Tuesday 24 October 2000

Rt Hon Helen Clark
Prime Minister

Presentation to
Business Forum

Buddle Findlay Telstra Business Centre
Auckland

Tuesday 24 October 2000
12.30 pm

Thank you for accepting the government’s invitation to come to today’s forum. Thank you also to Buddle Findlay for being our host and to Ernst & Young for hosting the dinner this evening.

Today’s forum comes ten and a half months after our new government took office. It has been an interesting time. The national mood has seesawed from the heights of euphoria around the Americas Cup to the depths of depression over the Olympics. In April/May we were told by the Reserve Bank that the economy was growing fast and monetary tightening was necessary. Then, within months, there was concern about the slow pace of growth.

On top of that New Zealand has been affected like almost everybody else by soaring oil prices and a soaring United States dollar. That has brought inflationary pressures, suppressed to a certain extent by the much greater competitive pressures within the domestic economy today.

On the flip side of the depreciation of the New Zealand dollar, however, has been a surge in returns for exporters, assisted in the case of farm produce by generally reasonable commodity prices and climatic conditions.

Clearly many of the events affecting the economy this year are beyond the control of government or business. But that is not a reason for doing nothing. The reason the government has called this forum together and the reason I believe that all those attending have come is that none of us are satisfied with the overall performance of the economy in the past and the present, and we want to be part of shaping a stronger performance in the future.

There is no point in attributing blame for why things are the way they are, nor in spending a lot of time describing the problem. Just as the policies of the 'eighties and 'nineties moved us on from the high deficit, high subsidy, heavily regulated environment which had gone before, so now must we move on from the era of costcutting and deregulation. While it has produced the goods in terms of a more efficient and flexible economy, the new era needs to emphasise growth, innovation, new business creation and investment. Globalisation is creating new challenges which we will ignore at our peril. If we don't create the conditions for our talented people and enterprises to thrive, others surely will.

Over the past four months the new Science and Innovation Advisory Council, chaired by Rick Christie and reporting to me, has worked on developing a vision and proposals for building a world-class innovation system which delivers social and economic benefits for all New Zealanders. We are taking it as read that New Zealand must speed up its economic transformation to becoming a knowledge-driven economy and society and that achieving that is our key challenge.

While the exact wording is yet to be finalised by the Council, the vision is to see New Zealanders as innovators to the world, turning great ideas into great ventures. In broad terms, achieving that vision requires the opportunity:

 for every New Zealander to have the positive, can do, give-it-a-go, and dare-to-excel attitude which ensures we live and breathe innovation
 for our education institutions to prepare young New Zealanders to contribute to growing and sustaining a knowledge economy
 to optimise New Zealand’s already world-class research and science to fuel our economy further
 to ensure that every enterprising New Zealander with a great idea has access to the capital and the management expertise required to realise their idea fully.
 To ensure that we have the people and the technology to realise our innovation vision.

The government subscribes totally to that vision. In the coming weeks and months, the Science and Innovation Advisory Council will be working with us on detailed proposals for realising it. Across our government departments, agencies, and advisory groups, work is going on in support of that vision. And, I know that out of today’s discussions will come many contributions to take that vision forward.

While acknowledging the need to move on and to embrace change, the government doesn’t intend to throw the baby out with the bathwater. Yes, we have made moderate policy corrections in areas like industrial relations, but what is of far greater significance are those economic fundamentals which have not changed. For example:

 the Reserve Bank Act has not changed
 the Fiscal Responsibility Act has not changed
 the government has budgeted for good surpluses and will continue to do so
 government spending is actually decreasing as a proportion of GDP, and
 the government is committed to promoting open world trade.

What we recognise though is that these fundamentals on their own are not enough. If they were, the economy would be in better shape after fifteen years of commitment to them than it is today. We need a series of new initiatives and policy settings to meet the challenges of the 21st century.

In a range of decisions taken over the past ten and a half months, the government has embarked on new initiatives and settings. But more can be done and must be done. We are looking for your input on that today. To build greater prosperity, much stronger partnerships are required between government and business and education and research institutions. We have the capacity to do so much better.

Let me highlight some of the priority areas:

1. Education

We have already acted to make tertiary education more affordable. Fees have been stablised for next year and the cost of loans has been reduced. The aim is to increase the level of participation.

But the next challenge is to attract more students into areas of real skill shortage. We do need more applied scientists, technologists and engineers. It is suggested, for example, that the economy is short right now of around 1,000 software engineers and that there is an emerging shortage of food technologists.

There are real opportunities here for young New Zealanders with the right skills. How, together, can government and its agencies and business get the message across and get the students into the necessary courses?

In trade and technical training, a lot is happening. There is a new modern apprenticeship scheme and increased funding for industry training overall. But how can we improve further the responsiveness of our industry training systems to the needs of the economy?

In the compulsory education sector there is now much more emphasis on both the basics and the new technology changes. Chief executives in the high-tech sectors are working with us right now on how to turn the digital divide into a digital opportunity. All schools are now required to give priority to achievement in literacy and numeracy and in a new initiative 121 resource teachers of literacy are being deployed.

