Wellington, 18 July 1980
No 2319. RESTRICTED ROUTINE
Australia/NZ Economic Relations: Financial Sector
The course of action we propose to follow as far as the financial sector is concerned involves firstly completion of the exchange control review. With the review complete, and assuming that policy is changed to introduce a more liberal attitude on outward remittances for direct investment in Australian financial sector (as is likely), we would then have a firm basis on which to press our case with Australia. Exchange control review has been held up, but progress should be made shortly.
The exchange control review aside, the question of New Zealand financial institutions in Australia is probably not one on which early progress can be made, given Permanent Heads’ agreement (February meeting in Canberra) that agreement to establish a closer trade relationship is a pre-requisite. For this reason, New Zealand working party has placed emphasis on trade questions at this stage. It is also possible that the conclusions reached by the Campbell Committee1 might fundamentally alter the context of our current approach. The questions and issues which we might wish to raise when the exchange control review is complete would probably cover detail on how far Australia is prepared to move in this area, including the particular areas of financial activity to be covered by liberalised Australian foreign investment rules, and extent of liberalisation. Australia would also need to consider questions of presentation to OECD and Japanese (Nara Treaty). Questions of how Australia would deal with situation where approaches originating in New Zealand involving enterprises owned or controlled in third countries would also require attention. If you wish, you could foreshadow these points with Australian authorities. However we hope to be in a position to come back to you with a more definitive list shortly.
On other points raised in your 2048:
- Reserve Bank and Treasury would each appreciate two copies of Campbell Committee’s Preliminary Report by airmail when available.
- We note from recent press reports that Campbell Committee mentions role of overseas banks in Australian financial system in its preliminary report. Our concern is, of course, with financial institutions generally (including insurance companies).
- This paper concerns the detailed commodity study and seeks authority for consultations with the commercial community on the basis of certain general policy principles upon which judgements now need to be made.
- Grateful if you could advise where question of compatibility between Stock Exchange requirements and FIRB rules now stands. Latest information we have is an AFR report of 26 March 1980 to effect that Federal Government was to ask States to agree to amendments to procedures to ensure that takeover and securities legislation does not conflict with FIRB rules.
- There is no specific objective to match participation of New Zealand banks in Australia with participation of Australian banks in New Zealand. Objective is simply to enable New Zealand financial institutions generally to have easier access to Australia, to redress (partially) the present imbalance in participation in each other’s financial markets.
- Your paragraph 4. Wider financial issues such as coordination of exchange rates, exchange control, foreign investment regulations and other aspects have been shelved in the meantime, by agreement amongst Permanent Heads. It would be inappropriate to consider these issues at this stage. The question of New Zealand financial institutions investing in the Australian financial sector is the only financial issue currently on the table.
The Bank2 would appreciate text of Australian Treasury submission to Campbell Committee on question of foreign participation. Submission on this aspect may have been made orally by Stone.
[ABHS 950/Boxesl221-1226, 40/4/1 Part 28 Archives New Zealand/Te Whare Tohu Tuhituhinga 0 Aotearoa, Head Office, Wellington]
1 A Government-sponsored inquiry into Australia’s financial system, which ran from 1979 until 1981.
2 Probably a reference to the Reserve Bank of New Zealand.