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Finance Minister Speech- Employers & Manufacturers

Employers and Manufacturers Association
Business Environment 2000
NZI Convention Centre
Kupe Room, Level I, Aotea Centre
2.30pm Thursday March 16

Hon Dr Michael Cullen
Treasurer
Minister of Finance
Minister of Revenue
Minister for Accident Insurance


Thank you for inviting me here to speak to you today. I was encouraged to note the co-operative tone of the conference and the expressed wish for a better understanding and relationship between the private sector and this Government.

Relationships and partnerships are critical concepts that feature largely in the workings of the Labour Alliance Government. They mark the difference between this Government and the last administration. The coalition between Labour and the Alliance is based on relationships rather than rigid and non-negotiable transactions and trade-offs. We are seeking partnerships with business and communities – hands-on rather than arms-length government. Our industrial relations legislation emphasises the human relationships between employers and employees, rather than focusing on contractual exchanges.

I was asked to speak today about the impact of a centre left government on business. Before getting into a detailed discussion on how our policies will affect business, I would like to spend a few moments exploring the relationship between the business community and this government.

This is a pro-business government. It isn't a government that sees business as a cash cow to be milked to fund lavish social programmes. Nor is it a government that leaves business to the mercies of global market forces in the mistaken belief that markets create a natural order of things.

The government does not believe in a wild-west business environment. Business can and should grow in a civilised and equitable way. The Employment Contracts Act tended to empower the cowboys. It is time to put balance, common sense and good faith in the employment relationship.
I believe business needs to see the changes we are making to industrial legislation as contributing to a more sustainable pattern of development, not as being anti business.

Let me be frank. It is important that business does not become its own worst enemy by being sucked into a cycle of perpetual grievance. The worst case scenario is that business begins to believe its own negative publicity – spooking customers, workers, other employers and investors.

I am not going to attempt to convince you to see the world as I do. You are entitled to your opinions, as we, by elected mandate, are entitled to govern. However, I will reiterate the words of the Prime Minister when she, commenting on the level of opposition to the ACC changes, predicted: “A year from now they will wonder what all the fuss was about”. I would add only that the same basic sentiment is equally pertinent regarding the effects of our industrial relations legislation.

Let me deal with these two issues here and now. The major thrust of the debate over ACC changes has been directed at costs. Employers and organisations have hammered home the message that private insurers offered a cheaper deal than the old ACC. We heard you loud and clear and the Government has already kept its promise of cheaper average premiums.

We are very aware that the old ACC was often a creaking, unresponsive creature. We are not giving the kiss of life to the old ACC - we have made it very clear to the Corporation that nothing short of excellence will be tolerated. My colleague Ms Dyson has already spoken to you at length about this policy so I won't go into further detail here.

The Government's new labour laws are about restoring the balance of power in the workplace and building good faith relationships. Allegations of returning New Zealand to compulsory unionism and union dominance are simply untrue.

Concerted protest certainly failed to incite Wellington's Fastcat Ferries Ltd. The company recently used mediation to settle a contract dispute with the Seafarers' Union, in advance of new labour laws. The Wellington Regional Chamber of Commerce magazine claims the amicably settled dispute can be regarded as a test case of the new labour relations environment.

In the item, the company says the new environment is not as disastrous as some employers are expecting and they were delighted to find the union recognised their bottom line that the company has to survive to keep jobs safe.

This Bill signals the Government’s intention to bring fair dealings and a more balanced approach into the workplace. This approach recognises the diversity of workplace agreements necessary in building a modern economy and the need for workplace relations, which encourage productivity and support economic growth and job creation.

The Employment Relations Bill provides a framework for the conduct of employment relations based on the understanding that employment is a human relationship involving issues of mutual trust, confidence and fair dealing – not simply a contractual, economic exchange – and this requires specific recognition in any regulation of the relationship.

Individual agreements remain but there will be a greater emphasis on allowing workers who want that protection to more easily engage with a union and to benefit from a collective agreement. While some have found individual contracts appropriate as either employers or employees, many have not. The Government’s approach as outlined in the Employment Relations Bill recognises the often unequal nature of employment relationships and attempts a re-balancing to produce fairer outcomes for all.’

Underpinning the Government’s approach is the belief that employment relationships must be built on good faith behaviour not low trust legalistic contracts. Good faith will apply to all parties and it will require all players in the employment environment to act reasonably in their dealings with each other.

