Address To ICANZ – UK Branch - Michael Cullen
Wednesday 4 July 2001
Hon Dr Michael Cullen
Address To ICANZ - UK Branch
Penthouse, NZ House, Haymarket
Investing For Success In The Global Economy
It is a pleasure to join you this evening and I bring warm greetings from home.
The past year and a half have been significant for New Zealand. There is a buzz happening that's hard to miss.
Things are changing. And they're changing for the better.
The dire predictions of the Opposition and some sectors of the business community that government policies such as returning workplace accident insurance to the state and repealing the Employment Contracts Act have come to nought.
Recently the Employers and Manufacturers Association scored the new Employment Relations Act seven out of ten.
And ACC critics were silenced when average employer premiums dropped by almost 25 percent back under the control of the state.
The economy grew by 2.5 in the 2001 March year, and is forecast to average three percent growth over the three years after that. Most of this was driven by exports, which rose a healthy 6.8 percent over the year.
The recent GDP result was disappointing but also three months out of date. But recent evidence points to an increase of growth in the next two quarters.
The latest mechanise trade figures show exports are booming, consumer and business confidence are both in positive territory and a recent survey by the largest manufacturer's association in the South Island shows average export turnover is up 34 percent on last year.
The unemployment rate, which was 6.8 per cent in the quarter before the Government took office, is currently down to 5.4 per cent and is forecast to fall to around 5.0 percent by March 2004.
More New Zealanders than ever before are involved in industry training.
New Zealand is now back on a stable AA+ credit rating, Standard and Poors second highest ranking.
The stability of the Labour and Alliance Government proved to a public, disillusioned with the performance of previous administrations, that MMP and coalition politics can work and work well - delivering smooth, steady government.
Inflation is projected to return to round the middle of the Reserve Bank's target range in the next two years.
And the balance of payments deficit we inherited is falling steadily from 7 per cent of GDP to a much more manageable 4.8 per cent and is set to keep falling, with Treasury forecasting a drop to 3.5 per cent of GDP by 2005.
Our exports are booming on the back of a competitive dollar and great growing seasons.
And the mega-merger put the cream on a great year for dairy farmers.
Last month farmers voted overwhelmingly to create Global Dairy Co.
With a $12 billion turnover, the new company will easily be the biggest in New Zealand - dwarfing Telecom - and will weigh in as the ninth-largest dairy company in the world.
There is incredible interest in New Zealand as a film location. Success breeds success and our profile is being boosted internationally by big budget movies with big name actors.
New Zealand has just completed hosting the biggest film project in the world. The Lord of the Rings trilogy is estimated to have a total budget of over $500 million. The tangible benefits to New Zealand's economy cannot be over rated.
The freshness of New Zealand and the sheer diversity of our landscape excite overseas producers.
There’s also a growing acknowledgement that we have the film industry infrastructure - the locations, the technical and acting talent - to support the big productions.
The innovative success of kiwi format TV shows is gaining world wide attention. The hugely successful UK 'Popstars' was based on a format developed by Peter Urlich, who some of you may remember from The Dudes (or so I am reliably informed, personally my heart dances to the "music formerly known as classical").
Now the Labour Alliance Government can't take complete credit for all of this - much as we might like to - but we can take credit for changing the way New Zealand thinks about the role of government and business.
We are now half way through our first term, with two successful budgets behind us.
The failure of hands-off policies to deliver the sort of country New Zealanders want was obvious to the electorate at the last election.
The evidence of failure showed in the current account deficit we inherited, our over reliance on commodity production, inadequate skills development and social breakdown.
We are unashamedly working with business in a partnership approach to economic prosperity and social well being.
We are proud of our successes and we are not afraid to take advice or alter course to make good ideas work better.
The sort of country we want our kids to inherit is one where every New Zealander has the opportunity to develop their talents to the full, where knowledge is valued and recognised as a key to prosperity.
The sort of country we want our young people away on their OE's to come home to is one where their experience and skills are rewarded.
