Michael Barnett Speech: Newmarket Rotary Tuesday, 11 February 2003

It Is A Privilege To Be Invited To Address A Newmarket Rotary Audience.

When Lord Rutherford Was Trying To Get His Team And Resources Together To Split The Atom, He Is Quoted As Saying “We Have No Money So Now We Must Think”.

So Whether Supporting Mayor Banks’ Efforts To Get Auckland Organised To Raise The Billion Dollars Needed To Complete The Unfunded Sections Of Our Long-Planned Transport Network ...

… OR ….

…. Getting In Behind The Labour Government’s Bid To Lift New Zealand’s Living Standards Back Into The Top Performing Group Of Nations….

…. The Proposition That I Want To Put To You Today Is:

“IT’S TIME TO THINK”

“IT’S TIME FOR ACTION”

BECAUSE AS WE FACE AN UNCERTAIN FUTURE AND COPE WITH INCESSANT CHANGE – THERE ARE IMPACTS WE HAVE NO CONTROL OVER:

THE WAR AGAINST TERRORISM - IRAQ – RISING OIL PRICES – CONTRACTING COMMODITY PRICES – A RISING DOLLAR – BUT THERE ARE THINGS THAT WE DO HAVE A SAY ON AND CAN INFLUENCE, THINGS LIKE…

GETTING ORGANISED AND MANAGING OUR OPPORTUNITIES…. WHAT GOVERNMENT DOES… THE ECONOMIC INFRASTRUCTURE WE NEED IN OUR REGION…. OR WHAT WE DO TO ENSURE OUR BUSINESSES GET RESULTS, ACHIEVE SUCCESS…

THESE ARE THE THINGS OVER WHICH WE HAVE SOME INFLUENCE.

SO LET’S DEVELOP OUR PROPOSITION ABOUT THINKING AND ACTION WITH WHAT BUSINESS IS THINKING AND TELLING US IN THE HERE AND NOW..….

WHEN NEWMARKET IS FIZZING, THE REST OF AUCKLAND KNOWS IT’S DOING OK – THAT’S NOT JUST WHAT I SAY BUT A FINDING OF THE CHAMBER’S MOST RECENT SURVEY OF BUSINESS OPINION….

AS MANY HERE KNOW FROM THEIR PARTICIPATION, THE CHAMBER CARRIES OUT A BASIC BUSINESS OPINION SURVEY FOUR TIMES A YEAR.....

…IT IS ALWAYS THE SAME SURVEY, TO ENABLE TRENDS TO BE CONFIRMED….

IN THE LATEST SURVEY, JUST BEFORE CHRISTMAS, EIGHTY-TWO PER CENT (82%) OF 600 RESPONDENTS SAID THEY EXPECTED THE ECONOMY TO IMPROVE OR STAY THE SAME OVER THE NEXT SIX MONTHS…

THIS WAS UP FOUR PERCENT (4%) ON THE PREVIOUS SURVEY - LAST SEPTEMBER - AND THE HIGHEST LEVEL OF OPTIMISM SINCE LATE 2001….

REINFORCING THE HIGH OPTIMISM AROUND AUCKLAND, OUR MOST RECENT SURVEY INDICATES THAT NINETY-ONE PER CENT (91%) OF RESPONDENTS BELIEVE THAT THEIR OWN BUSINESSES’ PROSPECTS WILL IMPROVE OR REMAIN THE SAME OVER THE NEXT SIX MONTHS….

SOME OBVIOUS DRIVERS ARE HELPING TO KEEP AUCKLAND BUSINESS FIZZING:

AMERICA’S CUP….

RECORD TOURISM – AUCKLAND IS INCREASINGLY AN INTERNATIONAL DESTINATION – A PLACE TO VISIT - NOT JUST A GATEWAY TO THE REST OF NEW ZEALAND….

