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Tamihere Speech: Getting down to business - Timaru


John Tamihere Speech: Getting down to business in Timaru


Speech to South Canterbury Small Business Day, Theatre Royale, Timaru, Monday March 1, 7pm

WELCOME

I'd like to welcome all of you here tonight - it's great to see such a fantastic turn-out in Timaru for the first of 24 regional Small Business Days.

I'd also like to introduce to you my colleague Clayton Cosgrove, MP for Waimakariri and chairman of Parliament's most powerful select committee, the Finance and Expenditure Select Committee, and to offer the apologies of my Cabinet colleague, Aoraki MP Jim Sutton, who would have liked to have been here tonight but unfortunately his ministerial duties have kept him otherwise occupied.

CELEBRATING SMALL BUSINESS SUCCESS

Today is all about hearing what you, as small business owners and operators, have to say about the realities of doing business, the struggles and the successes. It is also about celebrating small business, which is something I think we don't do enough of in this country. We applaud our sporting heroes, and increasingly our success stories in the arts – today's Oscar nominees in particular – but we still don't celebrate the success of our business heroes. You are the backbone of our economy (as will be made clear to you in our debate tonight) and I want to thank you for your success, not least because the success of small business underpins the success of the economy, and of the nation as a whole, for the benefit of all New Zealanders.

It has been a great experience for me and the team of Government MPs and ministers visiting small businesses in the lead-up to the Small Business Days. We are absolutely committed to building the relationship and understanding between this Government and small business.

SMES

SMEs are defined as businesses employing 19 or fewer employees, and they represent 97 per cent of all New Zealand companies, employ 43 per cent of all employees and produce 39 per cent of all goods and services.

The SME sector is hugely diverse and cannot be treated as a homogenous group. It also has varying needs from region to region – the issues that are most relevant to you here in South Canterbury may not be the top priority in Northland or Wellington. Nor should we assume that big is beautiful in all cases – not all small businesses want to grow. For some, being compact, fleet-of-foot and focused on their main product is their competitive advantage. Others have clear ambitions for their small businesses to grow, and we want to do whatever we can to help them achieve that.

That’s why the Government is actively trying to understand the special and widely varied characteristics of small business, so that we can deliver initiatives that accurately target and meet their needs.

SOUTH CANTERBURY

The outlook for the region has some bad news and some good news – with a lot more of the latter, I hope.

According to the National Bank Regional Trends Report (September 2003), Canterbury posted its 14th consecutive rise in economic activity. Overall, year-on-year economic growth at 4 per cent eased slightly, but still remains the joint second-highest in the country (alongside the West Coast) and compares to nationwide economic growth of 3.3 per cent.

In January the Canterbury Economic Development Corporation's "Canterbury Economic Snapshot" showed that:

regional dwelling construction remained strong in the last month of 2003 retail sales showed year-on-year growth of 2.9 per cent for the year ended November 2003 there was a drop in the value of regional exports, with annual average growth for the year ended November 2003 at –17.9 per cent

Overall rural New Zealand posted a 1.6 per cent rise in economic activity in the September 2003 quarter – ahead of the 1.1 per cent increase in urban areas.

The latest AC Nielsen-Rabobank rural confidence survey in December 2003-January 2004 showed that the rising New Zealand dollar, climate (the survey included the impact of the dry summer in parts of the South Island, but was conducted before the recent North Island floods) and the expectation of increased interest rates continue to impact on farmer confidence, and over half of the farmers surveyed expect their income levels to decrease in the coming year. However, more than 80 per cent of farmers indicated that they plan to spend the same or more on their business this year. (This is probably a good point to point out that I consider farmers to be businesspeople and farms to be businesses, like any other.)

In November 2003 the Timaru District's Economic Monitor found that most key business indicators showed robust growth, and predicted the outlook for the exchange rate and interest rates will strongly influence economic activity this year. Key trends include:

Growth in the number of new firms in the Timaru District. Statistics NZ figures show there were 3914 businesses in South Canterbury in February 2003, 464 more than there were five years earlier, and up 100 in just a year. Greatest increase came in the property and business services sector, with agriculture, forestry and fishing businesses also showing marked increase. Year-on-year growth for regional retail sales was 3.8 per cent for the year ended September 2003, but was relatively flat over the third quarter of 2003. The local export sector edged slightly higher in September 2003, leading year-on-year growth to 22.3 per cent.

