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Address By Hon Bill English To Auckland Rotary


Address to the Rotary Club of Auckland Maritime Museum, Princes Wharf. 1pm 12 November 2001

Investing in New Zealand's Future

National's task is to provide the political leadership this nation needs to navigate a new century. My party will rise to that challenge, because the alternative is a slow suffocating decline under a Left-wing Government.

Yesterday I spoke to John Howard, to congratulate him. Now there is a triumph of optimism and hard headed Aussie confidence. I am looking forward to rebuilding our relationship with Australia. It's been knocked around by Ansett's failure, and the Government's incompetence over defence and welfare issues. Auckland, even more than the rest of New Zealand, needs the right environment to do business with Australia.

National stands for a strong economy and a secure community. Both will need new thinking, new flexibility, and new energy. Our Left-wing Government is preoccupied with what Helen Clark has called "correction", fixing the sins of the 90s. We have a Government on a Sunday drive, dawdling along, driving by the rear vision mirror. They swerve to the centre line occasionally and the kids are starting to fight in the back seat.

The prospects for the kind of strong economy every New Zealander needs are becoming more challenging by the day. Last week it was reported the United States economy shrank for the first time in a decade. Key US interest rates are at their lowest since John Kennedy was President.

The experts are talking about a synchronised recession of the US, the EU and Japan who are among our largest trading partners.

For the last year and a half New Zealand has ridden the crest of a wave of meat and milk driven by once-in-a generation growing conditions, a weak exchange rate and high world prices.

There are good reasons to believe these prices will stay up because of conditions in their specific markets. But New Zealand will not be immune from the global slowdown. It's hard to imagine otherwise. Uncertainty will have its own effect.

The general expectation is that the Reserve Bank will lower rates again on Wednesday to shore up flagging confidence, and maybe even a bit more after that.

These circumstances make the big targets like 5% growth per year, or getting into the top half of the OECD, look hard.

Now there is a new challenge for a secure community - security from terror here and around the world.

We've been caught with a defunct defence policy. Just when the Government had prepared us for peacekeeping, we find ourselves at war.

Just when we had made a defence policy based on assertive independence, we have had to reach out to support our allies. Just when our air strike force was most useful to Australia, we are scrapping it.

New Zealanders want to carry our share of the defence burden and it will be National's job to build a defence force for the needs of the next decade, not the last one.

The Government's newfound interest in the US is more political tactics than anything. Helen Clark's Government is tearing itself up over this issue, and the Government lacks the unity to sustain New Zealand's contribution to the war.

National thinks differently than Labour about defence, and also about business, jobs and the economy.

I don't blame the nation's commercial leaders for trying to get alongside the Clark Government to moderate their sillier ideas and to educate Cabinet about the needs of commerce.

Let's be honest - the business community is focussed on minimising the damage. Last week this bunch of academics came up with legislation to outlaw stress in the workplace. Presumably this is what Helen Clark means when she says the Government is pro-business.

When did you ever hear Helen Clark or Michael Cullen talk about profit without spitting? In fact the Government campaigned that they put people before profit. Is that the speech they give on the charm offensive?

There is another basic difference. Our economic strategy is about backing our people. We believe growth will come from greater productivity - the ability of our people to do a better job and the ability to invest our capital better. Labour says the answer is savings and so we have the superfund - a huge government savings scheme vastly outweighing any other investment the Government is making.

In coming months, I and my Finance Deputy, David Carter, will talk in more detail about National's plans for a strong economy, but I can tell you today some of our basic thinking.

First, we will focus on the special features of the New Zealand economy. We're not Australia or Ireland.

We are a small nation a long way from our key markets. But small also means we're better able to adapt to change. Being faster and smarter is more important today than size. That's the knowledge economy - learning fast.

We have a long history and natural advantages in biotech industries, strong tourism flows, and a resilient and adaptive manufacturing sector. We have a strong owner-operator culture, a capacity to find our niche and we're good at improvisation and learning about innovation.

Our thinking is in sync with Competitive Auckland and the Knowledge Wave. Their messages to the politicians are compelling:

* Getting business and personal taxes right to attract and retain capital, skills and entrepreneurial talent. We want our kids to be able to earn world-class incomes, but we want them to be able to earn them at home.

* Building on the strengths of those industries which offer the prospect of true international success.

* Investment in people backed up by dynamic education at every level.

* Removing the bottlenecks to growth by investing in the infrastructure that is required for a competitive economy.

* Providing the incentives to get on the ladder and be rewarded for working hard and acquiring skills.

* Having an action plan, so everyone can come along for the ride with a clear sense of direction and purpose.

* Above all, being practical, not ideological.

None of this is rocket science. The point is: Labour can't and won't do any of this. National will.

I want to talk about one part of the equation both groups have left out - how government does its own business. We, the taxpayers, have just spent a billion dollars on a bank no-one wants and an airline we didn't have to buy. Both are the product of Helen Clark's political deals with the Alliance.

At least we know about those deals. Almost no-one knows about the superfund. It will invest twice as much as the total cost of Air NZ and the People's Bank each year - $2 billion each year, and that's billion with "b". It's the same academics in charge, on the same ideological crusade to prove the government does business better than business.

How good a job will the Government do when its deepest instinct is that competition is bad, and profit is a rip-off?

These investments are only part of the picture.

