Tuesday 14 February 2006

Rt Hon Helen Clark
Prime Minister’s Statement to Parliament
Parliament
Wellington

Tuesday 14 February 2006

Three months ago the government’s agenda for this three year parliamentary term was set out in the Speech from the Throne delivered by the Governor-General.

That speech and that agenda were optimistic and realistic, and visionary and practical.

Labour and the Progressive Party are not in government to manage the status quo – it’s never good enough.

We are in government to make a difference for the better.
We want our country to be more affluent and dynamic.

We want all our families, young and old, to enjoy more opportunity and security, and to share in the progress the country makes.

And we want to build pride in the unique national identity of New Zealanders, and to celebrate the achievements and successes of our people, past and present, who have brought great credit to our country.

Last year, New Zealanders didn’t elect to government those parties which ran New Zealand down and predicted a grim and dreary future – and those in opposition are still at it.

New Zealanders didn’t vote for a government which threatened to put the achievements of the last six years at risk.

On balance, New Zealanders voted for those who would keep building on the solid progress our country’s been making over the last six years:
• growing the economy;
• dropping the level of unemployment to the lowest level in the western world;
• investing heavily in the critical services of health, and education, and policing;
• promoting our rich culture and unique identity;
• protecting our environment;
• and maintaining our nation’s reputation as principled, independent, and nuclear free.

These are the core policies which most New Zealanders look to the government to provide.

These are the core policies around which Labour and the Progressive Party have been able to form both governments and working arrangements with other parties over the past six years, and now for a third term.

While it’s important for individual parties to maintain their own distinctive brands and perspectives, it’s also possible for those with goodwill to work together in the interests of New Zealand.

That’s the approach Labour has followed with diverse parties over the past six years, and that’s the way we will work this term as we build on what we have in common with others to take New Zealand ahead.

Our policy programme balances economic and social policy.
We need a strong economy to deliver the living standards, the services, and the quality of life which the citizens of our first world country expect, deserve, and are prepared to work for.

A strong economy in turn needs healthy, well educated, highly motivated, and confident people to drive it to ever greater achievements.
That’s why the deregulated labour market and underinvestment in health and education of the 1990s could only ever deliver a low wage, low skill, low value economy.

Our job in government has been to stop New Zealand running the race to the bottom, and to aim for the top.
Labour takes the high road to growth and development based on skills and opportunity.

There’s a world of difference between Labour’s ‘New Zealand way’ of promoting higher wages based on higher skills, innovation, productivity, and sustainability – and the right wing parties’ standard prescriptions of slashing the tax base and public spending, cutting back on employees’ rights and protections, sacrificing the environment, and deregulating and privatising.
That was the agenda New Zealanders revolted against in 1999, and have rejected ever since.

The last six years have seen good economic growth averaging close to 3.8 per cent per annum. That’s better not only than OECD averages, but also better than the growth rates in our top three trading partners – Australia, the United States, and Japan – over the same period.

For those interested in comparisons with Australia – from 1999-2004, our GDP per capita grew at a rate nearly forty per cent higher than Australia’s.

Can it be a coincidence that in the previous five years, when National was in power with a different set of policies, our GDP per capita grew forty per cent more slowly than Australia’s ?
Labour’s policies have worked – National’s didn’t.

Five months ago, in the election campaign, National refused to debate the economy. In fact, they conceded it had gone well, and wanted a big spend up on tax cuts.

So what’s changed? Five months down the track they’ve decided to run the economy down, claim it’s weak, and pray for a recession.
That isn’t credible. The economic projections now are fundamentally as they were five months ago.

We are managing our way through a dip in the business cycle – and it’s important to keep the dip in perspective.

Under National the business cycle bottomed out in the late 1990s at around zero growth.

Treasury projections now are for a bottoming out of 1.7 per cent growth in the March 2007 year.

There are years in New Zealand’s recent past when we would have grasped 1.7 per cent growth with gratitude!

We are also managing our way through the dip in the business cycle against a record of creating a very strong labour market – which is still crying out for skilled and unskilled labour.

Based on last week’s employment figures, it’s estimated that 293,000 more New Zealanders are in work now than there were six years ago.

It is never easy getting redundancy notices, but the government commits through the Department of Work and Income to making every effort to help people to get into new jobs – and, indeed, the Department reports good progress in helping workers affected by recent lay-offs.

New Zealand does, after all, have the lowest unemployment in the western world.

The reality is that our economy is more resilient than it has been in the past – because it’s undergoing a transformation.

Economic transformation has always been central to this government’s economic policy.
We look at how we can add value to the private sector’s efforts to take their products and services upmarket.

