Wednesday, April 12, 2006

Fran O'Sullivan: Cullen's roars aren't going to serve him

We all want progress, but if you're on the wrong road, progress means doing an about-turn and walking back to the right road; in that case, the man who turns back soonest is the most progressive," said C. S. Lewis.

C. S. Lewis may or may not be one of Michael Cullen's favourite authors. But I'm sure the Finance Minister - yet again up to his armpits tidying up other Cabinet ministers' messes and still dealing with the backwash from the Prime Minister's recent comments to the Listener on his future - would get some mental satisfaction from playing casting agent for one of Lewis' most famous tales: The Chronicles of Narnia: The Lion, the Witch and the Wardrobe.

Unfortunately for Cullen - who in his own mind may well see himself as that rather magnificent lion, Aslan, involved in a now somewhat uneasy partnership with Helen Clark (who does not usually play White Witch with this very senior of ministers) - his week from hell resulted in a rather serious gaffe, which has the capacity to substantially damage the Government's relationship with business on both sides of the Tasman.

The critical word is "capacity". Because its also within the Finance Minister's capacity to make an about-turn, to the benefit of New Zealand business and the overall Government relationship.

Cullen was caught short when National's John Key asked him last Thursday if he would be attending the Australia New Zealand Leadership Forum in Auckland next month.

The forum is the third annual meeting of influential players from Government and the Opposition, as well as bureaucrats, businesspeople and opinion leaders to discuss transtasman issues.

It has focused on moves towards creating an Australasian single economic market, which Cullen himself considers vital to insulate our smaller economy from future shocks.

But even Key, who clearly plays by the parliamentary rule "don't ask questions for which you don't already know the answers", was surprised when, apart from confirming his non-attendance, Cullen went on to make disparaging comments that have been interpreted as a clear snub to the forum.

What is at issue is his criticism of participants at last year's Melbourne meeting as a "wailing wall of people pushing their own barrows as opposed to addressing the wider relationship".

He'd discussed the forum with Australian Treasurer Peter Costello. Neither was going.

In fact both ministers are in the final stages of preparing their Budgets, which will inevitably bring them more criticism from their respective business sectors for being too slow to move on tax reforms.

That's where Cullen's parliamentary comments should have gone and stayed gone.

But Cullen went on to rub salt into wounds by suggesting that, as a consequence of last year's forum, significant changes were occurring in the business leadership on both sides of the Tasman, while politicians such as himself and Costello were getting on with the real business of making things happen.

He didn't say so outright, but his words suggested the decision to replace Qantas chairwoman Margaret Jackson with Australian Insurance Group chairman James Strong, and the hunt for a replacement for New Zealand forum co-chair Kerry McDonald resulted from their failure to squash criticism in Melbourne and Wellington and their persistent push for policy changes that, at this stage, both ministers consider beyond their ability to deliver.

Cullen's comments also suggested a Government hand in changing the leadership of a forum that has been promoted as having a measure of independence.

It's true that last year's forum did strongly debate heated issues such as banking prudential supervision reform in a relatively self-interested way.

But that's because most of the major players - apart from Cullen, who the Prime Minister had asked to stay in New Zealand and mind the shop - were present. Costello, Reserve Bank Governor Alan Bollard, CEOs from various banks and regulators all had their bit to say in an illuminating way.

This could be interpreted as helping to reach common understandings over a controversial issue that was certainly damaging relations.

PricewaterhouseCoopers chairman John Shewan strongly promoted mutual recognition of franking or dividend imputation credits, which the forum recognised as a key issue that had to be addressed to ensure the proposed single market worked in a truly seamless fashion.

But Cullen said in Parliament: "To listen to Mr Shewan yet again say that the only issue is franking credits is not, in fact, a good use of my time."

What's not so widely known is that Cullen has, in fact, promoted just such reform behind the scenes to Costello and has run into an Aussie brick wall.

But hitting out at Shewan to release his own frustration is not the answer.

The forum provides a useful mechanism for Cullen to create new Australian business allies to pressure Canberra to address this long-term stumbling block.

Unlike Wellington, where the notion of businesses directly pressuring politicians in their own self-interest is seen as smacking of Muldoonism, Canberra is stacked full of Government relations people.

Canberra ministers are not shy of acting directly in their business' self-interest - they even got in a bit of lobbying with the Beehive on Telstra's behalf while in Wellington for the first forum.

Their businesspeople are tougher and more direct, compared with the more self-effacing manners displayed here. But the New Zealand contingent is rapidly lifting its own game.

Inevitably, Cullen's snub was interpreted on both sides of the Tasman as him thumbing his nose at the forum.

It has raised eyebrows in Canberra, where Cullen's throwaway lines confused those who rate him as the most effective New Zealand protagonist of a strong bilateral economic relationship - someone who has played his role as the junior partner to Costello with skill, gaining more results in the past few years than happened in the previous decade.

The irony is that, as a result, Cullen is held in high regard in Canberra. And not just by Costello, with whom I suspect he shares a waspish sense of humour and the type of insight a senior politician gains from playing one-step down from an all-embracing Prime Minister.

But he is also highly regarded by senior bureaucrats, who are now paying far more attention to New Zealand issues than they were in early 2003, when Cullen and Costello launched the single market agenda.

Inevitably, Cullen's comments will feed into wider speculation about his overall leadership of the finance area, which is unfortunate for him.

The forum has invited the Prime Minister to drop in.

But from a New Zealand perspective, business needs to get Cullen re-engaged, and the forum should do all in its power to get him along, if only for the economic session. It's not as if he is in complete stand-off mode.

It's not widely known what an integral role Cullen is playing in Auckland working with key business lobbyists and major businesses to get that city moving. Tomorrow he will meet those Auckland interests for a wide-ranging session.

He did initially display the courage to run against the tide in a relatively insular Cabinet when he first proposed the single economic market. He now needs to show courage and see it through.

The businesspeople I've spoken to on this are afraid of a reversion to the old Government business stand-off that dogged the Clark Administration's early months.

Personally, I don't think that's where this is going.

But the forum needs to make its best endeavours to keep champions of the relationship onside. The consequences of failure don't bear thinking about.

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