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Prime Minister's Statement To Parliament

Prime Minister's Statement

Parliament Buildings

2.00 pm
12 February 2002

Just over two years ago, the Labour-Alliance Government set out its programme for this three year parliamentary term in the Speech from the Throne delivered by the Governor-General.

That speech outlined a fresh direction for New Zealand. The values of fairness, opportunity, and security were to guide government policy, in contrast to the unfairness, denial of opportunity, and insecurity of the previous regime.

Our government made key pledges which it was determined to keep, in contrast to the broken promises which had characterised New Zealand politics for too many years.

We also signalled an end to “hands off” economic management and foreshadowed the development of smart interventions to facilitate economic growth.

Our first year in office saw us delivering up front on our key election pledges. Superannuation levels were restored; the cost of tertiary education was reduced; more jobs were created; more treatments were funded in our hospitals; income related rents came back for state houses; burglary rates fell; and we kept our promise not to increase GST or company tax or to raise income tax for those earning under $60,000 a year.

I believe that our determination to keep our word and provide steady, predictable, and commonsense government has been valued by New Zealanders. For too many years before, governments had been erratic, unpredictable, and pursuing agendas which left most New Zealanders feeling worse off and uncertain about the country’s future. There was growing awareness that New Zealand’s living standards had slipped relative to those of others over a long period of time and that the radical economic change of the 1980s and 1990s had not brought about recovery. On the other hand there is also awareness that New Zealand’s decline has proceeded over half a century and that the climb back will also take time.

In the Prime Minister’s Statement to Parliament a year ago I set out the government’s thinking on the economic transformation which needed to occur for New Zealand to lift itself back up the economic ladder. Emphasis was placed on the need to be innovative in everything we do to create higher value in our economy.

The past year has seen a great deal of time and effort devoted by government in collaboration with the private sector to the development of new strategies to lift economic performance. The results of that work are being released today. The government’s framework for growing an innovative New Zealand has been underpinned by the work of the Science and Innovation Advisory Council on innovation; by L.E.K. Consulting’s work on strategies for building a talented nation; by Boston Consulting Group’s work on how to target foreign direct investment most effectively; by Treasury’s work on economic transformation; by the Tertiary Education Advisory Committee’s work; and by the policy and programme development of other government departments and agencies in the economic and social development, trade, science and research, education, and immigration areas.

In addition, the Knowledge Wave Conference led by Auckland University and co-sponsored by the government played a catalytic role in bringing New Zealanders from many sectors together to work on how to make a significant improvement in New Zealand’s economic performance and how to translate that into improvements in the quality of life for all New Zealanders.

Growing an Innovative New Zealand

The growth and innovation framework being released today flows from the consensus of advice received from across these sectors. What has resulted is a widely shared vision for New Zealand. It sees our country as:

 a land where diversity will be valued and reflected in our national identity
 a great place to live, learn, work, and do business
 a birthplace of world changing people and ideas
 a place where people invest in the future.

That shared vision sees New Zealanders:

 optimistic and confident about our country’s future
 celebrating our successes in all walks of life
 creating globally competitive companies
 committing to sustainable development
 ensuring that a social dividend flows from economic success
 gaining strength from the Treaty of Waitangi as our nation’s founding document.

The growth and innovation framework’s objective is to return New Zealand’s per capita income to the top half of the OECD rankings over time. That requires our growth rates to be consistently above the OECD average for a number of years. While New Zealand’s economic fundamentals are sound, that in itself is not sufficient to accelerate growth. The framework document brings together initiatives already taken with new initiatives to speed up growth in four key areas:

1. Enhancing the Innovation System

The government has over the past two years been active in lifting research and development spending; developing new strategies for tertiary education; announcing funding for new centres of research excellence; and backing innovative business start ups through support for business incubators and the establishment of the Venture Investment Fund.

New initiatives to be developed will include entrepreneur support strategies; more support for mentoring programmes, incubators, and cluster development; improving our intellectual property framework to ensure New Zealand gets full value from its innovations; and encouraging and incentivising tertiary education institutions and Crown research institutes to be more active across the innovation system, by, for example, engaging in the commercialisation of more of their research.

2. Developing Skills and Talent for New Zealand

This requires the government to keep investing as much as it can in education and industry training; to keep adapting its immigration policies so that they assist, not hinder, New Zealand’s search for specialist talent and skills; and to enlist the talents of New Zealanders living off shore.

The new Tertiary Education Strategy, to be released in the first half of this year, and the Tertiary Education Commission being established in July of this year, will be aiming to get better alignment between tertiary education and New Zealand’s development goals.

