Tuesday 10 February 2004

Rt Hon Helen Clark
Prime Minister

Prime Minister’s
Statement to Parliament

Parliament
Wellington

2.00 pm

Tuesday 10 February 2004

Under Parliament’s Standing Orders, I have the opportunity through this formal Prime Minister’s statement to review public affairs and set out the government’s key policy and legislative intentions for the year. I welcome this because there is a very positive story to tell about how much is currently being achieved in New Zealand, and about how much more can be achieved as New Zealanders work together to realise our country’s full potential.

The Labour-led Coalition is now in its fifth year of office. From the outset, we did not pursue quick fix solutions to the challenges New Zealand was facing. We took a longer term strategic view of where we wanted economic and social policy to go. We built the foundations for change and improvement, and now we can see the results emerging from the seeds sown much earlier in our first term.

Over these past four years and two months, a combination of continuing economic growth and careful fiscal management have put the government in a position to deliver even more in areas of critical importance to New Zealanders. This year we will deliver a further growth dividend to low and middle income families, while still maintaining a prudent fiscal stance.

Our government’s core mission is to build a confident and dynamic nation, based on an innovative, growing, smart economy which can deliver more jobs, more opportunities, and higher living standards, together with the resources to fund world class public services, especially in health and education, and world class infrastructure.

The nation we seek to build is creative; it looks after its environment; it values diversity and tolerance; it takes its responsibilities under the Treaty of Waitangi seriously; and it is a good international citizen.

This is the kind of nation we believe New Zealanders are not only comfortable with, but are also very proud of - and rightly so. After many years of seeing sluggish growth and social decay, New Zealand has picked up momentum and is moving forward on many fronts. The majority of New Zealanders are feeling the benefit.

Our government intends to continue that momentum with more policies and programmes not only to promote and support more growth, but also to ensure that the majority, and not just the privileged few, benefit from it.

Economic success is an important part of New Zealanders’ growing sense of confidence about where the country is going.

Last year New Zealand topped the OECD with an annual growth rate of 4.4 per cent. The latest annual GDP figure at 3.9 per cent continues to stand up very well internationally.

On lowering unemployment, progress has been spectacular. In the September quarter of 1999 the rate stood at 6.8 per cent. For the September quarter 2003, it was 4.4 per cent. The decline in unemployment among Maori and Pacific peoples has been huge, and we are determined to make even more inroads there.

Net migration continues to be strong, which also reflects confidence in New Zealand. In the year to December 2003, more New Zealanders came home and fewer left than in the previous year. The long term visitor arrival numbers, however, are being affected by the decline in overseas student numbers. The government will continue to work with education providers to reverse that trend by improving the quality of both the education and the pastoral care provided to student visitors.

On short term arrivals, our tourism industry continues to put in a stellar performance, earning more than $6 billion a year in foreign exchange and with its yield growing even faster than visitor volumes. That is exactly what the New Zealand Tourism Strategy, developed jointly between government, the industry, and community stakeholders, set out to achieve when it was launched in 2001.

Overall consumer confidence continues at very high levels, and business confidence is strong on companies’ own intentions. The latest quarterly survey of business opinion reported the highest level in seven years of companies intending to invest in plant and machinery in the next twelve months, and the number of companies intending to take on new employees is also very high in comparison with recent years

Indeed the demand for labour is so strong that not only do a net fifty per cent of companies report difficulty in hiring skilled labour, but also a net 27 per cent report unskilled labour shortages.

The government will continue to do everything it can working alongside industry to ease those shortages.

We have prioritised education and skills training, and we have new immigration policies taking effect this year which are more closely attuned to labour market needs.

As well, the Jobs Jolt initiatives announced in August last year aim to support many more people moving off unemployment and other benefits into real jobs. When unemployment is at a sixteen year low, it is time for all hands to be put to the wheel.

The changes to be announced in the Budget will also help by ensuring that families with dependent children are always better off when in work than on benefits.

