It's The Economy Stupid - Rt Hon Winston Peters
19 February 2004
"It's The Economy Stupid"
Rt Hon Winston Peters
Bayleys Building, Boardroom, level 14, Wellington
Thursday Feb 19 2004, 5.00pm
You've asked for a speech about my business and about property. There is such a thing as intellectual property - someone should tell Mr Brash - he keeps stealing my speeches!
Now one doesn't mind that but he should admit its authorship.
William Ball Sutch once wrote a book called "Colony or Nation?' and it pointed out how this country has always faced economic insecurity.
Dr Sutch as a young man worked with the finance Minister during the time of the great depression.
One of the most radical measures to come from that time was the devaluation of the then New Zealand pound to get some returns for the farmer exporters because the whole New Zealand colony depended on this.
Times have moved on but we have always been a nation that has depended on trading with the rest of the world.
Once again the storm clouds are gathering, obviously not as bad as 70 plus years ago, but worrying just the same.
For four years the Labour Government has basked in the sunshine of a bouyant economy.
And, Dr Cullen has yet to face any real test of his ability to manage the economy
The Government is adept at taking all the credit for what is an essentially fortuitous combination of factors and taking none of the responsibility for the areas where New Zealand is not succeeding
As an example, despite all the advantages the economy has enjoyed, the external deficit is climbing into the danger zone
The underlying signal is unmistakable - the New Zealand economy is still unable to generate the level of exports that will sustain our standard of living.
To maintain that standard we are dependent on other people's money.
And the Government has been happy to see that dependency deepen to the point where our economy is like a raft in a stormy sea.
Until we come to grips with the question of foreign ownership, the prospects for significant improvement in the living standards of most New Zealanders will be limited.
It's time to take a strategic view of foreign ownership.
Because we cannot expect the boardrooms of Sydney, London and New York - where our fate is increasingly determined - to put New Zealand's interests first.
New Zealand's deepening external indebtedness must be addressed - this reliance on foreign money is a road to nowhere and makes us highly vulnerable to foreign capital markets.
How ironic - this Government made a great play out of how the Privy Council was a reflection of outdated "colonialism" but is quite happy to see New Zealand revert to the status of a branch office through its economic policy.
A branch office whose economic fate increasingly resides in the hands of foreign investors and bankers.
When Parliament opened last week the speech given by the Prime Minister lacked vision, lacked substance, lacked specifics and even she was bored by it.
It was so boring it could well have been given by Don Brash.
In fact, apart from the hairdos it is hard to tell the difference.
No, the real reason that the government has hung on this long is the economy.
Dr Brash did have the grace to publicly concede that the reason for recent export successes was the work of the Treasurer in 1997-8 in creating monetary policy conditions in favour of our producers and exporters.
Of course, modesty doesn't allow us to agree with this assessment.
And he is not entirely right.
High immigration has fuelled consumptive growth and has clearly been a factor in the property boom that you have experienced.
Improved export returns for our farmers and other producers have, as always, generated jobs and incomes in the provinces and elsewhere.
This government has enjoyed the benefits but contributed nothing to what should be our country's medium and long-term goals.
Where is the export plan? Where is the economic vision? Where is the structural support for sustained production rather than consumption-led growth?
Where are the signs that our infrastructural development will keep us in the first world, let alone hope for some return to our previous pre-eminent status?
What policies have they got to ensure that energy costs are minimised, that red tape and compliance costs are reduced, or that innovation is rewarded?
Don't look too hard - they just aren't there!
And without those fundamentals in place no amount of pre-election bribes will arrest a clear and devastating trend.
The Labour Government has to face the facts.
Apart from claiming credit for some economic highlights and spin doctoring around the provinces, the Government has done nothing constructive for the economy.
The Prime Minister has ignored the key advice: it is the economy stupid!
She has relied on an ivory towers approach to policy making that has made photographers out of policemen, prostitutes out of kids, millionaires out of grievance-mongers, and beneficiaries out of innovators.
So what is the prescription?
Real and lasting national prosperity will only come via economic growth -export-led economic growth is the key to our future development.
Where New Zealand's per capita exports in 2002 were $7,800 Ireland's were $48,700 and Singapore's were $64,700.
Those figures are all in New Zealand dollars.
Each Singaporean exported 8.3 times the value of each New Zealander. Clearly we have under-performed. Certainly this is our problem.
That is why we have been regularly slipping down the international ladder and why our standard of living is falling behind Australia's, and why our young people are heading off shore for greater fortunes.
"The London Economist's" view that New Zealand looks likely to be the first country in 50 years to go from the first world to the third is a dire prediction.
The least we can expect from the government is a genuine effort to prove them wrong.
The plain fact is that New Zealand does not have a big enough savings base. Remedying this situation is one of the keys to our future.
As is creating employment opportunities through economic growth.
And the up-skilling of our workforce is vital.
The so-called knowledge economy is another red herring.
We have thousands of people studying computers in New Zealand schools and tertiary education.
At the same time the real economy in this country is screaming out for skilled tradespeople.
We are headed for a fall because we have not stuck to the basics and we have not educated our young people to cope with the future that confronts them.
Employment growth for an increasingly well-educated and healthy populace, and fairer participation in our economy for all New Zealanders must become our policy planning priorities.
Responsible business leaders are now recognising that pure market forces have failed to deliver either economic gains or social justice.
In ignoring its economic opportunities over the last few years the Labour-minority government has failed to provide an export focus that allows a re-orientation towards high technology and further processing industries that could lead the way to an export performance that builds on the best of the present and provides growth for the future.
We still rely on many of our traditional commodities for the bulk of our export income.
We will always rely on those industries where we have a comparative advantage.
The trick is to identify those areas where we are performing below potential and where we can develop this comparative advantage.
Many of our exporters earn less than $50,000 in exports...there is obvious potential for growth in that basic fact.
Despite massive restructuring of our economy we are not a lean mean exporting machine.
There is a place for governments to provide the conditions under which exporters thrive and to facilitate the reaching of significant growth targets.
A government can do more than pay lip service to the expansion of development banking facilities to developing venture capital initiatives in support of the export sector.
It can do more to encourage innovation and research and development in key industries.
And in providing tax incentives for exporters where new markets are developed, or existing markets are significantly expanded.
While on the subject of taxation:
- New Zealand First will reduce the tax rate on new increased export net profit to 20%.
If Company A has net income from exporting of $10million this year, and if it achieves $12million next year then the tax on the additional $2 million will be at 20%.
And we will put the machinery and legislation in place to ensure that this system is honest and kept honest. Within five years we plan to put all exports on the same footing (of 20%).
The Fringe Benefit tax regime also needs jettisoning and we need tax holidays for businesses investing in new technology.
New Zealand First sees the development of new industries and the adding of value as vital to an improved export performance.
Whatever we have been doing for the last 20 years hasn't worked. We can point at individual successes but we cannot be proud of our national performance.
As technology changes our geographical isolation has become less of a handicap but Colin Simpkin's 1951 book "The Instability of a Dependent Economy" could have been written about Dr Cullen and Helen Clark..
It is past time to take full advantage of circumstances that favour the innovative New Zealander and create a climate for domestic success that attracts investment to the benefit of all sectors of our economy.
And it's time for a plan to treble exports in the short-term.
Then and only then will our domestic economic activity take place in circumstances that don't rely on the artifical impetus of high immigration and international speculation.
It's the economy stupid.