The Prime Minister’s statement to Parliament on this first sitting day of the year provides a formal opportunity to review public affairs and outline the Labour-Progressive Coalition Government’s legislative and other intentions for the next twelve months.

As recently as 27 August last year, the programme and priorities for the second term of the government were set out comprehensively in the Speech from the Throne. Today in this statement, I will comment on the current state of the economy, on the government’s key areas of activity for the year, and on the international crisis over Iraq.

The government begins the year very positive about the prospects for New Zealand and for its own policy programme.

The economy’s performance has been strong, even in a challenging international environment. New Zealand over the past year has been one of the OECD’s star performers, with annual average growth for the year to September coming in at 3.9 per cent.

While the economy is projected to come off that growth peak, commentators are predicting a soft landing with growth slowing to just below trend. Given the state of most Western economies, that would be a very credible result. The government, however, will continue to work alongside stakeholders in the economy on policies and initiatives to lift growth to a sustainably higher plane.

Currently our unemployment rate stands roughly equal to that of the United Kingdom, lower than that of either the United States or Australia, and significantly lower than that of the euro area.

Net migration remains strong, fuelled by fewer New Zealanders leaving and by more returning home. Twenty five per cent fewer New Zealanders left to live elsewhere last year than in 2001, and the numbers of Kiwis coming home on a permanent or long term basis rose by eight per cent. New Zealand continues to be a very attractive destination for migrants.

Other key indicators are also encouraging. Retail sales are healthy and consumer confidence is solid. Overall business confidence reflects the international uncertainty, but businesses’ own investment and employment intentions are solid.

The strong economic performance has had a very positive effect on the government’s fiscal position. While that is welcome, the government will be maintaining a strong fiscal policy. Our aim is to build and sustain solid levels of economic growth and to fund good public services and infrastructure sustainably. Spending which grows unsustainably inevitably ends in the heartache of structural deficits and/or cutbacks. That is a feature of New Zealand’s modern history which should not be repeated.

The appreciation of the New Zealand dollar over the past year has put pressure on the export sector. That pressure reminds us of the ongoing challenge to the New Zealand economy to reposition up the value chain as a supplier of highly desired and higher value goods and services which are less vulnerable to currency fluctuations. While the open nature of the New Zealand economy requires all our businesses to be internationally competitive, the maintenance and improvement of our living standards requires us to be innovative and to compete on quality and value. There is no future for New Zealand in a competition to produce the cheapest products with the least concern for labour and environmental standards.

Growth through innovation was the focus of the economic policy framework released at the time of my Prime Minister’s statement last year. Since then many initiatives have been taken in line with the framework to strengthen the economy’s capacity to grow, and we will continue to build on them this year. Moving ahead on workplace skills supply, on increasing New Zealand’s research and development capacity, on practical initiatives to speed up regional business, and export growth; on sector strategies, and on infrastructure is at the heart of the government’s economic programme.

That programme is reinforced by our commitment to strong leadership, a stable policy framework, a commitment to opening up world markets to our goods and services, and by the priority we place on social cohesion, participation, and opportunity so that the benefits of progress can be widely shared. In this way we can best build a shared vision and national consensus around the goal of lifting New Zealand’s economic performance and improving our social outcomes.

The very foundation of a dynamic economy and society lies in the talents and skills of its workforce and people. Our government has set out to open up opportunities for New Zealanders to gain higher education and skills qualifications. Tertiary education has become more affordable and participation in skills training has soared. Even so, employers still report skills shortages at a level which constrains our ability to grow. It is sobering to hear that those skills shortages are often as basic as an inability to read and write properly. We will continue to work with industry to overcome skills deficits, both through more funding of education and training, and by continually retuning the immigration system to meet our workforce needs.

