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Tamihere Speech: Partnerships for business success

John Tamihere Speech: Partnerships for business success

Speech to the Furniture Association of New Zealand annual conference, Hawke's Bay Club, Napier, Saturday October 11.

Good morning and thank you for the invitation to open your conference, and I welcome members of the Furniture Association from around New Zealand who are here today.

I'd like to begin today on a positive note, with a success story from within your own ranks: furniture maker Rose and Heather.

Rose and Heather is special in a number of ways, but it is most special because of the materials it uses.

The kauri timber used by Rose and Heather to make its furniture is extracted from under the ground in the north of New Zealand, and is believed to be among the oldest surviving wood in the world. Some dates back more than 40,000 years, pre-dating the Egyptian pyramids.

Recently the company negotiated rights to trees in three pre-historic forests sitting on top of one another in Northland. The deepest layer is a now extinct species believed to have been buried by some catastrophic event more than 43,000 years ago. The second forest dates back about 36,000 years and the most recent is a relative youngster at about 6000 years old.

Despite its long burial, the carefully selected, cut and dried kauri retains the qualities of more ordinary kauri that we all know: high-quality density, grain and lustre. However its beauty far exceeds that of traditional kauri, with a subtle grain that often features the silken effect of polished fossilised gum that has seeped into the wood.

The finished product is a rich cognac shade, darker than traditional kauri, and it glistens as if lit from beneath the surface.

The company likens its furniture to a very good suit – a piece you buy once, and while the accessories, the short, the tie and the shoes may change with fashion, the suit remains an elegant classic. Rose and Heather has outlets in New Zealand, Australia and the United States, and has built a reputation as one of the world's finest furniture makers, with clients around the globe.

The company's origins go back three generations to when the Heather family started making timber furniture with a distinctive New Zealand flavour as a hobby. Orders mounted, and the company expanded rapidly.

The family-owned company started exporting in 1992, starting with Australia, and opened its first overseas retail outlet in Sydney in 1998. Exports now account for more than 60 per cent of its sales.

Today the company has about a dozen retail staff and about 40 cabinetmakers. In the last two years Rose and Heather has increased its exports from $620,000 to more than $2 million last year, and aims for annual exports of more than $6 million within the next five years. The company also has plans to expand further into overseas markets and looks likely to open stores in Melbourne and London.

That sort of success is a classic New Zealand success story. Rose and Heather may be a relatively small company, by international comparisons, but it uses its smaller size as a strength, not a weakness. Because it controls the entire process through to after-sales service, the company can establish a close relationship with customers that larger companies lack.

This means it can react to customer feedback, incorporate customers' ideas into designs – earning a high rate of return business that that close customer relationship fosters.

That sort of attention to detail and quality, a distinctive, uniquely New Zealand product, combined with strong business practices and customer service are what makes successful New Zealand businesses succeed, and gives those businesses an advantage in a competitive global market.

You have probably heard in the last week or so that the Government will again begin reducing tariffs, after a six-year freeze, and the Furniture Association was among 170 organisations and individuals who made submissions on the tariff review.

While the decision to resume tariff reduction has implications for New Zealand manufacturers, the Government has held off moving to a zero tariff regime.

The highest tariff rates of 17-19 per cent, which apply largely to clothing, footwear and carpet, will begin reducing from July 2006, and will reduce gradually to 10 per cent by July 2009. Tariff rates on other goods will reduce to five per cent by July 2008. A further review in 2006 will determine tariff rates after July 2009.

The reduction rates aim to minimise adjustment pressures on firms and regions, while recognising that previous tariff reduction has generated significant productivity gains, and taking into account that there is international uncertainty surrounding trade liberalisation, both in the WTO and APEC.

New Zealand's tariffs are low by world standards, with an average tariff of 3.7 per cent, compared to 5.8 per cent in Australia, 4.5 per cent in Japan and 4 per cent in the United States. Ninety-five per cent of imports, by value, enter New Zealand free of duty.

