Cullen Speech: Financial Services Directory Launch
Hon Dr Michael Cullen, Minister of Finance
Wednesday 22 May 2002
Turnbull House, Bowen Street, Wellington
Welcome to the launch of the Financial Services Directory, which this year goes into its fourth edition. I would like to thank Tony Haas, the editor-at-large of Financial Decision Maker Ltd (or FDM), and Simon James, the publisher, for inviting me to speak at today’s launch.
It is almost obligatory at this kind of event to talk about the increasing complexity of the global economy, the increasing range of financial services and products, and hence the importance of publications like the Financial Services Directory and other FDM products and services to guide the average punter – and the not so average one – through the maze.
This perception has a great deal of truth. The post September 11 world continues to take shape, and although in many respects the impact has not been as serious or as long-lasting as was first feared, it is still early days in terms of identifying and understanding the underlying shifts in political and economic behaviour.
The boards and management of New Zealand businesses need to be up with the play if they are to offer their shareholders corporate governance of an international standard. And the investment advice industry needs to be strongly networked in order to maintain its high standard of service to New Zealand investors and to foreign investors. There is a constant stream of innovation in the world of financing, and a need for good information and good advice regarding which innovations best suit the needs of particular investors or companies.
There are also – as the recent case involving some suspect contributory mortgage schemes illustrates – people whose knowledge and understanding of investment and finance leaves a lot to be desired.
The financial sector runs on good information and good analysis of that information. If we want our financial institutions to maintain the respect of the international markets, we need to keep working to raise the general standard of financial literacy and hence the efficient operation of our various capital and financial markets.
However, there are some ways in which the outlook for those accessing financial services in New Zealand is getting simpler. I am thinking of course of the impact of government on the financial markets, and in particular the flow-on effects of stable, no-nonsense fiscal management. I can confirm the predictions that are rife throughout the country that the budget speech I will be making to parliament tomorrow afternoon will continue the tradition of solid, no-surprises budget documents.
Before the last election we made some promises to the electorate. We set ourselves the target of keeping government spending at around 35 percent of GDP, getting net debt below 20 percent of GDP and maintaining an operating surplus across the economic cycle. We have kept to these promises. Indeed net crown debt has fallen from just under 22 percent of GDP in 1999 to around 18 percent now.
The current status on these figures remains under wraps until tomorrow. However, I do not think it is any secret that I am delighted with the fiscal result and with the state of the Crown’s balance sheet.
As a result, I think it would be a safe bet for those who are interested in the government’s bond programme to foresee some changes in that programme announced in conjunction with the budget.
A fiscal house that is in good order provides scope for us to strengthen the Crown’s balance sheet, and make sensible long-term investments while at the same time meeting our current spending needs.
I have already indicated that I will be announcing new initiatives to attract increased foreign investment in New Zealand as part of a strategy to improve economic growth. The additional funding will be targeted particularly at attracting more foreign investment into three areas that have considerable growth potential, as well as have high potential spill-over effects for growth in other sectors. These areas are: biotechnology; information and communications technology; and the creative industries.
As you are aware, we will also be using a portion of surpluses to pre-fund the future cost of New Zealand Superannuation for the greying baby boom generation.
The Superannuation Fund will also have three important macroeconomic effects. First, it will discipline short-term fiscal policy at a time when a favourable demographic structure might otherwise have tempted governments into tax or spending plans that would be impossible to sustain but painful to reverse.
Second, it will increase the level of national savings.
And finally, it is likely to deepen capital markets, something which we need to achieve to facilitate the growth of New Zealand businesses.
The Superannuation Fund, our focus on reforming tertiary education and the set of strategies around building an innovative New Zealand illustrate the government’s conviction that it is the long game that is important. We need to take a position on where our prosperity will come from in ten or twenty years, and to invest accordingly. We need to ensure that our economy is a diversified portfolio. And we need to ensure that ordinary New Zealanders have confidence in the direction the country is heading.
I trust that the Financial Services Directory 2002 becomes an invaluable tool for those looking to prosper in our new economy.