Office of Hon Jim Sutton

COLD STORAGE ASSOCIATION SPEECH:

15 October 2000

Hamilton

Ladies and Gentlemen: it is good to be with you today. Prime Minister Helen Clark sends her apologies ? with any luck, I'll be a satisfactory replacement!

As minister of both agriculture and trade negotiations, I am delighted to be here. Your industry contributes significantly to the wealth of New Zealand.

Your association is made up primarily of cool and cold storage operators working within the primary production sector. It is to you that the suppliers of meat, fish, cheese, and butter entrust their products.

I daresay that at the moment, your storage facilities aren't all that full, as exporters take advantage of the low New Zealand dollar to send more products overseas. Perhaps you're thinking of installing revolving doors with products coming in only to head right back out again!

All in all, the rural sector is in good heart, though we would all appreciate it if the weather improved.

Primary products are still more than 60 per cent of New Zealand's export earnings.

The rural sector has shown an ability to adopt new technology and to take advantage of opportunities. That's demonstrated by the surge in growth in the agricultural sector in the GDP figures published a couple of weeks ago.

I was acting finance minister when those figures came out. Although the gdp figure for the past quarter ? June, July, August ? was negative, that is expected to change significantly, and figures for the current quarter are likely to be much higher. Annual growth is tipped to be about 3 per cent ? more than healthy.

The increase in the ANZ job ads series over September indicates that the slough which afflicted the economy in the June quarter will be short-lived.

The rise in the large Auckland market is particularly encouraging, coming as it does after eight months of decline.

But the real strength is in provincial and export New Zealand. Job ads show that the recovery is happening now in our regions. In the south of the South Island, very high levels of confidence and activity are occurring and in many other provinces business confidence is steadily improving. A survey predicting that more than 1800 jobs will be created in the next two years, for instance, has buoyed Northland. That has got to be good for us.

Provincial and rural New Zealand is where the economic powerhouse of the country is.

As both minister of agriculture and minister of trade negotiations, I spend my time trying to make things easier for farmers, exporters, and others ? such as yourselves ? in the supply chain.

I have just returned home today from a two and a half week trip to Thailand and Canada, where I went to two meetings aimed at liberalising trade. That is, reducing the barriers that stop us selling more of our products in overseas markets.

The first meeting in Thailand, at Chiang Mai, discussed a proposal to link the trade agreement between New Zealand and Australia with the trade agreement of the ASEAN countries. No doubt, you'll have seen lots of negative media coverage about that meeting.

Let me assure you, the wheels have not fallen off. In fact, the meeting's resolution to have officials work further on the proposal is extremely positive.

Trade agreements do not happen overnight.

The GATT Uruguay Round which resulted in the World Trade Organisation took 13 years to achieve. Even CER, an agreement between just two very similar countries, took seven years. A link between CER and ASEAN was never going to happen immediately.

But progress is being made and I intend to keep working for more.

Economists have estimated that the benefits of such a link up between CER and ASEAN would be worth $8 billion ? yes, billion ? to New Zealand over 20 years. I don't intend to let that go by without doing something about it.

The other meeting I attended was the Cairns Group meeting of agricultural trading nations. Again, trade liberalisation was the subject.

Agriculture is one sector which has high tariffs, low quotas, and many other barriers. The Cairns Group is working to improve access in world markets.

New Zealand's well being depends on our ability to trade with the rest of the world.

The Labour-Alliance Government is offering active encouragement to help new businesses get off the ground and to assist established businesses develop new markets.

We hope to be able to announce shortly a programme of export credits to help exporters into new markets.

New Zealand has a legacy of over dependence on domestic consumption and housing as the engine of economic growth.

We have set out quite deliberately to shift the emphasis of growth from the consumption of wealth to the production of wealth. We are actively supporting the move to the 'knowledge economy' or 'info-tech' as it is known in the U.S. The health of the export sector is a top priority and we recognise that we need to put in place policies to help lift our national savings rate.

This is a hands-on administration that wants to engage in constructive debate with business. Later this month the Government is hosting the first of its economic business forums. Prime Minister Helen Clark has invited key business leaders and talented individuals to a forum with government ministers to identify policy initiatives to improve New Zealand's economic performance.

We recognise the limitations on what governments can achieve on their own. That is why we actively seek partnerships across the economic sectors and society as a whole.

I think the Government has had some difficulty in making our voice heard. Business confidence surveys make headlines no matter what the businesses are actually achieving. So it is very important to keep putting up the facts to both local players and the international investment community. The Government is very moderate in terms of its overall policy positions. We have maintained a strong fiscal stance, a strong monetary stand, and an independent central bank.

BERL economist Ganesh Nana said recently that New Zealand should be looking forward to three or four years of solid export growth but that the doom and gloom being preached by some parts of the community could spell the end of that expectation. Mr Nana wisely acknowledges that public perception plays a major part in driving the economy.

Perception shapes how we see ourselves in terms of the modern economy. There is a notion percolating out there that somehow New Zealand is more part of the 'old economy' rather than the new 'knowledge based economy'.

The irony is, that for New Zealand, this is simply wrong. There is a tremendous amount of innovation out there, a very high level of IT uptake.

New research shows some surprising results to those who, to quote the author, "wail and gnash over New Zealand's alleged failure as a knowledge economy". A study measuring the relative levels of IT penetration and productivity across the Asia Pacific region has New Zealand leading the way for the second year in a row.

The report points out that New Zealand has the infrastructure in place to produce high-value, knowledge-based products and that, as a nation, we manage that infrastructure exceedingly well.

New Zealand also receives a bouquet for being the only country in which the levels of IT penetration in small companies exceed that in large corporates. That highlights the fact that when it comes to generating growth, our small companies are still where the action is.

The $2 billion Southern Cross Cable, which is expected to go live on November 15, links New Zealand, Australia and the United States and will allow for the huge volume of Internet traffic that Australasia is expected to generate.

New Zealand's widespread and enthusiastic adoption of IT has put us way ahead of many other more tentative countries. It has generated a thriving software industry. We spend 7 percent of GDP on IT ? among the highest in the world.

And yet, there is a feeling among some that being new economy must mean being Silicon Valley. That is not so. Being part of the new economy simply means that we apply the application of information technology, new ideas, research and development to a broad range of economic activity.

Agricultural companies have shown an excellent ability to do so.

A great example of this is the New Zealand Dairy Group's success in extracting complex lipids from milk fat to use as a key ingredient in baby care formulas and cosmetics.

Supported by Technology New Zealand and Industrial Research, NZ Dairy Group is reaping the benefits of this country's 100 percent pure, GM-free image in multimillion-dollar export earnings.

The government is actively encouraging e-commerce to make our commercial environment modern and relevant. There have been strong moves to encourage young New Zealanders to upgrade their skills. Suspending interest on student loans while students are studying, and moving to establish a Modern Apprenticeship programme are examples. A strategic review of tertiary education is under way.

The government is upgrading its commitment to science, improving the regulatory framework for electricity and telecommunications, increasing the resources for trade promotion and the provision of information to exporters about trade opportunities.

In closing, the fundamentals of the New Zealand economy are healthy and on track.

We produce some excellent products, particularly our food, which we export all over the world, and your industry plays its part in that. Exporting is the way to ensure our country's prosperity. The Government is working hard to ensure that more products can be sold in more markets to give you, your suppliers, and farmers more work to do!

Thank you for your contribution to New Zealand's export growth. I wish you well for the rest of your conference and every success in the future.

ENDS

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