CONFIDENTIAL
7.
Whilst the prospects for some of Australia's primary products and minerals are brighter, the general economic outlook is not #good. Inflation is currently over 10%. Although the budget was
well received in many quarters, it projected a rise in real government spending of over 7% on an assumption of a reduced inflation rate of only 71%. Add, to that the likely effect of the State budgets, the level of wage settlements and the high protection. enjoyed by Australian industry, and the prospect must be that. inflation
on will continue to rise in coming months. The economy is seriously afflicted by powerfully entrenched unions- another area where many Australians note with envy what has been happening in Britain in recent years, recognising that neither the ALP nor the Liberal Party show any inclination to tackle the problem.
8
Campaigns to reduce the powers of the States seem to have made te headway and I was told of instances of States operating
preference systems (eg, through public purchasing) for firms based in their own territory. Some officials in Canberra, including the gh Commissioner to London-designate, Mr Alf Parsons, professed: to be optimistic that the Federal Government would within a few months obtain the States' agreement to the proposals on residual rights it. wishes to put to the British Parliament. But in his talk with me Brian Burke, the newly elected ALP Premier of Western Australia, made it clear that he was just as strongly opposed to yielding up any rights
its Canberra as Mr Bjelke Petersen in Queensland.
9 had separate talks with Andrew Peacock, the former Treasurer John Howard (who sends warm greetings), and a number of other Liberal politicians in Canberra and in the State capitals. The Liberal Party is thoroughly demoralised and also in bad financial shape (Australian business apparently gives relatively little money to thearty for fear of antagonising the unions - although the unions back
ALP).
10 In New Zealand attitudes to Britain are generally warmer and less complex than those I found in Australia. The speeches I made in Wellington, Auckland and Christchurch were given good coverage. The overwhelming concern of the New Zealanders is for access to the markets of the EC and there is wide recognition of the efforts we have made and continue to make to fight their corner in Europe. No doubt the Foreign Minister, Mr Warren Cooper, made clear to you. last week - as he did when I saw him in Wellington - his Government's alarm at the Commission's latest proposals on imports of New Zealand butter. I saw something of the efforts being made to find new markets and to develop new agricultural and horticultural products. They are making progress, in spite of setbacks, but they are convinced that access to Europe remains crucial. Mr Muldoon's domestic policies are surprisingly interventionist and with a budget deficit equivalent to nearly 10% of GDP and a reluctance to tackle uniontu problems akin to those found in Australia, the outlook is uncertain, The wage freeze is due to end in February 1984 and still more serious inflationary pressures could then appear.
11. "Anti-nuclear sensitivities were more developed in New Zealand, than I had expected to find, including in some sections of Mr Muldoon's
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