In the past year the introduction of the work to residence policy, which includes the talent visa and the priority occupations work permit; increased English language requirements; and a points premium for job offers relevant to migrants’ qualifications and work experience have all aimed to lift the economic contribution which immigration makes to New Zealand. Changes designed to meet that objective will continue to be made. The government will continue to promote the benefits which migrants with relevant skills bring to New Zealand, and to promote the values of tolerance, inclusion, and respect which characterise all successful, harmonious, and outward looking societies.

Innovative economies and societies place a high value on science, research, and creativity as springboards for growth and development. The past year has seen exciting initiatives in these areas. For example;

1. Seven Centres of Research Excellence have been established in areas of major importance to New Zealand’s economic and social development. The Centres are operating collaboratively across tertiary institutions and, for the most part, also have links to Crown Research Institutes. Excellence, specialisation, and collaboration are all characteristics which the new Tertiary Education Commission has been set up to drive in the tertiary sector and we have high expectations for the increased contribution the tertiary sector will make to New Zealand’s wellbeing.

2. Funding for industry-led research consortia was also introduced in 2002. To date, $33 million of public funding over five years has been more than matched by $44 million from the private sector.

3. These research groups bring Crown Research Institutes and universities together with private sector companies to pursue opportunities with commercial potential. Among the consortia approved to date are those working on biomedical compounds, pastoral green house gas reduction, and wood quality. More are in the pipeline.

In the creative sector, the reputation of our film industry continues to be boosted by the box office success of Lord of the Rings. Most encouraging also is the early success of the first film to be financed from the Film Fund established by government in 2000. Whale Rider has won critical acclaim in film festivals in Europe and North America in recent months. Its success is positive for Maoridom and for all New Zealand, based as it is on a novel by Witi Ihimaera, and filmed in an East Coast community with its full backing and participation. Whale Rider’s success lives up to the vision the government had for New Zealand film making when the Film Fund was established. More films are in various stages of post-production and planning.

The New Zealand music industry has also had a good year. More New Zealand music is being broadcast locally, with commercial radio stations exceeding the targets set for local content in the voluntary code. New Zealand music is now making up almost double the share of total music sales in the country compared with five years ago.

The Music Industry Commission, with the support of Trade New Zealand has led successful delegations to major international music fairs and hosted a very successful New Zealand music showcase in association with America’s Cup activities late last year.

Trade New Zealand and Industry New Zealand have worked proactively over the last year to promote business, industry, cluster, regional, and export growth. Many hundreds of companies have been assisted by their advisors and funding. Trade New Zealand alone provided export development services to more than seven hundred new clients in 2002. In terms of results, Trade New Zealand’s customers estimate that its assistance to them resulted in an additional $2.41 billion of foreign exchange earnings.

More than a decade ago, Professor Michael Porter’s prescription for New Zealand advocated the development of industry clusters to boost growth. Now Industry New Zealand is backing 22 clusters which assist key business suppliers and related organisations to take advantage of growth opportunities. They range across sectors from Health IT in Auckland, to Waikato Biotech, Wellington’s Creative Manufacturing, Nelson Seafood, and Dunedin Engineering.

Over the past three years the government has helped establish and/or fund twenty six regional groupings to develop economic strategies and regional specialisation. From that work, new regional centres of excellence have emerged in the past year. Hawke's Bay has the Centre of Innovation for Food Processing; Marlborough has the Research Centre for Viticulture; Rotorua has the Centre for Exellence in Wood Processing and Training; and Hamilton has the Waikato Technology Park to promote commercialisation of intellectual property.

In the cities, and generally attached to tertiary institutions are fifteen incubators which have been funded by Industry New Zealand’s Incubator Development Unit. The start up companies in the incubators benefit from the collegial work environment and the mentoring and practical business advice available to them on site. New Zealand has been a latecomer in incubator support for start up companies, and we are running to catch up now, including by addressing their needs for capital.

In 2001 our government decided to get involved to ensure that start up companies could access early stage capital. Venture capital is recognised internationally for the key role it plays in commercialising innovation. The Venture Investment Fund now has co-investment arrangements with three privately managed seed funds and is currently finalising documentation with two more. The focus for these funds will be early stage, innovative businesses with potential for high growth.

