VH-LJD was inbound to Canberra from the north-east at 3500 feet. VH-NNC departed from runway 30 at Canberra and made a right turn on climb to 4000 feet, tracking to the east. The tracks of the two aircraft crossed. Subsequently VH-NNC was cleared to climb to 7000 feet. An actual altitude obtained from the pilot of VH-NNC indicated the mode C read out of altitude was 500 feet low. The pilot was told of this and air traffic control used the pilot altitude reports for the separation of VH-NNC from VH-LJD. After the two aircraft had passed the pilot of VH-NNC advised that he had misread his altimeter and that the mode C altitude was in fact correct. At the time the two aircraft passed the vertical separation by radar was 200 feet. Significant Factor The following factor was considered relevant to the development of the incident: 1. The pilot of VH-NNC misread his altimeter.