That’s why, for example, we’ve:
• doubled the skills training numbers;
• changed the immigration points system to focus on recruitment to vacancies in the job market which can’t be filled here;
• boosted R & D spending by over fifty per cent;
• supported regional, industry, and business growth strategies;
• embarked on huge infrastructure upgrades in transport;
• worked to open up opportunities for exporters through trade policy and FTAs, and through New Zealand Trade and Enterprise programmes;
• looked to leverage advantage for New Zealand wherever possible off major events like the Americas Cup, blockbuster and local movies, and now the 2011 Rugby World Cup.

We are passionate about New Zealand and its potential – and we’ll do whatever we can to see this country succeed.
Now it’s time to move to the next level in the economic transformation agenda.

Our country needs more globally competitive firms.
We need higher productivity, business investment, and skills levels, and more innovation in the economy.

We need to remove the infrastructure constraints which hold back world class performance in Auckland, our only city of international scale, while ensuring our regions continue to thrive.

And we need to work closely with business, workers’ representatives, educators, scientists, regions, and communities to lift our level of ambition about what can be achieved for our country, and lift our nation’s economic performance further. In Maoridom, the Hui Taumata has pointed the way ahead.

This year the government will be working to advance all these objectives.
The top priorities will be:

• The major review of the structure of business taxation. This forms part of the confidence and supply agreements with United Future and New Zealand First. Proposals are being prepared for public consultation in the middle of the year. They will be aimed at encouraging business growth and productivity. Already legislation is before Parliament to allow for accelerated depreciation rates on short life assets.

• We will also be taking a fresh look at regulatory frameworks. Feedback from business suggests that higher quality regulation would lead to more growth and investment – and we want to engage with business on how to achieve that.

• It’s become very clear that new initiatives are needed to get faster internet access and at more competitive prices. Broadband is a critical enabler of productivity, growth, and economic transformation, yet New Zealand is lagging behind on many broadband indicators. For example:
o Our connection speed offerings are on average still too slow.

o Our standard upload speed has been too slow for many users and has inhibited some important applications and development of advanced services.

o We are one of the few countries where restrictive data caps have been the norm.

o The latest OECD rankings on the average per person investment in telecommunications infrastructure placed us at 22nd out of thirty nations.

o Similarly, the OECD’s mid 2005 rankings for the level of broadband uptake also placed us at 22nd out of thirty.

These results are unsatisfactory. While recent announcements of price reductions and other changes are welcome, the government will be addressing the relevant policy, legislative, and regulatory settings as a matter of urgency.

We want to work with other parties on solutions which not only enable New Zealand to catch up with the rest of the world, but but also enable us to keep up as these technologies develop further.

• We will be looking to boost science and research funding further, and to develop a more secure funding path. We also want to strengthen the incentives for greater collaboration between Crown Research Institutes, tertiary institution researchers, and industry. That would help realise the potential for far more commercialisation of our innovations here in New Zealand.

• We will be refocusing spending programmes in the economic development area to impact more directly on productivity and innovation, and on export potential, leading up to the Export Year in 2007.

• Sector strategy development alongside industry will be important in key areas like food and beverages where a taskforce is currently working, and in primary sectors, like forestry and pip fruit, which face challenging international market conditions.

• Rolling out major infrastructure programmes:

Investment in energy projects overall has picked up, but critical decisions are due on how best to guarantee power to Auckland for the longer term. Once the Electricity Commission has reported, firm decisions can and must be taken.

Transpower has its option on the table. The job of the Electricity Commission is to test whether Transpower’s, or other options, should take precedence. But only one outcome is acceptable: adequate and secure power supply for Auckland.

Equally critical for Auckland is progress on its land transport infrastructure.

This will be challenging given that high oil prices have reduced fuel consumption, and therefore reduced revenue from fuel tax. As well, the pressure on construction capacity has been escalating costs. The government will be working closely with the transport agencies, local government, and Auckland stakeholders and communities to meet the goals we have set for major improvements over the next decade.

Auckland cannot realise its potential as a world class international city if people and goods cannot move rapidly through it.

Ports of Auckland and Auckland International Airport are first and second respectively in forwarding our exports by value. Auckland International Airport is the second busiest in Australasia, and it greets seventy per cent of our international visitors.

These two great assets cannot perform to their full potential if the transport infrastructure lets them down.

• Meeting New Zealand’s Kyoto commitments and maintaining the integrity of our environment are also part of the economic transformation agenda. The old polluting ways won’t do.

President Bush, in his State of the Union address this year said that the United States must end its addiction to oil. We too must be at the forefront of the new, cleaner technologies and biofuels, and of sustainable development.
In the coming months the government has a Kyoto – related work programme running across policy for land use, forestry, energy, agricultural and transport emissions; science, research and technology; regulation; and emissions trading.

We are looking for solutions which enable our economy to be cleaner, more energy efficient, and more sustainable – and to create opportunities for our companies to be more profitable too. The work the Green Party is doing with the government on this issue will be important in reaching these goals.