Already one of the funds has invested in an early expansion stage, software company which is recognised as an industry leader in business intelligence and data visualisation solutions. Further investments are expected to be made by fund managers in the next few weeks.

Other programmes rolled out in the past year include World Class New Zealanders which helps businesses get access to international expertise and innovative technology. Through the programme, businesses can set up networks and strategic partnerships with successful overseas businesses through international missions and exchanges. It also encourages links to successful expatriate New Zealanders and their networks.

A recent example of this programme in action saw representatives of the Petone based Black Arrow company, which manufactures Racetech racing seats, visiting the United States to meet with Daimler-Chrysler engineers, leading to a contract being signed.

Last year the government established four taskforces in innovative sectors with the potential to have significant spillover effects for growth in other sectors. The Information and Communications Technology Taskforce has already produced a draft report with ambitious targets; and the biotechnology, design, and screen production reports are due shortly. The blueprints which emerge will help guide the government’s investment in education and infrastructure, and the sectors’ ability to exploit market opportunities.

This year Trade New Zealand and Industry New Zealand will be merged to service the needs of New Zealand businesses better through a single agency. Last year the investment services of the two agencies were joined together to form a strong Investment New Zealand to attract foreign direct investment. Resources for the combined operation were increased by more than six million dollars in the current year. The new Investment New Zealand is working to get better alignment between investment recruitment and industry sector strategies.

To be successful in attracting both foreign and domestic investment into areas with high potential for growth, New Zealand needs to have infrastructure which can meet the needs of both industry and society.

For government this year and this term, this means planning and action on transport, on energy supply, on the quality and allocation of fresh water, and on the high technology infrastructure of broadband.

The New Zealand Transport Strategy launched in December will guide government decision-making across all transport modes. The Land Transport Management Bill, due for passage this year, provides for a broader land transport focus than has been encouraged in the past. Effective land transport planning must address public passenger transport funding and management systems along with the roading and rail networks. The strategy overall will ensure that a more balanced and sustainable approach is taken to developing transport infrastructure. The government is also increasing spending on roading, public transport, and alternatives to roading. Auckland’s transport needs are getting long overdue attention, to relieve the congestion there which impacts adversely on the whole economy.

New Zealand’s growth is putting pressure on our energy supply. So are the earlier than expected expiry of the Maui gas supply and the effects of longer term climate change on the critical hydro electricity supply from the South Island lakes to the east of the alpine chain. The government is not satisfied that inherited energy policy settings can ensure the provision of adequate supply quickly enough.

Ensuring that New Zealand has a secure energy supply, that our energy use becomes more efficient and less wasteful, and that our renewable sources of energy are developed and maximised are key objectives of the government’s recently released Programme of Action for Sustainable Development. The government announced yesterday proposals to amend the Resource Management Act to give greater weight to the benefits of renewable energy.

The Sustainable Development Programme of Action also addresses the need for new approaches to freshwater allocation and use. New Zealand has taken access to clean, abundant water for granted, and it is vital to our agricultural economy and to the functioning of our communities. Yet in some parts of the country, the pressure on water resources is already acute. Our work programme addresses how to allocate and use water in more sustainable, efficient, and equitable ways; how best to maintain its quality, and how to ensure that water bodies with nationally significant natural, social, or cultural heritage values are protected. Lake Taupo is an example of where past and current activities are threatening the long term water quality, status, and sustainable development of the lake and its environs.

In the telecommunications sector, a new Act, a new Commissioner based in the Commerce Commission, and an updated Kiwi Share obligation are in place. Now the government’s key focus is Project Probe, the initiative to roll out broadband to the regions. Commercial tendering is underway and project completion has been targeted for the end of 2004. Fast internet access is an essential precondition for economic modernization, and it needs to be available throughout New Zealand so that our rural industries can benefit from it along with our cities.