AUCKLAND ALSO CONTINUES TO BE AMONG THE FASTEST GROWING CITIES IN AUSTRALASIA….ADDING THE POPULATION OF DUNEDIN – AROUND 100,000 – EVERY FOUR YEARS,

… AUCKLAND’S GROWTH COMES FROM THE CONVERGENCE OF THREE TRENDS:

… PEOPLE MOVING IN FROM OTHER PARTS OF NEW ZEALAND, INTERNATIONAL MIGRATION AND HIGH BIRTHRATES COMPARED TO ELSEWHERE – NOTABLY THE PACIFIC COMMUNITIES, WHO NOW MAKE UP 13% OF AUCKLAND’S POPULATION…

((In case of Q’s – Pop. Stats: Of Ak’s 1.2m - Euro is 66% (NZ 80%), Pac 13%, Asian 13%, Maori 10%,... Birth rates: Tongan 5% pa, Samoan 3%+ cf European less than 2%.))

OTHER DRIVERS OF AUCKLAND’S BUSINESS OPTIMISM INCLUDE:

…THE EMERGENCE OF A VIBRANT INTERNATIONAL EDUCATION INDUSTRY –

WHERE SOME 50,000 OVERSEAS STUDENTS ARE –

… CONTRIBUTING AROUND $1.3 BILLION DOLLARS TO THE NATIONAL ECONOMY EACH YEAR, MAINLY TO AUCKLAND.

… ADDING A NEW DIMENSION TO AUCKLAND’S LIFESTYLE AND NEW CUSTOMERS TO EVERY BUSINESS IN AUCKLAND – FROM PUBLIC TRANSPORT, TO RESTAURANTS AND ENTERTAINMENT, TO RETAIL AND HOUSING….

((PAUSE))

…. THE PROPERTY MARKET IS BOOMING AS IS THE CONSTRUCTION INDUSTRY…

AND RETAIL SALES ARE AT RECORD LEVELS…

YES, THE AUCKLAND ECONOMY IS LOOKING GOOD.

SO MUCH SO, THE JOB MARKET IS SUFFERING FROM THE PANGS OF GROWTH – OUR PROBLEM IS NOT UNEMPLOYMENT….

… RATHER, AS CHAMBER SURVEYS CONFIRM, BUSINESSES ARE REPORTING INCREASING DIFFICULTY FINDING SUITABLY SKILLED STAFF.

FORTY-FOUR PER CENT (44%) OF RESPONDENTS SAID THEY WERE HAVING DIFFICULTY ATTRACTING THE SKILLS THEY WANT.

THE DEVIL IS IN THE SURVEY’S DETAIL, AND SHOULD HAVE ALARM BELLS RINGING IN THE HEADS OF WELLINGTON POLICY DESIGNERS AND POLITICIANS:

BECAUSE SURVEYS OVER THE LAST TWO YEARS CLEARLY SHOW A CONSISTENT TREND - AN INCREASING DEGREE OF DIFFICULTY OF BUSINESSES IN SOURCING SKILLED STAFF:

IN DECEMBER SEVENTY-NINE PER CENT (79%) OF BUSINESSES IN TOURISM AND HOSPITALITY INDICATED DIFFICULTY FINDING KEY STAFF – I WONDER WHAT THAT FIGURE IS NOW.

THIRTY PERCENT (30%) OF TECHNOLOGY AND COMMUNICATIONS BUSINESSES ARE EXPERIENCING DIFFICULTY RECRUITING SUITABLE STAFF.

PROFESSIONAL SERVICES – THIRTY-NINE PER CENT (39%), UP FOUR PER CENT ON SEPTEMBER.

WHOLSESALE AND DISTRIBUTION – FIFTY-FOUR PER CENT (54%) EXPERIENCING DIFFICULTY…

AND SO ON….

ALL THESE AREAS ARE AT THE HEART OF AUCKLAND’S FUTURE ECONOMY…

… AND VITAL TO THE SUCCESS OF WELLINGTON “STATEGISTS” – IF THAT’S THE RIGHT WORD - CLAIMING TO BE POSITIONING NEW ZEALAND TO ACHIEVE HIGHER SUSTAINED GROWTH IN KNOWLEDGE-BASED AREAS LIKE TOURISM, TECHNOLOGY & COMMUNICATIONS, MARINE AND BIOTECH…

…. TO MAKE THE POINT VERY CLEAR, FORTY-FOUR PER CENT (44%) OF THE BUSINESSES THAT CREATE AUCKLAND’S WEALTH – AND TAXATION REVENUE – ARE EXPERIENCING DIFFICULTY FINDING SUITABLE SKILLS….

