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PM Address To NZ Chambers of Commerce

Rt Hon Helen Clark Prime Minister Address at Annual Conference of New Zealand Chambers of Commerce Rutherford Hotel Nelson

Thank you for the invitation to address your luncheon today.

First, I want to acknowledge the contribution of the Chambers of Commerce, both to public policy debate, and to delivery of practical programmes of benefit to business and the economy.

Over the past eighteen months or so, the Chambers have been releasing a series of policy documents covering growth, innovation, skills and training, government spending, and on Auckland-specific growth challenges.

Today you add to that with the release of the document on local government and its role in achieving growth.

While the government wouldn’t agree with every idea in every booklet, there is a tremendous amount we do agree with. We regard the Chambers’ policy documents as serous contributions to policy debate, and they are read with considerable interest.

On the practical side, Chambers do a great deal to advise local businesses, and in some cases you do that in partnership with government agencies.

For example, some Chambers deliver enterprise training under contract to NZ Trade and Enterprise.

Nationwide, you have a partnership with the EDANZ, the New Zealand body of local economic development agencies, to deliver the NZ Trade and Enterprise programme BIZNETWORKS, providing general information to business.

I am particularly enthusiastic about the partnership the Auckland Chamber formed with government to get more new migrants placed in jobs.

A few weeks ago, I celebrated with the Chamber when the 1000th placement mark was passed, and I was pleased to hear that the programme has now spread to other parts of New Zealand.

With unemployment so low, and with skills shortages, it really is a case of all hands to the wheel.

With the support and encouragement of the Chambers, employers have discovered the large talent pool which exists among our new migrant communities.

I am also particularly aware of the role my local Chamber, the Auckland Chamber, plays in supporting a wide range of business councils linking with other countries.

I know the Auckland Chamber as a strong promoter of exporting, and I really appreciate the efforts I see it making to raise awareness of the opportunities offshore for our businesses.

For example, two weeks ago, the Auckland Chamber, in conjunction with the New Zealand Herald, ran the Gateway to China conference.

The government has earlier this year signed the Trade and Economic Framework Agreement with China, and expects to begin negotiating a free trade agreement next year.

Our businesses need to be gearing up now to take advantage of the opportunities. That is exactly what the Auckland Chamber is supporting them to do by ensuring that they have the early market intelligence they need.

Our Minister of Trade Negotiations was pleased to attend the conference, as were a number of government officials.

The topic I was given today was “The Government-Business Interface”.

That there is an interface, and that the Chambers of Commerce play a critical part in it, is clear from my opening remarks.

The Chambers engage in the public policy debate very constructively.

You provide feedback on policy and implementation.

You get involved in the delivery of government funded programmes which give practical support and advice to business.

Through conferences like the one on China I have just mentioned, you keep the business constituency up to date with new opportunities for growth. And your willingness to support the placement of new migrants in employment has helped the economy, and helped business seeking skilled employees.

From my point of view, this interface is active and healthy , and that is as it should be.

Government and business have many objectives in common. We both want to grow the economy and the nation’s prosperity.

For business, a growing economy and a prosperous nation means strong companies and strong bottom lines.

For our government, that means more jobs, strong revenue, good economic indicators all round, and an ability to invest in quality services and infrastructures.

From the time we took office, our strategy has been to identify where government can add value to the economy, and to form the partnerships and make the key investments which will take New Zealand ahead.

At the beginning of 2002, we set out our vision in our growth and innovation strategy. We said we wanted New Zealand to be:

a great place to live, learn, work and do business, a birthplace of world changing people and ideas, a place where diversity is valued and reflected in our national identity, and, a land where all New Zealanders have the opportunity to succeed.

I should add that we also set out to offer New Zealand strong, honest, decent, no surprises, social democratic government and leadership, and I believe we’ve delivered on that.

From the outset we stated our belief that New Zealand’s future prosperity will be generated by creating and injecting new knowledge, innovation in design, technology and branding, and entrepreneurship into all aspects of the economy.

In essence, we believed New Zealand could do better than just riding the commodity cycle.

Our focus was on the medium and the long term, and not on quick fixes. We wanted the results to be sustainable.

The cynics scoffed that the results would be slow in coming and wouldn’t deliver within the short term of the electoral cycles. Well, they are not scoffing now. The New Zealand economy is running extremely well, and it is hard to find a bad indicator.

3.6 per cent growth in the year to March was a very good result, and 2.1 per cent for the March quarter was outstanding. Export volumes are up thirteen per cent in the past year, and export value is up over sixteen per cent over the same period. The terms of trade rose 2.1 per cent in the June quarter. Commodity prices in August were 24.3 per cent up on the year before. The retail sales figures for July recorded another strong month, when market expectations had been for a contraction. Unemployment has fallen by more than a third since we have been in office, and at 4 per cent is not only the lowest since early 1987, but also the second lowest in the OECD.

What is most satisfying about that is that we are now making serious inroads into communities where unemployment had seemed intractable.

Today’s release by the ANZ of the latest figures in its jobs advertisements series shows those ads up by 1.4 per cent in August, and up fifteen per cent on August a year ago.