A new mediation service will be established to help resolve employment problems as close to the workplace as possible. If the problem cannot be resolved at this level there will an Employment Relations Authority which will investigate the matter and determine it. Access from the Authority to the Employment Court will be available. The Government’s intention is however that the litigious nature of current employment relations and the need for judicial intervention will be reduced.

We see the whole industrial environment becoming much less adversarial under the new legislation. The Employment Contracts Act fostered ill will and acrimony. Under the Employment Relations bill, employers and employees will have to show that they have genuinely tried to build bridges before resorting to the courts.

Good faith bargaining will mean that both sides have to behave with a degree of integrity that has been conspicuous by its absence in many of the industrial disputes of recent years.

This is not a return to the past. Union membership will be voluntary. Individuals are free to form or join a union of their choice. Unions are required to be democratic, accountable, independent of employers and prove their worth to their members. They will have statutory rights of access to workplaces and will be bound by good faith provisions in their dealings with individuals and employers. Only registered unions will be able to negotiate and settle collective agreements. Union members are bound by a collective agreement. Individuals can join a union and be covered at any time.

To reflect the diversity of workplace arrangements a range of collective bargaining options will be available – single employer, single union, multi-employer or multi-union agreements will be possible. Employment relations education will be promoted so everyone knows their rights, choices and responsibilities. This approach is about choice, flexibility and where exploitation has been allowed to flourish, a re-balancing in the interests of fairness for all.

Finally, it should be noted that individual agreements will be able to differ from collective contracts.

As a diversion from the steady stream of criticism over changes to the ECA and ACC, there has been a certain sweetness over the support we have received from the business community over some of our other initiatives, most notably the economic development strategy. Without a trace of irony, employers concede that the last government did little for manufacturers and exporters.

Ullrich Aluminium recently gave the Government a $10 million vote of confidence with its decision to expand its New Zealand operations - building an extra extrusion press at its Hamilton plant – creating 50 new jobs. Gilbert Ullrich said he believed the change of government would be good for manufacturers and employment growth and, again, conceded that the previous government didn't do much for manufacturers and exporters.

One thing that everyone needs to accept is that there is no such single beast as 'business'. Businesses take may different forms, face very different challenges, and can be helped or hindered in many different ways by what governments do or do not do.

Pro-active economic development policies are the key to assisting many businesses and actively supporting exporters. We have rolled up our sleeves with the recent formation of the Ministry of Economic Development and Industry New Zealand. We are committed to partnerships with local government, local communities and the private sector to invest in new job-rich, high-skill, high value industries.

The partnership model replaces the successive failures of the hands-off approach. Industry New Zealand will provide capital for small and medium sized enterprises – not only to establish new businesses but also to sustainably expand existing ones. This may take the form direct development grants, loans and start-up equity capital.

We will combine well-judged public investment in education, infrastructure and science and technology with creative private sector investment focused not just on adopting technologies already available but on continuously creating new products, processes and designs.

This means we have to tap into and build on our most successful yet, too often, our most neglected resource – our people.

As the global economy expands, we must nurture and encourage innovations and ideas for they will be the keys to our future success. Kiwi's were once famous for innovation yet as a nation we have sadly neglected broad based research and development. The tax treatment of R & D will be studied as part of the Government's review of the entire tax system.

More immediately, Industry New Zealand will be able to enter R & D joint ventures, with an emphasis on new technology industries providing sustainable, skilled, well paid jobs via our ticket to the future – high value-added exports.

The past approach to exporting has been one where New Zealand demanded our exporters fend for themselves while we unsuccessfully tried to persuade other countries to lower trade barriers. The result was that New Zealand now stands unique in the western world in refusing to put a value on its own people, products and industries. So while New Zealand businesses have been exposed to full market forces with minimal tariff or subsidy support, bigger nations have continued to protect their markets and give financial support to their exporters.

Even the most basic analysis tells us this is a ludicrous and damaging stance. To paraphrase Dorothy Parker, this is not an ideological position to be tossed aside lightly, it should be thrown with great force! Be assured, this government, through the Trade Development Board, will be working hard to put in place practical assistance for local exporters so bids for overseas tenders are at the very least on the same playing field as their competitors.

However, more optimistically, I note that the latest export values released by Statistics New Zealand show that the latest six-month period had the strongest growth recorded in five years.

The provisional value of mechandise exports for the year ended January 2000 was $23,754 million, up 6.1 percent from the previous year. This growth was helped along by the low New Zealand dollar and strengthening commodity prices.