The government continues to work to leverage advantage for New Zealand off major successes like the Lord of the Rings film trilogy and the hosting of the America’s Cup. They and our vanguard export industries, large and small are redefining the New Zealand brand as smart and innovative, creative, technologically advanced, and in tune with the 21st century. It’s working for New Zealand tourism which bounced back speedily from the tragedy of September 11. It’s working in our favour for net inward migration, both in retaining and attracting back more of our own people and recruiting the best and brightest from elsewhere. We need that updated brand to work in our favour consistently across our range of exports and to attract high quality investment to help drive our future.

The export orientation of New Zealand’s economy leads the government to prioritise getting greater market access for our goods and services. New Zealand is more adversely affected by protection in foreign markets than any other developed country. A successful WTO Round, especially on agricultural access, would deliver big gains for New Zealand. Opening up markets through the Doha Round is our top trade policy priority this year and until its conclusion.

The government will also continue to push at APEC for the achievement of the Bogor goals. Within APEC we already have open trade agreements with Australia, with the twentieth anniversary of CER this year; and with Singapore. This year we begin talks with Chile and Singapore on a three way agreement. And we have stepped up our promotion of free trade negotiations with the United States, following the positive reference to New Zealand in the US Trade Representative’s letter to Congress on his intention to negotiate with Australia. The government is working closely with the private sector locally and in the United States to press the New Zealand case.

Last year the government set the objective of returning New Zealand’s per capita income to the top half of OECD rankings over time.

There is no magic wand to be waved to achieve that, but there are many steps which government, economic stakeholders, and the broader community can take to make it possible.

The path the government has chosen sees us implementing smart active policies to encourage and facilitate growth and development, and forming partnerships across the economy and society to make it happen. Improving workforce productivity will be a central element in achieving improved sustainable growth rates. This year the government wants to work with both business and unions to make progress on lifting productivity.

The path we have rejected is the discredited direction of the 1990s. That path held families and communities back through repressive social and labour market policy and crushed the spirit of many. Then, through ideological extremism in economic policy, government had neither the resources required to invest in our common future, nor the levers needed to promote a vibrant, sustainable economy.

Now I believe there is a new optimism about New Zealand’s potential. New leaders, achievers, and entrepreneurs have emerged. The country’s sights are higher. We New Zealanders have a greater belief in our ability to succeed in the global economy and to have the basis for an unparalleled quality of life here. The country’s ability to grow even in tough times can no longer be dismissed as just good luck. There are smart and entrepreneurial people making that luck and a government prepared to play its part in backing the development of the smart and sustainable economy.

What makes all the effort worthwhile for our families and communities is to see a social dividend flow from New Zealand’s success, especially in health and education. Priorities for this year in those areas will include;

1. The continuing roll out of Primary Health Organisations as an integral part of our primary care strategy. Already PHOs are providing a broad range of primary health care services to over 500,000 New Zealanders, with the majority being guaranteed lower costs for primary health care and all being assured of access to comprehensive and co-ordinated primary care. A further 25 PHOs are due to start up by 1 April, by when it is estimated that 1.4 million New Zealanders will be enrolled in PHOs.

2. The progressive introduction of population based funding for District Health Boards as part of our ongoing population focus for the health system. Ensuring that the increased funding we have made available for District Health Boards is allocated according to the population needs of the district rather than simply on an historical basis will enable boards to better meet the health needs of their communities.

3. The continued implementation of the blueprint for mental health services will remain a priority. Prior to Christmas the Minister of Health announced her decision to bring forward planned additional funding for Auckland and Waikato mental health services to bring them more into line with the services available in other parts of the country. This is just part of the ongoing expansion of mental health services nationwide which is seeing spending increase from around $524 million five years ago to an estimated $900 million by 2003/04.

