Closer economic relations between Australia and New Zealand: specialisation, competitiveness, complementarity

Abstract

The Australia-New Zealand Closer Economic Relations Trade Agreement (ANZCERTA) came into effect in 1983 and the objective of bilateral free trade in goods between the two countries was achieved in 1990. This study provides a quantitative analysis of the Agreement’s impacts on specialisation, competitiveness and complementarity in trade between the two countries. It is shown that, compared with Australia, New Zealand was able to exploit its comparative advantage and increase its complementarity in trade with Australia to a greater extent in the first time period after free trade was reached (1991-1995). However, subsequent to 1995, the reverse has been true, reflecting the greater effectiveness of Australia’s commercial policies and economic performance in the late 1990s relative to New Zealand.