LET ME CONTINUE MY PROPOSITION ABOUT THINKING AND ACTION BY ASKING YOU SOME “WHAT IFS”:

WHAT IF – WE FAIL TO SOLVE THE WORSENING SKILLS SHORTAGE IDENTIFIED IN CHAMBER SURVEYS:

SURELY THE POTENTIAL FOR AUCKLAND BUSINESS TO GROW WILL BE CAPPED…. GOVERNMENT’S SO-CALLED SUSTAINABLE ECONOMY DRIVEN BY BUILDING A TIER OF KNOWLEDGE-DRIVEN BUSINESSES WILL REMAIN, ARGUABLY, EXACTLY WHAT IT IS NOW…. SIMPLY IDEAS ON PAPER – UNSUPPORTED BY AN ACTION PLAN TO OVERCOME THE SKILLS SHORTAGE…

MAYBE THIS CONCLUSION IS TOO HARSH AND UNFAIR…

BUT WHEN YOU DRILL DOWN INTO THE SURVEY DETAIL, I AM COMPELLED TO BE BRUTALLY HONEST WITH YOU…

OUR PROSPERTY IS RELATIVE AND HAS A FRAGILE LOOK…

OUR THINKING DOES NOT HAVE TO BE VERY DEEP TO GET TO THE CONCLUSION THAT:

POTENTIAL BARRIERS TO GROWTH ARE LOOMING THAT WE DO NEED TO THINK THROUGH, STRATEGISE…AND ACT ON….

I’M SURE MANY SMART BUSINESSES ARE ON TO SOME OF THESE…

WHAT IF - WE LOSE THE AMERICA’S CUP?

WHAT HAVE WE DONE TO REPLACE THE REVENUE;

THE $800 MILLION OF NEW ZEALAND BENEFIT

THE $450 MILLION ADDED VALUE TO AUCKLAND’S ECONOMY.

WHAT IF – THE IMMIGRATION DEBATE MEANS FEWER IMMIGRANTS SETTLING IN AUCKLAND….?

WHAT IF - “MONSIEUR” LE PETERS EMBARKS ON A “LE PENN” STYLE CAMPAIGN?

COMPELLING DATA CONFIRMS THAT IMMIGRANTS BRING NOT JUST “NEW BLOOD,” BUT NEW ENERGY AND, LONG TERM, WEALTH CREATION AND JOB OPPORTUNITIES…

RESEARCH SHOWS MANY OF AUCKLAND’S SUCCESSFUL ESTABLISHED BUSINESSES FROM THE MID-1950’S WERE FOUNDED BY NEW IMMIGRANTS – FROM EUROPE AND FROM ASIA

I ALSO ACCEPT A DEBATE ON THE BENEFITS AND COSTS OF IMMIGRATION IS CERTAINLY REQUIRED, BUT NEEDS TO BE:

FOCUSED ON AUCKLAND’S ASPIRATION TO BE A SUCCESSFUL GLOBAL ECONOMY - NOT AN ISOLATED AND CULTURALLY-INSULAR SOUTH PACIFIC BACKWATER.

((PAUSE))

WHAT IF – WE OVER-REGULATE AND OVER-PRICE AUCKLAND’S ENGLISH LANGUAGE SCHOOLS?

LET ME TELL YOU THE FACES WE SEE IN CENTRAL AUCKLAND ARE NOT THE IMPACTS OF OUR IMMIGRATION POLICY, BUT THAT OF A VIBRANT INDUSTRY CONTRIBUTING TO THE BOTTOM LINE OF MOST AUCKLAND BUSINESSES…

DO WE TURN OFF THE INDUSTRY THAT ARGUABLY GIVES AUCKLAND A “NEW TIER” OF SUSTAINABLE BUSINESS?

… AND WHICH, IF WE MANAGE ITS GROWTH STRATEGICALLY AND PROFESSIONALLY, WILL STILL BE ADDING VALUE TO THE REGIONAL ECONOMY LONG AFTER THE AMERICA’S CUP HAS LEFT OUR SHORES….