The first two years of the Coalition Government’s term in office saw strong growth in export returns in New Zealand dollar values, at ten per cent in 2000, and over 23 per cent in 2001.

That growth came off the back of a very competitive currency. Now the New Zealand dollar’s resurgence has clipped exporters’ returns, with the biggest falls in value coming from exports to the United States and Japan.

Logic would suggest that the growth in the US economy should cause its dollar to appreciate again, and that New Zealand’s growing trade and current account deficits should also act to check our dollar’s rise in time.

Meantime the export sector is under pressure, and where the rural sector has experienced drought the problem is compounded. I know that farmers are highly competent at dealing with drought conditions, and the government has well established assistance measures when required. We do acknowledge the stress and loss of income caused by drought, and the flow on effects on rural communities.

Overall our economy is now much less volatile than it was in the past, and companies are more resilient and more responsive to changing circumstances. There has been strong growth in the processing of primary products, in elaborately transformed manufactured goods, and in services such as tourism and education.

But the changes taking place in the economy need to go further and faster. While we ignore our traditional strengths at our peril, we must be building from them, rather than relying on them in their present form.

A recent analysis by NZIER for the Foundation for Research, Science, and Technology points out that New Zealand’s traditionally strong export sectors are areas where world markets are growing only slowly and where New Zealand is losing market share.

As our commodity competitors in the developing countries get their act together, New Zealand stands to be disadvantaged. That is why the government has a sense of urgency about moving the economy up market. Firms with innovative products and services well tuned to market needs will be the price makers of the future. Commodities are destined to remain price takers.

In the last five years productivity growth has begun to make a more significant contribution to income growth and is now growing at about the OECD average. The improvements in productivity reflect the changes going on in the economy. As we increase our skills and talent base and our investment in innovation and new technologies, and as we become more entrepreneurial, market focused, and outward looking, further productivity improvements will follow.

New Zealand is making progress on all these fronts. Through the strategies, policies, and programmes flowing out of the Growth and Innovation Framework, the government is working with stakeholders to make even faster progress.

Participation in tertiary education and skills training has been rising sharply, along with funding. Three years of frozen tertiary fees helped, and now the fee maxima policy ensures that fees stay under control. The projected debt for the student loan scheme has also fallen. This year’s Budget will provide for more students to qualify for allowances from the 2005 academic year. And this year for the first time, new competitive Step Up scholarships are available to students from low and modest income families studying the health and animal sciences where we have particular skills shortages.

Record numbers are in industry training, rising from 49,000 in 1999 to 107,000 in 2002 and we aim to keep those numbers growing. The goal of 6,000 participants in the Modern Apprenticeship scheme was achieved ahead of time last year. A strong partnership between the government, Business New Zealand and the Council of Trade Unions is working to improve the supply of skills to industry.

This year’s Budget will include new initiatives to boost science and research, including in collaboration with the private sector, and to support business growth and offshore market development.

The quality of research within our tertiary education sector will also be boosted with the introduction this year of a new performance based approach to funding.

The ambitious strategies endorsed by the biotech, ICT, design, and screen production industry taskforces are being implemented by new industry bodies with the support of government funding and policy changes.

We will continue to work with the regions of New Zealand through the Regional Partnership Programme. It has supported regions to develop smart economic strategies around their areas of specialisation and strength, and encourages the clustering of businesses and sectors, identified by the Porter Project almost fifteen years ago as an important feature of progressive economies.

Increased economic and population growth have put a lot of pressure on New Zealand’s infrastructure. The government identified the need for better policies and more funding and investment in key infrastructure at the beginning of this term, and a lot of changes are being made.

Last year, the second electricity supply shortage in three years proved beyond doubt that there were fundamental flaws in the 1990s market model. Now an Electricity Commission is being established to build security of supply and ensure that there is sufficient standby generation in dry years. The government itself invested in new capacity at Whirinaki to be available this year. Legislation before Parliament now will amend the Resource Management Act to give greater priority to renewable energy projects.

