Wellington, 3 February 1981

0.WL7391 CONFIDENTIAL

Call on Prime Minister

This morning, Monday 2 February, the Prime Minister, Mr Muldoon, kindly consented to my call at his office. He received me cordially. (I attended a private function with he and Mrs Muldoon on Saturday last.)

2. The PM spent two or three minutes commenting on an Australian reporter who phoned him at midnight last to seek his view on the controversial cricket result. He said the paper, in its headlines had misrepresented his view. However, he did not seek to amend what I understand is printed 'that Australians have a wide yellow streak'. A little time was spent in gaining a stable attitude toward such a result.
3. The matters raised by me covered three subjects:
   
   1. CER
   2. Pacific Community concept
   3. Social Credit
   4. Likely visits to Australia.
4. On CER the PM considered there are substantial political obstacles in the way of agreement. Officials had placed on his desk a file which gave encouragement to progress being achieved 'across the board' in a closer concept. However, the problem areas appeared to him, in instances, to be insurmountable unless proposed agreements were substantially altered.
5. He dwelt on the change occurring in New Zealand industry due to the Government's restructuring policies. There was no industrial sector which disagreed with the activity which had occurred and he spoke highly of Mr Douglas of the Manufacturers' [Federation]. All this meant that New Zealand restrictive quotas and limitations on imports in many areas would be eased. Whilst this would be a world wide to sell to New Zealand, the Australian market would find greater access to New Zealand and access would be easier in future, this had significant bearing on CER. But major problems existed with intermediate goods. He mentioned components for refrigerators. I agreed that compressors were such a component and he said 'That's the one.' The PM said that if New Zealand markets were being opened up to import influence then competition for certain intermediate goods would bring keener prices and NZ Industry would have cheaper goods to offer. This appeared a stumbling block in exports to Australia.
6. He mentioned in passing dairying as a very vital market problem and this required much further progress than was visible to him currently.
7. . 'Horticulture and canned goods' was his phrase to refer to both counties having troubles in getting goods into each others market. He mentioned beer and said it seemed that competition for NZ producers appeared difficult.
8. But he dwelt for the main time slot on finance. Australia had for 150 years built very strong connections with finance houses and banking institutions. When NZ attempted to grow in the Australian market they were prohibited and inhibited. BNZ bank could not extend its operation and when 'Marac' (a NZ finance house) attempted to take over an Australian finance house the Australian Government said 'you cannot hold more than 50 percent', the Australian Stock Exchange said 'buy all shares offered when you bid' and so the matter became 'unstuck and unresolved'. New Zealand were not treated well by any measure in reciprocal finance business operations. This must be attended now. The officials' report tended to say 'set this one aside and it will be cured later' but this could not be done. It must find equal opportunity in finance matters for both sides.
9. Also he understood that some items currently on Schedule 'A' were proposed to be transferred to one of these deferred lists and this can only be seen as a retrograde step. That was not pushing closer relations ahead it was reversing what had been achieved.

[NAA: A1838, 370/1119/18, xxi]