IN MY OPINION IMPACTS OF A DECLINING FOREIGN STUDENT POPULATION WOULD BE QUICKLY FELT ACROSS THE ECONOMY….

MAYBE WE NEED TO EXPAND THE DEBATE ON THE VALUE OF ENGLISH SCHOOLS TO AUCKLAND, BY ACKNOWLEDGING WHAT WE LOSE IF THEY DEPART FROM AUCKLAND AS QUICKLY AS THEY ARRIVED….

WHICH IS NOT AS STUPID AS IT MAY SEEM, WHEN YOU LOOK AT THE GLOBAL COMPETITION THEY FACE….

LIKE TEAM NEW ZEALAND – AUCKLAND’S LANGUAGE SCHOOLS ARE IN A GLOBAL COMPETITION – COMPETING FOR STUDENTS FROM ASIA WITH “SCHOOLS” IN ENGLISH-SPEAKING CITIES AROUND THE PACIFIC RIM - VANCOUVER - SAN FRANCISCO – BRISBANE – SYDNEY - MELBOURNE AND ELSEWHERE.

IN TODAY’S WORLD, WE HAVE SOME COMPARATIVE ADVANTAGES – WE CAN MARKET AUCKLAND AS A LIFESTYLE CITY, AND WITHIN A COUNTRY LESS THREATENED BY GLOBAL EVENTS….

OUR TOURISM INDUSTRY IS DOING A GOOD JOB TO MARKET THESE ATTRIBUTES…

BUT IF THROUGH OUR MISMANAGEMENT AND ATTITUDES WE SEND THE WRONG SIGNALS BACK TO THE STUDENTS’ ASIAN “HOME” COUNTRIES, WE COULD BREAK THE GOLDEN EGG OUR BUSINESS ENTREPRENEURS HAVE HELPED TO CREATE FOR AUCKLAND….

((PAUSE))

WHAT IF – THE DOLLAR STAYS HIGH FOR THE FORESEEABLE FUTURE, PETROL PRICES KEEP RISING AND RETURNS ON EXPORTS KEEP FALLING….

THE BUSINESS CYCLE CANNOT BE CONTROLLED, BUT WE DO HAVE OPTIONS TO INFLUENCE THE IMPACTS…

IN THE LAST THREE YEARS OUR RELATIVE PROSPERITY HAS COME FROM COASTING ON THE BACK OF STRONG COMMODITY PRICES, AND A VERY LOW EXCHANGE RATE.

FOR THE MOST PART WE HAVE BEEN UNACCEPTABLY SLACK OVER THE PAST THREE YEARS TO USE THE UPSWING IN THE GLOBAL BUSINESS CYCLE TO OUR STRATEGIC ADVANTAGE –

WE HAVE FAILED, I SUGGEST, TO USE THE OPPORTUNITY TO PUT IN PLACE SMARTER GROWTH-FOCUSED POLICIES AND TO ENCOURAGE BUSINESSES TO GROW AND NEW BUSINESSES TO LOCATE HERE…

I SAY “FOR THE MOST PART” BECAUSE IT IS TRUE THAT ENGLISH LANGUAGE BUSINESSES, A WELL ORGANISED AND MARKET-LED TOURISM INDUSTRY, AND SOME SECTORS SUCH AS THE FILM, MARINE AND SUPER YACHTS HAVE BEEN VERY ACTIVE TO BUILD NEW BUSINESS IN THE PAST FEW YEARS….

OVERALL, HOWEVER, STATSITICS NEW ZEALAND PROVIDES A SOBERING AND DISGRACEFUL REPORT CARD ON THE IMPACT OF GOVERNMENT’S GROWTH POLICIES IN THE PAST FEW YEARS:

THE VOLUME OF EXPORTS HAS BARELY RISEN – PERHAPS ONE PERCENT A YEAR

THE FLOW OF NEW INVESTMENT CAPITAL INTO NEW ZEALAND IS NON-EXISTENT

OF SOME 300,000 BUSINESSES IN NEW ZEALAND, JUST 10,000 CLAIM TO BE REGULAR EXPORTERS, AND JUST 153 OF THESE ACCOUNT FOR ABOUT EIGHTY PER CENT (80%) OF OUR TOTAL FOREIGN EXCHANGE EARNINGS.

