PM's Post-Budget Address, Akld Chamber Of Commerce
Rt Hon Helen Clark
PM's post-Budget address, Akld Chamber of Commerce
Thank you for the invitation to give this post-Budget address to the Chamber.
Last year's Budget was characterised by the government's desire to deliver on its core election commitments. We did that early in our term to keep faith with the electorate. Labour was careful to promise only what it could afford and not to run the risk of under-delivery.
That early delivery on a modest programme set the scene for developing a longer term vision for New Zealand. This government has done a lot of listening. Many have wanted to join us in dialogue. Through many forums and discussions with business, local government, Maori, the community sector, education and research interests, and the labour movement, we have become convinced that a shared vision for this nation is possible, and that it can work to build greater prosperity and a sense of wellbeing for us all.
The vision we are developing sees New Zealanders as innovators to the world, turning great ideas into great ventures.
The goal is to pull ourselves back into the top half of the OECD nations.
Achieving that is going to take every ounce of effort from us all ? business, communities, individuals, educators, researchers, and government.
Our shared vision will see us committing to being innovative, creative, enterprising, wealth generating, collaborative, caring, and achieving globally.
New Zealand can be the best place in the world to be innovative and enterprising, and we can take pride in being creative and caring people too.
In my Prime Ministerial Statement to Parliament in February this year, I set out the government's commitment to economic transformation to fulfil this shared vision and meet our goal for higher living standards.
We are ambitious for New Zealand. And there is no time to waste. New Zealand has been suffering a slow leak in its economic status for decades. The programme to reverse that is complex and multi-faceted ? and it has begun.
Fortunately we can embark on this process in what are, for New Zealand, relatively benign economic circumstances. Notwithstanding the sluggish economies among our main trading partners, the New Zealand economy is growing. Unemployment has been falling and the current account deficit is shrinking rapidly.
The government is maintaining a strong fiscal policy and saving for superannuation for the future.
Government spending is at its lowest level as a proportion of GDP since 1977.
Net debt by the end of this election term will stand at 17.8 per cent of GDP, down from 21.7 per cent when our government was elected.
If one took the short term view, these circumstances could induce complacency. But that is not our government's nature. We know that there is a fragile underpinning to the present recovery, with too much of it dependent on factors beyond New Zealand's control, like good weather, good commodity prices, and an excessively competitive dollar.
That is why the Budget continues our initiatives to reshape the economy, so that it moves upmarket to become more driven by the skills, talents, innovation and entrepreneurial talent of our own people.
Last year I appointed a Science and Innovation Advisory Council, chaired by Rick Christie, to advise me and the government on how to position New Zealand as a knowledge-driven economy and society, which is also socially inclusive and environmentally sustainable.
The Council's work and input is helping us to develop our economic transformation plans.
Now I am charging the Council with progressing a formal innovation strategy and action plan.
It hopes to be able to produce a draft for consultation by July. The strategy will identify critical elements to ensure that innovation, enterprise and technology are the drivers for achieving our vision.
The action plan is expected to be developed by November and will then feed into the 2002 Budget round.
The focus of the strategy will be on:
· developing and promoting a culture of innovation · ensuring that New Zealanders have the skills and opportunities to participate in a knowledge driven society · developing and encouraging effective entrepreneurial and business skills · ensuring New Zealand's success as an export-focused economy based on high value products · ensuring the maximum commercialisation of R & D across sectors · ensuring that government expenditure which can support innovation is aligned to best effect · having an education system which is both an engine for and a conduit to New Zealand's success. In developing the strategy and plan, the Science and Innovation Advisory Council will be seeking input from many sectors, and I know that business will want to be involved.
Already the government has taken many steps consistent with the development of the innovation strategy, and more have been announced in the Budget. For example:
· We are reshaping the tertiary education sector around the concepts of quality and excellence. Currently the sector is fragmented, and lacks specialisation and differentiation. Yet high quality education and training has to drive our sustainable economic recovery. On top of this year's fee stabilisation offer to the tertiary sector, which we urge it to accept, are a number of other initiatives which enable the leading institutions to contribute to the building of the knowledge society and economy.
New Centres of Research Excellence will be funded within the system, through $20 million new capital funding, and $26 million in operating expenditure over the next three years.
The government's research funding is also up by an extra $11.6 million, and leading tertiary institutions can expect to get their share of it.
There is increased support for business incubators, many attached to our tertiary institutions, and offering opportunities for research discoveries to be commercialised.
And then, in a major initiative to stimulate more business start ups, the government is putting $100 million into a New Zealand Venture Investment Fund. We have identified a gap in the venture capital market for seed and start up capital, and, in partnership with the private sector, we want to fill that gap.
In developing these innovation policies our ministers have been studying best practice in Israel, Singapore, and Silicon Valley, USA. We will borrow good ideas from anywhere to back the growth of innovative high value, research-driven New Zealand businesses.
In this respect my recent visit to Korea was significant. After the Asian economic crisis, Korea launched a Cyber Korea 21 initiative to accelerate its transition to a knowledge based economy. It has set a target of having 95 per cent of all its sixteen million households connected to the internet by 2005.
Korea has established a Venture Valley in Seoul which it hopes will encompass 4,000 venture firms and small and medium sized companies.
It has around 300 business incubators, and is setting up some for Koreans in the United States, China, and Europe. The aim is to make its high tech companies fully internationally viable and it is fully confident that their manufacturing needs will be met in Korea itself.