Growth in GDP for the Canterbury region from 1998-2003 was 4.7 per cent, compared to 3.1 per cent for New Zealand as a whole, according to NZIER.

I am particularly excited by the successes in the tourism industry in Canterbury, and I'm sure that the guest speaker here today, Mike Tamaki, will have inspired you with his tourism success story. From humble beginnings working in a forestry gang to running a Rotorua-based company that generates over $5 million a year and employs more than 100 staff, that is the sort of business success story that brings an amazing array of positive spin-offs for communities, for the economy and for this country.

Your own tourism success stories are undoubtedly reaping similar rewards for this region. By 2009, visitor numbers to Canterbury will be up 23 per cent to 4.2 million, with 81 per cent of that growth driven by an increase in international travellers.

The region's attractiveness as a tourist destination is fuelled by experiences that are uniquely Kiwi, that can't be experienced anywhere else in the world. For example guided hunting expeditions are pumping an estimated $5 million a year into the South Canterbury economy.

According to Kiwi Safaris owner Mike Freeman, his business alone puts about $1 million into the local economy each hunting season, not counting the $500,000 his company is spending on its purpose-built Sherwood Park Estate near Fairlie. South Canterbury is the only place in the world where you can hunt thar, and this year Mike's guides led 60 thar hunts, and have another 80 booked for this year. That is just one example of a number of innovative, distinctly New Zealand enterprises that are succeeding – to the great benefit of this region.

SMALL BUSINESS ISSUES/CONCERNS

Looking at the issues most likely to concern small businesses nationwide, there are a number of matters in which many small businesses have a shared interest. We're still working on a detailed analysis of issues raised by businesses during the nationwide series of small business visits, but early indications from those visits show that the top four issues raised by businesspeople were the Holidays Act, taxation, employment relations and compliance costs,

While four weeks annual leave is included in the new Holidays Act, the Small Business Advisory Group suggested that setting a firm future date for the introduction of this provision would allow businesses time to adjust, so we decided on a April 1 2007 implementation date. That's a good example of how we may not be able to deliver everything that business might demand, but we can go some way to producing at least some outcomes for them.

Small businesses told us that taxation removes incentives for business growth. While I can't promise you cuts to business tax rates, we are working on making the processes surrounding payment of taxes easier for businesses. Last year we released the discussion document Making Tax Easier for Small Business. It includes initiatives such as a subsidy for small businesses to use a payroll agent, standardising GST and provisional tax rates to the 28th of the month, and a 6.7 per cent discount for new businesses as an incentive to pay tax in their first year of business. The Government will make decisions on these proposals in coming months and legislation would be introduced later this year.

On the issue of compliance costs: of course, there will always be complaints from businesses about compliance and demands that the Government does more to reduce red tape.

There will always be some compliance demands on business – it goes with the territory. That said, my job is to mitigate any excesses in this area, and we have already introduced or planned a number of initiatives to cut back the compliance burden wherever possible.

And lastly of the top four issues, employment relations. No doubt the powerful big business lobby groups will tell you that this Government is in thrall to the unions when it comes to employment relations – and the unions will tell you that big business is calling the shots. The reality – and the way forward – is, as with most things, somewhere in the middle of those two extremes. And on that middle path we are producing some great initiatives to make employment relations easier.

One practical measure which will go some way to making employment relations easier for small businesses is the Employment Agreement Builder. This online tool allows businesses to build employment agreements that meet legal and regulatory requirements, while providing flexibility to meet individual requirements. Using this template, businesses can add their employees' details, tick the clauses they wish to include, and delete those they don't want. It's a great of example of how we are trying to make employment relations as straightforward for business as we can. The site will also provide a guide to the use of probation periods for new employees.

We are doing what we can to address these specific concerns raised by businesses, but perhaps most importantly we have our sights fixed on the big picture.