The largest such project currently proposed is Project Aqua in the Waitaki Valley, but there are competing demands for the Waitaki River’s water. The purpose of the Waitaki catchment legislation now before the House is not to determine either whether or not Project Aqua proceeds, or what particular uses are made of the water. It is to provide for a process which ensures that all interested parties are able to have effective input into determining how much water, if any, can be taken from the river, and what it can be allocated to.

Last year new land transport legislation was enacted bringing major change to the funding and prioritisation of projects. In December the government announced new funding averaging $297 million a year for projects across New Zealand. From that $162 million extra a year will go to Auckland where the transport infrastructure is under the most pressure.

For the extra funding to be used effectively, changes are needed in Auckland’s Regional Policy Statement and Regional Land Transport Strategy, and in Auckland’s transport governance. Formal feedback from Auckland’s local and regional government is now awaited so that the government can move on the legislation and financial measures required.

Broadband technology is an essential part of modern infrastructure, and the government is investing in its rollout across New Zealand through Project Probe. With broadband coverage in 77 per cent of schools by last December, we are well on the way to achieving our goal of offering 100 per cent access for all schools and their surrounding communities.

The key new policy development affecting the telecommunications infrastructure this year will be the government’s response to the Commerce Commission’s recommendations on local loop unbundling. The Commission’s proposal is for Telecom to provide bitstream unbundling, and the government expects to announce its decision in the first half of this year.

A modern and progressive economy needs an industrial relations framework to match it. The Employment Relations Act has resulted in fewer work stoppages. Indeed they have decreased for the third year in a row. The mediation services provided under the Act have been critical in helping solve disputes and will be expanded under the amendments to the Act laid before Parliament in December. Other changes include more protection, especially for vulnerable workers, at the time of sale, transfer, or contracting out of a business; and improvements in the area of good faith and collective bargaining.

In the watershed election of 1999, New Zealanders chose between two very clear models of economic and social development. There was the low value route, still advocated by right wing parties today, which saw us competing to be the cheapest, not the best, and saw New Zealander divided against New Zealander.

The centre-left parties of government, backed the high value route. Our vision sees New Zealand moving ahead because it is smart, innovative, skilled, and productive. We also want the rising tide to lift all boats, as it has and as it will under our Labour/Progressive government.

We have sought to build positive relationships with industry, regions, local government, and stakeholders across our communities.

We set out to be a government with a clear direction and vision for the future supported by the broad mainstream of New Zealanders. Our aim is to have the people come with us knowing that, despite an uncertain world beyond our shores, this government provides the stability on which New Zealand families, communities and businesses can plan their lives.

In contrast, the ideologues opposite sit praying for a recession in the hope that the cards might fall their way. They stir up division in the community in an attempt to obscure their real agenda of privatisation and public spending cuts. Their way points to a weak, failing, divided New Zealand, and not to the strong confident nation we are becoming - which is proud of our many cultures, proud of our achievements, proud of our economic success, and determined to see it widely shared among us and not kept in the hands of a few.

That’s why this year’s Budget will bring important changes for families.

The new Families Commission will be up and running, making sure that the needs of our families, our most important social institution, are met. I thank United Future for the goodwill and support they have provided for this important initiative.

As part of this initiative a new programme to promote positive parenting will be announced shortly. It will involve a community based approach designed to make a practical difference for parents and children.

We also intend to make major improvements to the level of family income assistance. We aim to ensure that families with dependent children are always better off when in work, while also improving the circumstances of families with children whose parents are not currently in the work force.

In doing that we will be directly addressing some of the most critical barriers to employment, such as access to affordable childcare and accommodation costs.

The latest OECD report on New Zealand estimated that up to one third of the income gap between New Zealand and the OECD average could be closed by raising our labour force participation to the top Scandinavian levels. There is close to a ten percentage point gap between our level of women’s participation in the workforce and theirs.

Other comparisons between Scandinavia and New Zealand would show that their provision of early childhood services and paid parental leave is better than ours.

