On 16 February 2011, the Prime Ministers of Australia and New Zealand signed the Australia-New Zealand Closer Economic Relations Trade Agreement (ANZCERTA) Investment Protocol (Protocol). The Protocol will increase the investment screening threshold for investments involving Australia and New Zealand and is aimed at further strengthening the close economic relationship between the two nations.
The importance of the relationship is emphasised by data in an Australian Government press release which indicates that the combined accumulated investment between the two nations stands at over AU$110 billion. Australia is also the largest source of foreign investment into New Zealand.
The Australian Government anticipates that the Protocol will result in lower compliance costs, less red tape, improved certainty for investors and over half of all new Australian investment in New Zealand being exempt from screening.
The effect of the Protocol
The current Australian screening threshold for non-US foreign investors (including New Zealand investors) undertaking business acquisitions or investments in developed commercial property is AU$231 million. The same screening threshold for US investors is significantly higher at AU$1,005 million.
Once implemented (the date is yet to be announced), the screening threshold for investments in Australia by New Zealand investors will increase from AU$231 million to AU$1,005 million (i.e. in line with the threshold for US investors) and for Australian investors in New Zealand from NZ$100 million to NZ$477 million. In Australia, an exception will still apply to investments in certain sensitive sectors (as is the case for US investors).
The Protocol is expected to commence later this year following parliamentary examination and legislative enactments by both nations.