PM To Trans Tasman Business Council Luncheon
Rt Hon Helen Clark
Trans Tasman Business Council Luncheon
1.00 pm (Australian time)
3.00 pm (New Zealand time)
Tuesday 28 May 2002
Thank you for the opportunity to address this Trans Tasman Business Council luncheon.
Today is the beginning of a four day New Zealand economic mission to Australia.
I am here as Prime Minister, accompanied by Hon Pete Hodgson - one of my senior economic ministers - and a large business delegation headed by the chief executive of Telecom New Zealand, Theresa Gattung.
We come with a clear message : that the New Zealand Government and the New Zealand business community are working together to build the strongest possible relationship between our two countries.
As nations, we go back a long way to early colonial times. We each came to a realisation of our individual nationhood and of the ties which bind us during the horrific Gallipoli campaign of 1915. On frequent occasions in the twentieth century, we engaged, for better or worse, in the same battles, and even today we have defence personnel tackling the same tasks in Afghanistan.
Both our countries are fully engaged in the forums and organisations of the Asia-Pacific, and we work together closely on many international issues.
Our people can live and work freely on both sides of the Tasman. Indeed it would be an unusual New Zealander who could claim no relatives living in Australia.
What complements all that history and these links is the comprehensive free trade agreement between us : CER, signed in 1983.
To the rest of the world, we are one market. Our message is : let’s make the most of it. Australia’s economic success has major spin offs for New Zealand. New Zealand’s economic success makes it an even more important market and partner for Australia.
And, with our combined GDP close to the size of that of ASEAN, we are together an important market and partner for others.
Australia is New Zealand’s largest market. Despite our small population, we are your fifth largest market. The New Zealand economy is equivalent in size to fifteen per cent of Australia’s economy.
Australia is the largest foreign investor in New Zealand. We are your eighth largest foreign investor.
In the last ten years, trans Trasman trade has increased annually by nine per cent on average. That exceeds the 8.5 per cent average annual growth recorded for Australian international trade over that period, and is well above the 6.3 per cent average annual growth in New Zealand’s international trade. Overall since 1983, our bilateral trade in goods has increased by over 300 per cent.
Clearly we matter a great deal to each other in economic terms, as in others. Where we can work together to promote better opportunities for our integrated market, we should. We have done so in APEC, and in the work to develop a closer economic relationship between CER and the ASEAN Free Trade Area.
At this point, we are each making our separate approaches to the United States on free trade agreements. We wish Australia well in its discussions, as we know you would wish us well in ours.
What is important to New Zealand is that discussions with one CER partner are sequenced with discussions with the other. Were one to succeed in concluding an agreement and leave the other far behind, the result would be investment and trade distorting. That would not be in the interests of either of our economies or of our closely integrated market.
On 1 January next year, CER has its twentieth anniversary. Much has been achieved, but we believe there is still more to do. It is important that CER remains a dynamic arrangement - and not one frozen in time.
There are presently a number of items on the governmental work programme to take CER further.
- Negotiations are well advanced on a bi-national therapeutics regulatory agency.
- We are focusing on co-ordination of our business law across securities law, mutual recognition of securities offerings, cross-border insolvency issues, and other capital markets regulatory issues.
- The Trans Tasman Mutual Recognition Agreement is to be reviewed in 2003.
- There is growing co-operation on science and innovation issues. There is also potential for investment in, for example, each other’s biotech and ICT sectors, which could lead to joint international efforts to market Australia and New Zealand.
Our trade ministers meet annually to review the operation of CER, as do senior officials. Aspects of CER are also discussed between Prime Ministers and economic ministers. Our governmental trade and economic departments and agencies have close working relationships.
We both have an interest in promoting together the global competitiveness of Australian and New Zealand industry. Strong competition between our companies is essential. But our companies, industry organisations and governments together should also explore ways in which we can collaborate to ensure that the global competitiveness of both our economies is sustained. Sectors such as forestry and food, where there is already considerable trans-Tasman investment, readily lend themselves to that.
Together we have succeeded in developing one of the most advanced and comprehensive free trade agreements in the world. But we believe we can get more value from it yet.
To maximise that value, it is important that we have a good understanding of what is happening in each other’s economies. I want to take the opportunity offered by this luncheon to brief you on ours.
New Zealand currently has stronger and more balanced economic indicators than it has had in many years.
- Growth is coming in at around three per cent and is currently forecast to straight line at that level for the next five years.
- Unemployment is expected to stay close to its thirteen year low reached last year at 5.2 per cent. It presently stands at 5.3 per cent.
- Employment growth is strong and participation rates are high.
- After experiencing outward net migration since the shock waves of the Asian financial crisis hit New Zealand, net inward migration is now strongly positive.
- Forecast inflation is staying within its 0 - 3 per cent target band.
- The current account deficit at 3.5 per cent in the March quarter was low by New Zealand standards. It is expected to rise to around five per cent in 2003/4 and then reduce again.
- Business and consumer confidence are currently healthy.
- Together, economic growth and the government’s firm fiscal policy have combined to produce credible operating surpluses in the government’s accounts. This year’s forecast operating surplus at $2.3 billion is 1.8 per cent of GDP.
- Gross debt is set to fall to 28.6 per cent of GDP in the coming year, down from 36.8 per cent when we took office.
- Net debt over the same timeframe will have fallen from 22.4 per cent of GDP to 16.8 per cent.
While all these trends are satisfying, the government is well aware of the vulnerabilities of a small nation economy with large primary sectors.
