In the opinion of my Ministers the existence of the ANZUS Treaty
is a vital source of strength for New Zealand and Australia and for the
Commonwealth as a whole. The policy of my Government will
therefore be to ensure that the organization established under the Treaty
continues to be effective.

I recall with satisfaction that since I last addressed you one of the
objectives of the United Nations in Korea has been attained by the
conclusion of an armistice agreement on terms which entirely accord
with United Nations principles. The armistice remains in full force
and effect, but no substantial progress has, I regret to say, yet been
made towards the further objective of a political settlement in Korea.

Recent developments in Indo-China and South-east Asia give rise
to grave concern for the safety of the free world, and the position is
being studied most carefully by my Ministers. Because of the
importance of the problems involved, my Government deemed it
necessary that New Zealand should be represented by the Minister of
External Affairs at the Political Conference in Geneva. Though the
discussions there have proved disappointing because of the attitude
of the Communist powers, my Ministers still maintain the hope that,
by the exercise of patience, a speedy and honourable conclusion to
the conflict in Indo-China can be achieved.

Fully recognizing the prime importance of the South-east Asian area
to the security of New Zealand, my Government has welcomed the
proposals recently made by the United Kingdom and the United States
for the examination of the possibility of establishing a collective defence
arrangement within the framework of the United Nations Charter
to ensure the peace, security, and freedom of South-east Asia and the
Western Pacific.

My Government continues to maintain its interest in developments
in the Middle East, a strategic area of vital importance to Common-
wealth security. Hostile relations between Israel and the Arab States
have been a matter of special concern, and my Government has,
through its representative on the Security Council, supported policies
and procedures designed to reduce the existing tension.

Though there appear to be grounds for hope that international
tension shows signs of easing, my Advisers do not regard the world
situation, and particularly the position in South-east Asia, as allowing
any relaxation in the defence measures we have had to adopt in the
interests of our physical security and in pursuance of our international
obligations. Our military force is still serving in Korea and, on
present indications, must remain there for some time yet. However,
our naval units have been able to resume periodic visits to our
outlying dependencies in the Pacific. Steady progress has been made
in the build-up and training of our land forces. Our Air Force
carried out a most important transport and escort mission in connection
with Her Majesty's recent tour of New Zealand and Fiji. In addition,
esort duties were performed by our Squadron in Cyprus while the
Royal Yacht Britannia was in the Mediterranean.

In the economic field my Government is gratified to record that
the sterling area has experienced a good trading year and that the
gold and dollar reserves of the area have substantially increased.

In January New Zealand was represented by my Associate Minister
of Finance at a Conference of Commonwealth Finance Ministers,
when, after very useful discussions, the objectives laid down at previous
conferences of strengthening the position of sterling and establishing
a wider and freer system of trade and payments were reaffirmed.
My Advisers are pursuing policies designed to ensure that New Zealand
plays a full part in the attainment of these objectives.

Although New Zealand is engaged in a large capital development
programme of her own, my Government is aware of the problems
facing the less-developed countries of the world, and of the need to
assist them in raising the living standards of their peoples. Accordingly,