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Budget 2006 Theme 1 - Economic Transformation

Economic Transformation

The Labour-led government has led New Zealand through six years of strong economic growth, which has been well ahead of the OECD average. New Zealanders are now wealthier, healthier, better educated, safer in the workplace and on the street, and better connected to the global economy.

To sustain the economic growth that will improve everyone's standard of living even further, we need to increase productivity, and lift the value of our exports.

Economic transformation has always been central to the Labour-led government's economic policy. Budget 2006 builds on and adds to, the work of the last six years, by committing $2.1 billion of new operating funding and $1.5 billion of capital funding over the next four years.

The emphasis this year is on improving our infrastructure. World-class infrastructure is essential if New Zealand is to modernise. That's why the government is unbundling the local loop to ensure New Zealanders have access to faster, better broadband Internet services.

Budget 2006 also allocates an extra $1.3 billion for land transport spending over the next five years as part of the biggest road-building programme this country has seen. This will guarantee the State Highway programme and also target major projects to ease congestion around the country, including Auckland, Wellington, and Christchurch. Delivering an efficient land transport network for Auckland in particular is a key priority for the government. The city accounts for a third of our GDP. Ensuring it grows as an internationally competitive city is vital to drive the modernising of our economy.

A skilled workforce is also critical if we are to lift productivity. Budget 2006 continues our progress in lifting skill levels through initiatives such as literacy training and Modern Apprenticeships. Proposed reforms in the tertiary sector will build on our efforts to create world-class tertiary organisations that produce more of the kinds of skilled graduates needed to drive economic transformation. Interest free student loans will also encourage more into universities and polytechnics by making tertiary education more affordable.

Budget 2006 will see more funding to encourage investment in New Zealand firms and continued support for exporters. The business tax regime is also being reviewed with the aim of improving productivity and competitiveness.

Globally competitive firms need access to good research and development to add value to their exports and strengthen their innovation. Research and development and science funding play important roles in this area. The government has recognised this through continual funding increases and a $100 million boost over the next four years.

New Zealand must be at the forefront of new, cleaner technologies and biofuels, and of sustainable development. Ministers will also consider climate change policies this year and funding has been set aside for this work.

Budget 2006 marks considerable progress in the Labour-led government's Economic Transformation agenda. It underlines our determination to lift New Zealand's economic performance to the next level so we can secure a better future for all.

Economic Transformation: major initiatives Budget 2006*

Transport
• $1.3 billion over five years to guarantee the state highway programme and speed up work on major projects to ease traffic congestion in Auckland, Wellington, Christchurch, and in other regional centres. It also addresses the projected shortfall in state highway funding identified earlier this year. The package guarantees funding for five years to give more certainty for state highway projects and other land transport initiatives.

Tertiary Education
• $33.5 million to improve literacy, numeracy, and language skills of the workforce.
• $31.1 million to increase the number eligible for student allowances and available bonded merit scholarships.
• $58 million for Industry Training, including Modern Apprenticeships.
• $23.7 million for Performance Based Research Fund.
• $12.7 million for career services.
• $40 million of capital funding for Partnerships for Excellence.

Research, Science and Technology
• $100 million for research and science funding, including $81 million to support key industries and $16 million to accelerate the commercialisation of research (of which $9 million comes from reallocation of existing funds).

Economic Development
• $60 million boost to the government's Venture Investment Fund over three years. The fund provides help for young New Zealand firms with high growth potential to develop into internationally competitive businesses.
• $64.2 million increase to widen market development support for New Zealand firms looking to enter or expand their overseas markets. This comes from a reallocation of funds.

Tourism
• $63.7 million for Tourism New Zealand to boost promotion

Biosecurity
• $20 million for major biosecurity response preparedness
• $13.2 million for pest management and invasive ant species surveillance.

*All over four years unless specified.

ENDS

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