Already the government has taken many initiatives in these areas, but more must and will be done.

New initiatives for early childhood education to be announced this year will be a boost for parents wanting to get back into the workforce and needing affordable and quality services for their children.

Right now, the government is also looking at further improvements to the Paid Parental Leave Scheme. Already more than 14,000 people have used the scheme. It has clear benefits for both parents and children, and it makes it easier especially for women to continue their commitment to the workforce.

Working families will also be helped this year by improvements to the Accommodation Supplement which helps make mortgages and private rentals more affordable.

And already the new mortgage insurance pilot scheme between Housing New Zealand and Kiwibank is helping people on low incomes buy their own homes.

Consultation will begin soon on a new Housing Strategy for New Zealand, setting out the steps to be taken to ensure that all New Zealanders have access to affordable, sustainable, quality housing appropriate to their needs.

This year will also see big steps forward in health policy.

From 1 July, all New Zealanders aged 65 and over enrolled in Primary Health Organisations (PHOs) will have access to low cost primary care and pay only $3 in prescription charges. From last October all 6 – 17 year olds enrolled in PHOs were also added to the low cost scheme. Already more than sixty per cent of New Zealanders are enrolled with PHOs – the most exciting initiative in increasing access to primary care since the 1938 Social Security Act of the First Labour Government.

Older New Zealanders will also benefit from two other important health and disability services initiatives this year.

Steps will be taken to lower the waiting times for major joint surgery, such as hip and knee surgery.

And this year, the legislation will be introduced to begin the phasing out of asset testing on older people in care, to take effect on 1 July next year.

Two especially significant initiatives in preventive health care this year will see increased access for New Zealand women to the breast screening programme, and the nationwide rollout of the new vaccine to combat the deadly meningococcal B virus which has killed more than 200 New Zealanders and left hundreds more disabled.

Our government accepts that good health care and education are among our most important responsibilities, and that New Zealanders expect the government to be both the main funder and provider of these services.

This year there will be an extra 774 teaching positions in our schools, over and above what was required for roll growth. That brings the number of new teaching positions our government has created since 2001 to 2087.

In schooling we will continue the strong focus on literacy and numeracy, and on ensuring that our schools have the latest in new technologies. The Secondary Futures Project will develop a shared vision for secondary education, and the school network reviews will ensure that we have strong schools to meet the roll demands of the future.

New Zealand’s experience in economic and social development has shown that a one size fits all approach doesn’t get the best results. For many years governments of all shades have worked to make policy and service delivery more responsive to the needs of particular communities.

That’s why a special development package was made available to the West Coast.

That’s why Auckland will get extra provision for its transport infrastructure. No other region has transport problems of the same magnitude.

Where any community faces challenges which see it having fewer opportunities and greater needs than others, we will endeavour to work alongside those communities to provide opportunities and meet those needs.

The excitement comes in seeing those communities – regional, suburban, small town, big city, Maori, Pasifika and other ethnic minority groups - step forward to be part of the solutions.

These are positive developments for New Zealand, not negatives.

We will continue to work with economic and social partners to even up the odds. That’s how responsible 21st century governments and societies will work. They don’t try to reinvent the economic policies of the 1990s, the society of the 1950s, or the attitudes towards indigenous people of the 1830s. New Zealand has moved on. Our government is about taking New Zealanders into the future together, not back into the past divided.

I regret the ill will shown by a bad mannered, noisy minority at Waitangi last week. I deplore the violence. But none of that will dissuade me and my government from getting on with doing what’s right for all of us – Maori and Pakeha.

We have a challenge this year to meet the needs and interests of all our peoples over the foreshore and seabed. With goodwill and mutual respect we can uphold the general public’s right to access and the customary rights of Maori.

And I will rejoice this year when Maori television goes to air, knowing what that means to the preservation of the language and to Maori pride and self esteem.

I will rejoice when the Maori fisheries legislation passes, knowing that the resources for allocation are greater than those of all other settlements to date combined.