Research shows that previous tariff reductions from 1987-98 raised household spending by $22 a week, brought a 0.3 per cent increase in GDP, and improved New Zealand companies' uptake of technology, and boosted innovation and business practices.

New Zealand companies will survive and thrive in an increasingly competitive global market because – like many of you here today – you offer products and services that offer quality and uniqueness that can't be found anywhere else. New Zealand businesses are employing much smarter strategies to position their products higher up the value chain.

We, the Government, recognise the value of a skilled and educated workforce, and the importance of research and development, new technology and innovation. When we announced our Growth and Innovation Framework last year we set out our vision of a New Zealand that is a great place to live, work, learn and do business.

The framework recognises that New Zealand must have smart businesses, that are globally competitive, that are strongly connected with their customers, and are founded on good ideas and talented, skilled people.

The Growth and Innovation Framework identified four priority areas: skills and talent innovation strengthening international connections, and boosting sectors with spill-over effects for the wider economy and society

In the last two months we have reported back on progress under the framework, and outlined a set of benchmark indicators by which we will measure the country's economic performance. These will let us more closely monitor trends in labour productivity, educational achievement, research and development spending and GDP per capita.

Already progress under the framework includes:

Increased research and development spending, especially in the private sector, where R & D spending grew by more than 30 per cent from 2000-2002 Establishment of the new Tertiary Education Commission and Tertiary Education Strategy A new immigration policy that focuses on the skills New Zealand needs to drive development Increased investment in apprenticeships and industry training The merger of Trade NZ and Industry NZ to form the New Trade and Enterprise NZ, offering a broad range of services to businesses under one umbrella Report back from taskforces in the ICT, biotechnology and creative sectors

This Government is committed to providing a stable environment in which businesses can make decisions with as great a degree of certainty as possible. Sound Government finances leave a margin of safety in the uncertain world economy.

New Zealand's economic prospects are encouraging. Of course there is a downside: the rapid appreciation of the New Zealand dollar against the US, and dairy prices coming down off a peak have brought export revenue down, and the forestry sector is under considerable pressure. However, overall, things are looking pretty good.

Last year our growth rate topped the OECD. Unemployment is at its lowest level since the mid-80s. Inflation is low. Dwelling consents in August were at the highest level since 1975. Business confidence continues to improve. Consumer confidence in the September quarter was the highest since 1996.

Of course, from a business perspective, there will always be grumbles about compliance costs, and demands that the Government do more to reduce the tax burden and red tape tangle. And I can assure you we are listening to those grumbles and are making ongoing efforts to reduce compliance costs.

For example, as Minister for Small Business I will shortly be announcing the appointment of a Small Business Advisory Group, recruited from the business sector, that will directly advise the Government on the needs and ideas of small business.

And in February next year, the SME Summit, followed by a series of regional forums, will also take on board the advice of small-medium enterprises in forming Government policy. I hope that many of you here will take the opportunity to attend and contribute.

It is really good to see the small business sector performing strongly – economic activity in the small business sector expanded 1.4 per cent in the June quarter, taking year-on-year growth to 5.5 per cent. This compares to 0.2 per cent for the economy as a whole in the June quarter, and 2.7 over the year.

There was strong performance in small business across all sectors in the June quarter, with manufacturing, construction, wholesale and retail sales and the service sector all recording solid growth.

Another Government initiative of benefit to the small-medium business sector is a discussion document on tax simplification recently released by the Government, which outlines a number of proposals that would make paying tax easier for businesses.

I hope that proposals such as a subsidy for small businesses to use payroll agents, standardising GST and provisional tax rates to the 28th of the month, and a 6.7 per cent discount for new businesses as an incentive to pay tax in their first year of business will help make doing business easier.

Those are just some of the things the Government is doing for businesses like yours. We know that businesses need the Government to help create an environment in which business can prosper, but we also need your help in doing that. Co-operation and partnerships between Government and businesses, at local, regional and national level, will be the key to that success.

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