Hon Dr Michael Cullen

Address to Vision Manawatu Business Meeting
Steeple Room, Quality Hotel, Palmerston North

Good afternoon. Thank you for the opportunity to talk with you today.

Firstly I would like to acknowledge the enthusiasm and work of Vision Manawatu as a dynamic economic development agency.

Since 1999, Vision Manawatu has been successfully involved in the establishment and retention of a number of companies in the region – to the tune of 400 fulltime positions and a boost to Palmerston North's economy of $20 million.

Regions need champions and its people like you who have the commitment and energy to establish a strategic direction and then go out and chase opportunities.

As a government we too are determined to support regional economic development and work in partnership with agencies such as Vision Manawatu.

The Regional Partnership Programme is helping revitalise provincial economies by boosting employment and helping to promote sustainable growth.

The Industry New Zealand Enterprise Awards Scheme helps good business ideas become reality.

The Industry New Zealand Up and Ready Scheme is designed to improve innovative small businesses and entrepreneurs’ chances of raising finance in the early stages of development.

The Angel Network matches up small to medium businesses with investors.

Here in the Manawatu a number of small businesses have received Enterprise Awards. And I understand that last month the Manawatu was awarded $100,000 for regional development and another $35,000 to promote industry clusters.

Let me now give you a quick snap shot of the New Zealand economy. Despite a weakening global economy the outlook for New Zealand is positive - with one commentator going as far as to describe New Zealand's economy as 'decidedly perky'.

A wealth of data has been released recently; all of it pointing to a strong economy in which growth is becoming increasingly broad-based.
Unemployment is at a 13 year low and full-time employment is up 3.4 percent on the same time last year.
Here in the Manawatu unemployment has fallen from 6.9 percent last year to 4.4 percent.

Tourism is now officially measured as a $13.2 billion dollar industry. It makes up almost 10 percent of New Zealand's GDP one out of every ten jobs is in tourism.

The trade balance is showing a stable surplus with exports in June up 22.6 per cent on the previous year.
Seasonally adjusted building consents were up 9 percent in the June quarter and retail sales rose 2.3 percent in the same period and 6.9 percent in the year to June.
The current account deficit is projected to shrink to around 3.3 percent of GDP by 2005. That is still high, but it is a lot better than it has been for many years.

New Zealand is now back on a stable AA+ credit rating and consumer and business confidence are both in positive territory.

And finally in the mixed bag of good news, the government is running an operating surplus, projected at over one percent of GDP this financial year, rising by roughly half a percent of GDP a year for the years after that.

I am making the point that although there is much to be done to lift our economic growth, we are not in a crisis and we should not talk ourselves into one.

The government has a vision for a prosperous and socially cohesive future. The by-line of the recent Knowledge Wave conference was 'creating Kiwi prosperity' in order to restore us to the top half of the OECD.

Steve Maharey has made the point that the Manawatu economy is something of a microcosm of the New Zealand economy in terms of the challenges and opportunities we face as a nation. The region has a traditional rural based economy and a future resting largely on what is called a biological economy. That is the quality of land and climate – our comparative natural advantages - and the value added through farming, research and development and further processing.

Our task then is to foster of climate of innovation which levers off our natural comparative advantages and the talents and skills of our people.

We need the capacity to create new knowledge and to apply it to new and existing industries and primary production.

Strong economies develop by educating and up-skilling their people; by investing in science and research; by inventing and applying new technologies; constantly innovating; and being enterprising in everything they do.

We are in the midst of an economic transformation to put in place the structural framework that is needed to get away from our historical dependence on commodity trade. It's about the right mix of education, infrastructure, innovation and commercialisation and a desire to succeed.

This transformation hinges on some core themes founded on realism and common sense coupled with a much more holistic approach to economic and social policy.

Focus
Firstly, New Zealand government, enterprise and industry need more focus.
In this age of rapid change, where scale and distance work against New Zealand, we cannot be generalists and we cannot continue with the scattergun technique of recent times.

We need to recognise areas where we have a natural competitive advantage and do everything we can to apply change processes and technology to these areas: forestry, dairy, meat and wool, fishing, aquaculture, marine, tourism, film, fashion, education and the like.