That’s why we have adopted a strategy of driving growth through innovation to take the New Zealand economy upmarket.
We know that nations which prosper in the 21st century will be those which have the capacity to create new knowledge and apply it to both existing and new industries. We know that New Zealand has the capacity to be one of those nations.
- OECD comparisons rank us well for our participation and achievement levels in education and for employment.
- A recent Harvard University study by the Centre for International Development placed New Zealand eleventh out of the seventy five countries studied in terms of overall networked readiness.
- Another international study on entrepreneurship, the Global Entrepreneurship Monitor has identified New Zealand as a global leader in many of the qualities and attributes considered to be key factors for successful entrepreneurship. It ranks us as one of the five most entrepreneurial countries in the world.
Our goal is to lift New Zealand’s living standards over time, back into the top half of the OECD rankings.
Our strategy gives priority to growing our pool of skills and talent through education and immigration; to increasing our investment in science and research, and to commercialising more of the output; to aggressive off shore marketing and brand promotion of New Zealand, and to a focused drive for foreign investment in key sectors.
For New Zealand it is critical that new economy concepts drive our primary sectors, from which some sixty per cent of our exports are still sourced. At the production level these sectors have long been highly innovative. Increasingly, more of their produce is branded and moving up the value chain. Our tourism industry, which ranks up alongside the dairy industry as an export dollar earner, also offers a range of high value, sophisticated, and specialised products.
New Zealand today offers luxury lodges; eco and adventure tourism; wine, arts and cultural tourism; a string of international golf resorts; the uniqueness of Maori culture and heritage; and scenery and landscapes very different from those of Australia.
New Zealand and Australia are traditionally each other’s biggest tourism markets. In the last ten years the number of Australian visits to New Zealand has doubled to more than 630,000 each year. Naturally we would like to see that number jumping to the level of the 725,000 New Zealand visits to Australia each year!
What is especially appreciated about tourism from Australia is that it occurs throughout the year, rather than just in the peak seasons. Australians also visit all the regions of New Zealand, which spreads the economic benefits within New Zealand and reduces the pressure on the best known areas.
While the airline capacity over the past tourism season has been tight, I am pleased that both major airlines flying the Tasman have indicated that they will be increasing air capacity for next year’s season.
New Zealand has developed high value export sectors in many new areas. Significant earnings are now coming from information and communications technology, niche manufacturing, film and television, leisure marine industries, fashion and design, aquaculture, and wine. Education has gone from being a low earner of foreign exchange a decade ago to bring in almost one billion New Zealand dollars a year today.
Indeed a sign of how much our economy is changing can be found in the prediction that our information and communications technology industries will, within three to five years, equal the earnings from wool, once the nation’s leading export industry.
Our growth and innovation strategy is giving particular priority to three areas which have the potential both to expand in their own right, and through their growth, to improve productivity across the economy. Those areas are biotechnology, information and communications technology, and creative industries. Biotechnology has spin offs for our primary sectors, for food processing, and for pharmaceuticals. ICT is a powerful modernising force across the economy and society. The creative industries have an impact on design and marketing and the capacity to update and enhance the whole New Zealand brand. All three areas are well represented on the economic mission with me in Australia this week.
For New Zealand’s overall brand image, we are working to add smart and innovative to our already strong image of being clean and green. Currently New Zealand is leveraging off the release of the largest ever movie production, Lord of the Rings, filmed in New Zealand and made by New Zealanders with the latest in film technology. Seeing “Lord of the Rings” scoop four Oscars recently has been an enormous source of pride for New Zealand.
Shortly we will host our second defence of the America’s Cup. The first defence spurred the growth of the leisure marine industry and had significant spin offs for the software and tourism industries.
The innovation which comes from New Zealand is world class. Traditionally our geographical remoteness required us to be self reliant and innovative. Now modern communications have overcome the tyranny of distance and we are able to connect strongly with global partners with networks, resources, capital and expertise. Those connections can help to leverage more fully the commercial value of our innovations. To that end, we encourage Australian investors to build further win-win relationships with New Zealand.
Investment by Australian companies has played an important part in New Zealand’s economic development, and can play an important role in our future. We are just now launching a new integrated investment agency with a substantially increased budget. We will be targeting FDI which builds on our domestic strengths and adds to our competitive advantage.
We believe that the fast developing innovative economy in New Zealand will of considerable interest to Australia. Your government too has identified science and innovation as vital for your country’s strategy for growth, and is investing substantially in the area.
Already New Zealand and Australian officials are working on:
- A joint case study of the biotechnology sector to identify opportunities for collaboration.
- Promoting opportunities for trans-Tasman involvement in each countries’ research centres.
- Jointly showcasing at international science events.
- Increasing co-operation between our key government research funds.
With our economic mission this week, we seek to highlight the many positive trends and developments in the New Zealand economy.
The sectors represented in our delegation range from the dairy, marine, and building industries to tourism, wine, biotechnology, information and communications technologies, and the creative sector, including fashion, design and music. We also have with us the chairs of the New Zealand Stock Exchange, the new New Zealand Venture Investment Fund Advisory Board; the chair and chief executive of the New Zealand Tourism Board; the chief executive of Trade New Zealand; and a representative of our new economic development agency, Industry New Zealand.
No two countries are more natural economic partners than New Zealand and Australia are. Our economies are almost entirely open to each other. Our business law and regulation is moving to greater harmonisation. Our strategies for growth are taking the same direction.
These are all reasons why we should seek to work even more closely together to secure the maximum benefit for both our countries. We have a common future. Let’s make it a prosperous one.