• Decisions were taken last year on lifting the value of spending on tertiary education and skills – and cutting out the opportunities for wasteful spending on poor quality courses inherent in the old funding system. Further initiatives will be taken this year to ensure spending lines up well with New Zealand’s economic and social needs.

These and many more initiatives are central to the government’s drive to take New Zealand’s economic transformation to the next level.
Our country’s made a lot of progress, but we need to lift our sights and our level of ambition even higher.

As fast as we make progress, others are coming up fast behind – not least the mega economies of China and India, and the new member countries of the EU which will be looking to rival New Zealand’s living standards. We have to stay ahead.
Going back into our shells won’t do the trick. We need to build on the open, competitive economy we have now.

• That means continuing to give top priority to our trade policy agenda of opening up markets for New Zealand.

The next few months are crunch time for the WTO Round – which could deliver especially big gains to our primary sectors.

As well, our negotiators go into the sixth round of FTA negotiations with China and Malaysia, knowing that success there will also deliver for our economy. Legislation giving effect to the new Trans-Pacific trade agreement with Singapore, Brunei, and Chile will be passed this year.
What is critical is that the gains we make for our primary sectors from lower tariffs and better access aren’t just banked as a reason for not making further change in those sectors.

While the primary sectors are making real progress in moving more of their exports away from commodities and moving up market, there will need to be faster progress.

We can’t compete on volume and price with mega-producers like Brazil, and others like Argentina and Chile. We have to compete on value and branding.

The government will do whatever it can to work alongside our primary sectors to speed up the rate of change required to secure New Zealand’s future prosperity.
I come back to the present state of the economy at this point of the business cycle – it is in neither crisis nor recession despite the fervent prayers of the Opposition.

At the bottom of the cycle:
• Growth is continuing at rates which would have been deemed very respectable in most of the developed world in recent years.
• Unemployment is low and there is a continuing demand for labour.

• The latest international consumer confidence survey found New Zealand the second most optimistic country in the world.

• The latest merchandise trade figures reported a rebound in exports and a fall in import values.

• December’s dwelling consent figures surprised on the upside.

• Inflation in the year to December was down.

• The government’s fiscal position is sound.

New Zealanders can continue to rely on the Labour-Progressive government putting in place good policies for the medium and long term to strengthen the economy – and managing through the dip in the business cycle in a measured way.

That’s in stark contrast to the vacuous slogans and banshee wails of the opposition.

The second major priority area for the government this year and this term is ensuring that families, young and old, are able to be secure and have the opportunity to reach their full potential.

April 1 this year will see:

• A big extension to Working for Families with 60,000 more families becoming eligible. All up, 350,000 families will be entitled to family tax relief in 2006.

• An increase in the rate of New Zealand Superannuation – in line with the confidence and supply agreement negotiated with New Zealand First, to boost senior citizens’ living standards.

• No interest will be payable on student loans for those staying in New Zealand. This is very positive for our families and young people who haven’t been able to get ahead because of the weight of their student loans.

On 1 July :

• There will be big improvements in the rates rebate scheme – easing the burden of rates on many superannuitants and others on modest incomes.
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• The next phase of the roll out of more affordable primary care occurs – extending lower doctors fees and prescription fees through the PHOs to 45 – 64 year olds.

• Paid parental leave is extended to the self employed and the qualifying time for a second period of leave is reduced to six months, and by 1 April next year all workers will be entitled to four weeks minimum annual holiday.

On 1 October:

• income thresholds for both Out of School Care and childcare subsidies increase making more families eligible for help with those costs.

This year the government will also be working to get in place the planned improvements in access to early childhood education and childcare, with the twenty hours free for three and four year olds due to take effect in 2007. The following year, new teacher-child ratios of 1:15 in new entrant classes are planned for introduction.

Paid parental leave, four weeks holiday, and access to affordable, quality child care are all critical to achieving a better work-life balance for our families.

• This year the legislation setting up KiwiSaver will be before Parliament. The new scheme encourages savings for retirement and for first home ownership.

The government will also be developing policy on shared equity initiatives to help first home buyers, drawing on the United Kingdom experience.
• In health, there are important targets to meet in the delivery of orthopaedic and cataract surgery, and work to be done on lifting productivity across the sector. Again the United Kingdom experience on targets and contracting may be useful.

• Labour has targeted child health initiatives in its election policy – across well child, hearing, and pre-school checks. We will be looking for fresh policy to tackle child obesity – our rates are disturbing, and will deliver poor health long term to many of our people at a very high cost to the tax payer.

• Work will be stepped up this year on a new benefit structure, aimed at offering the same range of case management services for employment to people across the current separate categories. The aim is to help all on benefits reach their full potential, and to ensure that those who are able to work get both a chance and the support to do so.

