Canberra, 3 February 1981
No 307. RESTRICTED IMMEDIATE
ANZCER: Financial institutions
The story from Des Keegan in yesterday’s Australian1 has created quite a stir here. Head offices of the BNSW and the ANZ have been seeking urgent background from their NZ counterparts: briefing material has been hastily prepared in the Treasury for senior officers: and Anderson has also phoned to seek clarification on some aspects of the story.
- Anderson’s reaction was perhaps the most interesting. He claimed that he has never intended to suggest that the question of financial institutions could only be examined after CER was in place. It was entirely proper in his view to treat it as a first generation issue if restrictions on the movement of capital were not to potentially undermine the trade liberalisation process. But from Australia’s point of view, the implementation of measures to free up capital flows could only accompany and could not precede the implementation of the CER. Any formal move before the CER regime began to be implemented would be vulnerable to challenge by Australia’s other trading partners (particularly the Japanese) as a breach of MFN principles.
- This is a considerable advance on the formulation Anderson gave us last week. It means that the Australians are now relatively relaxed about addressing the issue in the Heads of Agreement-and even as we spoke, Anderson began drafting aloud a possible paragraph. He appreciated it may be necessary for the capital exporting country to retain some control over the outflow of capital: As he sees it the essential point to capture in the Heads of Agreement is an acknowledgement of the principle of some form of preferential treatment being accorded to imports of capital from the partner country.
- You know the FIRB has been taking a very strict line recently with all foreign investment proposals, from whatever source, particularly if they relate to the finance sector or mining. There have been no FIRB decisions permitting more than 50% foreign ownership of any finance company in the last few years, despite quite an upsurge in interest from foreign investors in the Australian financial sector recently. Preferential access for NZ to the Australian financial sector would therefore need to be written into the FIRB’s guidelines as part of the implementation of a CER.
- By our count, there are 4 NZ companies with interests in the Australian financial sector: Broadlands, BNZ, NZI and Marac. In the last twelve months the latter three have all been called on by the FIRB to review applications for investment in Australia, but each now owns a half share of an Australian finance company-the BNZ’s status here as one of only two foreign-owned banks in Australia is regarded by most in the business world as somewhat distinctive, if not unique. It follows that if the Australians accept a commitment to treat more liberally investment proposals from NZ finance companies, it is most unlikely that they could, by the same token, agree to entrenching the BNZ’s relatively privileged position here.
- Keegan’s report says that New Zealand ‘banks’ have been denied ‘licences’ by the FIRB, and that the NZI has been ‘unable to buy into financial houses in Australia.’ Both these statements are, of course, factually incorrect: We suggest Keegan might be briefed accordingly.
[ABHS 950/Boxes1221-1226, 40/4/1 Part 33 Archives New Zealand/Te Whare Tohu Tuhituhinga 0 Aotearoa, Head Office, Wellington]
- 1 The story reported Muldoon’s frustration at restrictions placed on New Zealand banks wishing to operate in Australia, and quoted some of the Prime Minister’s comments.