PRODUCTIVITY

On the positive side of the ledger, there are a lot of good things to report:

New Zealand has one of the fastest-growing economies in the OECD. From 1992-2002 our economy grew at an average annual rate of 3.6 per cent (defying the recent global downturn). Last year our growth rate topped the OECD rankings. The small business sector led growth last year, with 4.9 per cent growth, compared to 3.1 per cent growth for the economy as a whole. Unemployment is at its lowest level since the mid-1980s, as the latest figures this week show. Government debt, at 27% of GDP, is the lowest it has been since the mid 1970s. 30 % of respondents to the recent National Bank business outlook survey expect increased activity in the year ahead. However if New Zealand is to return to the OECD's top 10 from its current ranking of 20, there are things we must do better. We must have smart businesses that are globally competitive, that are strongly connected with customers, and are founded on good ideas and talented, skilled people

New Zealand has relatively low productivity and labour productivity growth. While our performance has been trending upwards since the mid-1990s, at 1.5 per cent average per year over the last 4 years, we continue to lag behind other OECD countries with 2-3 per cent productivity growth.

Our education and literacy levels are around the OECD average. However if we could improve our education performance, it would provide even more people able to contribute to economic growth.

ECONOMIC GROWTH

Economic growth leads to jobs and higher standards of living for all New Zealanders. For example if we’d had just 1 percent more growth each year since 1970, by now: the number of people in work would be considerably higher there would $175 more in the average weekly pay packet we’d have $3.7 billion more to spend on health each year we’d have $4.2 billion more to spend on education ( $3500 more per student) we’d have twice as much per capita to spend on roads

THE GOVERNMENT'S ROLE

We need to clearly articulate how business can contribute to sustained economic growth in New Zealand. My message to the small businesses that have committed themselves to becoming well-run, innovative and world-class, is that they can be certain that the Government will be there for them.

- We’ll be there as a partner who will back you, and help make it possible for you to achieve your objectives. We will make sure you have the information you need and help you acquire the skills and capabilities needed for your business success.

We’ll be there to help you over hurdles, removing or changing unnecessary regulation, and making engagement with the government and government agencies as useful and easy as possible.
We’ll be responsive to your changing needs. While the government recognises that it can often be the small things that are important for small business, we are also keeping our eye on the big picture for small business and ensuring that the things that are important to you are amongst the government’s key economic and social development priorities.

SMEs are a big priority for the government, and their success is crucial for the wellbeing of every New Zealander - that’s why this government is making every effort in supporting small business and will continue to do so.

Unless the SME sector is stimulated, unless we lift our export capabilities, and the capacity and capability of our business leadership, we'll have some major problems. We must be focused on how we lift productivity, how we market and package and add value to our goods and services, rather than looking for answers solely from the Government. We have to move forward as a partnership between small business and the Government in which we both bear a leadership responsibility. That's a relationship and a challenge I very much look forward to being a part of.

LOCAL ISSUES

There are a number of issues of particular relevance to this region in which the Government has a role to play, and I'd just like to touch briefly on some matters that come to mind.

Something that will be high on the list of concerns for those of you involved in exporting will be the high New Zealand dollar. While the region has been running an above-average GDP for the last four years, a downturn is expected as a result of the high dollar. We are equally aware of this issue and the Government is looking at the options, but while I am greatly respectful of the efforts of Finance Minister Michael Cullen in managing this nation's economy, unfortunately his powers do not also extend to managing the American economy or the US dollar.

Another issue is the problem of skills gaps – while unemployment in this region, at a marvellously low 3.7 per cent, is below the national average, the number of people with no qualifications in the Canterbury region is slightly higher than the national average of 27.6 per cent, and in Timaru the proportion of people with no qualifications is significantly higher at 36.6 per cent. Obviously that is a situation that must be addressed if we do not want to see the skills shortage worsen.

But rather than list for you the issues which are of concern to you, I'd like to hear from you what issues you believe to be most pressing, and I welcome your questions on any subject. That's the whole point of the Small Business Day Series: we want to hear from you – genuine, hardworking businesspeople.

I have been accused of attacking business lobby groups by saying that we aren't interested in hearing from big business, the Business Roundtable, Business NZ and the like for the purposes of this series. I wasn't saying that because I want to get stuck into business lobby groups – my point is that for the purposes of this exercise I want to hear from the ordinary Mums and Dads businesses who are out there doing the hard yards. I want to hear what makes you tick, what works for you and what is a problem for you. Tonight's your night, so go for it, have your say and I'm here to listen – and give you some straight-up answers and hopefully follow up with some action.

I also hope you will stay to enjoy tonight's debate on a topic dear to my heart: "Small business is the backbone of the New Zealand economy." I have been assured it is no-holds-barred and designed to entertain as well as inform, so it should be a lot of fun. Thank you again for your attendance here tonight, and I'd like to now throw the floor open for your questions.


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