4. In education, work will continue on increasing participation and quality in early childhood education in line with the Early Childhood Education Strategy released last year. We will be working with the sector on ways in which the funding systems could be altered to encourage better participation.

5. In the compulsory sector this year the government is funding more than 700 teaching positions over and above what would have been required for roll growth alone, and we will continue to invest in increasing teacher numbers.

6. This year we will also begin a comprehensive examination of ways to improve teaching and learning. We know that New Zealand’s future success will depend on our ability to apply knowledge across the economy and society. How well we are able to educate our children will directly influence our competitive ability. We also value education for its intrinsic value in building a tolerant, knowledgeable, and outward looking nation.

7. More information and communications technology initiatives will be funded in schools. Project Probe will see broadband rolled out to all schools over the next two to three years. The cluster based approach to the use of ICT in schools has worked well and will be expanded, as will initiatives aimed at getting more computers to teachers.

8. A taskforce has been set up to examine issues relating to secondary teacher supply and to teacher qualifications and professional development, and its report will help shape government policy.

9. The Tertiary Education Commission has been formally established from the beginning of this year and is now responsible for steering the development of the sector. This year will also see the introduction of performance based research funding.

10. The development this year of a system of maximum tuition fees for students, effective from 2004, along with triennial tuition funding for institutions will provide a lasting solution to the problem of unpredictable fees for students and income for providers.

11. A review of student support will look at ways to bring more students into the student allowance net, while at the same time setting out fair rules for determining the contribution students make to the costs of their study.

12. Strengthening and expanding opportunities for people to learn in the workplace is a top priority this year. By the end of the year, we intend to have 6,000 young people in Modern Apprenticeships, an increase of 100 per cent since the middle of last year.

13. We will also continue to increase the number of industry trainees and have adopted a target of having 150,000 workers in industry training during 2005.

14. This year we are extending the Gateway programme so that senior students in another 39 schools will be able to experience structured learning in the workplace and leave school better equipped to move into paid work and further training.

The legislative and policy agenda for this year is very full. In the coming weeks and months important bills we will be looking to progress include:

1. The Television New Zealand Bill to enable TVNZ to proceed to implement its charter for quality public television and to separate out BCL as a profitable state owned enterprise.

2. The Responsible Gambling Bill which aims to control the growth of gambling; to minimise the harm it causes; and to see that the community funding available from it is both publicly accessible and accountable.

3. The Racing Bill which merges the Racing Industry Board and the TAB into a single statutory body to simplify the governance of the racing industry and make it largely responsible for its own affairs.

4. The Resource Management Amendment Bill which will reduce delays and costs in the planning process, strengthen provisions relating to national policy statements and environmental standards, and enhance the provisions for historic heritage.

5. New holidays legislation, which will replace the old confusing law with new provisions which are easier to understand and which more appropriately recognise the relationship and balance between the demands of work and of life outside employment.

6. The War Pensions Amendment Bill which enables veterans pensioners to earn income additional to their pension on the same basis as others on social security benefits.

7. The Supreme Court Bill which provides for New Zealand’s final court of appeal to be located in New Zealand and marks the coming of age of New Zealand’s judicial system.

8. The Land Transport Management Bill is due for report back on 9 June and has a high priority for passage thereafter.

9. Major legislation to be introduced includes;

10. Amendments to the Hazardous Substances and New Organisms Act, which are scheduled for passage prior to the expiry of the moratorium on applications for genetic modification in October.

11. An Aquaculture Reform Bill to put in place the new framework for the development and regulation of aquaculture. It gives regional councils more involvement in the regulatory process, and gives both industry and the public more certainty about where aquaculture development can and cannot take place.

12. The Families Commission legislation which will give effect to the policy announced at the end of last year. The passage of this legislation implements a key part of the confidence and supply agreement reached with United Future, and reflects the important role of families in our society.

