New Zealand and Malaysia have strong reasons to pursue a free-trade agreement, says a study.

Trade Negotiations Minister Jim Sutton said the study results, released yesterday, showed both economies stood to gain from such a deal.

Both countries would benefit through improved market access, domestic efficiency gains from lower prices and from possible measures to make it easier to do business.

"Such an agreement would have the potential to open up opportunities for our goods and service exporters, and for investors and consumers," said Mr Sutton.

Late last year, he and Malaysian International Trade Minister Dato Seri Rafidah Aziz agreed to the study on a possible free-trade agreement before moving into formal negotiations.

They will now discuss the findings before deciding on the next step later this month.

Malaysia is a key member of the Association of South East Asian Nations (Asean), with which New Zealand and Australia have already started negotiations.

It is New Zealand's largest Asean trading partner, its eighth-largest trading partner overall, and the seventh-largest supplier of imports.

The study found a free-trade deal would:

* Build on the existing Singapore and Thailand agreements and help to maintain New Zealand's overall regional trade competitiveness.

* Result in economic gains through improved market access.

* Create lower consumer prices and improve opportunities for importers and exporters.

Electronics, machinery and fuels account for two-thirds of Malaysian exports to New Zealand.

Agricultural goods, particularly dairy, dominate exports to Malaysia.

The report said a free-trade agreement would also create more opportunities for value-added products.