In recent years New Zealand has adopted a 'light-handed' approach to economic regulation. While there have been benefits to this there have also been some serious problems over the issue of competition.

All power corrupts and absolute power corrupts the market absolutely. The Government is cracking down on companies that abuse their market power with unfair or anti-competitive behaviour.

The Ministerial Inquiry into the telecommunications industry, which began this month, has already reaped benefits for the economy with the recently announced Telstra Saturn merger. The companies made it clear that the joint venture was formed with the assumption the Labour-led Government would make changes to the operating market place and level off the playing field.

The new company plans to invest more that $1 billion in New Zealand over the next five years. The joint venture represents a huge vote of confidence in this Government and our policies.

We are also launching an inquiry into the electricity market and we intend to back both these inquiries with tougher competition law.


Another area of concern where the government can make a positive difference is improving the performance of the NZ sharemarket. The government is making enactment of a take-overs code and tighter securities regulations a top priority.

The performance of the sharemarket and the debate surrounding it has fuelled a further discussion. One that raises the issue of whether the New Zealand economy is, in fact, large enough to sustain a separate market - whether we might not be better off merging with Australia. I make no comment now over the relative merits of the argument, except to say the debate is healthy and one worth having.

As I said at the beginning of this presentation, I sometimes get the feeling I am dealing with the protest movement of the new millennium. Business has mobilised around issues: ACC, the Employment Relations Bill, tax and so on. As with all issues based protest movements, there are times when it is better to stand back and look at the bigger picture.

Let me finish, then, by sketching out some of these bigger picture items to let you locate yourselves inside a wider New Zealand community and the vision the government has for that community.

The Budget Policy Statement did set out some major approaches that reflect the distinctive style and intent of the new government. Unlike the previous government, we do not see the economy as something that sits apart from society or the natural environment it operates within.

We do not see New Zealanders as anonymous economic automatons, indistinguishable from any other production and consumption unit anywhere else in a seamless global economy.

We celebrate our identity, nurture our environment, build trust in the institutions of government, strengthen the capacities of distinct communities and so on. These are not things the government does if the economy leaves it enough money with which to do them. These are a part of our economic objectives, and they put new and exciting challenges in front of all involves in the design and delivery of policy.

Secondly, the government puts a lot of store on stability and sustainability. This means that it takes a longer view of emerging risks and costs, and seeks to respond to them. The longer view is reflected in a more active biodiversity strategy, in greater commitment to ensuring that we have a robust infrastructure, and in facing up to the inevitable costs associated with demographic changes that produce an older population. It means that it is more directly concerned about and more determined to act to reduce the imbalance in our economic transactions with the rest of the world and our low savings rate.

The government is concerned that while we have got some dimensions of economic performance under control, we still have an undesirable level of cyclical volatility in the real economy. Hence a small but significant change in the Price Targets Agreement I negotiated with the Governor of the Reserve Bank preserved its independence and its focus on a single operating target, but required it to seek to avoid unnecessary instability in output.

I am also committed to a review of the governance and operations of the Bank to see if we can reduce some of that volatility.

On the fiscal side of things, the government has indicated that it wants to operate in a less pro-cyclical way. This isn’t easy to do, but we can certainly avoid some of the unhelpful stoking of the fires in an overheating economy and blast freezing a cooling one that came to be the hallmarks of the previous government’s fiscal manipulations.

Finally, there is the matter of market failure. Free markets do some things very well, but they can respond to very short-term signals and erect barriers that constrain large sections of our entrepreneurial community from realising its full potential. That is why the dread words of development and economic activism have re-entered our vocabulary and will inform our practice.

Bill Clinton once used the words ‘opportunity, responsibility, community” to synthesize the guiding principles behind his policy programme. They are appropriate in our particularly New Zealand context.

We do need to promote opportunity. There will be opportunity for businesses as well as for communities and individuals. That opportunity carries with it responsibility. Rights have to be matched with obligations, across the spectrum of economic and social activity. There is give and take, not take and take. This give and take applies at the level of the individual but it also has a group or communal dimension. We all live in the wider community and communities of businesses have responsibilities to communities of workers, and communities of workers have responsibilities to communities of consumers. And so it goes on.

The government is fair, it does listen, it is pro-business. But remember this and judge us on this. This is a Labour-Alliance government. It is not a Tory government that has lost its way.

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