I will rejoice as I see growing numbers of Maori in work, in education, and in decent housing.

These are the best ways to deliver the equality of opportunity, and the unity in diversity which we New Zealanders hope for in our country.

We also increasingly see ourselves as a creative people with much to offer the world. Our film industry is well and truly on the map with sixteen New Zealanders nominated for this year’s Oscars. The government’s support for local films and for offshore film investment is important for growing the industry and for promotion of the New Zealand brand – clean, green, and beautiful, plus talented, innovative, creative, and unique.

The government is also working with the New Zealand music industry to grow its exports, and early steps have been taken to explore ways of increasing the exports of New Zealand books. As with film, policy in this area has both cultural and economic development components.

Our clean, green, and beautiful image needs more than rhetoric to be sustained. That’s why we are giving priority this year to strategies for water quality improvements in Lake Taupo and the Rotorua Lakes, and to National Environment Standards on fresh water and on air quality.

And that’s why we are giving priority to establishing a network of high country parks and reserves which has already led to the permanent protection of Molesworth Station and to the acquisition of Birchwood Station.

The security of New Zealanders is also a core responsibility of government. At home, with almost 1,000 more police staff than there were when we came into government, we have been able to improve crime resolution and work proactively on tackling the criminal organisations peddling dangerous drugs like metamphetamine.

The government wants the New Zealand Police to enjoy high public confidence and respect. That’s why we and the Police have taken so seriously recent allegations which could damage perceptions of the Police. A Commission of Inquiry will be hard at work this year to look at those issues and make recommendations arising from its terms of reference.

The New Zealand Defence Force has another full year ahead with offshore deployments and progressing the upgrading of its equipment in line with the agreed Long Term Development Plan. All three arms of the services will benefit.

Decisions will be announced shortly on further contributions to the international campaign against terrorism and to the work of the army engineers in Iraq. The work of defence personnel in their many offshore engagements has been outstanding and they have been wonderful ambassadors for New Zealand.

New Zealand’s diplomats and trade negotiators have a busy year ahead, as New Zealand works to progress the WTO Round, trade talks with China and Thailand, and deepening the economic relationship with Australia. In the near term we will be analysing the details of the proposed free trade agreement between Australia and the United States and its likely impact on New Zealand. There is also much work to be done following up last year’s Seriously Asia conference, so that we maximise the benefit of New Zealand’s relationships with the nations of Asia.

New Zealand will continue to be fully engaged across the range of international debates, including on trade, terrorism, disarmament, human rights, development, and the environment. In our own region we are facilitating the review of the Pacific Islands Forum, aimed at increasing its effectiveness in promoting a better future for member nations.

The government’s major legislative priorities this year include the passage of:

- an aquaculture reform bill
- the Building Bill
- the Care of Children Bill
- the Charities Bill
- the Electricity and Gas Industries Bill
- the Employment Relations Law Reform Bill
- a foreshore and seabeds bill
- a bill implementing the new family assistance package to be outlined in the Budget
- a Local Government (Auckland) Bill, following through on the Auckland transport package
- the Railways Bill
- RMA amendment bills covering renewable energy and the Waitaki catchment, and
- the legislation phasing out asset testing on older people in care.

Other legislation to be introduced and/or progressed covers insolvency law reform, securities trading, consumer protection for home owners, human assisted reproductive technologies, civil unions, and omnibus legislation removing from New Zealand statutes discrimination on grounds which are prohibited by the Human Rights Act.

Overall, the government’s work programme this year is heavy, and this Statement can only highlight a small part of it.

Our mission is clear; we want to build a New Zealand which offers equal opportunity, a fair go, and security for all our people. We want to unite, not divide. We want New Zealanders to take pride in all our country’s achievements – economic, social, and creative. We want our country to be well respected internationally. In short, we want to make a difference for the better. We know that being in government is a privilege, not a right, and that we must earn that privilege every day. We look forward to another year of engaging with New Zealanders across our communities, industries, and regions and of working in partnership to make a difference for the better.

ENDS

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