TRUE, THIS DOESN’T INCLUDE TOURISM AND OTHER SERVICE INDUSTRIES,…

BUT FOR A NATION BUILT ON THE MYTH THAT IT RELIES HEAVILY ON INTERNATIONAL BUSINESS FOR ITS PROSPERITY, AND HAS DIVERSIFIED ITS ECONOMY IN RECENT YEARS, THIS REPORT CARD HAS “FAILED – MUST DO MUCH BETTER” STAMPED ALL OVER IT…

… OR IN THE NEW EDUCATION LANGUAGE IS AN “F-PASS”…

I AM NOT HERE TO BE A DOOM-MERCHANT, BUT HAVING SEEN THE “BOOM-BUST” BUSINESS CYCLE OPERATE OVER THE PAST DECADE AND LONGER, IT IS VERY CLEAR THAT AUCKLAND’S MOOD OF BUOYANCY IS TO SOME EXTENT BASED ON STRAW CLAIMS….

…ESPECIALLY, WHEN WE NOTE THAT OF THE 150-PLUS LARGER EXPORTERS, MOST OPERATE MAINLY IN THE COMMODITY MARKETS…

AS THE DOLLAR RISES AND COMMODITY PRICES FALL, THERE IS NO DEBATE - ECONOMIC FORECASTERS AND OTHER PUNDITS ARE GETTING WORRIED ABOUT OUR FUTURE PROSPECTS….

BUT THAT IS NOT THE POINT I AM WANTING TO STRESS – IT IS THIS:

WHAT HAVE WE DONE – WHAT ARE WE CURRENTLY DOING – TO BUILD A BIGGER POOL OF INTERNATIONALLY-FOCUSED WEALTH-CREATING BUSINESSES?

ISN’T IT STUPID TO FAIL TO RESPOND TO THE DANGEROUSLY LOW 1.5% OF EXPORTERS WE CURRENTLY DEPEND ON FOR MOST OF OUR FOREIGN EXCHANGE EARNINGS?

SURELY A REASONABLE TARGET TO SET WOULD BE TO ENCOURAGE SOME OF THE 8000 SMALL-MEDIUM BUSINESSES WHO EARN LESS THAN A MILLION DOLLARS OFFSHORE A YEAR TO GROW THEIR GLOBAL MARKETS….

LADIES AND GENTEMEN, BY WAY OF BRINGING THESE COMMENTS TO A CLOSE, LET ME ASK YOU TO REFLECT ON THE FOLLOWING: WHAT IS THE STRATEGY TO INCREASE THE VOLUME OF EXPORTS?

ALSO

WHAT IS THE STRATEGY TO LIFT PRODUCTIVITY, AND CREATE ENOUGH WEALTH TO ENABLE TOP PROFESSIONALS IN STATE-DEPENDENT BUSINESSES – DOCTORS AND NURSES, TEACHERS – AND SKILLED TRADES PEOPLE, TO BE PAID AT THE RATES MANY ARE BEING OFFERED IN AUSTRALIA, EUROPE AND THE UNITED STATES?

WHEN YOU DRILL DOWN IN TO THE DETAIL OF WHAT AUCKLAND BUSINESS IS THINKING, THE CHAMBER SURVEYS CONFIRM A REMARKEDLY CONSISTENT PICTURE OF WHAT A SMART CUSTOMER-FOCUSED GOVERNMENT COULD DO TO ENCOURAGE BUSINESS TO DO BETTER….

ABOVE EVERYTHING, BUSINESSES WANT AS MUCH CERTAINTY, PREDICTABILITY AND FAIRNESS IN THE ENVIRONMENT AS POSSIBLE…

THEY WANT TO BE ENCOURAGED BY GOVERNMENT:

THAT IT IS BEING PROACTIVE TO ENSURE COMPLIANCE COSTS ARE FAIR AND PREDICTABLE,

THAT THERE IS A PREDICTABLE, TIMELY PROCESS FOR WORKING THROUGH RESOURCE CONSENT ISSUES,

THAT TAXES, DUTIES AND LEVIES ARE FAIR AND WON’T CHANGE ARBITRARILY….