The Crown is the single largest owner of assets in the economy. Central government controls $83 billion in assets while local government controls $45 billion in assets. Together, general government directly or indirectly controls over a quarter of New Zealand's capital stock. These include land and buildings, student loans, SOEs, marketable securities. An increasing proportion will be overseas bonds and equities purchased by the superfund.

The Government is also the biggest single new investor each year. Over the next five years, Michael Cullen, Helen Clark and Jim Anderton will invest nearly $20 billion on your behalf. It won't all be your money - about half of it will be your children's money, because the Government will have to borrow it. Public debt is starting to rise again after falling for a decade.

Think of them as the fund managers for every small business, for every family working overtime, for every New Zealander who willingly pays their taxes in the belief it's helping someone. This Left-wing Government is running loose with hard earned taxes and debt. It should make you sweat.

National is working towards a public investment policy. This policy will set out how the government uses its extensive capital base and new investments to contribute to a stronger economy. If higher growth rates are a strategy for the nation, then they should be a strategy for the Government.

We want to achieve better economic opportunity.

Right now there is no debate, let alone critical analysis of these decisions. Our public investment policy will set out where the government will make its new investments, why we're making them, and how they will be financed. This will force government to think a lot harder and stop the waste of taxpayer money going on now.

A new National government will work to actively manage the asset portfolio to ensure that it contributes to growth rather than being a net drag on it.

I can hear the critics - this is just another story about privatisation. It isn't. The Government should make choices just like everyone else does.

Imagine if the billion dollars spent on Air New Zealand and the People's Bank could be invested in fixing infrastructure in Auckland. Imagine if some could be spent on boosting our capacity for research and technology. Yes we would sell Air New Zealand or the People's Bank in order to make new investments in the future, rather than trying to recreate the past.

It's a practical choice because it is the job of government to invest where no-one else will, like defence. Carrying our share of the burden will be expensive, and we need to look at all the financing options. A public investment policy will help us make these choices.

In fact it's the Labour Government that's extreme - their policy is to hold onto every asset because it's a left wing thing, and buy more for political reasons.

Either we are going to be slaves to a Left-wing theory, or the government is going to carry its share of taking New Zealand forward.

A public investment policy is about choices. Do we want:

* a subsidised People's Bank or properly funded research,

* a clapped out Super Fund or lower taxes,

* to drive on better roads or fund more personal arts projects for Helen Clark?

* to pay our way or let Clark and Cullen send the bill to our children.

New Zealand can get by for a while on badly managed public assets, congested roads, undercapitalised research and environmental protection. It's called the Third Way. The price will be more of what we are paying now - more debt and less progress.

A public investment policy will also help us deal with issues like the superfund. It represents 50 times the value of Air New Zealand and the People's Bank put together but it's had a lot less scrutiny. Three weeks ago the Government passed legislation to take $50 billion (with a "b") from taxpayers and create an investment fund to partially cover the costs of super in 25-year's time.

But the Government doesn't have enough money to save - it will have to borrow most of what goes into the fund. Then the fund exports most of the capital to overseas markets just when we'll need it here to invest in our own economy. National believes these investment decisions are best made by the families and the businesses who pay the tax in the first place.

All this for a fund that's going to contribute 10% of the pension, if it meets the government projection of 9% return on capital for the next 50 years.

For good measure Treasury says the perceived increased security about retirement incomes will lead to a lower level of private savings. The National Bank says the fund will knock 0.2% per annum off New Zealand's growth rate.

The superfund is a solution looking for a problem.

Under the public investment policy we will also include financing partnerships between the public and private sector in those choices.

The public sector is much more sophisticated than it was. And, under a National government, it is capable of getting the benefit of private finance for public infrastructure.

Our goal is the best service for the people and the best infrastructure for the economy. Where it's practical we will use private money and expertise to achieve it. We reject the Left-wing view of this Government that people just have to take what they can get and be grateful.

Today, I have outlined a pragmatic policy framework for a future National government to manage its own affairs. We cannot continue to waste billions of dollars on the pork barrelling of the People's Bank, the commercial vandalism of Air New Zealand and a super fund that sells out New Zealand.

Bad Government mismanagement costs jobs and lives. We shouldn't have to make our cancer patients wait months, then fly them to Australia by the planeload only when matters are critical.

A public investment policy is but one step on the road to a 10-year view of New Zealand. There is more to come - on education, infrastructure, research, taxation, resource management and superannuation.

I expect there will be controversy. But New Zealand must move on. Winston Peters and Helen Clark want to bog us down in old arguments about privatisation. Here's a challenge for them: Explain why they want to give away billions (with a "b") of investor dollars to overseas sharemarkets through the super fund.

In this area, as in others, National will be staking out new territory, new ways of navigating the fast changing landscape. Can we beat the cynics? I say there is no choice - we have to.

There is more to running a country than sound bites, more to caring than government grants and more to an economic strategy than drinks with the Prime Minister.

It's time for a new National to move on, to reach out to more New Zealanders and become once again a broad-based party of the national interest.

It's time New Zealand moved on from the arguments of the 80s and 90s and lifted its sights to the future - how to create the next 20 years, rather than re-create the last 20 years.

The timeless principles of self-reliance, freedom, enterprise and contribution to the common good have worked for you and your community. I am looking for your support to bring those principles to the governing of our nation as we set out on a new century.

Thank you.


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