We also aim to build stronger links between employers and tertiary education and training providers to minimise gaps between emerging skills shortages and education and training responses. It is important that we make use of the talents of all New Zealanders. Most of the workforce of 2010 is working now. Upskilling the current workforce is critical for driving economic growth.

The new Talent Visa and the Skills Shortage Work Permit come into effect in the first half of this year. They will enable employers to access skilled people much more quickly than before.

The World Class New Zealanders initiative being led by Industry New Zealand aims to build networks of talented New Zealanders based overseas, and to use those networks to establish exchanges and mentoring for young talented people and entrepreneurs. Related private sector initiatives are also underway. The government will look for ways of working together with the private sector on other recommendations from the L.E.K. report and the Knowledge Wave Conference in this area.

3. Increasing New Zealand’s Global Connectedness

Here the government is focusing on the attraction of quality foreign investment; aggressive export promotion; and improved national branding of New Zealand.

The activities of Trade New Zealand’s investment arm and Industry New Zealand’s Major Investment Service need to be closely co-ordinated, and more work will be done on the best structure through which to drive our attraction of foreign investment. More funding will be needed to attract that investment, and the promotional activity will be targeted into priority areas.

Trade New Zealand is looking at beachhead programmes in which it makes premises available offshore for new exporters to develop forward marketing bases and for incubators for small and medium sized businesses establishing themselves in new markets. Trade New Zealand is already facilitating the presence of New Zealand companies in a Singapore Technology Park.

Industry New Zealand’s Business Grow programme is now focusing on those companies which have the ability both to grow quickly and to grow their exports quickly.

The government’s trade policy is very active in furthering market access for New Zealand exports, and a lot of ministerial and diplomatic effort is going into that.

In seeking to rebrand New Zealand as an upmarket, innovative, dynamic economy, the government is leveraging off both the release of The Lord of the Rings and the defence of the America’s Cup. These two events help promote an image of New Zealand as technologically advanced, creative, and successful. Government will work with the private sector to develop a consistent brand image of New Zealand across our industry sectors. As well as being seen as clean and green, we need to be more widely perceived as smart and innovative.

4. Focusing Government’s Resources

In the drive to speed up growth and innovation, the government has decided to focus on three key areas, each of which not only has considerable growth potential, but which also has high potential spill-over effects for growth in other sectors.

Boston Consulting Group, Industry New Zealand, Trade New Zealand, and the Foundation for Research, Science, and Technology have all worked on sector targeting and come to similar conclusions. The consensus of advice is that government should focus on areas which are capable of having a material impact on growth rates across the board, which are capable of developing world class scale and specialisation quickly, and which contribute to the vision of a globally-oriented, innovative New Zealand economy.

These criteria led the government and its advisors to conclude that promotion of biotechnology, information and communications technology, and creative industries was most likely to help move New Zealand on to a higher growth plane. Biotechnology, for example, has spill-over effects for the primary sectors and the processing of their goods, and for the pharmaceutical and other industries. While research on genetic modification falls under the broad rubric of biotechnology, so do ecological research and many other areas of biological science. The need for a precautionary approach with respect to one aspect of biotechnology should not blind us to the opportunities which this fast developing field represents

Information and communications technology helps drive the modernisation of the entire economic and social infrastructure, and is an essential part of making e-commerce a reality.

Creative industries not only underpin the effective branding and marketing of all New Zealand goods and services, but also can, through areas such as design, have a major impact on industrial output.

The government will be moving to establish joint public-private sector taskforces to identify the strategic opportunities in these areas and will be ensuring that government departments and agencies prioritise the development of these areas in their policies and programmes. So, for example, the government and the private sector will need to give priority to developing the skills needed in these areas, research will be encouraged, innovation initiatives will be focused there, and appropriate foreign direct investment will be targeted there.

This focus will not be at the expense of strategies well under way to boost other key areas of the economy, such as wood processing and tourism. The government has been an active facilitator of business, industry, and regional growth, with many new programmes being driven through the economic development portfolios of the Deputy Prime Minister, and that essential work will continue.

The growth and innovation framework sets out the direction in which the government is moving to advance New Zealand’s growth prospects. The priorities it sets will impact on the 2002 and future budgets.

The development of the framework to date would have not have been possible without sustained private sector input and collaboration. The government will continue to work closely with the private sector on the implementation of initiatives within the framework. An Advisory Board largely drawn from the private sector, including employee representation as well as that from business, will be established to advise the government on the progress being made and on new initiatives which should be taken, or on new areas for focus.

