Beyond travel, a trans-Tasman bubble is an opportunity for Australia and NZ to reduce dependence on China



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Hongzhi Gao, Te Herenga Waka — Victoria University of Wellington and Monica Ren, Macquarie University

When it comes to our economic over-reliance on China, New Zealand consumers need look no further than their most popular big box chain, The Warehouse. The familiar “big red shed” sourced about 60% of its home brand stock from China in 2017 – and a further NZ$62 million in products directly through offices in China, India and Bangladesh in 2019.

In Australia, many major chain stores as well as online retail giant kogan.com are in a similar position. Reliant on China for much of what they sell, including exclusive home-brand items, they are part of what has been described as the world’s most China-reliant economy.

The COVID-19 crisis has thrown Australian and New Zealand businesses’ dependence on China into stark relief. With countries reportedly competing with and undercutting each other to secure desperately needed medical supplies from China, many are now waking up to their economic exposure to a single manufacturing giant.

Understandably, discussions about creating a “trans-Tasman bubble” between Australia and New Zealand have focused on kick-starting economic activity in the short term, particularly through tourism. But both countries also need to take a longer-term view of boosting economic activity – including through increased manufacturing and trade integration.




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The statistics support this. In 2018, 20% of global trade in the manufacturing of “intermediate” products (which need further processing before sale) came from China. Chinese manufacturing (including goods made from components made in China) also accounted for:

  • 35% of household goods
  • 46% of hi-tech goods
  • 54% of textiles and apparel
  • 38% of machinery, rubber and plastic
  • 20% of pharmaceuticals and medical goods
  • 42% of chemical products.

Australia and New Zealand are no exception, with China the number one trading partner of both. Australia earned 32.6% of its export income from China in 2019, mostly from natural resource products such as iron ores, coal and natural gas, as well as education and tourism.

Inside a Bunnings store in Australia: many of the shelves would be empty without goods sourced from China.
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From New Zealand, 23% of exports (worth NZ$20 billion) went to China in 2019, and much of the country’s manufacturing has moved to China over the past 20 years. The China factor in New Zealand supply chains is also crucial, with a fifth of exports containing Chinese components.

Supply shortages from China

The world is now paying a price for this dependence on China. Since the COVID-19 outbreak in early 2020 there has been volatility in the supply of products ranging from cars and Apple phones to food ingredients and hand sanitiser packaging.

More worryingly, availability of popular over-the-counter painkiller paracetamol was restricted due to Chinese factory closures. This is part of a bigger picture that shows Australia now importing over 90% of medicines and New Zealand importing close to NZ$1.59 billion in pharmaceutical products in 2019. Overall, both countries are extremely vulnerable to major supply chain disruptions of medical products.

For all these reasons, a cooperative trans-Tasman manufacturing strategy should be on the table right now and in any future bilateral trade policy conversations.

The big red shed: New Zealand’s Warehouse chain sources 60% of its products from China.
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Opportunities for Australia and NZ

Rather than each country focusing on product specialisation or setting industrial priorities in isolation, the two economies need to discuss how best to pool resources, add value and enhance the competitive advantage of strategic industries in the region as a whole.

Currently, trans-Tasman trade primarily involves natural resources and foodstuffs flowing from New Zealand to Australia, with motor vehicles, machinery and mechanical equipment flowing the other way. Manufacturing is skewed towards Australia, but closer regional integration would mean increased flows of capital, components and finished products between the countries. We have seen this already in the primary and service sectors but not much in the manufacturing sector, especially from New Zealand to Australia.

Medical technologies and telecommunications equipment manufacturing (both critical during the pandemic) stand out as potential new areas of economic integration. In that sense, it was heartening to see major medical tech companies such as Res-Med Australia and Fisher & Paykel Healthcare in New Zealand rapidly scale up their production capacities to build respiratory devices, ventilators, and other personal protective equipment products.




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These brands enjoy a global technology edge, smart niche positioning and reputations for innovation. We need more of these inside a trans-Tasman trade and manufacturing bubble.

China still vital but balance is crucial

Key to successful regional integration will be the pooling of research and development (R&D) resources, mutual direct investment, subsidising R&D and manufacturing in emerging markets with profits from another (such as China), and value-adding specialisation in the supply chain. For example, Tait Communication in New Zealand recently invested in a new facility based in one of Australia’s largest science, technology and research centres.

Together, we can make a bigger pie.

None of this means cutting ties with China, which will remain the main importer of primary produce and food products from Australasia for the foreseeable future. And Chinese exports will still be vital. Fisher & Paykel Healthcare sells its products in about 120 countries, for example, but some of its key raw materials suppliers are Chinese.

Getting this dynamic balancing right will be key to Australia and New Zealand prospering in the inevitably uncertain – even divided – post-pandemic global business environment. And you never know, maybe one day we’ll see a “made in Australia and New Zealand” label in the aisles of The Warehouse and Bunnings.The Conversation

Hongzhi Gao, Associate professor, Te Herenga Waka — Victoria University of Wellington and Monica Ren, Lecturer/ Assistant Professor, Macquarie University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Why a trans-Tasman travel bubble makes a lot of sense for Australia and New Zealand



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Freya Higgins-Desbiolles, University of South Australia and James Higham, University of Otago

We are hearing increasing talk about a trans-Tasman “travel bubble”, which could see Australia and New Zealand open their borders to each other.