For example, the rise in production and profits of New Zealand lamb comes in part from farmers using the results of genetic research and technology. Similarly the increase in dairy production can largely be credited to genetics, artificial insemination and better management practices.

Continuous adaptation
The second theme of economic transformation is that this is a process of continuous adaptation. There is no single path to economic success. I am talking about a broad based but careful change process. The last thing the economy or the people of New Zealand need or want is another round of traumatic restructuring.

Integration of social and economic programmes
I have mentioned the government's commitment to the integration of social and economic programmes. This is fundamental to an inclusive society. An economic transformation that ends up with our success stories locked in fortresses and hiring security guards to keep out the marginalised and the dispossessed is neither desirable nor sustainable.

When this government took office, Treasury identified social cohesion as a primary concern. Now, a year and a half later, for the very first time,
Treasury will be obliged to examine the social impact of its advice and likewise social policy development will be considered in a wider context that recognises the linkages between social and economy policy.

Education and training
Different industry and service sectors have been sounding warning bells over New Zealand's skill shortage for years. Our present predicament should be no surprise to anyone.

While there is no quick fix there are many things a government can do and we are doing it. We are taking a strategic approach to tertiary education. We are getting away from the duplication and lack of coordination that marked the last decade and we are linking provision with personal, social and economic imperatives.
And our modern apprenticeship programme is boosting participation in skills training for young people and is a direct and innovative response to the skills shortages being experienced by many industries. There are now over twelve hundred Modern Apprentices in 24 industries throughout New Zealand.

More New Zealanders than ever before are involved in systematic industry training linked to nationally recognised qualifications. Industry training now occurs in a wider range of occupations, skills and industries than ever before.

From idea to enterprise
A most important policy theme is the need to highlight innovation strategies and link them to appropriate financing mechanisms to get new ideas and new businesses off the ground.

New Zealanders are known for good ideas and can do attitudes. Traditionally, we have filed more patent application per head of population than most industrialised nations worldwide. Unfortunately we have not been so successful in turning all those good ideas into good business.

We are turning this around. Do you recall that it was only a few short years ago that hardly anyone had heard of things like venture capital or seed capital, start up or business incubation and clusters? Now, not only are they part of the business vocabulary, they are as integral a part of the economic transformation as Research and Development.

This year the Government is backing Kiwi innovators with a $100 million seed capital investment fund to finance business start-ups, focussing particularly on technology and high value-added products and services, in partnership with private sector venture capital.

The establishment of the fund will help the commercialisation of innovations from Crown Research Institutes, Universities and the private sector.

An important theme of the knowledge Wave conference was the need for us to be bolder in attracting quality foreign investment and expertise in key high-tech areas.

As well as going boldly where no New Zealand government has gone before we must be quick and nimble, smart and active.

We must be able to meet the needs of an investor within an investors' time frame. Many of the success stories of Industry New Zealand's investment arm have been about speeding up consent processes, cutting red tape, working with local government officials and generally breaking down the barriers to starting a business.

And as well as acting as advocates and facilitators, the government is putting its money where its mouth is in attracting quality investment. Recently Investment New Zealand announced its first success, a joint venture between Swedish phone maker Erricson and Wellington's Synergy International.

The venture to develop mobile phone internet applications is in line for $1.6 million of government funding and is expected to create close to 200 high skilled jobs in the IT sector.

The Ericcson Synergy venture is just the first off the rank with Investment New Zealand exploring options with more than 30 other foreign companies.

Last month our new export credit scheme kicked off. This is about creating a level playing field for our businesses. At last New Zealand is once again offering its exporters a basic measure of support which other developed nations take for granted.

The Government is also investing $9.5 million over two years in Trade NZ’s e-commerce strategy for exporters to assist their entry into this new delivery channel that is now becoming critical to survival in the global environment.

Finally, the government has a number of projects underway in areas such as developing a biodiversity strategy, an inclusive and sustainable economy and innovation strategy and so on and so forth.

The government – for so many years a missing partner in economic development – cannot be expected to do everything. Neither will the market mechanisms, on their own, provide sufficient momentum for the growth we need. But together - anything is possible.

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