13. Legislation on asset testing will also be prepared.

14. New legislation regulating the building industry will be introduced and will address issues highlighted by the leaky buildings saga. The hands off regulatory regime introduced in the 1990s clearly has not worked satisfactorily. New legislation should allow for appropriate flexibility and innovation in design which still giving customers confidence that their homes will meet acceptable standards.

15. Other significant areas of policy review and development will include:

16. the review of the Employment Relations Act after its first three years of operation;

17. policies to promote work/life balance, in line with the Coalition Agreement between Labour and the Progressive Coalition Party;

18. consideration of expansion of the Paid Parental Leave Scheme;

19. work is underway on policy to improve support for low income families and provide further assistance to families to move into employment and build better futures for themselves and their children. This year’s Budget will see us take the first steps in the change process, with further major changes being planned for the 2004 Budget.

Last week an OECD report covering the situation of young people made for grim reading. Some of it was out of date, and with respect to youth offending the report was inaccurate. Youth suicide figures are down significantly on the 1998 figures quoted.

Nonetheless the government believes that child and youth development is a critical area for attention, and has identified it as one of the four priority areas in the Sustainable Development Programme of Action.

The Agenda for Children and the Youth Development Strategy, both released last year, provide clear direction on the way forward. The challenge now is to get a co-ordinated approach across government agencies and to work effectively with NGOs. Our children and young people deserve to grow up in supportive families with adequate incomes; to have a secure home and to have their health and education needs met; to live lives free from violence and crime; and to be able to fulfill their potential as human beings. Children and young people are our future, and we neglect them at our peril.

Following the horrific dog attack on a young girl last week, government and public attention is again focused on the state of our dog laws. I believe we must ensure that animal control officers have the powers they need to take dangerous dogs out of circulation. Parliament should consider whether it is practicable to designate dangerous breeds and their cross breeds and then ensure that they are leashed and muzzled whenever they are out of containment. Increased penalties for breaking the law should be considered, and enforcement of the law needs to be stepped up across the country.

Of particular interest to Maoridom this year will be the launch of the new Maori Television Service; the development of legislation to implement the fisheries allocation decisions; and the completion of negotiations on more Treaty settlements and the passage of legislation to effect them.

Some opposition parties have signalled their intention to focus on issues relating to Maoridom and the Treaty of Waitangi this year in a way that I believe is divisive and destructive. The government will be continuing its partnerships with Maoridom for economic and social development. The Hui Taumata Matauranga facilitated by ministers and the leader of Tuwharetoa, Tumu Te Heu Heu, is an example of the positive relationships which are being built. Across New Zealand there is enormous activity in Maoridom focused on development, and this momentum and renaissance should be celebrated by us all.

The government will also be ensuring that more information is made available about the Treaty of Waitangi so that the public can debate its significance in an informed way. It is unfortunate that so many of us know so little about this aspect of our country’s history and about how it relates to the nation we are building.

At a minimum the Treaty of Waitangi enabled two peoples to co-exist. At the maximum, it provided the basis for building relationships of respect and recognition which can endure down through the generations. It is in that positive spirit that I believe we must continue to build our unique and special nation which is now home to the peoples of many lands.

In recent months the focus of the international community has been on the crisis over Iraq. Last November in Resolution 1441, the United Nations Security Council determined that Iraq was in material breach of its disarmament obligations under a series of Security Council resolutions, and warned Iraq of serious consequences if it did not comply with the new resolution.

After passage of Resolution 1441, UN weapons inspectors returned to Iraq. Their leaders reported to the Security Council on 27 January. Under the resolution, the onus is on Iraq to provide evidence to unanswered questions. Evidence has not been found of chemical, biological, or nuclear weapons, but because Iraq has not adequately accounted for material which was still unaccounted for in 1998, suspicions remain that it has retained a capacity to produce chemical and biological weapons.

