229 Record1 of Discussion between Muldoon and Fraser

Brisbane, 29 September 1981

Call on Prime Minister of Australia-the Rt Hon Malcolm Fraser
Hilton Hotel, Tuesday, 29 September 1981

At Mr Fraser's invitation Mr Muldoon called on him at his hotel. Mr Fraser asked Mr Muldoon how his post-arrival press conference had gone. Was the auditorium satisfactory? Mr Muldoon said it was technically good on the whole. Mr Fraser then invited Mr Muldoon to lead off on either bilateral issues or CHOGM- related matters.

Mr Muldoon said he thought the meeting opened the opportunity for the two of them to clear their minds on 3 or 4 CER issues, the first of which was the timetable. Mr Muldoon said it was his impression that the timetable was extending a little on the Australian side. While that caused no problems for New Zealand he said it was important that both countries had the same understanding on timing, whether a July 1982 start up, as originally intended, was feasible or not.

Mr Fraser replied that one reason for Australia's 'going slow' was the New Zealand election. Australia did not want to 'wake up' any issues which might prove difficult to New Zealand because of the election.

Mr Muldoon said there were no real political problems in the sense Mr Fraser suggested. New Zealand manufacturers were now very positive about CER. Mr Fraser responded that his fear was that Australian manufacturers or dairy farmers could 'make noises' about CER which might cause their New Zealand counterparts to wonder afresh about CER. Mr Muldoon said that in manufacturing and agriculture (dairy and wine) the respective industries were talking to each other with the result that the initial impact of CER apprehensions had diminished. Mr Fraser noted that the Australian dairy industry still had some real concerns, and their 'sounding off' might produce some questioning of the overall benefits of CER in New Zealand.

Mr Muldoon said that worried him less than the need for him to be able to give an intelligent reply when asked what had happened to the starting target. He had in mind January 1983. Mr Fraser said he thought Mr Anthony should join the meeting but he was happy enough for Mr Muldoon to say that January 1983 was an agreed 'objective'. Mr Muldoon said that July 1982 now looked a little tight. Mr Fraser affirmed January 1983, noting, however, that it was better to describe that as an 'objective' not a hard fact because there were always imponderables to some extent. Mr Muldoon said he could talk in more detail with Mr Anthony during the CHOGM if Mr Fraser was happy. He replied that he was, and that if it would help Mr Muldoon he could also say that 'they had agreed that good progress had been made and while there was more to be done, both Prime Ministers were satisfied by-and-large.'

Mr Muldoon said that there were one or two difficult issues still, and a new one in steel. New Zealand Steel had put before the Government a proposal for a very large expansion which would involve extracting vanadium as a by-product to add to the return.

New Zealand Steel would have to be export oriented and by their own estimates they would be competitive. Mr Muldoon said he believed the Australian industry had excess capacity in more sophisticated areas which would require increased basic steel production for full utilisation of plant. The New Zealand Government, close to the point of decision on the New Zealand expansion (with a few more estimates to make) had to deal with the place of steel in CER. The New Zealand company had said they would need some protection until 1989.

Mr Fraser said that the steel industry and Government officials from both sides should be talking. Mr Anthony could be briefed accordingly. The Australian Government, he said, regarded the steel industry as basic to the Australian economy: it was unsubsidised and competitive. Extensive depreciation provisions had been introduced by the Government to encourage the industry to stop being a 'repair-of-plant' operation and introduce the latest generation of equipment which was seem to be essential if the industry was to stay internationally competitive. If it was possible it would be better for the New Zealand and Australian industries to complement each other rather than compete. Mr Muldoon agreed that harmonisation was the desirable course: it was 'way down the track', but the prospect perhaps existed that the two industries might even take a financial interest in each other.

Mr Fraser asked whether the New Zealand Government could hold off its decision on the New Zealand Steel project until the industries, and officials, had talked. Mr Muldoon said he thought so, noting that the industries would come together first at an international meeting in Toronto in mid-October. Mr Fraser urged that officials, as well as the two industries should 'get talking'.

When Mr Fraser asked whether there were any other CER issues to be raised, Mr Anderson mentioned wine. Mr Muldoon said he did not see wine as a problem in this context because there had been good talks between the Australian and New Zealand industries. The New Zealand industry no longer feared a flood of imported wine from Australia-any more than the Australian dairy industry now feared a flood of New Zealand imports after the recent inter-industry discussions. It could be assumed that the wine industries would continue talking. Mr Muldoon noted that decisions taken earlier in the year by the New Zealand government should lead to increased sales of quality Australian wines in New Zealand, while it had been made harder for cheap wines from any overseas source to enter. The protective regime would affect wines priced below $2.50 per litre. Mr Fraser said he did not mind a regime which encouraged Australian wine makers to strive for better quality in export wines. Mr Muldoon said he thought most Australian wine imports already came into the higher quality bracket, and that accordingly the Australian industry was pretty relaxed.

Mr Muldoon then raised the Government purchasing issue and the obstacles apparently posed to New Zealand exporters by interstate preferences. If Mr Fraser agreed, New Zealand would like to continue talking with individual states. New South Wales, which generally accounted for 50% of all New Zealand economic interests in Australia, was likely to be the most difficult, just as on CER generally Tasmania appeared the most uncertain. Mr Fraser agreed. He said anything the New Zealand Government could do to get the States off their 'crazy' preferences system would be welcomed by the Commonwealth Government.

Mr Muldoon then said there was a further issue-that of internal consultations. He said he understood Mr Fraser had undertaken to allow a period for consultation. Mr Muldoon said the New Zealand Government had been consulting interested industries throughout and he appreciated that both Governments would have to 'keep selling' the CER.

Mr Fraser wondered when he and Mr Muldoon should schedule their next meeting-early in the New Year? Mr Muldoon suggested late February or early March. Mr Fraser agreed that it should be said that the Prime Ministers would talk in March with the objective of a CER start up in January 1983.

[matter omitted]

[ABHS 950/Boxes1221-1226, 40/411 Part 40 Archives New Zealand/Te Whare Tohu Tuhituhinga 0 Aotearoa, Head Office, Wellington]