Australia and New Zealand have agreed to establish a trans-Tasman council for the banking sector, with a similar move for the insurance industry not far off, according to informed sources.

In a joint press conference by Federal Treasurer Peter Costello and NZ Finance Minister Michael Cullen in Wellington last week, Mr Costello said “the development of a single economic market across the Tasman would bring very valuable benefits to both countries”. 

“Our companies are always looking for opportunities to engage in new investments, and obviously NZ is a great place to invest,” he said. “Our goal ought to be that, for competition purposes, Australia and NZ are viewed as one market.”

That statement may well have sent a shiver down the spines of Kiwi insurance professionals, who are hoping for a new regulatory regime that is less onerous than the Australian Financial Services Reform Act.

Insurance Council of New Zealand CEO Chris Ryan told Sunrise Exchange News the move to a single regulator, which could be implemented in just two years, is “fantastic in principle”, but the “devil will – like with most things – be in the detail”.

He says while the industry supports the unification of both countries’ financial services sectors, it’s sceptical of allowing Australian regulators to reign over NZ insurers.

“New Zealand will resist the high regulatory regime of Australia,” he said. “When it comes down to it, the countries need to look at the value of introducing overly tough regulation compared with costs and consumer value.”

He says the benefit for NZ will be “access to the scale of Australia and its diversified market”.

Dr Cullen says “non-banking financial institutions [in NZ]… clearly need overhauling” and the NZ insurance industry has not “sufficiently caught up” with Australia’s. “We are actually well behind Australia in this respect.

“So, on this side of the Tasman, there is a need for us to address that issue of the broader regulatory regime around financial institutions, probably within the context of this trans-Tasman movement.”