Michael Cullen Speech to NZ Mussel Industry Council Shareholders Conference Montana Brancott Winery, State Highway 1, Riverlands, Blenheim

It is fair to say the last few years have been difficult for the aquaculture industry. Nevertheless, with the benefit of hindsight we can now see these difficulties as important rites of passage for an industry that is moving from its infancy towards a healthy maturity.

Some of the difficulties could have been predicted. They were things that needed to be worked through if the industry was to progress.

Any industry that depends upon natural resources has to come to terms with the other interests that exist regarding how those resources are accessed and managed.

That is why a great deal of effort has gone into finding a regime that allows growth in the aquaculture while balancing environmental and resource management issues and respecting the needs and priorities of the community at large.

The old regime was cumbersome and uncertain, and clearly unsuited to an industry that was expanding rapidly. What is more, the important question of how the Crown’s Treaty of Waitangi obligations applied to marine farming needed to be resolved carefully and in a way that would not prompt further grievance.

We chose to do the job properly, since aquaculture is too important an industry to allow it to be hamstrung by a half-baked management regime.

The result is that we now have new legislation which enshrines a simpler and clearer decision making process. This has reduced the cost of starting new ventures and increased the certainty for all of the interested parties.

As I have said, the issues addressed in the new legislation have been recognised for quite some time, and we knew a solution needed to be found.

That was not the case with the foreshore and seabed debate, prompted by the Court of Appeal’s decision in mid 2004 that countenanced Maori claimants applying to the Maori Land Court to confirm ownership of portions of the foreshore and seabed.

It is fair to say that the Court’s decision was something like the discovery of a sink-hole underneath what had been understood to be firm legal principle and precedent. My government was not about to allow what would have been a lengthy process of legal argument to rage across the whole of our Court system, possibly for many years. That would have meant an effective moratorium of indefinite length over all commercial activity around New Zealand’s coast.

Our preference, despite the risks, was to legislate for a clear and unequivocal regime for Crown ownership of the foreshore and seabed, and for recognition of the longstanding relationship that some Maori have with particular parts of the coast. I believe we have achieved that, and essentially put to bed an issue that could have divided communities for decades.

The important factor for the mussel industry now, as for aquaculture more generally, is to realise that the moratorium is over, and the way is clear towards an exciting growth path. This comes with its own challenges. Like any growing industry, yours has to face a number of familiar issues:

How to manage increasing scale and expanding market expectations;

How to invest in technologies that benefit the whole of industry;

How to build and retain a skilled workforce;

How to identify and manage industry-specific risks; and

How to get better value out of export markets through collective effort.

Industry growth requires two important factors: strong industry leadership and partnerships with government.

Industry leadership is essential in building investment in things such as workforce training, technology and export marketing.

Partnerships with government are essential in strengthening links to the education system, identifying and addressing regulatory issues, guiding scientific research and developing export strategies.

For example, Budget 2005 put additional resources into the Growth and Innovation Framework, including:

$31 million to increase the gains from international economic partnerships;

$49 million to implement the digital strategy to improve the uptake of high-speed digital communications technology;

$72 million to increase support for business research and development; and

$118 million to increase capability in scientific research.

These are investments in programmes that are already working for New Zealand businesses, boosting our productivity and expanding our capacity and the return on our skills.

My government has also pursued a philosophy of promoting and supporting industry clusters. Hence our support for the Aquaculture Forum in April, and our ongoing engagement with the development of the Sector Strategy and Action Agenda that arose from that.

Aquaculture issues, and broader fishing industry issues, will be addressed by the Food and Beverage Taskforce which has recently started work. The taskforce consists of sector leaders and the government is willing to engage with them on the whole range of issues of interest to the sector. It marks the beginning of a government and industry-led initiative to capitalise on one of the country’s fastest-growing sectors.

Of course, one of the most exciting developments for food and beverages generally has been the progress made on removing trade barriers under the WTO. My government is a firm believer in free trade and we have pursued better access in that forum, as well as in negotiating free trade agreements with China, Singapore, Chile and the ASEAN nations.

Close to home we also have the Australian market. In spite of a few hitches, there are very significant opportunities not only for increased flow of food and beverage products across the Tasman, but also for joint ventures in research, marketing and distribution. CER is becoming as important as a platform for moving into broader markets as it is important for adding 20 million consumers to our domestic market.

The other industry taskforces we have established have done invaluable work assessing the priorities for development and helping government clear away barriers to success.

As an industry made up of small to medium sized enterprises, the mussel industry shares many concerns common to New Zealand business at large, such as a shortage of skills and a desire to reduce compliance costs. These are concerns that the government is addressing in various ways.

This year we allocated an additional $300 million over the next four years to develop quality tertiary education. The package includes higher funding rates for technical and scientific subject areas including science, trades, and technical subjects. It also includes an additional $45 million to expand Modern Apprenticeships and Industry Training.

Alongside of that we have reoriented our immigration policies towards attracting the skilled people we need and facilitating their settlement here.

This year’s budget also featured a package of changes to business taxation aimed at ensuring a more productive use of capital and improving New Zealand's access to worldwide capital, skills and labour. The key elements are:

Changing tax depreciation rates to reflect better how assets decline in value. Depreciation rates for short-lived plant and equipment will increase and rates on buildings will reduce;

Raising the low-value asset threshold from $200 to $500, thereby reducing compliance costs from having to maintain fixed asset registers;

A temporary tax exemption of five years on foreign income for people who are recruited to New Zealand to work, be they foreigners or New Zealanders who have been living abroad for ten years or more;

Better access to tax deductions for R&D expenditure for companies who bring in new equity investors; and

Finally, a range of tax simplification measures including alignment of payment dates for provisional tax and GST and changes to FBT.

A successful working relationship between industry and government is about both the minutiae of reducing compliance costs and the large strategic issues. My government sees a very promising future for the mussel industry, and we have shown a willingness to engage at these levels.

That commitment will continue as you move into a new phase of growth.

Thank you.

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