New Zealand Prime Minister Jacinda Ardern was a special guest at Australia’s national cabinet meeting on Tuesday, which discussed the possibility of setting up a travel safe zone.

Both Ardern and Australia’s Prime Minister Scott Morrison have cautioned a travel bubble will not happen immediately. After the meeting, Morrison said a safe zone is “still some time away”. But he also stressed, “it is important to flag it, because it is part of the road back”.




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What would a travel bubble mean in practice for Australia and New Zealand?

As tourism researchers in both countries, we see a travel bubble as a great opportunity to kick-start the post-COVID economic recovery, while also focusing on more sustainable tourism.

Why the trans-Tasman bubble makes sense

A travel bubble would see quarantine-free travel allowed between Australia and New Zealand.

The two neighbours have a unique opportunity to do this. Not only are they geographically isolated, both have so far had success containing – perhaps even eliminating – COVID-19 cases within their borders.

It is not yet known when international flows of tourists will be possible again. But it is understood that global tourism as we once knew it will not be possible until a COVID-19 vaccine is widely available.

Historically, limited travel circuits have been associated with former and current Communist states. Nevertheless, for Australia and New Zealand in 2020, the idea of a travel safe zone makes a lot of sense.

In 2018, New Zealand was Australia’s second largest inbound market for visitor arrivals and fourth largest market for visitor nights and total visitor spend. Australia is New Zealand’s largest visitor market, generating 1.5 million visitors a year as of 2017.

Australians make up more than half of international arrivals to New Zealand each year.
Lukas Coch/AAP

The beauty of our shared travel markets is our visitors are generally repeat visitors who head to diverse regions. Because more than 70% of Australians book self-drive holidays, for example, their spending spreads more widely than some other visitors.

Australians seek skiing and adventure in Queenstown, wine in the Martinborough or Waiheke Island regions. They also support Australian sports teams competing in Auckland, Wellington and Dunedin. In reverse, lots of Kiwis head to the Gold Coast but also visit the Hunter Valley for wine or Melbourne, Sydney or Brisbane for sports events.

Starting to rebuild these markets while the rest of the world remains in lockdown would represent a huge boost to both economies.

What is needed to make a bubble work?

After the national cabinet meeting, Ardern stressed “there is still a lot of work to be done” before the travel safe zone idea can progress.

The key to a successful trans-Tasman travel arrangement will be sound planning and implementation.

Rigorous public health measures to facilitate safe travel will be essential, including being prepared for all travel to be halted again if the situation changes.




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Broad stakeholder involvement and coordination will be necessary, including between tourism commissions, airlines and airports, industry associations and a range of government agencies, to ensure any reopening is managed well.

Local councils and businesses must also be involved to ensure that the tourism restart is planned, coordinated and controlled.

A chance for greener travel

A trans-Tasman travel bubble could also lead to a change in both countries’ tourism strategies.

Like other countries, Australia and New Zealand have historically prioritised international tourists, particularly “high value travellers”, who spend more and stay longer.

A COVID-era focus on domestic and trans-Tasman travel will likely result in lower yield but could also lead to a more sustainable tourism future. Trans-Tasman travel is the least carbon emitting of our international markets, because it does not rely on long-haul flights.

A focus on domestic and trans-Tasman travel also provides a chance to create a greener tourism industry.
Lukas Coch/ AAP

Trans-Tasman visitors also tend to have a lower carbon footprint at their destinations. In 2018, more than half of all Australian visitors to New Zealand (57%) were repeat visitors. Repeat visitors tend to spend more of their time at regional destinations, and less time incurring the carbon costs of transporting themselves around the country.

New Zealand has already begun to rethink its tourism economy to establish greater sustainability. A trans-Tasman bubble presents an opportunity to foster tourism with a lighter footprint.

Could the bubble be expanded?

There is a call for an extension of this travel bubble to the Pacific neighbourhood, where there are also low infection numbers.

Such a move would not only provide economic support to the Pacific community, it would also represent another step in the long process of restoring normality in different regions of the world.




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Ardern has kept the door open on this aspect, but noted “at the moment, we are focused on Australia”. She has also cautioned about not introducing COVID-19 to parts of the Pacific untouched by coronavirus.

Even if it remains just Australia and New Zealand, any travel bubble will obviously elevate the risk of COVID-19 reinfection. So, public health priorities must trump the desire to kick-start economies, to make sure we don’t squander our success against coronavirus so far.

But if the governments and tourism industries can find the right balance between public health and economic needs, then Australia and New Zealand stand to benefit from a head start on the long road to economic recovery.The Conversation

Freya Higgins-Desbiolles, Senior Lecturer in Tourism Management, University of South Australia and James Higham, Professor of Tourism, University of Otago

This article is republished from The Conversation under a Creative Commons license. Read the original article.