Budget Speech Part 1
(The Budget Speech is released on a rolling embargo this is part 1.)
Mr Speaker, I move that the Appropriation (2000/2001 Estimates) Bill be now read a second time.
It is with a sense of honour and privilege that I present today the Labour-Alliance Coalition's first budget. The Budget 2000 does not try to do everything at once. But it does mark out a new direction. It points the way to rebuilding a fair and sustainable social and economic order.
For too long, New Zealanders have voted for one set of policies and got another. This Government will continue to honour its election commitments and thus restore faith in the political process.
For too long, New Zealand governments have ignored the growing gap between rich and poor. This Government is committed to closing the gaps.
For too long, governments have neglected provincial New Zealand. This Government will invest in the regions.
This Budget is about a new start for a new century.
All New Zealanders depend on a thriving economy. It delivers the incomes needed for personal development and fulfilment, and for active participation in society. Within the economy, markets are vital channels through which individuals make choices about employment, production, saving and consumption. The liberating power of the market mechanism must be recognised.
It is important, though, to see economic life as more than materialistic consumption; an economic system as more than a set of markets. It is in this wider context that the Budget 2000 has been constructed.
The Budget moves us, as a society, a step closer to the destination we set for ourselves through the six goals laid out in the March Budget Policy Statement.
These are to:
· develop an innovative economy which creates jobs and provides opportunities for all New Zealanders
· foster education and skills
· close the gaps that now divide our society
· restore trust in government and to promote a strong public service
· treasure and nurture our environment, and
· celebrate our identity as a people who defend freedom and fairness, enjoy arts, music, movement and sport, value our cultural heritage and who are committed to the Treaty of Waitangi.
These are the values that drive this Government. They will continue to create the context for our decision-making. They are the framework within which I will present the Budget announcements.
A generation ago, the 1972 Royal Commission on Social Policy defined the task of public policy as enabling all citizens to feel they belong to, and can actively participate, in society. That definition is just as relevant today as it was then.
We cannot, as individuals, as families and as communities, celebrate our identity if we are locked out of participation and made outsiders in our own land.
This means that the Government has to recognise that there are rights of citizenship that exist alongside rights to own and trade property. Honouring rights of citizenship is a fundamental obligation of governments. In meeting that obligation governments provide basic entitlements, and do not merely step in when markets fail.
We have the advantage of a strong economic outlook. Growth is forecast to average around 3% per annum over the next three years on the back of a robust world economy and a competitive exchange rate. Unemployment is expected to reduce to just above 5% by March 2002. I would like it to fall further and remain low.
There is more life in the provinces. Tourism is expanding. Exports are increasing steadily and the export base is widening. We have seen a welcome resurgence in agriculture and the prospects for primary exporters continue to look good.
This should assist in bringing the external deficit closer to sustainable levels. It is now running at around 8% of gross domestic product. We should see it shrink back to about 5% of GDP over the next two years.
On the fiscal front, the Government is looking ahead to substantial and rising surpluses. This year's surplus is forecast at $763 million. The 2000/2001 figure is expected to rise to $1.01 billion. This is in line with the Budget Policy Statement forecast of $1.0 billion. Projections for the following two years - 2001/2002 and 2002/2003 - show the same pattern of continuing improvement at a little over $2 billion and $2.7 billion respectively.
Those surpluses represent increased national savings. We will not spend them. We have promised that we will be a fiscally conservative Government and we will hold to that promise. The $5.9 billion spending cap we have imposed on ourselves remains in place, even though it will demand great discipline over the next two budgets.
The Budget consolidates initiatives taken since the election, complements them with new initiatives, and creates a platform from which the country can build a sense of identity, integrity, prosperity and purpose.
The foundations are access to education, to affordable housing, to health services, to a job and to an income in retirement that is consistent with peace of mind, dignity, and a capacity to participate actively in society.
1 Developing an Innovative Economy
In the modern age, all economies face a mix of opportunity, stress and challenge. We live in a time of massive and rapid technological change. Global markets and world financial systems are at one level more open and accessible, and at another, less predictable.
Everywhere, governments are reassessing how they can best assist the private sector to manage the risks in the new economic environment, and prosper from the opportunities it presents.
A lot of money is, and always has been, spent in creating and maintaining a framework in which economies operate, change and grow. Government programmes cover a broad spectrum from developing skills, providing infrastructural supports and maintaining stable financial and market systems, to more specific supports like provision of business information and trade assistance.
The challenge now is to coordinate those efforts, continuously monitor them to improve their effectiveness, and to provide resources to upgrade the level and scope of the economic development effort.
As one part of the wider policy framework, we promised that we would increase investment in industry assistance by $100 million a year before the end of our first term in office.
We have done better than that. Today's budget allocates an additional $112.5 million a year from 2002/2003. We will get there in three roughly equal instalments beginning with $34 million in the coming year, rising to just over $73 million in 2001/2002 and reaching $112.5 million in the third year.
The money will be spent on a range of services, including a strategic investment service, early stage financing assistance and developing business skills. And not just in the cities, but in the regions also.
We do not want to pick winners. We do not want to regulate, subsidise or compel. We do want to help businesses find new markets and become winners. At times that means getting the regulatory framework right so that short term opportunism does not damage the wider public commercial good. At times it means ensuring the right financing options are available. At times it means taking a direct leadership role.
Industry New Zealand will work with firms with good growth potential to enable them to fully realise that potential. Specifically it will assist them to develop business plans, build partnerships with other businesses and approach financiers. It will also work with Trade New Zealand to actively market New Zealand as an investment destination.
The funding also allows for the establishment of a nationwide regional development strategy to be administered by Industry New Zealand in partnership with local authorities and other local groups. This will be reinforced by a coordinated central government effort, organised through the Ministry of Economic Development, in areas with particularly acute problems.
The Government will provide financial support to help communities through the process of developing their plans, developing the capacity to implement their plans and implementing them. Details of the principal regional development vehicle will be announced soon.
A further increase of just under $3.5 million a year has been allocated to the Ministry of Economic Development specifically for policy advice on economic development.