New Zealand has agreed a free trade agreement with Malaysia, its seventh-biggest trading partner, aimed at boosting business worth around US$1.6 billion (S$2.3 billion) a year, the trade minister said on Tuesday.

The agreement needs legal and technical work before a final signature later in the year.

'It is an important signal that in the midst of the global financial crisis and the creeping tendency towards protectionism internationally, Malaysia and New Zealand have reaffirmed our commitment to trade liberalisation,' said Trade Minister Tim Groser.

New Zealand's main exports to Malaysia include dairy and other food products, while imports were dominated by oil products and electronic goods and appliances.

More than 2,200 Malaysian students study in New Zealand.

Talks on the agreement started in March 2005. The two countries have previously had strong defence links.

Groser said the benefits would be over and above those gained by New Zealand in the recently agreed deal with 10-member Association of Southeast Asian Nations (ASEAN), of which Malaysia is a member.

New Zealand has separate trade deals with Singapore, Brunei, Thailand and China.