197 Minute from Lind to Scully

Canberra, 4 August 1982

CER Phasing Out of Export Incentives

During informal discussion in Wellington on 28 July, initially with Ted Woodfield and later with more junior officers, I raised questions relating to how export incentives were to be phased out from 1985.

The responses I received created a growing doubt in my mind that New Zealand acknowledges any commitment to phasing. I did not have time to pursue the matter again with Ted Woodfield, but asked Al Page to follow up.

Al Page is forwarding, by bag, a record of his discussion, but the key elements appear to be:

  • New Zealand officials do not accept that there is a commitment to phase out from 1985
    • the phasing offer related to the 1988 terminal date, which Australia did not accept.
  • The New Zealand Government is not committed to NZ industry beyond 1985.
  • The New Zealand Government is not committed to NZ industry beyond 1985.
  • The Government is expected to announce on 5 August its intention to consider the future of export incentives by the 1983 Budget.
  • Phasing is one option, as is 1985 removal
    • if Australia seeks resolution of this question now, it could lock New Zealand in.

if Australia seeks resolution of this question now, it could lock New Zealand in.

Sir Laurie Francis wrote to the Minister on 20 May(1) advising that New Zealand could accept phasing from 1 April 1985 with 1988 as the terminal date. The Minister's reply(2) recalled that CAIINZMF had agreed that significant disparities in incentives should be phased out between 1 April 1985 and 30 June 1987 and stressed the importance of 1987 as a terminal date if the CER package was to be acceptable in Australia.

Subsequently, Mr Muldoon and the Minister agreed on the telephone that performance-based incentives should be terminated in the 1987 tax year. We are not aware of any suggestion that, in agreeing to 1987, the offer of phasing lapsed, but we have no formal record nor personal knowledge of the conversation.

There was no specific references to phasing in the draft Heads of Agreement circulated, but we told the New Zealand High Commission that we regarded this as an oversight and that we would be informing interested parties that phasing would apply as from 1 April 1985. New Zealand has not previously contested this.

Cabinet and industry have been told by the Minister, in writing, that the export incentive arrangement involves phasing out from 1985, with the formula yet to be determined. If there is drawing back from this, it could be used to discredit the whole package and the integrity of the negotiations.

I suggest we consider the situation again in the light of the expected announcement of 5 August. It may then be appropriate for you to ring Harry Clark on the matter.(3)

[NAA: A1313/113, 82/2594, vi]