THE CHAMBER SURVEYS SHOW THAT FINANCE, CAPACITY AND DEMAND ARE THE MAIN CONSTRINTS TO A BUSINESS GROWING… AND MOST OF THESE COMPANIES ARE SMALL-MEDIUM…

A COMMON SENSE RESPONSE, THEREFORE, IS TO IMPLEMENT AN ACTION PLAN TO ENCOURAGE BUSINESSES TO GROW AND THUS CONTRIBUTE TO BUILDING A BIGGER, BETTER PERFORMING ECONOMY.

A GROWTH ACTION PLAN WOULD EMBRACE:

TRANSPARENT, BUSINESS-FRIENDLY PROGRAMMES TO ENCOURAGE INNOVATIVE SMALL-MEDIUM BUSINESS TO MEET THEIR POTENTIAL AS JOB CREATORS AND THRIVING EXPORTERS…

FOR EXAMPLE, AS AUSTRALIA HAS, FLEXIBLE PROGRAMMES TAILORED FOR IN-HOUSE DELIVERY TO BUSINESS “CLIENTS” - ADVICE TO YOUNG COMPANIES ON GOING OFFSHORE, SOURCING FINANCE FOR INVESTING IN INCREASED PRODUCTION OR DOING ON-THE-JOB TRAINING TO BUILD CAPACITY…

ANOTHER IDEA IS A BUSINESS-GOVERNMENT PARTNERSHIP TO PUT NEW LEGISLATION AND REGULATIONS THROUGH A “GROWTH LENS” –

DO THEY “HELP MAKE THE ECONOMY GROW FASTER” - OR, IF A PROPOSED LAW ADDS COMPLIANCE COSTS AND IN OTHER WAYS ACTS AS A DRAG ON BUILDING A BETTER PERFORMING ECONOMY… THEY WOULD NOT PROCEED…

BY NOW, YOU WILL HAVE GOT THE PICTURE….

FOR LORD RUTHERFORD, SPLITTING THE ATOM WAS THE EASY BIT… …GETTING RESOURCES AND A TEAM ORGANISED TO CONVERT HIS THINKING INTO ACTION WAS THE TOUGHER TASK…

SIMILARLY FOR THE NZ ECONOMY…

SIMILARLY FOR TEAM NEW ZEALAND…

TO GET OUR ECONOMY ONTO A SUSTAINABLE WINNING GROWTH PATH NEEDS A TEAM NEW ZEALAND ACTION-FOCUSSED APPROACH….

… IF AN IDEA DOESN’T HELP “MAKE THE BOAT GO FAST” FORGET IT!

I GUESS HERE IN AUCKLAND OUR IMMEDIATE FOCUS IS AROUND TEAM NEW ZEALAND AND RETAINING THE AMERICA’S CUP….

THE STRATEGY IS ONE WE CAN ALL PARTICIPATE IN – A PARTNERSHIP BETWEEN CREW AND BOAT WITH THE SUPPORT OF A NATION…. THE SPONSORS…

LOOKING OUT BEYOND THE CUP’S DEFENCE, I BELIEVE BUSINESS SHOULD INSIST THAT GOVERNMENT PROVIDE THEM THE BEST ENVIRONMENT IN WHICH THEY CAN GROW SUCCESSFULLY - THAT’S WHAT’S BEST FOR AUCKLAND AND THAT’S WHAT’S BEST FOR NZ.

I ACKNOWLEDGE THAT BUSINESS IN AUCKLAND RIGHT NOW IS VIBRANT AND EXCITING, BUT I HAVE ALSO HIGHLIGHTED ISSUES TODAY THAT COULD DETRACT FROM THAT VIBRANCY.

TO COUNTER THE RISKS OF MOVING TO A LESSER PERFORMING ECONOMY WILL TAKE THINKING AND ACTION AND I SUGGEST THAT THIS SHOULD BE DONE IN A PARTNERSHIP OF GOVERNMENT AND BUSINESS IF WE ARE TO GET THE BEST RESULTS FOR NZ IN 2003.

THANK YOU

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