As you know the government has kept a very strong set of books.

Gross sovereign debt, as a proportion of GDP has fallen steadily during our term in office, from 33.7 per cent to an estimated 24.7 per cent by June this year. It is predicted to pass through 20 per cent by 2015.

Net debt was expected to be 8.7 per cent by June this year, and by 2007/8 is expected to drop to zero.

All these positive indicators are getting recognition where it counts with the rating agencies.

Last week Standard and Poors reaffirmed New Zealand’s AA+ rating, saying that “the strength of government finances, with low and falling public sector debt, underpins New Zealand’s very strong credit quality”.

It noted further that it was hard to see the AA+ rating coming under pressure any time soon.

An accolade of another kind came from the World Bank which ranked New Zealand first in the world for ease in doing business.

The obvious question to ask at this point is why, when the indicators are so positive, and when the external agencies and commentators are so positive, does headline business confidence in New Zealand stay so negative?

The National Bank wrestled with this question in its latest Business Outlook commentary, entitled “Unrequited Love”.

It concluded, having canvassed a list of issues from taxes to compliance costs and employment law, that perhaps New Zealand is just not used to success!

It noted that “the good news is that business cycles do not die of old age, and the good times can continue”.

The Bank went on to suggest, and I agree, that the more reliable indicator of the economy’s strength is how businesses feel about their own outlook.

On that score, a net 28 per cent of their respondents were expecting conditions to improve, consistent the Bank suggests with economic growth for the calendar year 2005 growing by three per cent.

That is some soft landing !

Yet it is not only business which has been too pessimistic about the economy’s prospects.

The consensus forecasts have underestimated our growth for four of the past five years.

What I think a number of the commentators have been missing is the level of innovation in the economy, and the deepening of the economy.

Our workplace is upskilling. The private sector investment in R & D has risen. We have developed more innovative goods and services. Our branding and promotion has improved.

All that, along with increased business investment, adds up to higher productivity, and means that New Zealand is capable of higher levels of sustainable and low inflationary growth than has been thought possible in the past.

Yet we all know we can do more and better.

You have my commitment that the government will continue to work on ways to increase the economy’s value.

Education and skills will continue to be a huge priority for us. By next year we will be close to doubling the number of industry trainees since we came to office. But we still need to do more to help fill the skills gaps, and we will.

Where those gaps cannot be filled quickly by New Zealanders, immigration policy kicks in to help employees get the skills they need. We regard immigration as a critical part of economic policy.

We will continue to prioritise investment in research and development. The government spend on science and research is up 45 per cent since we were elected.

And through a range of initiatives we are working to get greater commercialisation of our innovation here in New Zealand.

Through the Ministry of Economic Development and New Zealand Trade and Enterprise, we will keep working with industries and clusters, sectors and regions, to develop more and bigger successful businesses.

Through our trade policy, we will endeavour to open up more opportunities for New Zealand business offshore.

Our top priority is the WTO’s Doha Round, and over time it will bring us the greatest gains.

But complementary to that, we have FTA talks going with Thailand, and three way talks with Singapore and Chile.

Next year we start negotiations with China, and there are very promising indications from ASEAN too.

Meantime, on the home front we are coping with the challenges of growth.

I have already mentioned the skills shortages which, together with business, we are working to overcome.

Rapid economic and population growth have also placed great strain on both energy and transport infrastructure – the latter particularly in Auckland.

The flawed market model for energy has been altered, and we are seeing more investment in generation, which is much needed.

And a great deal more investment is going into transport infrastructure across New Zealand, with a special effort in Auckland which has had less than its fair share for many years.

Another issue of great interest to business is the future of the Resource Management Act. The government has made decisions on a range of amendments to the Act and they are being announced at 1pm today. We will be introducing legislation to Parliament this year.

My colleague Paul Swain will cover the amendments to the Holidays Act and the Employment Relations Act when he addresses you tomorrow.

What I want to reiterate is that the government looks for a positive interface and positive interaction with business.

And it is hard not to be positive about the way the economy is running at the moment.

Some people always prefer to see a glass half empty.

Right now, I see the glass as more than half full.

I believe that New Zealand is moving ahead with far more confidence than we have seen in many years.

But there is no room for complacency.

Policies cannot be static – they must be dynamic and ready to respond to new needs and challenges.

The rest of the world isn’t standing still.

Our vision sees New Zealand moving ahead because New Zealanders, and New Zealand business are smart, innovative, skilled and productive.

While the half century of relative decline New Zealand experienced cannot be reversed overnight, the economy’s performance suggests that the approach we are taking is producing tangible results.

There is a buzz around New Zealand today, with a new generation of entrepreneurs enthusiastic about growing their businesses, and with our regions focusing on growth initiatives around their centres of excellence and specialisation.

I travel throughout New Zealand visiting businesses and initiatives large and small. I find their enthusiasm and passion for what they are dong infectious. They certainly keep me motivated and energised, very positive about the future of our country, and convinced that we are on the right track.

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