AUSTEO (AUSTRALIAN EYES ONLY) REPORT: EXCERPT NO. 7

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Australian Delegation Brief Prepared for the July 11, 1997 Forum Economic Ministers' Meeting in Cairns, Australia

NEW ZEALAND AND ECONOMIC REFORM IN THE SOUTH PACIFIC

"New Zealand is now more supportive of Australia on the need for economic reform, having been shaken by the financial crisis in the Cooks. But Peters, a loose canon, could adopt a soft approach at the FEMM if it served his domestic interest."

New Zealand policy in the South Pacific is a mix of co-operation and competition with Australia -- the proportions varying with different governments. Wellington collaborates closely and shares information on many issues. But wanting to differentiate itself from Australia, New Zealand can act in ways which complicate Australian diplomacy.

Old habits die hard and many politicians and officials in Wellington still like to believe that New Zealand, because of its smaller size, links to Polynesia and Maori and islander populations, is part of the Pacific in a way that Australia is not and understands the region better. They present New Zealand policy as less prescriptive and more attuned to the "Pacific way."

That attitude colored New Zealand's early response to Australian efforts to promote economic reform in the South Pacific. Wellington gave generalized expressions of support to Australia's goals but did not exert itself on the ground to lobby island countries, including over forestry abuses and financial malpractice in Melanesia. New Zealand ministers, not fully seized of the extent of the islands' economic strife, were content for Australia to take the lead rather than risk their own popularity by delivering hard messages. On occasion they have even undercut Australia, especially in the Solomons where they have been reluctant to take on Mamaloni over forestry and have started new aid projects despite Australia's having cancelled its own forestry aid.

Divergence over reform of regional institutions was pronounced in 1995 when Wellington ran against Australia's Robert Dun a candidate for Secretary-General of the South Pacific Commission who campaigned against Australia's approach and who seemed to have been chosen as someone who would indulge the islands.

New Zealand has become less indulgent over the last eighteen months because of the threat to its interests posed by the problems of its associated territories in the Cook Islands and Niue. Bolger and Foreign Minister McKinnon have become more robust with the island countries over economic reform. The insolvency of the Cooks weighed on ministers not only because of concerns about possible New Zealand financial liabilities but also because tax avoidance and other scandals in the Cooks became a domestic political issue in New Zealand.

Even so, we still cannot assume that New Zealand will support Australian policy because of a continuing desire for "product differentiation" and uncertainties about the approach of Treasurer Winston Peters, the junior partner in the governing coalition who will represent New Zealand at the Forum Economic Ministers' Meeting.

Peters came to office advocating a hard line with the Cooks and exploiting white resentment of the islander presence in New Zealand: the coalition Government's policy of recovering unpaid hospital bills from island countries' aid votes is a Peters initiative. His record on these issues suggests he could favor a hard line with the island countries over economic management generally.

But Peters captured the Maori vote at the 1996 elections and, ever an opportunist, is trying to establish himself as a Maori and Polynesian leader. He has talked of a "Pacific centered" foreign policy and spoke in private before the 1996 elections of competing with Australia for influence in the region. His role may already be apparent in Wellington's initiative in hosting the forthcoming Bougainville peace talks; announcing the talks, Foreign Minister McKinnon attributed New Zealand's greater activity to the coalition with Peters. As with its earlier shift on the irreversibility of Indonesian incorporation of East Timor, the Government did not fully consult Australia beforehand.

Peters will want good publicity at home, and to get it he could be tempted to adopt a more "sympathetic" posture that could dilute Australia's message in Cairns. Whatever his personal motives might be, such action would not be out of character for New Zealand politicians. Australia is New Zealand's most prominent partner. New Zealand's growing dependence on Australia, especially, in CER and in defense -- in which New Zealand capacity is weak and declining -- underlines the strategic inequality of the relationship. Because New Zealand politicians are less able to preserve the fiction of equality with Australia, they are attracted to gestures that underline New Zealand sovereignty and freedom of action.

 

WINSTON PETERS Deputy Prime Minister and Treasurer of New Zealand since December 1996

An opportunist, Peters, aged 50, has been the major beneficiary of the new proportional voting system, holding the balance of power for his New Zealand Firs Party. Ambitious but a loner, Peters has never been at home in the established party system. His previous stint as a National minister ended with his being sacked for disloyalty, leading to his defection.

Peter's mercurial temperament and his battler/Maori background are well suited to exploiting sectional grievances and discontent with established parties and policies. He has cobbled together an odd coalition of conservative whites, nostalgic for the Muldoon era, and discontented young urban Maori.

 

ASPIRING LEADER

Peters wants to be Prime Minister but will be hard put to satisfy his supporters' conflicting expectations. His choice of National as a coalition partner has disappointed those who voted for change. His popularity has slumped, limiting his immediate options. He is now distrusted by the Labor leadership. He probably hopes eventually to gain the National leadership, a better vehicle for his long term ambitions than his makeshift party.

But the National Party would now be unlikely to accept Peters as leader of the party or a coalition, even were Bolger to step aside for him. Neither can he count on retaining the increasingly influential Maori constituency which he wrested from Labor and which remains suspicious of his National allies.

Peters's capacity for national leadership will be tested now by his willingness to accept cabinet discipline and his performance as Treasurer. He remains ambivalent about economic reform, harking back to the interventionist approach of his mentor Muldoon. He has yet to mend fences with the business community, which he has upset with his populism, or to shake off his reputation for laziness, inattention to detail and erratic behavior.

 

INWARD-LOOKING

External policy is a low priority for Peters and he gives little indication of being well-informed on the subject. He will see little advantage in challenging the existing thrust of foreign and defense policies, including the minimalist approach to defense relations with Australia. His domestic agenda dictates more social not defense funding.

Peters talks of an export-driven approach though he has played on anti-foreign sentiment and will be wary of engagement in the region. His Maori agenda could prompt him to push for a more active South Pacific role; he has spoken in private of competing with Australia for influence.

Still, Peters has lived in and is well disposed to Australia and emphasizes the importance of the relationship. He welcomes Australian investment, especially to balance Asian capital, and gives high priority access to the Australian labor market. But Peters can be a prickly nationalist with an eye to popular causes and would not be above exploiting New Zealand sensitivities towards Australia if it served his purpose.

 

BACKGROUND

With an impressive physique and a practiced charm Peters has a commanding presence. He plays on his working-class/Maori origins. He worked as a laborer for BHP in Newcastle and on the Snowy Mountains project, before taking an arts/law degree and a teaching diploma at Auckland. He remains a partner in an Auckland law firm.

Peters was in local government before entering parliament in 1978 as a Muldoon protégé. Peters lost his seat in 1981, but was re-elected in 1984 and has been in parliament since. After being sacked as Bolger's Minister for Maori Affairs in 1991 he was re-elected in 1993 as an independent, forming New Zealand First a few months later.

Peters is separated from his wife, and has one son and one daughter. Three brothers are active in New Zealand First. Of Scottish and Maori descent, Peters is a former rugby player with Auckland Maori. A Methodist by upbringing, he does not practice and enjoys late hours in nightclubs -- which has provided damaging copy for the media.

TOMORROW: NIUE

"Niue is doing better so far at managing its dependence on New Zealand than the Cook Islands."

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