‘C.E.R. attractive for N.Z. business’

Press, 7 September 1981, Page 27

‘C.E.R. attractive for N.Z. business’

PA Auckland An Australian business leader believes closer economic relations (C.E.R.) between Australia and New Zealand will attract Australian investment in New Zealand. ; The president of the confederation of Australian Industry, Mr Harold Aston, said he did not believe New Zealand would lose its economic sovereignty through C.E.R- nor would skilled New Zealand labour relocate to Australia because of wage differences. Mr Aston told the annual dinner of the Auckland Manufacturers' Association in Auckland that loss of economic sovereignty was -not a possibility" unless there was political union between the two countries. Political union was unlikely and would in any event be economically irrational. One of the New Zealand worries about C.E.R. was that of industrial redeployment to Australia, he said. Yet it was the view of most Australian companies that in fact the reverse would probably occur. “The attraction of the wage differential is likely to attract Australian investment in New Zealand and may well stimulate the New Zealand economy rather than damage it.” Any redeployment to Australia would be more likely to occur in capital-intensive industries where economies of scale were of major significance.

Nor was a C.E.R. relationship likely to accelerate the migration of New Zealand labour to Australia, since a wage differential already existed. “In fact,” Mr Aston said, “offshore investment by Australian companies might have the effect of creating more employment incentives for New Zealanders at home.” A suggestion that New Zealand companies would be unable to compete without import licensing underestimated the adaptability of New Zealand manufacturers. Mr Aston said both sides must be prepared to make some big adjustments in the interest of long-term benefit. Most of the areas which remained to be tackled in C.E.R. negotiations were those in which the two countries had built up competitive rather than complementary industries. An essential element in the negotiations would be acceptance by Governments and industries on both sides of the Tasman of the concept of restructuring. “In real terms this means factory closure, mergers, rationalisations often temporary loss of employment for some workers, and temporary social dislocation for some communities or townships which have a high degree of dependence on particular activities.” In the view of his confederation, Mr Aston said, the time for concluding a C.E.R. agreement was growing shorter. Unless some-

thing was resolved by mid--1982 much of the momentum and enthusiasm for C.E.R. in Australia would be lost. A great opportunity for both countries would have been missed. Without C.E.R. he expected trading relations between the two countries would quickly deteriorate, w’ith increasing areas of irritation and pressure. Growth prospects for New Zealand producers in the Australian market would become increasingly limited as Australia developed new trading relationships with other countries. While New Zealand remained the main Australian market for manufactured exports, that situation could also alter dramatically if genuine free-trade relationships were not established. “The Australian Government is aware of the high degree of dissatisfaction by Australian industry with the present one-way nature of the current N.A.F.T.A. trading framework.” An Australian Government could not afford the adverse publicity it would receive if a C.E.R. agreement did not include realistic target dates for removal of New Zealand licensing restrictions and harmonising of export incentives.