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Jim Anderton Speech - MED Policy forum

Jim Anderton Speech - MED Policy forum

8:30 am Thursday, 15 May 2003 Ilott Theatre, old town hall. (Next to Michael Fowler Theatre). Wellington Geoff Dangerfield and Lewis Holden from my Ministry Officials, colleagues, OECD delegates, business analysts, academics

It’s my pleasure to welcome you all here, and particularly to welcome your keynote speakers, Professors Howitt, Bhide and Edquist.

International biologist story “keeping your mind focussed on the real issues” Israel /Palestine border guard, motor scooter and sand.

It’s my pleasure to open today’s Policy Forum.

A policy forum invoking discussion on the main drivers of economic growth and the most appropriate Government response for achieving higher rates of growth is welcomed by the Government.

This Coalition Government is committed to enhancing the levels of economic growth in New Zealand.

We therefore need to stimulate discussion about the drivers of economic growth in our country.

For at least three decades, New Zealand has been slipping behind other countries we like to compare ourselves to.

When you think of countries like Spain, Portugal, Cyprus and Slovenia, there are not many people who would consider those countries to be rich.

Yet New Zealand today ranks among them in comparable, per capita wealth.

In 1970, New Zealand had roughly the same per capita income as Australia.

Australia is not doing too badly today – it’s ranked about 12th in the OECD, just behind where we were in 1970.

To have kept up with Australia since 1970, we would have had to grow by just one per cent a year more than we did.

That would have meant real GDP growth of about 3.1% -- hardly a startling rate.

But we didn’t achieve it.

It’s sometimes been quipped that the malaise of the New Zealand economy could not have been achieved just by civil servants and politicians alone.

It required the intervention of economists.

I asked the Ministry of Economic Development to do some figures for me on how things could have been different if we had achieved the same growth rate as Australia’s.

It would have meant extra incomes for the average worker of $175 a week.

What would that mean for most families?

It would mean, for health, another $3.7 billion a year.

What would that do for waiting lists? For kids with glue ear? For people who can’t afford to pay for their prescription?

It would mean another $4.2 billion for education or $3500 per student each year.

That’s the end of the student debt problem.

The total student debt is not much more than $4 billion – so we could pay that off in one year.

How many of our best and brightest would be heading overseas permanently, to escape a lifetime of debt?

If our GDP had grown at the same rate as Australia’s, we could have invested twice as much per capita on our transport infrastructure over the last thirty years.

Imagine how different the budget Michael Cullen is announcing today might have been if we had grown just 1 per cent a year faster, over the last 30 years.

That is the urgency of the task we are facing today.

Economic growth is not an abstraction – it is not an end in itself - it is the living reality of better services, and a better quality of life.

Of course, successive governments were confident that that they were following policies that would lift our economic performance.

The secret is not in recognising that something must be done, but in recognising exactly what must be done.

This Government has maintained and enhanced New Zealand’s platform for growth. We’ve got sound monetary and fiscal frameworks, flexible labour markets, few domestic barriers to competition, a good climate for entrepreneurs. We are starting to see the benefits of initiatives to assist businesses and regions. But these alone are not enough to achieve the higher rates of economic growth necessary to increase our living standards – this Government agrees that more needs to be done.

The Government’s Growth and Innovation Framework was launched in February 2002.

It established a growth goal of returning New Zealand’s per capita income to the top half of OECD rankings and maintaining that standing.

But almost everyone here knows that is harder than it sounds – economics, after all, is the only discipline in which two people can get a Nobel Prize for saying exactly the opposite thing.

That is why it is essential to hold discussions such today’s – to sort through different and sometimes competing ideas.

We need to record some of our lessons, for the benefit of the future development of our economy – and for the benefit of other economies which do not have to repeat our mistakes. They can also benefit from the positive steps New Zealand has taken to modernise its economy.

Some of our lessons have been learned painfully – so painfully, that many architects of change have refused to admit mistakes and policy failure.

But we don’t have the luxury of ignoring policy failure any longer.

