A fair go on investment

Press, 22 June 1983, Page 12

A fair go on investment

New Zealand’s decision to suspend all Australian investment in New Zealand, announced on Monday by the Prime Minister, Mr Muldoon, is bound to be discussed when Mr Muldoon and the Australian Prime Minister, Mr Hawke, meet later this week. The subject of investment in Australia by New Zealand companies and investment in New Zealand by Australian companies has arisen many times before in relations between the two countries. This time, Mr Muldoon said that Australian investment in New Zealand would be suspended until the two countries had harmonised their policies. This takes the points of dispute somewhat further than they have gone previously. It may not bring the resolution of the dispute any closer. To some extent, the Closer Economic Relations Treaty has precipitated the present difficulties. New Zealand firms were reluctant formerly to try to take over companies in Australia lest their access to the market be stopped suddenly. C.E.R. guarantees access and a number of New Zealand companies have been emboldened to make take-over bids. Australian foreign investment rules allow for a 90-day cooling-off period, during which time it is possible for Australian firms to make counteroffers. Thus more than a usual number of New Zealand companies have been waiting for the approval of the Australian Foreign Investment Review Board before they can take over companies. Australian companies, for their part, have not found access to New Zealand as easy as they had believed that it was going to be under C.E.R. They have tried to overcome access problems by establishing plants in New Zealand to gain access. Their view that they still are thwarted in obtaining trade access to New Zealand, combined with the suspension of investment by Australian companies in New Zealand, has made the whole subject a very sensitive one. Both Mr Muldoon and Mr Hawke will have had some wrathful pressure put on them before they meet.

Other factors complicate the issue. Two New Zealand finance companies, Marac and Broadlands, have tried to establish themselves in Australia and have run into state-Federal barriers. Broadlands has been confined to New South Wales and Marac to Western Australia. In New Zealand two of the biggest banks, Westpac and A.N.Z., are of Australian origin and this is viewed by some in Wellington as giving an unfair advantage to Australia. Mr Muldoon is anxious that the National Bank of New Zealand should be able to open offfices in Australia as well as the Bank of New Zealand. He has made this cause peculiarly his own. The National Bank is a wholly-owned subsidiary of Lloyd’s Bank and the Australians are not persuaded of the virtues of allowing a British bank into Australia under the guise of a New Zealand bank. Different perceptions of the role of finance institutions in trade between New Zealand and Australia further cloud the issue. The New Zealand perception appears to be that financial institutions should form an intimate part of C.E.R., that the next step of C.E.R., sometimes called second-generation issues, should include a series of moves to harmonise financial practices. In this way, New Zealand would have a special place in Australia’s foreign investment provisions. Two difficulties are apparent. One is that, if foreign investment is coming into a country, it is not always clear where the investment originates. The other is that Australia already is bound under an early 1970 s agreement with Japan not to give treatment to any foreign investor that is more preferential than is given to Japan. Australian perceptions of foreign investment are therefore coloured by these conditions. Perhaps Mr Muldoon will persuade Mr Hawke and the Treasurer, Mr Keating, that Australia should adopt the New Zealand view that finance institutions should form an integral part of C.E.R. The task will not be easy. The suspension of Australian investment in New Zealand will heighten the tension.