for Cook and I have developed as we have undertaken various mutual responsibilities goes back a long way. I have enormous respect for him as a member of this House and it is not diminished in the least by the contribution he just made. This measure is to be welcomed. I go back in my parliamentary service nearly 20 years. One of the first committees on which I served was the House of Representatives Standing Committee on Legal and Constitutional Affairs, which undertook a visit to New Zealand in, I think, 1987, following the 1983 initiation of the closer economic relationship agreements that we had entered into. Those agreements led to improvements and streamlining of the relationship. They are sensible agreements and continue to be improved and streamlined as we proceed.

Historically there are reasons why those in New Zealand, in their entitlement as a sovereign nation, have decided upon quite a different set of arrangements for the registration of companies and the management of corporate administration to those in Australia. In many ways it would have been more convenient if we had adopted the same set of arrangements, but people in New Zealand regard theirs as preferable and we in Australia proceed in our own manner. This legislation finds an effective way of allowing those who wish to undertake corporate activity between the two countries to do so with the least degree of complexity, given that there are different regulatory regimes in both countries. I hope over time that we can bridge this divide even further.

The House of Representatives Standing Committee on Legal and Constitutional Affairs—which I am a member of and which is chaired by the honourable member for Fisher—recently recommended in a report further steps towards closer integration of our relationship with New Zealand. That relationship not only is embedded in the economic areas that the member for Cook has mentioned but also extends into a whole range of other areas where our countries have mutual interests. In the area of law enforcement, New Zealand ministers serve as members of our ministerial councils on law enforcement. We have effective relationships in policing, and health ministers from Australia and New Zealand also meet. It is a historical anomaly that our relationships are not even more intimate. In the early days before the adoption of our federal compact, New Zealand was an eligible colony to have federated as part of the Commonwealth of Australia but did not take that step. A part of the recommendations made by the honourable member for Fisher is that we do, over time, explore the possibility of not only having economic relationships and better and more effective relationships in a whole range of areas where we already have ministerial exchange but also political integration at a more fundamental level.

It is difficult not to be seen to be a little bit Big Brotherish in relation to this matter. Australia does have a larger population than New Zealand, the economy that it possesses is larger than New Zealand’s and the direction of its political structures has perhaps diverged even since the time when federation was first put on the table. It is a peculiarity, I suppose, that, as we become a much more centralised federation than we were in 1901, the attraction for New Zealand of joining the federation would be less because the degree of freedom of the federal entities within the Commonwealth of Australia has been considerably reduced over the last 100 years. And it is no disrespect to the High Court of Australia to observe, as both Justice Callinan and Justice Kirby did, that the manner in which the Constitution has been read in a contemporary way has permitted the central government to exercise a wider range of powers than would have been imaginable by those who first framed that compact.

So, in a sense, whilst we are moving closer in terms of a recognition that we have a common interest, economically, politically and socially, with New Zealand, perhaps the threshold to get over in terms of political integration is greater because the degree of freedom of the federal components of that national government are much less than they were in the past and therefore perhaps much less attractive to any potential New Zealand administration that might believe that there would be, in the long term, some benefit in closer political harmonisation. Those are large philosophical issues that cannot be embraced, other than by mention, in this debate, but I think they do repay some reflection on our part.

One of the things that I would hope this parliament and those who are responsible for decisions on how we proceed in our region eventually grapple with is this: I think there is a good case to be made that we should also have a constant exchange between parliamentarians, like the exchange between the ministers of our two countries. It does seem to me a little anachronistic that we as parliamentarians do not share the same closeness between our parliaments as those holding executive office. And I think it is an unhealthy thing, from a point of view of parliamentary democracy, that that is not the case.

One of the points raised in the report of the committee inquiry chaired by the honourable member for Fisher was the need to establish effective means whereby Australian parliamentarians can routinely participate in mutual deliberations with their New Zealand counterparts so that we enrich the relationship, so that, in our various deliberations, we do not stumble upon difficulties that could be avoided and so that, where we do have differences, we can put in place, by way of common interests, harmonious means of overcoming them.

Those are the only remarks I have. I have no objection to the terms of the minister’s second reading speech, which covers the reasons for our support of this legislation. It does mean that New Zealand entities that wish to issue securities in Australia can do so. It means that we can have mutual recognition of companies in both countries. It also means that our regulators, in particular those looking to deal with anticompetitive behaviour, can exchange information so that we can minimise the degree of difficulty that is caused by both national entities—for their own perfectly understandable reasons—having divergent corporation laws. It gives us a means of avoiding undue complexity—which, I must say, has in the past been a considerable stumbling block.

We did take evidence in the past—though I cannot remember precisely which committee I was serving on when we did—on the regulatory difficulties that were experienced because arrangements for recognition of the different corporate structures that existed in the two countries were not in place. There was evidence that the means of issuing securities in the two countries were complex and required very different approaches by way of disclosure and that we did not have an effective means of having a common regulator for anticompetitive behaviour. So these measures, whilst they do not bring the substantive law into exact parallel, at least provide us with an effective means of minimising the inconvenience that would otherwise be inherent.

In conclusion, I will go back to the point I made when I commenced by saying that the contribution made by the member for Cook really does reflect the wealth that this parliament has, on both sides, of members interested in the national interest and not in pursuing differences for the sake of it in these kinds of debates. In this instance, the opposition not only is content to not oppose the legislation but actively supports the intent of the legislation, sees it as a practical advance and wishes it all success.

Chris Pearce (Aston, Liberal Party, Parliamentary Secretary to the Treasurer) Share this | Link to this | Hansard source

I would like to thank those honourable members who have taken part in the debate today on this important piece of legislation, the Corporations (NZ Closer Economic Relations) and Other Legislation Amendment Bill 2007. The bill further cements Australia’s close economic ties with New Zealand and continues the move towards a single economic market based on common regulatory frameworks. The bill reduces duplication in regulatory compliance in trans-Tasman financial markets. It also allows the ACCC to exchange certain information with domestic and international regulators, including the New Zealand regulators, in certain circumstances.

The bill’s first initiative allows a New Zealand entity to offer securities in Australia and New Zealand based largely on compliance with New Zealand fundraising laws. Of course, mutual recognition means that Australian entities will also be able to offer securities in New Zealand under reciprocal similar regulatory arrangements. Importantly, this initiative will reduce compliance costs to business, with flow-on effects expected in the form of increased investor choice and enhanced competition in capital markets.

The second initiative reduces the filing burden on New Zealand companies operating in Australia, with equivalent simpler filing arrangements for Australian companies operating in New Zealand. This deregulatory initiative reduces the costs for approximately 1,500 Australian companies operating in New Zealand and 500 New Zealand companies operating in Australia. Whilst the two initiatives are framed with Australia and New Zealand in mind, these arrangements could also be extended to countries other than New Zealand. The importance of these initiatives is evidenced by the trade figures with New Zealand, which is Australia’s third-largest investment destination and fifth-largest trading partner in goods and services.

David Hawker (Speaker) Share this | Link to this | Hansard source

Order! It being 2 pm, the debate is interrupted in accordance with standing order 97. The debate may be resumed at a later hour and the parliamentary secretary will have leave to continue speaking when the debate is resumed.