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Peter's - Nation or Economic Colony

Thursday 9 June 2005

An address by Rt Hon Winston Peters to Otago Chamber of Commerce, The Dunedin Club, 33 Melville Street, Dunedin at 10.30am Thursday 9 June 2005


The celebrated economist William Ball Sutch once wrote a book called ‘Colony or Nation?’ in which he pointed out New Zealand’s economic insecurity.

As a young man Dr Sutch 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 New Zealand currency to get real 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.

Obviously the situation is not as bad as it was 70 plus years ago, but storm clouds are gathering once again.

The Labour Government has been basking in the sunshine of a so-called buoyant economy.

That buoyancy was always a myth.

The phenomenon is the number of commentators who were, and remain, in denial about this.

And, Dr Cullen, who promised so much, has clearly failed the test on his ability to manage the economy.

The Government is adept at taking all the credit for what is an essentially fortuitous combination of factors but is taking none of the responsibility for the areas where New Zealand is not succeeding.

The underlying signal is unmistakable – the New Zealand economy has been for far too long unable to generate the level of exports that would sustain our standard of living expectations as New Zealanders.

In fruitless efforts to maintain that standard, we are now almost totally dependent on other people’s and other nation’s money.

And like National before it, 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, now over $123 billion, must be addressed.

This reliance on foreign money is a road to nowhere and makes us highly vulnerable to foreign capital markets.

We are a nation of small and medium sized business people.

Over 60 per cent of our workforce work for employers who employ less than 100 people.

When you consider that a large portion of those who work for larger employers actually work for the government sector, then the folly of the fixation by National on the needs of big business becomes clear.

The demands of small and medium sized business are quite different from those of big business.

These are engineering workshops; builders; cafe, bar and restaurant owners; hairdressers; farmers and computer businesses.

They are not IBM, McDonalds or the Ford motor company.

These small companies are by nature more intimate with their employees who are often family and friends.

The reality is that for salary and wage earners, you are more likely to be employed by a small and medium sized business – so what is good for them is good for you.

What small business needs is a serious reduction in compliance costs.

This is their single greatest concern and as a party committed to fixing things it is a priority for us.

We will also be supporting the simple maxim that ‘a small business which is able to export effectively can become a better business’.

A small business able to operate efficiently and effectively can become a bigger business.

We believe that in order to achieve this several policy prescriptions are needed.

We believe that lowering the corporate tax rate is necessary – but our aim would be to link this initially to reducing tax on net new export income.

We believe that the framing of the Policy Targets Agreement between the Minister of Finance and Governor of the Reserve Bank must be adjusted through the Reserve Bank Act to include objectives related to keeping New Zealand’s dollar low and a sustainable level of economic growth through exporting.

Just as the Policy Targets Agreement currently includes bands of movement for the inflation rate, acceptable bands for the dollar and growth rates would be incorporated into interest rate decisions.

This would require lateral thinking by the generally conservative Reserve Bank, but without this focus we remain dangerously exposed to external pressures.

This government has enjoyed the short term benefits of immigration-fuelled consumptive growth, but has 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?

When will we admit that many other nations have got it right and that we have got it wrong?

And wrong now for a long time.

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 has the government 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.

I mean, who would offer tax cuts of 67 cents in three years time?

Apart from claiming credit for some economic highlights and spin doctoring around the provinces, the government has done nothing constructive for the economy.


Which is why we now have the lowest level of business confidence for 17 years.

And nothing in the National party’s policies prescription, excepting the blatant attempt to steal New Zealand First’s Treaty and infrastructural policy, offers anything but more of the past.

You know we in New Zealand First are becoming cynical about some of National’s policies and speeches.

Some of them sound quite familiar because they have been taken off our website.

Don Brash was caught out after Orewa because he did not have any policies to follow his borrowed rhetoric.

During the election campaign he will try to scare New Zealanders into believing their beaches are at risk.

It wont work because most people can discern truth from deceit.

Everyone went to their beaches last summer and they will do so next summer – when it arrives.

Nothing had changed – just like we said when we passed the Foreshore and Seabed Act.

Now National are trying to raise some spurious concern about some negotiations with Maori over East Cape coastline

At the end of the day, the Crown will still own it – and we will all have unhindered access.

Customary rights may well be granted – but who gave these in the first place?

National of course! So why do these people have the cheek to try to set New Zealanders against each other when the same laws are there for everyone.

Only one word can describe National over this – Baloney!

But back to the economy. And we are a party that gives answers to problems.

So what is New Zealand First’s prescription?

Our prescription is neither new, nor unique in the first world, but it is unique for this country, and we have been hammering this issue for years.

There is nothing so antiseptic as the saying “I told you so”, but those who are honest about it know that I have “told you so”.

Real and lasting national prosperity will only come via economic growth.

Export-led economic growth is the key to our future development.

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 – half in fact – earn less than $50,000 a year in exports.

The government can do more than pay lip service to the need for the expansion of development banking facilities.

It must offer more pay more than blandishments for the need to develop venture capital in support of the export sector.

It can also do much more to encourage innovation research and development in key industries.

It can start with removing the bureaucracy from these initiatives and replacing them with experienced business advice and participation.

We will never get real innovation in research and development when the bureaucracy is in charge of it.

Provide the incentives and businesses will do the rest.

And provide tax incentives for exporters where new markets are developed, or existing markets are significantly expanded.

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.

And for that matter about Don Brash and his failed neo-liberal prescription.

It never worked when National was last in power.

It has never worked anywhere in the world. So why give him a chance to reintroduce it?

It is long since 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 whilst we’re at it, let’s agree that there is a real difference between foreign investment to benefit domestic employment and export growth, and our hapless past of foreign corporate takeovers.

Our approach to global markets is one of ‘open up and hope’.

Our engagement in global markets has been plain dumb.

Where is New Zealand Incorporated in our attention to trade agreements and where is the concept of our capacities when we talk about the global economy?

We have taken on all the major risks in our foolish view of foreign investment, hence our current slide in the world and our growing external deficits.

Even with the wolf at our door most still have not woken up.

Just recently the Australians almost succeeded in taking over the New Zealand stock exchange and now our Prime Minister has been off shore arranging a free trade agreement with China.

With leadership like that our country doesn’t need any enemies.

In 2005, it is now or never for New Zealand.

Either we carry on the slide that the two old parties have taken us into where we are now number 40 on the World Bank’s latest index of income per capita, or we make a change.

New Zealand’s national dreamtime must end, as must our cargo cult of blind economic ideology.

New Zealand needs an economic truth and reconciliation commission where we face up to the fact that these two old parties – Labour and National – have equally been guilty for the demise we are now in.

When you voted for Labour in 1999 what did you think would be really different about our economy?

Equally, if you are contemplating voting for National in 2005 what do you really think will be different about our economy in the future?

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 artificial impetus of high immigration and international speculation.


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