Hon John Tamihere
3 March 2004 Speech Notes

Doing business on the Coast

Speech to West Coast Small Business Day, Regent Theatre, Greymouth, March 3, 6pm

As a Westie myself, a West Aucklander, it's great to see so many of you West Coast Westies here today, and I extend a very warm welcome to you all here.

I'd also like to welcome my fellow minister, who I am sure you are all familiar with as your local MP Damien O'Connor. Not only have I worked alongside Damien in the Labour caucus, I have also been his flatmate up in Wellington for the last four years, and have been introduced to that local brew Monteiths as a consequence. It's a great laxative for us Aucklanders. So not only is Damien a mate, while living with him I have seen Damien and his wife nurse their baby back to health after a couple of years battling against cancer, and not once in that time has he missed a beat in his service to his constituents – and that's an accolade for your MP if ever there was one.

Another inspiring person I hope you had the opportunity of hearing was today's Lunchtime Inspiration speaker Hamish Conway. Hamish was named the Ernst and Young Young Entrepeneur of the Year in 2002 in recognition of his entrepeneurial outlook and his determination to do whatever it takes to succeed. And succeed he certainly has since setting up Rock and Ice NZ Ltd in 1997. Today Rock and Ice provides conference activities and team development programmes for the corporate market, and in 2002 Hamish launched a training and dvelopment company to provide high-level team training and professional development to corporates. It is this kind of success story that we need to hear more about, and we need to celebrate and applaud our business success stories as often and as loudly as we celebrate our sporting and Oscar-winning achievements.

That's what this series of Small Business Days is all about: celebrating business success, and hearing directly from people in small business about what contributes to their success – and what holds it back.

I have commented before that I'm not all that interested in hearing from the well-paid lobby groups at either end of this debate, for the purposes of this exercise. I'm not that interested in hearing from the big business elites at one end of the spectrum, nor am I interested in hearing from the unions. The Small Business Days are about hearing from the people who are actually involved in setting up and running small businesses, day in and day out around this country. Those are the views that really count.

The people I am concerned with as Minister for Small Business are our small-medium enterprises or SMEs. They are defined as businesses employing 19 or fewer employees, and they represent 97% of all New Zealand companies, employ 43% of all employees and produce 39% of all the goods and services. The broadest definition of SMEs would also cover what would traditionally be perceived as some of our largest companies. For example, dairy giant Fonterra is in fact made up of 13,000 small businesses – its dairy farmer suppliers.

The SME sector is hugely diverse and cannot be treated as a homogenous group. 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 is their competitive advantage. And the needs of small businesses here on the West Coast are likely to be very different in many regards than the needs of businesses in Central Auckland, for example – not that you have anything against us Jaffas.

When you read some of the headlines above the stories that appear in the business pages of our newspapers, as a businessperson you might be excused for going out and slitting your wrists. Talk about always look on the dark side of life, as these recent examples show:

From the Otago Daily Times on Monday: "Business editor Dene MacKenzie looks at the black clouds gathering over the economy". And from the Christchurch Press last week under the headline "Outlook bleak for economy": "in the first part of a two-part weekend series, Colleen Simpson talks to New Zealand business leaders about what to expect from 2004, a year that is shaping up to be an annus horribilis for our nation's commerce." Apart from introducing subsidised bulk supplies of Prozac to the nation's business press, I'd suggest that we shouldn't forget about all the things we have got going for us in business in this country.

Contrary to popular belief, on international comparisons New Zealand does pretty well on compliance costs for business. That doesn't mean we don't want to hear about the impact of compliance issues on businesses, and we have implemented a number of initiatives to cut back the red tape as far as possible. And we will continue to do so. However we shouldn't be so singly focused on compliance costs that we lose sight of the big picture, and that we forget to celebrate our success stories.

And there are good news stories out there. The National Bank Regional Trends report last September reported that the West Coast posted a strong surge in economic activity in September, propelling year-on-year growth above the national average for the first time in two years.

The West Coast real estate maket was very buoyant in September, with the strongest increase in the number of house sales across the regions, and the region also posted the largest gain in retail sales. It is encouraging to see businesses like Greywmouth engineering firm GT Liddell, Zane Smith's Greymouth internet café and adventure tourism business, and Hokitika jeweller Tracey Piercy expanding their thriving and innovative businesses.