The government and private sector focus on growth and innovation has led to the development of a new economic agenda and a substantially shared vision of the future over the past year. While some still hanker after lower tax rates and further deregulation as the key economic prescription, I believe many more are seeing the strategic focus the government is adopting and the policy interventions which accompany it as more likely to contribute to sustained growth. New Zealand already offers a substantial degree of economic freedom and a low cost of doing business relative to other western economies. It is important to the Labour-Alliance Government and, I believe, to most New Zealanders that decent environmental and labour standards are maintained in the drive for a high value and sustainable economy.

Indeed for most of us the development of a stronger economy is a means to an end. That end is higher living standards and the ability to provide a better quality of life for all our people. An inclusive and cohesive society is an essential building block for a growing and innovative economy. In the past year as unemployment came down to a thirteen year low, many more New Zealanders had the opportunity to raise their living standards.

This government has been able to run a strong fiscal policy while also investing more heavily in the social areas and core services, in the environment and conservation, and in the arts, culture, and sport.

This year the government will continue its programme of engagement with Maori to promote economic and social development. Our focus has been on capacity building and opportunity. One size fits all policies have failed New Zealand. It is important that government tailors policies to meet the needs of our distinctive communities. Pacific peoples and other ethnic minorities have also seen government policies adapted to meet their needs.

The consequences of 11 September

The tragic events of 11 September had consequences which touched all nations. Economic growth rates were clipped and nations reviewed their security policies.

The New Zealand economy was better placed than most to cope with the setback. We have low inflation, modest growth, and a historically low current account deficit. Business and consumer confidence has been recovering since the 11 September shock, although the slowdown in job advertisements suggests that firms are still, understandably, cautious. New Zealand is forecast to continue to outperform many of its key trading partners this year.

The government acted quickly after 11 September to join the international effort against terrorism. We pledged co-operation through diplomatic, intelligence, military, and other means. The government also acknowledges that a new international impetus for development would play a part long term in tackling the causes of terrorism. We are now moving to implement measures recommended by the United Nations against terrorism, including against financial flows to terrorist organisations. Legislation in that area has priority in the coming weeks.

The government has also announced substantial new counterterrorism spending to improve New Zealand’s ability to collect, analyse, evaluate, and act upon intelligence. By 2003/4 almost $14 million a year extra will be spent across the police, customs, defence, immigration, and intelligence portfolios to ensure that New Zealand contributes effectively to international counterterrorism efforts and to ensure that our country is not used as a safe haven for terrorists and their activities.

Parallel to these efforts are new measures the government is taking this year against people smuggling. Australia’s efforts to thwart mass arrivals by sea could lead the criminals behind the people smuggling trade to look for new destinations. While New Zealand has been largely protected to date by its geographic isolation, we are not complacent. The government will shortly introduce legislation providing for massive fines and very long prison sentences for those involved in people smuggling. We will be moving to ratify the relevant protocols under the Convention on Transnational Organised Crime.

The government takes New Zealand’s border security very seriously. Where New Zealand’s borders are breached, as they are now by a small but steady flow of asylum seekers, we seek to act rapidly to process those who arrive and move to deport those with no genuine claim for refugee status. More than eighty per cent of asylum seeker claims processed in the year to 30 June 2001 were found to have no genuine claim for refugee status.

Legislative Programme

The legislation on terrorism and people smuggling adds to an already busy parliamentary programme for this year.

 Electoral amendment legislation will need to be passed soon to pave the way for improved administration of the general election.
 The legislation providing for the two year constraint period on release of genetically modified organisms is a high priority. The government’s approach to genetic modification is precautionary and preserves opportunities for New Zealand in line with the recommendations of the Royal Commission.
 Legislation will also be introduced to enable the ratification of the Kyoto Protocol on climate change. Ratification is an important step and will give a clear signal that New Zealand believes that all nations must accept their part of the responsibility to address climate change.

Ratification, however, does not mean that New Zealand must immediately implement policies to reduce greenhouse gases ahead of our trading partners. The government intends to move in step with and not ahead of the broad consensus of western countries on Kyoto.

Implementation of measures to meet New Zealand’s obligations will not occur until enough countries ratify to bring the treaty into force. At that point many countries will be obliged to introduce policy measures, and trading regimes, which will allow New Zealand to gain benefits to offset the costs involved. The full treaty does not come into effect until 2008.

