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Trevor Mallard - Speech to Export NZ Auckland

Supporting business to grow and compete

Speech to Export NZ Auckland breakfast, Novotel Hotel, Auckland

Thank you for the invitation to talk to you today. I want to discuss Budget 2006 but I also want to discuss with you how the budget and other government work fits into our economic transformation agenda.

The budget has been generally well-received by informal business commentators as part of our government's ongoing work in boosting our economic success and lifting people's incomes and our standard of living.

I am sure you will realise all too well that the sort of economic transformation we are talking about is not a one day wonder, and it is not a transformation that will take place as a result of government action alone.

Boardrooms and management have to take responsibility for 85 to 95 percent of this process, with government support and input and a firm commitment from us to work alongside you to achieve our common goal of an export-led high value New Zealand economy.

Neither is economic transformation suddenly a new plan on our part - the New Zealand economy has not stood still over the last two terms of the Labour-led administration, it's gone ahead.

Over the last six years we have posted GDP growth consistently ahead of the OECD average, and as a result have made up considerable lost ground relative to other developed nations.

Our economy is 20 percent larger than when Labour took office and average weekly incomes for individuals have increased by 17 percent in real terms.
We have achieved the lowest unemployment rate in the OECD and we've seen
an economic resurgence in regions such as Northland, Gisborne and the West Coast.

Treasury's latest forecasts are that after a bottoming out at 1 per cent growth in the year to March 2007, growth will pick up to average 3.3 per cent in the following three years.

On the issue of tax, Labour has no intention of running down New Zealand and becoming a cheerleader for Australia like Brash is, especially on the basis of his utterly misleading claims on that country's tax levels.

It is wrong to say we pay more taxes than Australia. Australia's top marginal income tax rate even after the latest changes is still 45 per cent. Ours is 39 per cent. And remember that Australians pay payroll tax, capital gains tax, compulsory medical insurance, and stamp duties when they sell a house. They also pay tolls on roads.

We do acknowledge more needs to be done and our government is working to address the outstanding issues as we move ahead.

We've committed more funding to address skills shortages through a continued expansion of Modern Apprenticeships, industry training and quality tertiary education that is relevant to our country's needs.

We've addressed the broadband issue, and we're also attacking the serious roading infrastructure problems through Budget 2006 which will see the biggest road building programme ever seen. We are very aware that we need a worldclass infrastructure to underpin further economic changes.

We recognise that Auckland as our biggest economic engine room needs to get ahead in order to become a truly competitive international city.

We also know that more needs to be done to deepen our capital markets - hence the $60 million boost to the government's Venture Investment Fund. The expansion of this fund will provide further help for young New Zealand firms with high growth potential to enable them to develop into internationally competitive businesses.

The need for research and development links to industry is also addressed through the $100 million boost to research and science. That includes $81 million to support key industries and $16 million to accelerate the commercialisation of research.

A $64.2 million increase in market development assistance for New Zealand firms trying to crack key markets overseas is also an important budget initiative in the lead up to Export Year 2007.

The market development assistance programme is based on an Australian one, and research overseas, including in Australia, shows that schemes such as this add value to businesses and export growth.

Yesterday I visited an exporter in Albany, Cleanflow Systems, which has developed a simple laser profiling device that takes the expensive and time-consuming guesswork out of inspecting underground pipelines.

The market development grant they received enabled the company to travel throughout the United States and Europe to promote their product and gain access to an increased pool of potential customers.

Since launching into the US and European markets in 2003, sales of the Clearline Profiler have more than quadrupled, and they now have global distribution networks in place for Europe, Asia, North America and Australasia.

This is exactly the sort of success story that we need to see more of.

It is critical that we develop more companies of scale, exporting high value goods and services to the world.

There is a general consensus building that part of New Zealand's challenge is the lack of firms that are of sufficient size and scale that can make a significant contribution to the continued transformation of the economy.

According to the most recent figures, just 151 firms are responsible for 78 percent of our exports. Only 590 firms export more than $5 million per annum.

The key challenge will be scaling-up existing export activity and diversifying into new markets. Instead of aiming to create a few more companies of the size of Fletcher Buildings or the Gallaghers Group - we need to grow hundreds of them, we need to see far more firms like Cleanflow Systems. And we need to think hard about how to do this.

Creating the right environment for business to thrive in is part of the mix. As well as the business tax review, we have also announced a sweeping review of regulation affecting different sectors. It will look at issues in existing regulatory frameworks that may be unnecessarily constraining business development.

Other characteristics of the economy are equally important. We need a significant and sustained improvement to our balance of payments. Deficits of nine percent are just not acceptable even in the medium term.

We are working to progress our economic transformation to a high income, knowledge-based market economy, which is both innovative and creative and provides a unique quality of life to all New Zealanders.

As part of this work, the government is focusing the lens on key areas. We aim for a workforce that is productive, innovative and has the skills that our export-led economy needs.

We will have a world class infrastructure, including communication lines, transport links and energy supplies.

We will also have a regulatory environment that recognises environmental sustainability as a platform and enabler of economic transformation. Auckland will be an outwardly focussed, international city.

And we will have reached the point where there is a willingness on the part of all stakeholders to commit to and engage in New Zealand's economic transformation.

The question is how do we get there and what does it mean for government. Again, I have some broad ideas. Economic transformation cannot just be about more of the same.

An effective economic transformation strategy will mean taking a fresh approach, and being clear about our goals, and it will go beyond simply building on our existing initiatives.

It will mean having a consistent and integrated approach across government and having a strategy that is owned by government, business, workers and the community, so that we can all contribute to our success.

On that first point, I acknowledge that taking a fresh approach will mean some challenges. We have to be prepared to take some risks, to try a few things that may not be in the conventional economic text books.

New Zealand is unique, not least because of our size and distance from global markets. What fits other countries may not fit us. And taking risks means that we won't always get it right first time. I accept that and I also think that to do nothing in order to avoid all risks, will not work.

Our business assistance programmes are evidence of the benefits of such approach. When we created New Zealand Trade and Enterprise (NZTE) and introduced the programmes they were a new approach untried in New Zealand.

But roughly two years on, a series of evaluations show that we have got it broadly right. And where the evidence shows things weren't working as well as they might, we have made changes.

The review of those programmes currently underway will take that process one step further by asking have we got the aggregate mix right, or do we need to focus on fewer, more flexible programmes?

I'm inclined to think the latter, but I look forward to the review results to answer this point.

Our existing export activities will remain critical. We are a country of vast natural resources, and sectors like agriculture and horticulture will continue to be a cornerstone of our export industry.

However we also need to branch out into highly innovative, creative industries. We need to look at how we can add value to our existing exports, especially by using the recent focus on information communications technology, biotech and the creative industries as enablers.

It will be up to innovative, creative New Zealand business people to make this economic transformation possible, but the government will be right there supporting it to happen.

Lastly, on the point of shared ownership, I see this as vital to our success.

I am the first to acknowledge that the government does not have all the answers on economic transformation. In many ways the process of working towards those answers will be as important as the answers themselves. If we want people to share responsibility for making economic transformation happen, then we need to involve them in the process, sharing ideas and knowledge.

For this reason, active stakeholder engagement is not just desirable, but essential.

Thank you


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