P.M. threatens wider Aust, investment ban

Press, 28 June 1983, Page 1

P.M. threatens wider Aust, investment ban

PA Wellington Australian car manufacturers and finance houses were drawn into the Tasman foreign investment row by the Prime Minster, Mr Muldoon, yesterday.

Announcing that a freeze on Australian investment in New Zealand would continue indefinitely, Mr Muldoon warned that if New Zealand was going to harmonise investment policies with Australia, his Government would have to devise rules for finance houses. Wholly owned Australian finance houses already trading in New Zealand would have to “divest themselves of 50 per cent of . their capital to New Zealand shareholders... none of which makes very much sense to me,” he said. The Industries Development Commission report on the New Zealand motorvehicle assembly industry must also play a part in the foreign investment discussions, Mr Muldoon told a press conference. The Australian Government wants New Zealand to “give them a better run than the I.D.C. report would,” he said. The report recommends the abolition of preference tariffs for Australian and British-sourced cars, and removing the 38.75 per cent customs tariff advantage over cars from Japan. Mr Muldoon said, “The motor industry thing is a difficulty with us. If we implement the I.D.C. report it is clear that the number

of cars coming from Australia will diminish.” The report also impinged on the components industry “which has an Australian spin-off.” But Mr Muldoon said it was “quite incongruous” for Australia to be advocating the cause of its multinational car manufacturers while refusing to let New Zealand’s National Bank, owned by Lloyds of London, open branches in Australia. A series of difficult decisions needed to be made on the I.D.C. report, he said, and “we won’t get finality on that for several months.” Mr Muldoon said he had instructed the Overseas Investment Commission yesterday to reject all present and future Australian applications. At least 20 applications are believed to be held up. The freeze on Australian investment would remain until the two governments “get something tidied up,” Mr Muldoon said. The freeze was imposed after Australia held up applications from New Zealand companies wanting to invest across the Tasman. Mr Muldoon said he was writing to the Australian Prime Minster, Mr Hawke, after talks in Canberra last week when he made “no progress” with his Treasurer, Mr Keating.

Mr Muldoon said the subject would come up again in August when he had talks with Mr Keating in Canberra at the South Pacific Forum. Under the 0.1. C. rules applications are automatically approved if no decision is made on them “so it was necessary to reject them.” “They can apply later if we get something tidied up.” In the meantime New Zealand had no option but to reject them and any further applications from Australia, Mr Muldoon said. He said he would write in detail to Mr Hawke — “put some of these things in front of him, ask him if his Government will reconsider these policies.” He could not say how long the freeze would be in .force but that there would be a “dialogue” with the Australians. It was possible “we can get something moving” before the forum meeting, he said. The Australian Government was advocating the cause of the Australian carmanufacturing industry, which was very largely owned by the multinationals, Ford and GM, Mr Muldoon said. “It is quite incongruous that the Australian Government should be advocating the cause of the car internationals but be so sensitive about Lloyds having a couple of branches through a New Zealand subsidiary.” The National Bank of New. Zealand was a New Zealand bank, with New Zealand staff and a New Zealand board, but the shares were owned by Lloyds, he said. One of the applications before the 0.1. C. was from an Australian branch of an English merchant bank that wanted to set up a branch in New Zealand, said Mr Muldoon. It was also seeking "one

of the overseas dealers licences that we are going to approve very shortly.” “It is an exact parallel of Lloyds-National Bank Australia except the National Bank has been here since before the turn of the century and is one of our four trading banks. “We would approve this application for this English merchant bank to come here ... but it was their Australian branch that wanted to set up a subsidiary.” Mr Muldoon noted that under Australian rules two New Zealand finance houses which wanted to take over Australian companies were not permitted to have more than 50 per cent shareholdings, in spite of one of them putting in 10 times more cash than its Australian partner. One had obtained a 70 per cent shareholding, and had to divest itself of 20 per cent. Mr Muldoon said another problem was that at the very least a New Zealand take-over in Australia could only proceed if no Australian company wanted it, whereas New Zealand has just been inclined to say “That looks reasonable enough, approve it.” “Every proposal on the list I had to hold up would have been approved, according to the 0.1. C.,” Mr Muldoon said. This illustrated the extent to which “our policy is much more generous than the Australian policy.” One of the stumbling blocks in the Canberra talks was the Australian claim to its non-discrimination policy with Japan. “The whole of C.E.R. is discrimination in favour of New Zealand, and indeed, in New Zealand, discrimination in favour of Australia,” said Mr Muldoon. “Excluding the financial sector does not make any sense.”