Top Exporters Club Dinner - PM's Speech
Top Exporters Club Dinner
Banquet Hall, Parliament
Tuesday 4 December 2001
Thank you for the opportunity to address you this evening.
During the course of the day, a number of ministers have addressed the conference. I am sure there has been a lot of dialogue around key issues.
I have seen the list of questions submitted to ministers. Some were pretty challenging in seeking a level of support which to date we just haven’t been able to provide.
It is worthwhile recalling that when this government took office just on two years ago, 10 December 1999 to be exact, it was after some years of hands off government which saw government largely opt out of industry and business support.
On occasion in the 1990s, even Trade New Zealand was struggling for survival. The export credit guarantee scheme went in the early “90s and even grants to up and coming small businesses had gone by the end of the decade. When this happens, the problem is that it is not just the programmes which disappear; the funding, the provision and the government structures which backed that disappear too.
Our job now is to construct a role for government in the economy which avoids the mistakes of the past. The excesses of hands on policies brought New Zealand to its knees by the 1980s, but the excesses of hands off didn’t bring sustainable growth and prosperity either. That's why our government has been exploring new approaches, to provide smart, active government appropriate for the 21st century. I have defined that role on many occasions. Governments have to provide strategic leadership, set out the vision, the goals, the action plan, and be prepared to actively partner, facilitate, co-ordinate, broker, and where necessary, fund and provide to back economic growth. In the past two years, we have done all those things and we believe we are beginning to get results.
Michael Cullen today has run over the present economic settings. Prior to 11 September we were well pleased with the trends:
- Economic growth in the year to June was 3.5 per cent.
- Unemployment at 5.2 per cent was at that thirteen year low.
- The current account deficit at four per cent of GDP was at an eight year low - and falling.
- The trade balance had turned positive in July for the first time in six years.
- Business and consumer confidence was reasonably steady.
Then the actions of suicidal hijackers threw the world into turmoil. The American economy, already slowing down, slowed further. Economic confidence world wide dived. We all wondered what the fallout on our small economy would be.
What we knew was that we entered this period of uncertainty in better shape than many others. As well as those favourable economic indicators, we are also enjoying low inflation, low government debt, and a strong government fiscal position. Our dollar remains exceptionally export friendly. We look set to continue to outperform our key trading partners - although the growth prospects for all nations have been clipped.
Eleven weeks after the tragedy of 11 September, we remain determinedly optimistic. Almost every nation has united behind the international effort against terrorism. This new spirit of international co-operation has had a positive spin off for New Zealand’s trade prospects. The nations represented at the World Trade Organisation’s talks in Qatar knew that launching a new trade round was essential for the international economy. And for the first time, New Zealand and its friends in the agricultural exporting nations were successful in getting the phase out of export subsidies for agriculture on the negotiating table. It is estimated that if New Zealand were to get even half of what it wants at these talks, our GDP could be boosted by four per cent. We stand to make substantial gains.
If anyone doesn’t think export subsidies are a problem, look at the latest ANZ Bank commodity price index. Dairy prices, which make up 31 per cent of the index, fell 10.3 per cent after the European Union’s decision to increase export subsidies on milk powder and butter!
Of course as we all know, being dependent on commodity exports in the 21st century is no place to be if you want first world living standards.
A lot of the work of this government has been aimed at speeding up the process of economic transformation, which is already well under way, to take the economy up the value chain. That applies as much to the primary sector as to all other sectors.
Indeed New Zealand’s primary industries have always been progressive in their adoption of new production techniques, and the processors have followed suit. Out of the New Zealand dairy industry has come a modern, unified global company, underpinned by decades of scientific research and its flow on for agribusiness, technology, and food processing. We see similar new economy trends across the primary industries. In tourism too, we aim at the top of the market where there is the greatest value for New Zealand.
In the eighties and nineties, New Zealand’s protected and subsidised industries either adapted fast or went out of business. Significant and lingering unemployment was the legacy. But slowly on the razed earth, new third tier, internationally competitive, export-oriented industries began to grow.
Today New Zealand is earning growing export revenue from niche manufacturing, information and communications technology, film and television, leisure marine industries, aquaculture, fashion and design, wine, and other new sectors. Education has gone from being a low earner of foreign exchange a decade ago to close to a billion dollar industry today - and it will grow further.
Our challenge now is to speed up the development of high growth, high value internationally competitive sectors which create opportunities for well paid and satisfying work for our people. Smart active government can support that development in a number of ways as we have, as we are, and as we will.
Government’s investment in science and research is critical, and has increased by twelve per cent since the last election. It is aimed both at greenfields research, and at supporting applied research and development in the private sector. Improved tax treatment for R & D should also lead to greater private sector investment.
But having broadened the base of science and research, the next step is to capture the benefits. Too often in the past, New Zealanders with great ideas have gone off shore to develop their great ventures - and the opportunities have been lost to New Zealand. That’s why we have to support the commercialisation of innovation at home.
What’s being built is a conveyor belt of programmes and opportunities to grow new businesses and sectors.