While the region's GDP of $0.9 billion is below the per capita average nationwide, there are strategies to turn this around. The West Coast Economic Development Strategy's key goals of increasing the region's per capita GDP, reaching a population of 37,500, expanding economic activity by more than 50 per cent, and increasing employment by 2500 jobs by 2010 is an ambitious programme, but one that will deliver significant benefits to the region. Developments in the core "driver" industries in the economy – dairying, tourism and mining – will be vital to that strategy,

As a miner's son myself, its great to see industry stakeholders on the coast getting together to work co-operatively to develop and expand opportunities for the West Coast minerals industry.

The potential for tourism in the region is also really exciting. By 2009, tourist numbers are expected to increase by 28 per cent to 1.1 million a year, with more than 80 per cent of that increase coming from greater numbers of overseas tourists. The West Coast is one of the few regions where tourism is expected to grow significantly faster than the national average. Total visitor nights are expected to climb 30 per cent to 3.2 million, and tourist spending by 61 per cent to $420 million.

I would like to congratulate Venture West Coast on their work in planning an eco-tourism and heritage tourism strategy aimed at getting people to the parts of the coast that are less frequently visited, and getting them to stay longer.

It's also great to see the work being done in Greymouth by the GROW organisation in developing a business-friendly environment in the Grey District.

Thinking outside the square has sometimes been necessary to resolve problems - for example, sending people to London in 2002 to recruit people to come and work on the West Coast. That initiative was followed up by the setting up of Recruitment West Coast, a co-operative initiative to identify local job vacancies and pro-actively seek to fill them. And going into schools to encourage students to see and plan for a future on the coast is a great forward-looking part of the solution. Already there has been a reduction in job vacancies, and in a recent survey half the employers with vacancies said they would use Recruitment West Coast to fill them.

While the Government is here in partnership with businesses to contribute what we can to a business-friendly environment, it is great to see a strong ethos of self-help in action down here on the coast as well.

And the news on a national scale shows we have got a lot going for us:

- New Zealand has one of the fastest-growing economies in the OECD, topping the OECD rankings last year.
- 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.
- Government debt, at 27% of GDP, is the lowest it has been since the mid 1970s.

However there are some things we need to do better if New Zealand is to return to the OECD's top 10 from its current ranking of 20. 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. The Government's Growth and Innovation Framework sets out a strategy to build an economy capable of sustaining the higher growth rates needed to return New Zealand to the top half of the OECD. In particular we need to boost productivity growth – an area where we continue to lag behind other OECD countries.

While some issues may be of particular relevance to small businesses here on the coast, there are a number of issues which businesses around the country are likely to have in common.

We're still working on a detailed analysis of issues raised by businesses during a series of visits by MPs to small businesses that led up to the Small Business Days, but the first cut of that work shows that the issues most frequently raised by businesspeople were the Holidays Act, taxation, employment relations and compliance costs.

Regarding the Holidays Act – while four weeks leave will be a fact of life, 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 an April 1 2007 implementation date.

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, proposing a raft of measures that we are now working on. For example self-employed people who pay provisional tax in their first year of business will soon be eligible for a 6.7 per cent discount.

Of course businesses will always want compliance to be reduced, but there will always be some compliance demands on business – it is our job to see that the compliance burden is not excessive. We have already introduced a range of measures targeting compliance costs, and I can assure you I will continue to be diligent in stamping out unnecessary additions to the compliance burden, wherever I see them.

In the area of employment relations, we have just set up the Employment Agreement Builder - an online tool that helps businesses 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.

One Government initiative I really want to see enjoy the huge support it deserves is the Small Business Advisory Group which I set up last year. The people on the group are people just like you – hardworking businessmen and women who know the realities of starting, running and developing a business. The group members have experience in producing everything from helicopters to designer fashion. They are straight talkers. They're not academics, or politicians, or lobbyists or unionists – they are the real deal, and I am confident they will honestly champion the cause of small businesspeople in advising the Government.

Already this group has advised us on what it thinks should be priorities for the Government in helping small business in the areas of tax, employment law and work/life balance.

Before Christmas the group told us that we needed to address the issues of:
- model employment contracts available on-line
- one-month probation periods for new employees
- accelerated depreciation on assets
- the FBT system for motor vehicles
- availability of better mentoring for SMEs.

The Government agreed to include these in its own priorities and I’m pleased to say that we have implemented, or in the process of implementing, those issues.

So we are listening and will continue to listen and to act on your advice. As the Small Business Days continue over the next few months, we’d like to hear your ideas. So I encourage you now to have your say on what you think would work best for small business. I'd like to thank you again for your participation here today, and I'd like to now hear your questions and comments.

ENDS

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