The Korean Government is supporting new start-ups to the tune of US$900 million with US$45 million of that allocated to securing Nasdaq listings for 100 Korean ventures by 2005.
If we have ambition for New Zealand, as we do, the Korean example is worthy of study. Korea is also pushing economic development initiatives and collaboration at this high level within APEC. New Zealand's traditional pre-occupation in APEC has been trade liberalisation, which is of course important to us. But we must also embrace the fast moving economic development agenda of APEC as being very much in our interests. If we don't we run the risk of being the country cousins freely exporting primary produce which won't pay for the sophisticated imports and living standards we require for first world status.
In overseas missions this year in partnership with senior business delegations, we have been actively seeking to rebrand New Zealand. Our international economic image is somewhat old fashioned, stemming from our dominant primary sector export profile.
We have been taking the message that New Zealand has sophisticated new economy sectors and services to offer the world.
Our information and communication technology and biotechnology sectors; our education and tourism sectors; our professional and financial services; our innovative niche manufacturers; our huge forestry and primary sectors' potential for added value ? all these assets add up to a strong profile for New Zealand.
I have been fascinated by some of the niches which New Zealanders are occupying in the export of high value goods and services. For example:
· Airways Corporation staff are supervising
the implementation of new software systems at Seoul's vast
new international airport
· New Zealanders are supervising the implementation of the new software system at the Port of Piraeus, near Athens
· Glidepath of West Auckland has installed the baggage conveyor systems in new airports in Santiago and Athens
· New Zealand Post is active in reforming the postal systems of many countries
· Deep Video Imaging of Hamilton has developed a revolutionary three dimensional monitor screen which has engaged the interest of the giant joint venture between Lucky Goldstar of Korea and Phillips of Holland.
All these examples show that we have it within our national capacity to be innovators in leading edge sectors. What we need is more of it ? and fast.
Another initiative funded in this Budget is designed to link New Zealand up with our expatriate community and their access to investors, new ideas, and technology.
Among established New Zealanders overseas there is enormous goodwill towards New Zealand and a desire to see it do well. Many want to help and to be part of virtual networks aimed at rebuilding New Zealand's economic base.
Some are prepared to relocate back home and create jobs and opportunities here, as can be seen in the two new super yacht business developments in Hobsonville and Whangarei. The government is bending over backwards to facilitate such high value, job rich investments.
The Budget also provides ongoing funding for industry and regional strategies.
Last week a Tourism Strategy report was released, after months of work by a joint private-public sector task force. High value tourism is increasingly a major driver of our economic growth,
Industry New Zealand is working collaboratively with the private sector in strategies to boost investment in the wood processing industry and development in a range of other industries.
A great deal of energy has been unleashed in the regions through the Regional Partnerships Programme.
And innovative small firms are being promoted through the Enterprise Awards Scheme.
On the trade opportunities front, the government has been exceptionally active.
Last year we concluded the Closer Economic Partnership Agreement with Singapore, which formally took effect on 1 January. The doomsayers were out in force, and have been proved totally wrong.
This Agreement has raised New Zealand's profile in Singapore enormously and to our benefit.
In the first three months of this year, trade with Singapore was up nineteen per cent on the same three months of last year.
The good news for New Zealand is that our exports to Singapore in that period were up twenty seven per cent, as against a rise in imports from Singapore of eleven per cent.
There has been no sudden influx of textiles, clothing and footwear from Singapore or third world countries under the new zero tariff. Indeed less than one per cent of total imports from Singapore entered under the provision for tariff preference on goods of Singaporean origin. Strict rule of origin requirements apply to that preference.
This success encourages the government to move on other such agreements. We are now in negotiation with Hong Kong, and believe that given the larger size of its economy, the benefits to New Zealand of a closer economic partnership will be substantial. We remain ready to negotiate with others on agreements of mutual benefit.
We are also active in both APEC and the WTO in pursuit of a new world trade round.
In November this year I will be taking a delegation, including senior business representatives, to Latin America, with a special focus on Brazil. We are opening our first embassy in Brazil, the world's ninth largest economy, and the nation with the world's fifth largest population, standing at 170 million people. Brazil's total import market is worth US$57 billion a year, and we want our share of it.
One of our leading export industries, the dairy industry, has presented the government with far-reaching proposals for reform. The government has worked closely with the industry on the best possible proposal, and it will proceed if dairy farmers give it their strong support.
Overall on economic policy and initiatives this government is very active, but in new ways not experienced by New Zealand before.
We have given a lot of thought to what the appropriate role of government is in the 21st century economy.
There can be no return to the Muldoonist economy where the state wielded all the economic levers and where we deserved the label of being a western Albania.
On the other hand when the pendulum swung to the extent of leaving the market to substitute for government, that didn't produce good results either.
We have defined a role for government consistent with the third way approach of social democratic governments similar to ours elsewhere in the western world ? and not dissimilar to those of the progressive Asian economies like Singapore and Korea.
We see government as a leader, a facilitator, a co-ordinator, a partner, a broker, and, where appropriate, a funder in the cause of spurning on economic development.
I am excited about the early progress we have made, but I know there is much more to be done.
We look to strong partnerships with the business community in developing the growth and innovation strategies which will see our country radically improve its performance in the 21st century.
New Zealand is on a journey, taking many steps towards long term goals and a vision for a more prosperous future.
This Budget, combining economic vision with both social and fiscal responsibility, is yet another step along that pathway.