Closing of bank not dismissed by Mr Muldoon

Press, 6 July 1983, Page 1

Closing of bank not dismissed by Mr Muldoon

PA Wellington The possibility of either the Westpac or A.N.Z. banks having to withdraw from New Zealand has not been entirely dismissed by the Prime Minister, Mr Muldoon. Australian banking circles however, were more amused than worried yesterday. Although he said yesterday that no-one in his right mind would contemplate such extreme measures, Mr Muldoon did not completely rule it out. “The alternative is that we do not harmonise our policies and, in the context of C.E.R., it is quite unacceptable to the New Zealand Government that we have a more generous policy on investment than Australia does,” he said. “That would undermine the whole C.E.R. agreement from which we expect, finally, equal advantage on both sides of the Tasman.”

Mr Muldoon said that he was merely pointing out the ultimate result if New Zealand and Australian investment policies were to be harmonised.

“It is certainly not something that would be in any way acceptable to me.” But he would not completely discount the possibility that one of the banks would have to be closed. When asked if his comment that no-one in his right mind would contemplate closing one of the banks meant it would never occur, Mr Muldoon said, “Maybe. I do not expect it to occur. I expect the Australian Government to see how ridiculous it would be.” Mr Muldoon was asked if he could rule out such a move and said, “It is a long way in the future.”

Mr Muldoon criticised the Leader of the Opposition, Mr Lange, who yesterday called for the Prime Minister to clarify his suggestion that either the Westpac or A.N.Z. banks might be closed.

Mr Lange said the “political posturing” of Mr Muldoon was breeding insecurity among financial institutions, investors, account holders and in the New Zealand economy generally.

He said that more than 3000 jobs, millions of dollars in savings and assets, and the future financial relationship between New Zealand and Australia were at stake if either bank were to close. Mr Muldoon said the statement was “typically extravagant.” He accused Mr Lange of supporting the Australian point of view rather than the New Zealand one.

He said, “It is as an absolute last resort, as I have made clear that we would wish to disturb Australian investment in New Zealand which has been here for a very long time.” But he said it was equally clear that if the Australian Government was not prepared to move on its investment policies, and at the same time say that the two countries’ policies should be harmonised, “it is inevitable that New Zealand policies have to be tightened up to match those of Australia.”

He hoped the Australian Government and Treasury would depart from their “inflexible” attitude. “What we have at the moment is a very precise statement by Mr Keating, the Australian Treasurer, and Mr John Stone, secretary for the Treasury, that there will be no movement as far as Treasury is concerned.” “If that remains the Australian position we have to go through a very distressing experience of moving New Zealand policy into line with Australia,” said Mr Muldoon. “That will take time and it will cause no end of difficulty and upset both of the Australian investors in New Zealand and the whole trans-Tasman relationship?

He said that a number of Australian companies with interests in New Zealand, including interests in the financial sector, had made direct approaches to the Australian Government urging it to moderate its stance.

Also, Mr Muldoon had sent a letter on the subject to the Australian Prime Minister, Mr Hawke. Mr Muldoon expects to discuss the subject further when he attends the South Pacific Forum in Canberra at the end of August. In the meantime there would be an exchange of views by letter.

He would put no time limit on when the New Zealand Government would have to move on investment policies, saying he wanted to talk further with the Australian Government.

A spokesman for the Australian Treasurer, Mr Paul Keating, said yesterday that Mr Keating had no comment to make at this stage on the latest development. But banking sources believe Mr Muldoon is simply asking too much while the new Australian Government is reviewing the whole foreign investment and banking picture. It is examining the report of the Campbell Commission of Inquiry into the matter, compiled for the Fraser Government and well received by all sections of the financial and business establishment.

The report recommended that some foreign banks be licensed to operate in Australia, and the Government was intending to follow the report’s advice when it was brushed out of office by the Labour landslide.

In Sydney, Australian banking circles were yesterday more bemused than worried by Mr Muldoon’s veiled threat to expel either the Westpac or A.N.Z. from New Zealand.

Sources said that they regarded the threat more as a move to apply pressure to Mr Hawke’s Government in the continuing row over financial access to banking and business on this side of the Tasman.

However, no-one was prepared to make an issue of the latest salvo from Wellington, preferring not to inflame the issue.

The reaction from the A.N.Z. group was a bland: “We do not expect to be dismissed from New Zealand given our long history there.”

A spokesman said that the A.N.Z. had been trading in New Zealand since 1840, when it was the first bank to set up, five years after it opened in Australia.

He said that the matter was one for the two Governments to decide, and “Mr Muldoon’s attack should be directed through the legitimate channels of government.”

The New Zealand general manager of Westpac, Mr Geoffrey Thompson, said in Wellington that he endorsed Mr Muldoon’s comment that closing one of the banks would be ridiculous. He said he was not sure of the Prime Minister’s motivation in making the statement. Now the Australian Labour Government is said to.be in something of a ideological dilemma, of whether to follow its predecessor down the road of the well accepted report, or to follow a more protectionist line.

Observers say that while Labour is reviewing the report and making up its mind, it is inopportune for

New Zealand to be trying to force the Australians’ hand. The Campbell report laid down a framework, it got the backing of interested parties in Australia, and now there is “pressure from the east” for the whole lot to be ignored while an exception was made in favour of a British-owned bank, they said. The A.N.Z. spokesman said that he/was surprised Mr Muldoon had put the focus on the activities of the National Bank when there was an “indigenous” New Zealand bank trading in Australia, the Bank of New Zealand.

“New Zealand can immediately expand its banking in Australia if it chooses to do so through the 8.N.Z.”

He would not comment on what expulsion would do to A.N.Z. activities, but said: “Whatever Mr Muldoon says, we are not changing our name.”