Jim Anderton MP Wed Aug 25 1999

Speech Notes

Jim Anderton MP

Leader of the Alliance

NZ Employers Federation Conference

Plaza International Hotel, Wellington

Embargo to: 10.45AM Wednesday, 25 August 1999

I'm delighted to have the opportunity to speak to this Employers Federation conference today.

I was recently sent a copy of the Employers' Federation policies.

I identified 116 very important areas of policy where the Employers are in agreement with the Alliance - far more than the areas where we disagree.

Let me give you some examples, which would surprise you if you relied on the descriptions of the Alliance in some quarters as 'anti-business'. These basic principles in the Employers' manifesto sound like they come from the Alliance:

Support for:

· Low inflation. The Alliance has low inflation as an important economic goal - not at the expense of everything else, of course, but as one of a range of important policy targets.

· Export-led economic growth, including positive measures to encourage sustainable employment growth, recognising the serious effects of unemployment. I'll have more to say about this shortly.

· The need for the development of and efficient utilisation of infrastructure.

· Balanced, environmentally-responsible principles.

I want to make a point of outlining our areas of agreement.

I also believe it's important for you to hear about needs in our society which most of you probably don't come across every day, but which you will know that I have to be concerned about as a political leader:

· Children with glue ear.

· Get out of the car and walk around Petone.

· Mental health.

In the Alliance view, we have a responsibility to focus on two main policy priorities: The need to lift the overall level of economic performance, and the need to address our pressing social problems.

Last week the Alliance released a very important document, called Partnership 2000.

It is an extensive review and summary of international literature on economic growth and development

It finds that New Zealand's economic performance has continued to deteriorate relative to the OECD average since 1984...

In 1984, New Zealand's per capita income stood at 95% of the OECD average. By 1992, it was down to 80%.

It rose again briefly for two years in the mid-90s, and has now slumped again after last year's recession.

This is in sharp contrast to, the EU, Japan, Korea, Taiwan, and even Australia.

In 1970, a number of countries had US$1 billion to US$1.5 billion worth of export income. Among them were New Zealand, Chile, the Phillipines, Ireland, Taiwan and Singapore. In 1996, we had US$14 billion of exports but Chile had US$15 bil-lion of exports, the Phillipines had US$20 billion, Ireland had US$48 billion, Taiwan US$116 billion and Singapore US$125 billion. We have lost the plot in the world economy.

Most affluent New Zealanders don't realise the extent of the problem. They have been shielded from New Zealand's relatrive economic decline by sharply growing income inequality.

The top 10% have had huge rises in their pre-tax and post-tax incomes.

At the bottom end of the income scale there has been an absolute as well as a relative fall in income.

While our relative per capita income has fallen, our overseas debt has ballooned...now over $100 billion.

In 1984, our total debt was equivalent to 145% of exports. Now it's 350%.

In 1984, little Olivia had a debt of $5000. Now, it's $27,500.

And our 'net international investment position' has deteriorated dramatically.

The rest of the world earned $7971 million from its invetsments in New Zealand last year.

We earned $118 million from our investments in the rest of the world.

We have had 27 consecutive years of balance of payments deficits.

The free market policy is being propped up by a rising tide of overseas debt. New Zealand is slowly going bankrupt.

Another symptom of our economic decline is the sharp regional polarisation in employment during the 'free market' period.

Nearly all the employment growth between 1986 and 1996 occurred in a few main centres. On the other hand, a huge swathe of the country saw employment fall between 1986 and 1996.

Weak regions mean the country as whole is weak.

The national economy is seen as a summation of a whole network of regional economies, rather than the other way around.

Europe

This leads to a positive re-evaluation of lagging regions. Instead of being seen as a drag on the rest of the country, they are seen as a base for future specialised skills and investment which strengthens the whole country.

An example is the Finnish electronics industry based around Northern Finland.

In both economic growth theory and international trade theory exconomists now attribute success to created advantages rather than inherited, resource based advantages.

Examples of countries where a deliberate planning decision has been taken to create an industry and where substantial public investment has followed:

Taiwanese computer industry

(Scotland)

(Finland)

Economists no longer talk about 'picking winners' but 'creating winners'.

SCOTLAND.

In New Zealand, we need to strengthen our regions: Northland, West Coast, East Coast, central North Island, Otago, Southland.

We need to combine our educational, scientific and business skills in a regionally-based, strategic economic development programme.

It is not enough to give free rein to market forces and then just expect economic growth to bubble up.

Experience shows we get plenty of cafés, shops and house-builders by this approach, but we don't get enough of the leading edge businesses we need to pay our way in the world.

Above all, we need some strategic planning (such as has been called for by some business leaders, such as Hugh Fletcher).

And, we need a concerted public-private effort to lift New Zealand's economic performance.

Moving away from our present dependence on exports of crude commodities gives us the best hope of reaching and maintaining full employment. Slowly and surely, the mobilisation of the renewable resources of the regions by New Zealanders for New Zealanders will transform the New Zealand economy.

In our Partnership 2000 policy we propose a $200 million Economic Development Fund to provide:

1). Investment capital funding for Small and Medium Enterprises, not only to establish new businesses, but also to sustainably expand existing ones.

2). Funding for industry joint ventures between government and private industry in research and development. The emphasis will be on new technology industries providing sustainable, skilled and well-paid jobs to enable NZ not only to get out of debt but also to improve incomes for more New Zealanders.

The EDF won't just provide cash. Examples of the contributions it could make:

Direct development grants

Loans

Start-up equity capital

Encouragement for r&d

Access to expert advice

Training assistance packages

Development parks/enterprise zones

FIRMS SUPPORTED BY THE DFC DURING THE 1980 FINANCIAL YEAR

Sanfords

Canterbury Timber Products

Trigon Plastics

Hallmark Industries

Mt Hutt Ski Field

C W F Hamilton and Co

Autex Industries

Bruggers

Woolcraft Knitwear

South Wood Ltd

Pacific Leathers

Tait Electronics

ENZED Precision Products

A G Robinson and Sons

Peco Ltd

Borren Metal Forming

SCIENCE, RESEARCH AND DEVELOPMENT

We need to substantially increase spending on research and development, particularly for non-traditional high-tech, added-value industries with high growth potential.

In order to encourage our best and brightest researchers we must improve opportunities for university-based research. New Zealand needs to combine well-judged public investment in job opportunities, education, infrastructure, science and technology with creative private sector investment in new technology.

Investment in creative new products, processes and designs needs to be continuous.

The level of investment in education and in research and development in both the private and public sector needs to be built to a level at least equal to (and eventually in advance of) the level in other developed nations.

MACROECONOMIC MANAGEMENT

The final element in providing a springboard for growth is economic management.

· Monetary policy

· Fiscal policy to be roughly neutral over the economic cycle

· Reform of foreign investment rules and tariff policy.

· We will aim to achieve a smoother economic cycle by using a better balanced combination of fiscal, monetary and government investment policy.

· And we will establish a ministry of economic development and employment to take over the economic development policy functions of Treasury and implement this plan.

ENDS

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