A stalled free trade deal with the Gulf Co-operation Council is a step closer after a meeting this morning between Prime Minister John Key and the Saudia Arabia deputy Prime Minister, Crown Prince Mohammad Bin Nayef Bin Abdulaziz Al Saud.

Foreign Minister Murray McCully joined Key for the talks on the sidelines of leaders' week at the United Nations General Assembly.

A free trade deal between New Zealand and the GCC was concluded in 2009 but has not been signed or ratified largely because of Saudi objections to New Zealand's ban on live sheep exports, which affected Saudi investors.

LISTEN: NZ Herald Political Editor Audrey Young speaks to Rachel Smalley from New York

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The controversial agricultural hub that McCully set up in Saudi Arabia - and is the subject of an Auditor-General's inquiry - was designed to reduce the irritant in the relationship and reduce legal risk of action.

Key revealed after the meeting that Trade Minister Todd McClay is heading to Saudi Arabia next week.

Key said it was a good meeting with the Saudis: "We didn't hold our punches."

"I think we are getting closer."

He said he was quite optimistic the deal would come off.

"They are quite aware of what they need to do. They are considering a package of things at the moment, so yeah, we are getting closer."

The GCC is made up of Saudia Arabia, United Arab Emirates, Qatar, Kuwait, Oman and Bahrain but Saudi Arabia is the heavyweight.

Key also had bilateral meetings with the President of the European Council, Donald Tusk and the Prime Minister of Pakistan, Muhammad Nawaz Sharif.

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