At its beginning is business incubation - generally attached to tertiary and research institutions. The graduates with the ideas for new businesses can start up their venture in a supportive environment, with links to the staff and services of the institution and to mentoring. From no such incubators two years ago, New Zealand today boasts twelve to eighteen depending on how you count. In Auckland, incubators have sprouted from almost all the major tertiary institutions - Auckland and Massey Universities, the Auckland University of Technology, and Unitec.
New businesses need access to capital, and for young people there is often no collateral to lend against. There was a gap in the venture capital market which the government has moved to fill. The New Zealand Venture Investment Fund has been formed with a $100 million government contribution to provide seed and start up capital for new businesses in partnership with private sector funders.
From there, a range of possibilities exist, from grants for further research and development, to the programmes of Industry New Zealand to support business growth, to the work of Trade New Zealand to assist the export ready businesses to find markets off shore. In a new initiative, Trade New Zealand has facilitated a presence for New Zealand companies in a Singapore technology park to give them a forward marketing base into Asia; and we are investigating how that can be replicated in the United States and Europe.
In my view the greatest return to the New Zealand economy will come from the steps we take to unleash the potential of the innovative and entrepreneurial New Zealanders who can turn great ideas into great ventures. Government must act as a catalyst for that development. Fully engaged, committed, third way government is the way of the 21st century. The indifference displayed in the nineties holds back potential and impedes sustainable high value growth.
In creating our own model of development we’ve looked at many others. But none can be simplistically applied. We can borrow the best of what has been done in Singapore and Korea, Ireland, Finland, and Silicon Valley. But then we must do what works for us.
New targeted foreign investment will be helpful where we have capability and potential and where new entrants will support the growth of even stronger clusters of activity. Greenfields investment rather than acquisition and takeovers will bring the best returns.
Key sectors stand out as attractive for that investment. The biotechnology industry is poised for take off, built on the foundation of many decades of world leading scientific and medical research. We have great strengths in information and communications technology.
The forming of the joint venture by the Swedish company Ericsson with Synergy International is bringing 200 high skilled jobs to New Zealand. That didn’t happen by accident - it happened with government funding of $1.6 million to secure the investment, knowing that our contribution would be repaid many times over by the attraction of a successful business.
For the same reason we have allocated millions of dollars to enable New Zealand to capitalise on the release of the Lord of the Rings trilogy. We have in this country the very latest film production technology to act as a lure for future investment. There are also significant spin offs from Lord of the Rings for our tourism, computer software, and other industries. We are also investing in projects to give our economy further leverage off the defence of the America's Cup in Auckland.
The last two years have seen a proliferation of initiatives to speed up business formation and growth from a range of government agencies. The challenge before us now is to bring better co-ordination to what we are doing to get the best results and so that the conveyer belt of programmes available is able to be easily understood by business.
As Prime Minister I have found that economic and trade policy absorbs a lot of my time. That shouldn’t be surprising. The Bill Clinton team’s response in 1992 to the question of what the key election issue was: “It’s the economy, stupid”.
But the economy takes on more importance today than ever. New Zealanders know that our economy underperformed for a long time and undermined our living standards. We have seen other countries, which lagged behind us, overtake us. Over many years, as a result, many of our best and brightest left. Our government has had a sense of urgency about reversing those trends and we believe they are reversing. We also believe that New Zealanders want to see the country move ahead faster and support the government actively engaging with other stakeholders to achieve that.
As a government we have looked for opportunities to raise New Zealand’s export profile in overseas markets. That has been done in a number of ways:
- Our Closer Economic Relationship with Australia continues to be nurtured, as we endeavour to clear away “behind the border” issues and get greater harmonisation between our business law and regulations.
- The Closer Economic Partnership with Singapore took effect from 1 January. It has certainly raised New Zealand’s profile in that market which itself is externally oriented to the greater Asian region. New opportunities are being created for the export of New Zealand goods and services.
- We are endeavouring to conclude a similar arrangement with Hong Kong, a sophisticated market, not only roughly twice Singapore’s size, but also one which knows the China trade well.
- We are actively seeking the opportunity to negotiate with the United States on open access to that market, although progress will not be fast without the President gaining fast track authority from Congress.
- We have been active in APEC in pushing opportunities for our exporters, and we are well satisfied with the outcome of our efforts in the WTO round.
- Both Jim Sutton and I have been accompanied by business delegations on overseas travel this year. Delegations have been with me in Japan, Hong Kong, China, Korea, Greece, and five Latin American nations. Our eyes have been opened to the opportunities for New Zealand in many fields. The prospects for the education sector are particularly striking. As the sector itself is well aware, that growth will need to be well managed to maintain the high quality on which our reputation depends.
Others today will have spoken on the details of specific government business and export initiatives - and I am sure the feedback from this conference will help us improve policies further.
Exporting contributes 31 per cent of our GDP, and its health is essential to our economy. In the past two years New Zealand has experienced the real benefits of export-led growth. Exporters are doing an outstanding job for New Zealand. The government wants to continue to partner you to achieve continued success.
Thank you for your willingness to attend the conference today.