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Peters: Policies to support NZ Manufacturers and Exporters

Rt Hon Winston Peters

New Zealand First Leader
21 July 2014

EMBARGOED UNTIL DELIVERY

New Zealand Manufacturers and Exporters Association Council & CEO Forum

Monday 21 July, 5pm

BNZ Partners Centre, 5 Sir William Pickering Drive, Burnside, Christchurch

Policies to support New Zealand Manufacturers and Exporters

Fairness for Quake Outcasts Group

It is a pleasure to be here today.

As we all know, a successful economy is the essential precondition for a prosperous society that will enable all New Zealanders to lead a full and satisfying life.

And the plain fact is that unless we begin to dramatically improve New Zealand’s economic performance, all that we value in terms of employment opportunity, health, education and the environment will be in jeopardy.

Fairness

New Zealand First stands for fairness, for a fair go for everyone.

Today I met with the leaders of the Quake Outcasts and of the Port Hills red zone group. Altogether about 120 land owners.

Three and a half years since the quakes the Quake Outcasts have had to battle all the way to the Supreme Court over the Government's offer of only 50 per cent of the 2007 rating value for bare land or uninsured home owners.

The Port Hills group has had no offer at all after all this time.

This is unreasonable and disgraceful behaviour from a Government without any compassion.

There are many businesses affected in the same way – they are also victims of a woefully unsympathetic government.

We say set aside the legalities. Let's do what is right.

That means Minister for Earthquake Recovery Gerry Brownlee needs to be told to stop his bullying ways and do what should have been done at the beginning - a 100 per cent offer for every one of these people.

The net cost is only about $14 million. That is not too much to pay for common justice. It is a master of public policy. It should not need the intervention of the Supreme Court.

Mr Brownlee is becoming a bully - he is willing to spend millions on court cases but is not delivering fairness to the legitimate claimants.

‘Rock star’ economy

New Zealand First does not buy the pretense of the “rock star” economy that the Government and much of the media are peddling.

Look at the facts:

Last year 46 per cent of all employees did not get a pay increase – and there are still almost 150,000 New Zealanders unemployed, not to mention those who are underemployed.

Right now New Zealand’s net international indebtedness stands at around $150 billion - one of the highest rates relative to GDP in the OECD.

And with an ongoing balance of payments deficit we are continually adding to that figure.

For New Zealand the debt time bomb is ticking!

We are never going to repay this massive debt if we allow our manufacturing and export capacity to erode, and in fact its rebuild is critical to our survival as an economy.

There is no cause for National’s complacency.

It is vital that we strengthen our economic base to deliver long term prosperity for all New Zealanders.

Right now dairy and forestry account for 40 per cent of New Zealand’s annual export receipts – and of course we have a growing reliance on just one market - China.

Relying on two products and one customer is not smart for New Zealand’s future.

This makes New Zealand a hostage to fortune in the event of a major external shock or disruption.

New Zealand First’s economic policy is to capitalize on the natural assets and climate that New Zealand is endowed with, and the talent and enterprise of New Zealanders.

A new economic direction is needed because New Zealand is at an economic crossroads. In spite of the terms of trade being at a 40 year high our economy is dangerously exposed.

New Zealand First’s economic policy is based around some major areas of reform.

Exchange rate

First, we urgently need to stabilise our overvalued currency.

The IMF and the OECD have repeatedly warned of the ashes of an overvalued dollar.

The respected Peterson Institute in Washington has assessed the New Zealand dollar as the most overvalued exchange rate of the 34 that it monitors.

That overvalued dollar may be costing your members up to 15 to 20 per cent of their returns.

That is the reason New Zealand First has a long standing commitment to change the Reserve Bank Act.

For too long, monetary policy has been used as a club, a blunt instrument, to bludgeon the economy into submission.

But as you will have seen, this year’s Budget was as silent on the overvalued dollar as it was on many other critical issues for New Zealand’s future.

In contrast to the Government’s inertia on the dollar, New Zealand First has the legislation ready and waiting to broaden the Reserve Bank’s mandate in favour of balanced growth that will encourage exports and support both the agricultural and manufacturing base.

If National had a sense of responsibility about the economy they would have voted for our Bill to go to a Select Committee.

Then all of parliament, including your organisation, could have had their say.

Research and Development

In our view, the key to a successful research and development policy is maintaining the balance between genuine blue sky research and research activity which will directly lead to economic advancement.

New Zealand must focus its limited research funds where it has a competitive advantage, primarily in expanding export potential.

However, public good science must also be supported through a dedicated funding pool and a sound tax incentivisation policy towards that end.

At present, New Zealand lags behind the rest of the world in terms of research and development.

New Zealand First is committed to achieving a target of over two per cent of GDP for research and development.

New Zealand First will actively encourage strategic alliances between industry, the Crown Research Institutes and tertiary institutions.

New Zealand First’s policy includes:

• Providing tax incentives for businesses to engage in research and development leading to innovation and export growth.

• Increasing the proportion of tertiary tuition subsidies for specific courses to increase the number of appropriately qualified graduates (e.g. science and technology).

• Assisting New Zealand companies in developing new technology and facilitating technology transfer.

Manufacturing

International research shows that for every job created in manufacturing, up to five further jobs are created elsewhere.

Over the long term allowing our manufacturing sector to atrophy will be a disaster for the New Zealand economy.

For that reason New Zealand First will:

• Introduce a lower (20 per cent) business tax rate for exporters.

• Give preference to New Zealand firms in government procurement.

• Have a capital guarantee scheme for small to medium enterprises.

• Provide accelerated depreciation for plant and equipment.

• Pursue policies to add value to raw materials.

As well as an appropriate exchange rate, a sensible research and development policy, and preference for local manufacturers in Government procurement there is one other initiative we consider that must be introduced to support the manufacturing sector.

We call it the “No Stone Left Unturned” policy.

When a manufacturing company faces a serious threat to its future - for example,

• The sudden loss of an overseas market.

• An episode of unfair competition.

• A supply chain disruption.

• Or a similar crisis; the company involved would be able to approach government for support and assistance.

The purists will scream – shock-horror – that is interfering in the market.

We say – precisely!

And we make no apology for that.

In our view common sense is not a cardinal sin.

Every case would be treated on its merits.

We are not waving an open cheque book.

The Ministry of Business Innovation and Employment would need to do a national interest analysis into each case.

First, if the national interest were found to benefit overall from intervention, then government support should help that manufacturing company to weather the storm.

Even an arch conservative like Prime Minister Maggie Thatcher came to see the wisdom of that view. It is far easier to keep an existing company going than to start a new one.

New Zealand First is not hung up on market theory or ideology and we have practical solutions.

And in fact this happens already in other sections - and overseas based!

The $30 million support for Rio Tinto’s Tiwai Point smelter is an example.

A similar sum, applied as we propose, would have saved hundreds of manufacturing jobs in the last six years.

New Zealand First’s policy is clear.

If it makes sense to help a manufacturing company weather the storm then we say the government needs to be there.

Conclusion

You may find it hard to believe but the National party is not a friend but a serious threat to the manufacturing sector.

The present National-led government has done much to undermine the manufacturing base in this country than any other government.

The poverty of the present Government’s economic thinking over the past six years is abundantly clear.

Rather than building a sustainable, robust economic base for the future National has weakened it.

So this talk ends with a simple message - New Zealand First is committed to the manufacturing, and exporting sector.

ENDS


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