New Zealand has plenty of time to make the transition required. The overall economic effect is estimated to be of net benefit to New Zealand. The effects of unimpeded climate change would most certainly adversely affect an economy like New Zealand’s with its large primary sectors. In preparing to ratify the Kyoto Protocol, we are, after all, participating in an international process to slow down climate change which has the potential to cause billions of dollars of damage and affect hundreds of millions of people.
 Priority will be given to the Sentencing and Parole Reform Bill which realistically addresses the public’s legitimate concerns about longer sentences for the most serious crimes and about parole reform, in contrast to the slogans produced by opposition parties to date.
 Overhauling outdated local government legislation has been a priority for both the Labour-Alliance Government and for Local Government New Zealand. New rating legislation and the new Local Government Act are due to pass into law this year.
 In the labour area, there are the paid parental leave legislation, new provisions for health and safety in the workplace, and the Minimum Wage Amendment Bill. New holidays legislation will also be introduced.
 The government will be introducing legislation to implement more Treaty settlements. Legislation is now being drafted for the settlements with Ngati Ruanui and Ngati Tama, and that for Te Uri O Hau is currently before a select committee.
 Major social legislation before Parliament this year includes the Tertiary Education Reform Bill; the Social Security (Working Towards Employment Bill), the Social Workers Registration Bill, and the Retirement Villages Bill. Legislation to repeal asset testing of older people in rest homes and geriatric hospitals will be introduced, as will legislation to update and consolidate health sector occupational regulation.
 Legislation to set up the Food Administration Authority will be passed.
 Major industry legislation to be passed includes the Racing Bill, and the bill providing for a two year moratorium on new aquaculture activities while more efficient consent procedures for aquaculture are put in place.
 Late last year the government announced a new three year funding path for the health system with substantial extra resources. It will ease the pressure on district health boards and fund new initiatives in primary health care. The government has also committed to a major vaccination programme to eliminate meningoccal meningitis – a deadly disease which is at epidemic proportions in our country.

Developments in Transport Policy

The New Zealand Transport Strategy, planned for release in the next few months, will move forward a sustainable transport system. The Strategy will encompass all modes of transport – road, rail, sea, and air. It will recognise the needs of all users, including pedestrians and cyclists, tourists, commercial users, and commuters.

As part of the overall strategy, the government is preparing a major land transport package which will help address Auckland’s congestion as well as roading issues in key regional development areas. While roading will be a key focus, the package will also put greater emphasis on other land transport issues which the government wants to see given priority, especially public transport, pedestrian issues, safety, and regional development. The legacy of inaction is considerable and there will be funding implications for overcoming it.

Congestion in Auckland is costing the country around $1 billion a year. At the same time roads in key regional areas like Gisborne and Northland are not up to the demands being made on them. In addition, alternatives to roading, such as public passenger transport, and rail services, struggle to get funding under the present funding allocation system.

These problems have been around for over a decade but were not dealt with by the previous government, which instead spent five years planning how to commercialise roads against the wishes of local government and most New Zealanders. The Labour-Alliance government has been working closely with local government for the last two years to find solutions to land transport issues.

Major advances are being made in Auckland to tackle its transport problems, which are problems for the whole country. Just before Christmas the government completed the purchase of the Auckland rail corridor, to enable the development of an efficient passenger transit system. Road construction work has begun at Grafton Gully, on the Puhinui interchange, and on the feeder roads critical to the North Shore Busway. The complete transport picture for Auckland is beginning to emerge after a long hiatus in major highway developments in the 1990s. We look forward to working with the Auckland Mayoral Forum again this year on transport plans for the region.


In New Zealand an elected government has the privilege of a three year term in office. The Labour-Alliance Government came to office just over two years ago, determined to restore a sense of fairness; to build opportunity for New Zealand and New Zealanders; and to guarantee security for older New Zealanders, for families, and for those in adversity. We have placed growth and innovation at the top of our agenda so that New Zealand can generate the wealth required not only to increase living standards for all, but also to fund world class health and education services for all New Zealanders

The past two years have seen us deliver on our promises, cope with challenging international events, and make a lot of progress.

The Labour-Alliance Coalition Government is providing steady and progressive government. My thanks go to the Deputy Prime Minister and Alliance Leader Jim Anderton who has played a very important role in that, and to his Alliance ministerial and parliamentary colleagues.

I also acknowledge the significant support of the Greens, which has allowed our minority coalition government to govern effectively. New Zealand First’s support at critical junctures has also been appreciated. I believe New Zealanders have welcomed the stability the government has offered.

There remains much to do to realise the vision we have for New Zealand. The legacy of underinvestment and decline was substantial.

Later this year we will seek a new mandate for carrying on the work we have begun. It is a privilege to be in government in New Zealand and it is a privilege we must earn each day.

We look forward to open, honest, and robust debate about the future of New Zealand in this election year. We stand on our record of providing strong leadership, clear direction, a growing economy, and major investment in the basic needs of New Zealanders for education, health, housing, and superannuation. We are committed to a New Zealand in which people of all backgrounds, beliefs, abilities, gender, and orientation have a fair go. We stand as a government with a clear programme of action to grow an innovative and sustainable economy for the future which can support a higher quality of life for all our people.

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