I would imagine that many of you here this evening have been abroad since the Labour Alliance Government came to office.
So I would like to take this opportunity to bring you up to speed on what we are doing to lift New Zealand back into the top half of the OECD.
Our approach to economic and social success is about common sense, hands-on activity. We are committed to taking an active role in transforming the economy to support good people and turn good ideas into successful businesses. We will achieve this by:
- 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
- ensuring New Zealand's success as an export-focused
economy based on high value products
- ensuring the maximum commercialisation of R & D across
- 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.
New Zealand's economy depends on exports and foreign investment. With a population of just under 3.8 million, economic self-sufficiency is not one of our options. In order to afford our standard of living and import dependency, we need to perform strongly as an export nation.
We have committed over $330 million over 4 years, for a more active business development programme, with the focus on export development.
This month our new export credit scheme opened for business.
The scheme is another election promise kept.
We are levelling the playing field for our own exporters and New Zealand is once more offering its exporters a basic measure of support available to exporters in nearly every other developed nation.
The Government is also investing $9.5 million over two years in Trade NZ’s e-commerce strategy for exporters to assist their entry into this new delivery channel that is now becoming critical to survival in the global environment.
The Government is also investing in the education export sector. This is a sector that effectively managed and developed could double its annual foreign exchange earnings to over $1 billion over five years.
We are moving to open up access to foreign markets. We are enjoying the benefits of a Closer Economic Partnership with Singapore. We are working toward closer economic partnership with Hong Kong and we are continuing to seek and support wider trading relationships, whether that be a broad based World Trade Organisation round or suggestions such a P5 agreement between New Zealand, Australia, the USA, Chile and Singapore.
Back on home turf, regional development is critical to our well being as a nation.
The Regional Partnership Programme is helping revitalise provincial economies by boosting employment and helping to promote sustainable growth.
The Industry New Zealand Enterprise Awards Scheme helps good business ideas become reality.
The Industry New Zealand Up and Ready Scheme is designed to improve innovative small businesses and entrepreneurs’ chances of raising finance in the early stages of development.
The Angel Network matches up small to medium businesses with investors.
Industry New Zealand also works to identify and assist major domestic and overseas investment opportunities.
Let me give you some examples of our successes.
In the Sovereign Yachts development the Government sought the early release of the Hobsonville Airbase from airforce requirements. The company expects to create 350 jobs within two years and to generate $600 million in export earnings over five years.
In Whangerei central and local government worked together to give an $80 million Superyacht venture speedy access to a variety of government services and programmes. Here we are looking at 120 jobs in the first year and hundreds more in succeeding years. It already has export orders worth $30 million.
Ericsson-Synergy is setting up a high-tech mobile internet applications research centre in Wellington and Auckland, creating about 150 high-value jobs and enriching New Zealand's skills base.
The availability of possible financing from the Foundation of Research, Science and Technology and through the Government's R&D policies was a factor in their decision to locate here.
Ericsson has entered a joint venture with San Francisco based GeoVector Corporation to develop leading edge "point and click" mobile phone technology. It will provide up to 40 jobs over the next two years. The Government helped by fast tracking the necessary approvals. The company said that approvals that would have taken 16 weeks in the US took little more than a week in New Zealand.
New Zealanders are known for their creativity and can do attitude.
We have produced some world changing ideas. This small nation has produced three Nobel Prize winners.
Last month, kiwi company Virtual Spectator, which won international accolades for its animated graphics coverage of the America's Cup, hit the big league with an offer to provide live animation for the US golf tour and the British Open.
This is the sort of success story we want to encourage.
Unfortunately too many good ideas stall after the drawing board. We are not always successful at turning those good ideas into good businesses.
We need infrastructure that allows a garden shed idea, a scientific discovery, or a technological breakthrough to be developed into a business.
That means education, public and private R&D, venture capital and development finance, intellectual property protection and incubators.