I want to stress that there will be no dumbing down of education standards under this government. Mediocrity will not do. We aim to raise standards. We are investing significantly more in the low decile schools for precisely that reason. Closing the gaps has never been about dragging standards down, but about pulling the lower achievers up. We applaud and fully encourage the many business initiatives to interact with and provide mentoring services to low decile schools. Your efforts do pay a big dividend.

2. Research and Development
Government spending on research and development was increased by ten per cent in our first budget. Of the $43 million extra, almost half goes direct to the private sector – and there has been a very heavy demand for that funding.
Not withstanding that, there continue to be calls for more to be done. Our concern has been that poorly designed initiatives lead to a loss for government revenue without a significant commensurate increase in research and development. We look forward to your ideas on this vexed subject today!

3. Immigration

It is well known that since early 1998, New Zealand has experienced net migration loss. The good news is that the trend is slowing. But it needs to slow faster and turn into net migration gain.

Without doubt New Zealand’s immigration policy and procedures have been too slow to adapt to the fast changing global labour market and its premium on skills. As fast as others poach our talented people, we must poach theirs. We may not be able to compete on salary, but we are highly competitive on lifestyle and on providing a safe society to live in by world standards. That means a lot to families seeking a fresh start.

I hope new approaches to immigration will be discussed today, along with ideas on how to spread migration gains beyond the major cities.

4. Investment

New Zealand needs more high quality, direct foreign investment. Some initiatives are under way within Trade New Zealand and Industry New Zealand to attract it.

Key sectors for investment need to be targeted and resources mobilised to ensure that the skills and infrastructure required to make that investment a success are in place. Fresh thinking on how to attract and retain that investment is welcome.

Education, research and development, immigration, and investment: these are just some of the drivers which will take us closer to a shared vision for an innovative and prosperous society. Everyone here today wants to see that vision realised, and I believe everyone here believes that fresh approaches are required to make it happen.

Let’s look ahead ten years to where we could be if we buy in to this vision.

 New Zealand would be very interconnected with the wider world and making the best possible use of information and communication technology.
 We would be not only adopting leading edge ideas and technologies, but also be innovators in those ideas and technologies.
 Our country would be made up of a series of ‘global villages’ which attract and nurture talent.
 Those global villages would be good places to live in, offering a unique combination of cosmopolitan lifestyles, a fantastic physical environment within easy reach, and a unique New Zealand sense of identity.
 The seed bed of the economy would be a dynamic small business sector which is enterprising and committed to quality and innovation in products and services.
 We would be a nation of diverse traders, world leaders in our areas of specialisation, and alert to changing opportunities.
 More of our emerging companies would become global companies with a commitment to operating from their New Zealand base.
 Having more globally oriented companies in leading edge sectors would make New Zealand a more attractive place for companies from elsewhere to relocate in.
 The New Zealanders who create and sustain this new economy would be well educated, have access to appropriate vocational training, and have a strong appetite for future economic and business growth
 New Zealanders would be enterprising in all aspects of their life – in sport, in business, and at work, in community and neighbourhoods, the arts – and would hold their most successful citizens in high esteem.
 New Zealanders would be earning substantially higher incomes, and there would be more jobs, and lower unemployment across all groups.
 There would be an improved transport and communications infrastructure throughout New Zealand, and
 There would be a social infrastructure which provides the security people need to be able to take risks and maximise their opportunities.

That new New Zealand is achievable. Certainly the government is prepared to play its part in getting us there. But we can't do it on our own. The change that needs to happen needs goodwill and a commitment to partnership. It needs us all to be looking forward, not backwards.

My invitation to business today is to join us in that partnership. We don't ask or expect business to endorse everything we do. But if New Zealanders are to become innovators to the world, turning great ideas into great ventures, then business leadership is needed alongside government leadership. Government in the 21st century can lead, facilitate, co-ordinate, act as a broker, and where appropriate fund and provide. But it takes two to tango.

This government will be active in promoting investment, exporting, business, regional and job growth.

It will manage its finances responsibly, keeping within the spending cap it has set.

It will seek to balance the needs of the market with the needs of society. Too much market leads to social fragmentation and despair. Too much on the social side kills the goose which lays the golden egg.

The government will promote an inclusive, high trust economy and society, where government itself is open and predictable, where core values are widely shared, and where all New Zealanders feel they have a stake in the outcome.

What will change New Zealand is attitude and commitment at every level. Without question our national self esteem has suffered from decades of drifting towards the bottom of the OECD class. But we don't have to stay there. It's within our power together to change that status. We are all in this together.

Today's forum is designed to be free and frank and to let the ideas flow. Please don't hold back. Everyone here has a lot to contribute and we want to hear it.

The outcome of the forum is in the hands of the participants. Some may want to work on specific initiatives arising from today, in the way the digital divide group is already doing with government ministers. Others may wish to form loose networks to liaise with ministers, or to feed in ideas to a body like the Science and Innovation Advisory Council which I see having a key role. There may be a desire to meet again to review progress within a certain time frame.

All that is over to you. What I want to emphasise is that the government is genuine in wanting to involve business in a sustained effort to lift national performance to offer people more opportunity, better rewards, a better quality of life, and greater economic and social security for our nation overall.

ENDS

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