The Fiscal Impact of the Trans‑Tasman Travel Arrangement: Have the Costs Become Too High?

Abstract

The trans-Tasman travel arrangement allows Australian and New Zealand citizens to work and live in each other’s country with minimal restriction and is seen as being a key part of the closer economic arrangement (CER) between the two countries. This arrangement has its origins back to 1920 and predates the CER agreement between the two countries in by over six decades. The travel arrangement and the CER agreement, is also complemented by a comprehensive double tax agreement (DTA) and social security agreement (SSA) between the two countries.The trans-Tasman travel arrangement was of little significance until the late 1960s when a significant pattern of migration emerged of New Zealand citizens to Australia. It has been estimated that by 2012 over 648,000 New Zealand citizens lived in Australia.The trans-Tasman travel arrangement underwent a significant modification when in 2001 Australia unilaterally enacted a new category of non-immigrant visa for New Zealand citizens settling there. While the basic principle of allowing New Zealand citizens the right to work and live in Australia with minimal restriction remained, migrants after February 2001 are no longer treated as permanent residents of Australia and are ineligible for a wide range of social assistance irrespective of the time they are resident in Australia. Nor are they eligible to apply for Australian citizenship unless they qualify for permanent residence status. Thus New Zealand citizens who have settled in Australia since 2001 remain essentially “guest” workers on an indefinite basis.This paper examines the fiscal impact arising from the trans-Tasman travel arrangement after the changes in 2001. It is suggested in this paper that the existing frame works underpinning the social security and income tax agreements between the two countries are inconsistent with the changes unilaterally made by Australia in 2001 to the trans-Tasman travel arrangement. The effects of these current policy settings mean that New Zealand citizens must return to New Zealand if they are in need of social assistance with the cost borne by the New Zealand taxpayer. Longer term if CER is to achieve the benefits sought from a single market, a more coordinated and bilaterally negotiated approach to tax, social security and labour movement needs to be adopted.