One of this Government's priorities is to build greater levels of private sector R&D. Current private expenditure is now only about 0.34 percent of GDP. This is pretty dismal by international standards.
As at April this year, all R&D spending expensed under generally accepted accounting practice now qualify for immediate tax deduction.
Last year we provided the largest ever increase in Government support for private sector R&D, putting $11.8 million into a new grants scheme, plus an additional $8.5 million into the business assistance schemes already run by Technology New Zealand.
The economy reaps great rewards from these investments.
Technology New Zealand has invested about $90 million in more than 1500 New Zealand businesses since 1995.
Those investments have been directly responsible for increasing their turnover by an estimated $335 million and creating high value technology based jobs.
In addition, the scheme is increasing companies' skills in managing R&D projects and helping build stronger links between companies and research providers.
This year the Government is backing Kiwi innovators with a $100 million seed capital investment fund.
The Fund will finance business start-ups, focussing particularly on technology and high value-added products and services, in partnership with private sector venture capital.
The establishment of the fund will help the commercialisation of innovations from Crown Research Institutes, Universities and the private sector.
The government is not stepping into un-chartered territory with this fund. We are following a successful overseas strategy.
An adequate and effective insider-trading regime plays an important role in
determining how New Zealand and overseas investors perceive the New Zealand market. Ineffective law may undermine confidence in the market.
Since our insider trading laws were introduced in 1988 no one has been found liable for insider trading. This has led to a perception in the market that the current regime is inadequate.
This month the long overdue Takeovers Code came into effect. It lays out an orderly process for companies to follow when staging a takeover.
The Code means that all shareholders, big and small, are treated equally in a takeover situation and there will be an independent Takeovers Panel that will oversee that process.
The takeovers regime is similar to many other jurisdictions including Australia, the United Kingdom, Hong Kong, Canada, Singapore and the European community - to name but a few.
And the Commerce Act has been strengthened to give the Commerce Commission more teeth and to get a better deal for consumers and small businesses.
We will deal with anti-competitive behaviour by dominant firms in a market.
We are aligning mergers and acquisitions laws with Australian legislation to restrict mergers that have the effect of substantially lessening competition.
I would like to finish this evening by talking about what has been called -inaccurately has it happens but nonetheless the expression has taken off - the brain drain.
As it happens, anecdotal evidence over the last couple of months shows that people are coming back to Godzone and that migrants to New Zealand are as least as skilled as those leaving.
I think there is a changing pattern occurring. New Zealanders used to leave the country for a relatively short period - the classic kiwi OE filled Earls court with New Zealanders and Australians.
Now New Zealanders are tending to stay overseas for a longer time but returning at that stage of their life when they’re planning children or have just had children and want a better quality of life. And there is no question that the quality of life in most New Zealand cities is better than most British cities, and I say that as a British born New Zealander.
Compared to the rest of the world New Zealand ranks very high in providing the majority of our citizens - men and women - with excellent opportunities and access to the resources they need for pursuing their personal goals.
We are one of the least corrupt nations in the world. We live in the most beautiful country in world where our citizens can enjoy a lifestyle that is the perogative of only the very rich in other countries.
But, no matter the relative attractions of home, at any given time there are over a million kiwis living in different countries around the world.
In this sense New Zealand is a nation with no frontiers.
In terms of a national identity I believe that, like the Irish are always Irish, Kiwis are always Kiwis. Whereever we are in the world, we stay committed to the New Zealand way of life and we are proud to be New Zealanders.
We want to tap into the hearts and minds of our talented and successful expatriate New Zealanders.
We want our young people to know that there are world leader kiwis out there. We want them as positive role models for New Zealand youth.
We need to network and allow them to still contribute to the New Zealand's prosperity whereever they are in the world.
There's no shortage of good ideas in our community.
There's no shortage of talent.
There's no shortage of commitment.
I recognise that you are all following you own yellow brick road here now, but I leave you with what Dorothy said - "There's no place like home".