This means achieving sustainable economic development – that is, development that meets the needs of the present without compromising the ability of future generations to meet their own needs. The New Zealand government’s key concern is to ensure that the benefits of growth accrue to all New Zealanders, in all social groups, all ages and all regions.

Higher economic growth will bring about the improved standards of living that most New Zealanders aspire to. Higher growth helps retain skilled New Zealanders and so helps grow the incomes of the less skilled. Higher growth also finances New Zealanders expectations of quality social services and enables investment in better environmental outcomes.

In New Zealand we haven’t got excess money to throw at problems, but we do have the confidence and freedom to try things out. We’re building on that strength and want to become a nation known internationally for our innovation, our creativity, our skills, and our lifestyle.

We have learned, however, that if we want an economy that grows as fast as other developed countries, it is not enough to create conditions of classical economic purity.

In the eighties and nineties New Zealand’s economic management delighted classical economists.

But it just didn’t change fast enough to produce the results we needed.

In 1970, New Zealand and Taiwan each exported about a billion dollars a year of mainly commodity products.

Rice from Taiwan, and meat, wool and dairy – mainly – from New Zealand.

Today, we have grown that export base to $30 billion – a thirty fold increase.

Taiwan, exports $125 billion a year – a 125 fold increase. New Zealand exports the lowest proportion of complex manufactured goods in the OECD.

We import five times as much as we export.

Greece – which is the next worst performer – imports three times as much.

Most high-income countries are net exporters of complex manufactured goods.

We are still predominantly exporters of primary goods and commodities.

We are good at it, - the best in the world- and we shouldn’t abandon those industries.

But we have to transform the base of the economy, and produce far more goods that rely on the unique talent and creativity of New Zealand.

Today’s event is hosted by the Ministry of Economic Development – a Ministry that was created precisely to lead that transformation.

MED was created out of a recognition that merely setting economic fundamentals is not enough.

There needs to be more – there needs to be partnerships between government and industry.

The contribution from central government remains very small – as little as $110 million out of a central government budget of something like $36 billion.

We’re not going to “fix” the economy with that nor are we going to do it overnight.

Yet I believe we are already seeing the early rewards of a more proactive, partnership-based approach.

Every region of New Zealand is now in positive growth mode.

We’re beginning to see examples of business successes resulting from partnerships between government and industry.

So the first lesson from our recent experience is that partnerships can make a difference, where they consist of expert advice, facilitation and co-ordination and sometimes modest assistance.

The second is that we need to learn also to be serious about the cost of transition.

The economic upheaval New Zealand experienced in the eighties was traumatic in human terms.

But it also carried an immense economic cost.

There were costly recessions, high levels of unemployment and the loss of industries

If one does a discounted cashflow calculation of the cost of that transition, then the returns would have to be spectacular indeed to make such upheaval worthwhile.

That is an argument not against change, but against the way it was done.

The third lesson is that the social dimension of the economy cannot be ignored.

We will talk about the drivers of growth, but barriers are important too.

We need only think of the skills shortages that employers around New Zealand are complaining of at the moment.

Many are being held back by the difficulty of locating and retaining skilled staff.

Yet we still have unacceptably high levels of youth unemployment.

But before we can equip all young people with skilled jobs, in many cases we have to repair deeper problems, in home life, health and so on.

Kids in Northland and Tairawhiti who have given up thinking about work, and sit around smoking dope all day – they’re not very likely to turn up to work at 8 in the morning five days a week.

We need to go to work on those issues, too.

There is no magic bullet, but there are good ideas.

That’s why we are planning to host events like this. They enable the Government to tap into the best minds internationally to ensure that our policy direction is in tune with the best and most innovative modern economic theory and practise.

And I want to close by saying I’m very positive about New Zealand – more positive than I have ever been in my entire life – which is longer than most.

We have flexibility that other developed countries can’t believe.

Our isolation has bred resourcefulness and we enjoy a depth of creativity that has sprung from our freedom.

I know we can harness those advantages for our common good.

I look forward to your deliberations today about some of the best ways to do that.

Best wished for a successful forum!

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