84 Cabinet Economic Committee Minute

Wellington, 19 February 1980

No E (80) M 7 PART II. CONFIDENTIAL

Australia/New Zealand Economic Relations

Among the points made in the discussion were:

  • that it was now unlikely that economic co-operation between Australia and New Zealand across a broad front could be phased in within the 5 to 7 years it had previously been considered possible. It now appeared as though a pragmatic approach was required whereby each aspect was phased in at such time as appropriate;
  • that there was a need for officials to give attention to the question of how the agricultural sectors in the two countries would be involved with and affected by the proposed closer economic relations. It was commented that in a political context there was on the Australian side, pressure for their agricultural sector to stand apart from the exercise, while in New Zealand the converse was the case. Officials advised the Committee that there had been correspondence between Australian Ministers and Australian farming interests to the effect that the agricultural sectors of the two countries would be drawn into the co-operation exercise. Australian officials at the working party level had also indicated that this would be the case;
  • that it was most important for areas such as that immediately above to be resolved, to the point where the Prime Ministers could make a joint statement indicating that progress had been made, before the Prime Ministers' meeting. If such progress could not be made it was considered that the Prime Ministers' meeting should be postponed;
  • that another aspect which required consideration was the 'fall back' position which would be adopted if sufficient progress could not be made on the development of economic co-operation across a broad front. It was suggested that in this situation the best approach might be to take specific issues through to fruition rather than to persist with a general approach. In this context it was suggested that co-operation in the financial sector was a possibility although officials could see some problems in this area in relation to Australian-Japan relations.

The Committee:

  1. noted:
    1. the stage reached in the present studies and discussions as outlined in the memorandum attached to E (80) 23 and Annex thereto;
    2. officials' view that the scope for realising the potential gains in closer economic relationships with Australia lay in an approach of the type outline in paragraph 11 of the memorandum attached to E (80) 23;
  2. agreed:
    1. that a Customs Union, based on the lower of the two countries' protective structures, was not likely to be achievable over the next five to seven years without unacceptable costs to the New Zealand economy;
    2. that a Full Free Trade Area also had major problems for both countries;
  3. directed officials to continue discussions with Australian officials, with a view to developing and defining the elements that might be considered in a pragmatic approach based on an adjusted free trade area, giving due weight to broad economic policies, for consideration by the Prime Ministers at their meeting in March.

[ABHS 950/Boxes1221-1226, 40/4/1 Part 25 Archives New Zealand/Te Whare Tohu Tuhituhinga 0 Aotearoa, Head Office, Wellington]