The head of the UN Verification, Monitoring and Inspection Commission, Hans Blix reported that Iraq was co-operating on process but not on substance with the UN’s requirements. He wants answers to specific questions about materials and missiles related to chemical and biological weapons; he wants unimpeded access to scientists who may be involved; and he wants guarantees that U2 surveillance planes will not be shot down if used. Iraq should meet his requests in full.

Meanwhile the United States has positioned large numbers of forces and equipment in the Middle East for use against Iraq. A small number of other countries, including the United Kingdom and Australia, have also done so.

Last week the United States Secretary of State, Colin Powell, addressed the Security Council. He did not present further concrete evidence of Iraq’s weapons programmes, but did present a case based on intelligence which strongly suggested a pattern of deception and concealment of such programmes.

Following that presentation Mr Blix and the head of the International Atomic Energy Agency, Mr El Baradei, have returned to Iraq to impress on it that only full compliance with the UN’s requirements that it disarm and be seen to disarm will prevent the serious consequences warned of in resolution 1441. They will report back to the Security Council on Friday 14 February.

The New Zealand Government, like most governments, has sought to uphold the principles of multilateralism, the international rule of law, and the authority of the Security Council throughout this crisis. We do not support unilateral action against Iraq. We place considerable weight on the inspection and disarmament process which has been established. We have a strong preference for a diplomatic solution to the crisis. We recognise that the Security Council can authorise the use of force as a last resort to uphold its resolutions. We do not believe that such authorisation would be justified while weapons inspectors are still engaged fruitfully in their inspections with the objective of disarming Iraq, and we support them continuing their work.

The reality is, however, that unless there are now dramatic developments within Iraq itself and in its level of co-operation with the inspectors, there is likely to be armed intervention with or without the backing of the United Nations Security Council. I repeat today our government’s call to Iraq to move rapidly to prevent the catastrophe which war would bring to its people.

If the Security Council were to sanction the use of force, New Zealand as a United Nations member would be obliged to uphold the resolution, and would consider what contribution it could make. That contribution would be most likely to be in the form of humanitarian, medical, or logistic support. It could probably most usefully be made at the end stage of the conflict when the huge task of meeting Iraq’s needs for reconstruction and humanitarian support would have to be tackled by the international community.

Government officials are now looking at how New Zealand could work with the international community to meet those needs subsequent to military action. The New Zealand Defence Force’s engineering and mine clearance expertise is well regarded in the United Nations and may be called on. Some kind of peacekeeping operation could also be established by the UN.

By this time next week, the world will have a clearer picture of whether there will be war in Iraq or not. The New Zealand Government supports the weapons inspectors continuing their work if they report that they believe they can continue to make progress. That has to be preferable to the consequences of war on the people of Iraq and to the implications war could have for the wider Middle East, for international terrorism, and for the United Nations itself.

Iraq is of course not the world’s only trouble spot. North Korea’s admission of a nuclear weapons programme and its intention to withdraw from the Nuclear Non- Proliferation treaty are of great concern. The nuclear stand off between India and Pakistan last year heightened concern about nuclear weapons proliferation, and reinforces the need for New Zealand to be proactive on disarmament issues internationally. Progress on an Israeli-Palestinian settlement is badly needed. And our government will continue to press for more resolute Commonwealth action on Zimbabwe

The gravity of these issues leads New Zealand to be engaged in international consideration and resolution of them. But, as I have outlined in today’s statement, the government has a very heavy domestic programme. Our sights are firmly set on lifting New Zealand’s economic performance, ensuring that the rewards of that are widely shared, and on building a cohesive, inclusive, and both forward looking and outward looking nation.

This minority coalition government’s success owes much to the commitment of the Progressive Coalition Party to stable and progressive government. It also owes much to the stability provided by United Future as a confidence and supply partner and we will continue to build on that relationship this year.

The working arrangements we have with the Green Party are also important in progressing legislation which is critical to this social democratic government.

I look forward to a year of steady progress on the agenda outlined today as we work to offer more opportunity and security and a better quality of life to all New Zealanders.

ENDS

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