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Anderton Speech Institute of Chartered Accountants

Hon Jim Anderton Minister of Economic Development

Institute of Chartered Accountants – Waikato-Bay of Plenty Branch Ferry Bank Reception Lounge, Grantham Street. HAMILTON



Adrienne Olsen, Waikato, Bay of Plenty Chair of ICANZ, Elizabeth Hunter, Midland Regional Manager, ICANZ, Peter Anderson, General Manager of the Branch Network, ICANZ, Councillors and members of the Institute, Jeff Fairweather, from sponsors ASB Bank, and Distinguished guests.

There is a story told about an accountant and a politician…

The politician was a hot air balloon enthusiast, and took the balloon out flying one day when he realised he was lost.

So he lowered his altitude until he spotted a man on the ground below.

The politician called out, "Excuse me, can you help me? I don't know where I am."

The man consulted his portable GPS and replied, "You're in a hot air balloon 30 feet above a ground elevation of 2346 feet above sea level. You are 41 degrees, 14.3 minutes south and 100 degrees, 49.09 minutes west."

The balloonist rolled his eyes and said, "You must be an accountant."

I am," replied the man. "How did you know?"

"Well," answered the balloonist, "everything you told me is technically correct, but I have no idea what to make of your information, and I'm still lost."

The man smiled and responded, "You must be a politician."

"I am," replied the balloonist. "How did you know?"

"Well," said the man, "you don't know where you are or where you're going. And you've risen to where you are due to a large quantity of hot air."

Today I do want to take some time to talk about where I think we’re going.

I am immensely confident about New Zealand, but I also believe we have some important challenges to overcome – so I’ll talk about those too.

New Zealand is enjoying the best economic conditions experienced in two generations.

New Zealand is humming.

Not just economically – although that’s important.

We’re also taking giant strides socially, because the two go hand in hand.

Unemployment is the lowest it has been since 1987, at four per cent.

211,000 new jobs have been created since 1999.

A couple of weeks ago Donald Brash went to Australia.

He told them we’re on our way to becoming a failed Pacific state.

He is simply wrong.

Over the last five years, our growth rate has outstripped the OECD average.

New Zealand's GDP grew by fourteen per cent during that time.

Australia's grew by eleven per cent.

In the previous five years – when National was in government and Donald Brash was at the Reserve Bank – New Zealand grew by 9.9 per cent and Australia by 16.9 per cent.

So we trailed Australia when he ran the show, and we are beating them now.

The difference might not sound like much.

But consider this: if our economy had keep pace with Australia’s for the last thirty years, it would have required another one per cent a year of growth.

Every New Zealand family would be $175 a week better off.

Health: An additional 1% growth would have meant we could invest $3.7 billion a year more on health.

Education: $4.2 billion more would be available per year. That's roughly an additional $3,500 per student. In one year it would almost wipe the current student debt.

If our GDP had grown at the same rate as Australia we could have invested twice as much on roading infrastructure over the last 30 years.

That is the cost of a generation of economic failure.

For the first time since the sixties or possibly even the fifties, we have enjoyed five consecutive years of strong growth.

I keep reading commentators who refer to this as the government’s good fortune.

Certainly the government can't, and doesn't, take all the credit; trading conditions have been generally positive.

But we have also sustained a global economic recession, the ‘tech wreck’, floods, drought, SARS, a national airline collapse and a dollar valued at cyclical highs.

You haven’t once heard this government blame the Asian economies or drought or the BNZ for poor performance.

There are other things going on here.

As accountants, you will recognise some of them.

Prudent fiscal management - the government has managed its finances carefully, and invested wisely instead of rushing out to spend every dollar as soon as it’s earned.

Confidence is another factor.

In every region and every sector, there is confidence that the government is working to ensure the success of the economy.

Roadblocks are being systematically removed.

For the first time in a generation the government is working proactively in the regions of New Zealand.

Back when entire regions or industries were abandoned, it was hardly surprising that investment was unsteady.

Who would bet on a regional economy that was in a spiral of decline?

Today, every region of New Zealand is in positive growth mode.

As jobs return, services, like banks and petrol stations, return also.

As people come back, local businesses see more cash coming through the doors and they grow as well.

So it becomes a virtuous upward cycle.

The success of the economy is creating new kinds of problems.

It’s creating skills shortages.

The cost of houses is going up.

Wages are going up.

These problems are much better than the problems of decline - no jobs, falling asset prices and incomes.

When I became a minister, people asked where the jobs were.

Now I get asked where the skills are.

The government is working closely with industry to resolve issues such as skills shortages.

This government has placed a high priority on industry training.

The target is to get 150,000 New Zealanders learning on the job by the end of 2005.

We are well on the way to achieving that target, as already there are 127,000 workers in industry training.

The number of employers involved in the industry-training programme has increased substantially, with around 29,000 firms participating (up from around 25,000 in 2002).

At the end of March, there were 6,580 modern apprenticeships.

We need skilled workers.

The only way we are going to produce higher incomes is by making more high-skill, high-value products and services.

We need to produce and sell goods using the unique creativity and innovation of New Zealanders, which the rest of the world wants to buy.

