51 Note from Powles to Corner

Wellington, 30 October 1979

Australia: Economic Relations

In conversation with Australian Permanent Heads this week, and possibly in the meetings themselves, there could be a sense of impatience on the Australian side that New Zealand is not, even at this stage, coming up with precise proposals (complete free trade, customs union of this or that sort) on which a preliminary Australian response is sought. (The Australian Discussion Paper1 opens with an explicit reference to expected 'New Zealand proposals'.) A sense of impatience on the Australian side could easily become a sense of frustration and could sour Australian attitudes generally.

  1. The formal explanation of course is that it will be for the Prime Minister to discuss concrete 'proposals'. But this is unlikely to cut much ice with Australian Permanent Heads, who may well expect a precise, if preliminary, indication of New Zealand thinking on the form of economic cooperation which we favour.

    I suggest that it will be an important aim of this week's discussions to get across to the Australians an understanding of the way the subject is being approached here. This will require an understanding on the Australians' part that:

    there is a very real appreciation here of the magnitude of any decision to link New Zealand's economic future more closely with that of Australia; the domestic economic implications for New Zealand are immense and extend beyond the strict confines of trade and external economic policies; no New Zealand Government could take such steps without the support of the electorate, including the influential manufacturers;

    while, therefore, a satisfactory economic blueprint for, by way of example, a form of customs union might in theory be easily negotiable between economists from both sides, a New Zealand Government could not endorse it unless it was saleable to the electorate;

    obtaining the support of the New Zealand electorate will involve a sustained effort to emphasise publicly the opportunities afforded New Zealand by closer economic cooperation with Australia and, equally important, a widespread appreciation of the historical inevitability of closer cooperation between the two countries or, put another way, of the implications for New Zealand of having to choose between drawing closer to Australia or drifting apart.

  2. These points need not be made in any negative sense. The Governments are committed to a positive examination of the options. But they do suggest that the most likely path to closer economic cooperation will be by a thorough examination of respective economic (and political) objectives, both by officials and, eventually, in public. Such an examination could well lead to widespread acceptance of the logic of moving closer to Australia, even if it should take a little time. The alternative approach, of beginning by looking at economic blueprints or formulae, is likely to result instead in fear and, most likely, opposition in New Zealand.

[ABHS 950/Boxes1221-1226, 40/4/1 Part 21A Archives New Zealand/Te Whare Tohu Tuhituhinga 0 Aotearoa, Head Office, Wellington]