We are pleased at the continuing drop in overall benefit numbers, now down 25 per cent – almost 100,000 people – since 1999.

Unemployment benefit numbers have dropped seventy per cent since 1999. In the past year, the numbers on Domestic Purposes Benefit have decreased and there is a steep decline in the growth rate of the numbers on Sickness and Invalid’s Benefits. These results have been achieved by opening up real opportunities – not by impoverishing beneficiaries or placing them on make work schemes. • This year has been designated the Year of the Veteran, and events will be held around New Zealand to honour our veterans and their service to our country.

• Work will be done by the government and New Zealand First on the development of a Seniors Card.

In the justice and security area we will: • Begin the build up towards the 1000 more police promised for this term.

• Get more prison capacity in place to accommodate rising prison populations, but also take initiatives aimed at reducing that trend.

• Give priority to law reform proposals already received from the Law Commission which update key statutes, for example in the property law area.

• Other legislation to be prioritised this year will include the Lawyers and Conveyancers Bill, an amendment to the Employment Relations Act clarifying the position of vulnerable workers, and bills on an independent prison complaints authority and pandemic preparedness.

The economic and social policy successes of the past six years have been a source of pride to many New Zealanders. Indeed it’s hard to build a strong, proud nation without having economic and social success. But there’s much more New Zealanders take pride in about our country. We celebrate our sporting and cultural successes, our creativity and unique heritage, our cosmopolitan lifestyles and great outdoors, and our ability to live largely at peace with each other in our multicultural society. There is an evolving New Zealand way of doing things, and a stronger New Zealand identity is emerging. It’s important to develop that distinctive New Zealand style, identity, and set of community values.

As a government we will continue to prioritise policies which contribute to a strong sense of national identity. A remarkable sporting year in 2005 was capped by winning the right to host the 2011 Rugby World Cup. This was achieved by a partnership between the New Zealand Rugby Union and the government. That partnership is ongoing to ensure that New Zealand gets the maximum economic benefit and leverage from hosting the Cup. 2005 was also a remarkable year for New Zealand made movies. Who could have imagined a decade ago that two of the three blockbuster movies released pre-Christmas world wide would have been made in New Zealand by New Zealanders? The major international investments in King Kong and the Narnia film were secured with the support of the Large Budget Screen Production Grant Scheme set up in 2003.

The New Zealand movies keep coming too, benefiting from increased government funding. The World’s Fastest Indian, River Queen, and Number 2 have all premiered recently – all telling different aspects of the New Zealand story: of the determined Southlander; colonial settlement and Maori resistance; and Pacific peoples’ settlement in our country. Through film, and through the successes of our music and other performing and visual arts, New Zealand is growing its reputation as a creative nation which has much to offer the world. Critical to our nation building is our ability to reconcile our past and adjust to the diversity of our present times. Both can be uncomfortable. But the efforts New Zealand is making are pioneering – both through the Treaty settlement process and through the efforts we make to build social cohesion and tolerance. More Treaty settlement legislation will be before Parliament this year.

Part of the emerging Kiwi identity is the extension of our support for reconciliation and respect for each other at home to the international arena. Kiwi peacekeepers are respected wherever they are deployed. We are perceived to be a voice for dialogue and moderation across civilisations and faiths. Next month we will be a co-sponsor of the Asia-Pacific Inter Faith Dialogue in the Philippines. Peace and tolerance in our region and the world matters to us.

In the last two years, the Growth and Innovation Advisory Board surveyed New Zealanders’ attitudes to economic growth. While not negative towards it, support for growth came with strong conditionality: New Zealanders don’t want growth to damage our unique environment. Environmental and biodiversity protection, and conservation of our wild and scenic places, loom large for our government in maintaining New Zealand as a special and unique nation.

A strong national identity is also founded on an understanding of the forces and events which have shaped our nation. Our government has worked to boost recognition of our history and heritage in many ways. This year, a New Zealand Memorial will be dedicated in London in recognition of our huge efforts and sacrifices in support of the defence of the United Kingdom in the past century. Work and planning continues on the New Zealand Memorial Park and precinct adjacent to the National War Memorial.

As well, the travelling exhibition created by Te Papa on the Treaty of Waitangi is travelling through the country, and community dialogue on issues arising from the Treaty is being developed by the State Services Commission. New Zealand in 2006 is in many ways a work in progress. Our country is on a journey – away from the old economy to a new one; improving the health, education levels, and living standards of all our people – and the services which support our needs; and building a nation from an increasingly diverse population.

Our government’s task is to provide leadership and sound policy to support that journey. I look forward to the challenges and opportunities 2006 will bring, and to working with all parties supporting or involved with the government in some way to take New Zealand ahead.

ENDS

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