New Zealand simply doesn’t have enough exports that are built on innovation.

We export a lower proportion of complex manufactured goods than any other developed country.

That’s why our incomes are much lower overall.

We need far more high value industries in New Zealand.

A raw log is worth about $70 a cubic metre.

Process it into kitset housing or furniture, and it’s worth $3000 a cubic metre.

The cellphone handset manufacturer Nokia used to be a forestry company.

Now it manufactures handsets – [SHOW PHONE]

Its latest products are worth not $70, not $3000, but $700,000 a cubic metre.

That is why I get excited about the development of high value new industries.

Of course, high-value and high-technology innovation not only means computers and cellphones.

It means anything that depends on the unique innovation and creativity of New Zealanders.

The raw truth is the solutions we tried in New Zealand in the eighties and nineties did not increase the breadth and depth of our economy.

Those changes were often aimed at trying to sell more of our the cheapest products.

But consider this.

The United States exports the same weight of goods today as it did a hundred years ago.

The value has increased immensely, because these days it sells its ideas, which are worth more.

New Zealand has to export more value and less weight!

I believe New Zealanders are innovative and creative enough.

Our hurdle is finding ways to commercialise our talents.

There are many things we need to do.

Invest more in research and development.

Unlock the potential of more of our communities.

Work better in partnerships between government, the private sector, and tertiary institutions.

Improve our global linkages.

There is another area accountants know something about.

One of the most important challenges confronting our businesses is the skill of managers.

Business strategies and practices are at the heart of improved business performance and growth.

These arise directly from management abilities.

There isn’t much recent in-depth research about the quality and abilities of New Zealand managers.

But there is widespread anecdotal evidence of both strengths and weaknesses.

New Zealanders tend to be resourceful, self-reliant people.

Our history of being small and isolated means we’re used to giving things a go.

While that is an advantage in producing innovation and creativity, it can also be a weakness.

Our resourcefulness is a strength in generating new ideas, but our ‘self-help’ culture is sometimes a barrier to rapid development.

When you consider the wide range of skills necessary to develop a business – marketing, technical, managerial, financial and so on – it’s almost impossible for a small company to possess them all.

Competing in a global market requires managers who can benchmark themselves against global competitors, undertake strategic planning, and become more innovative in response to the demands of the international market.

The evidence suggests our managers need to get better at these skills.

So the government is playing its role in helping to lift skills in the management area.

New Zealand Trade and Enterprise provides programmes aimed at lifting capability.

Examples include:

The Growth Services Fund - offers support for high growth potential firms to purchase external advice, expertise, and market development services.

The fund is intended to assist with new initiatives aimed at having a significant impact on the business leading to substantial, sustained growth.

The Enterprise Development Fund - Provides funding for businesses and entrepreneurs to engage the services of a business mentor, undertake training, employ specialised advice and expertise for specific projects.

This year’s Budget announced $2.4 million to better understand and lift New Zealand’s management capability.

The Ministry of Economic development is also working closely with private sector organisations on a co-operative approach to increasing management capability.

The support of private sector stakeholders is essential to understanding and improving management capability.

The Institute of Chartered Accountants is uniquely placed in this regard - most businesses retain the services of an accountant.

Institute members already play a major role by providing management and general business advice.

The Institute of Chartered Accountants is involved in a project looking at how existing networks and services can be enhanced to build management and business capability.

Strong individual businesses mean a strong national economy.

A strong economy is necessary for the living standards and quality of life - we want as a nation.

In March this year the government-funded Growth and Innovation Advisory Board found some encouraging views.

It found that 91 percent of New Zealanders agreed that the business success ought to be encouraged.

77 percent supported economic growth as a primary goal for the country.

We need to aim high and aim for success.

Economic growth is not an end in itself.

It’s something we pursue to unlock the potential of New Zealanders.

It means more jobs, higher incomes and more secure social services.

I want to say I am immensely optimistic about the future of New Zealand.

We have more opportunity and cause for hope than we have had in a generation.

We are steadily becoming more prosperous as a nation.

It has happened in part because the Government is predictable and steady.

Partly it has happened because the government works in partnerships.

And most of all, our prosperity has happened because fast-moving clever businesses are performing superbly on the world stage.

We have a long way to go and a lot more to do.

But we are on the way and making very rapid progress.

There are some talented individuals receiving recognition tonight for their abilities.

I would like to congratulate them in advance of their awards.

We need to be inspired by their success.

We need to harness the energies, talent and creativity of New Zealanders.

And we need to push on with the successes New Zealand is enjoying.

I want to close with an example of the advancers they’re making in medical science these days.

It’s amazing what you can find.

For instance there was someone who went in for a brain transplant.

He was shown around the brain shop to choose a new one.

The doctor pointed out one sample and said, ‘that’s a journalists brain. Only a thousand dollars.’

The next shelf had accountant’s brains for $2000.

On the top shelf, a politician’s brain: a hundred thousand dollars.

The customer marvelled.

"Why does the politician’s brain cost so much more than the others?"

"Ah," the doctor said, "that's because it's never been used."

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