Prime Minister’s Statement

Three months ago the Government’s agenda for this 3-year parliamentary term was set out in the Speech from the Throne, delivered by the Governor-General. The speech and the agenda were optimistic and realistic, and visionary and practical. Labour and the Progressive party are not in Government to manage the status quo; the status quo is never good enough. We are in Government to make a difference for the better. We want our country to be more affluent and dynamic. We want all our families, young and old, to enjoy more opportunity and security and to share in the progress our country makes, and we want to build pride in the unique national identity of New Zealanders and to celebrate the achievements and successes of our people, past and present, who have brought great credit to our country.

Last year New Zealanders did not elect to Government those parties that ran New Zealand down and predicted a grim and dreary future, and those who are in Opposition are still at it. New Zealanders did not vote for a Government that threatened to put the achievements of the last 6 years at risk. On balance, New Zealanders voted for those who would keep building on the solid progress our country has been making over the last 6 years: growing the economy, dropping the level of unemployment to the lowest in the Western World, investing heavily in the critical services of health, education, and policing, promoting our rich culture and unique identity, protecting our environment, and maintaining our nation’s reputation as being principled and nuclear-free.

Those are the core policies that most New Zealanders look to the Government to provide, and those are the core policies around which Labour and the Progressive party have been able to form both Governments and working arrangements with other parties, over the past 6 years and now for a third term. Although of course it is important for individual parties to maintain their own distinctive brands and perspectives, it is also possible for those with good will to work together in the interests of New Zealand. That is the approach Labour has followed with diverse parties over the past 6 years, and that is the way we will be working this term as we build on what we have in common with others, to take New Zealand ahead.

Our policy programme balances economic and social policy. We need a strong economy in order to deliver the living standards, the services, and the quality of life that the citizens of our First World country deserve and are prepared to work hard for. A strong economy in turn needs healthy, well-educated, highly motivated, and confident people to drive it to ever-greater achievements. That is why the deregulated labour market and under-investment in health and education of the 1990s could only ever deliver a low-wage, low-skill, low-value economy. Our job in Government has been to stop New Zealand running the race to the bottom, and to aim for the top. Labour takes the high road to growth and development, based on skills and opportunity.

There is a world of difference between Labour’s “New Zealand way” of promoting higher wages, based on higher skills, innovation, productivity, and sustainability, and the right-wing parties’ standard prescriptions of slashing the tax base in public spending, cutting back on employees’ rights and protections, sacrificing the environment, and deregulating and privatising. That was the agenda New Zealanders revolted against in 1999 and have rejected ever since that time.

The last 6 years have seen good economic growth, averaging close to 3.8 percent per annum. That is better than not only the OECD averages but also the growth rates in our top three trading partners, Australia, the US, and Japan, over the same period. For those interested in comparisons with Australia, I can tell them that from 1999 to 2004 our GDP per capita grew at a rate nearly 40 percent higher than Australia’s.

💬 Hon Members: Oh!

Yes, 40 percent higher. Can it be a coincidence that in the previous 5 years, when National was in power with a different set of policies, New Zealand’s GDP grew 40 percent more slowly than Australia’s? The moral is that Labour’s policies have worked; National’s did not work.

Only 5 months ago, in the election campaign, National refused to debate the economy. In fact, it conceded it had gone well, and wanted a big spend-up on tax cuts. So what has changed? Five months down the track National has decided to run the economy down, claim it is weak, and pray for a recession. That is not credible. The economic projections now are fundamentally as they were 5 months ago. New Zealand is managing its way through a dip in the business cycle, and it is important to keep that dip in perspective. Under National, the business cycle bottomed out in the late 1990s at around zero growth. Treasury projections now are for a bottoming-out at 1.7 percent growth in the March 2007 year. There are years in New Zealand’s recent past when we would have grasped 1.7 percent growth with gratitude.

We are also managing our way through the dip in the business cycle against a record of creating a very strong labour market, which is still crying out for skilled and unskilled labour. Based on last week’s employment figures, it is estimated that 293,000 more New Zealanders are in work now than there were 6 years ago—293,000. It is never easy or welcome to get redundancy notices, but the Government commits itself through Work and Income New Zealand to make every effort to help people into new jobs. Indeed, the department reports good progress in helping workers affected by recent lay-offs. New Zealand does, after all, still have the lowest unemployment in the Western World.

The reality is that our economy is more resilient than it has been in the past because it has been undergoing a transformation. An economic transformation has always been central to this Government’s economic policy. We look at how we can add value to the private sector’s efforts to take its products and services upmarket. That is why, for example, we doubled the skills training numbers, changed the immigration points system in order to focus on recruitment to vacancies in the job market that cannot be filled here, boosted research and development spending by over 50 percent, supported regional industry and business growth strategies, embarked on huge infrastructure upgrades in transport, and worked to open up opportunities for exporters through trade policy and free-trade agreements and through New Zealand Trade and Enterprise programmes. We have looked to leverage advantage for this country wherever possible from major events, from the America’s Cup to blockbuster and local movies, and we are now looking forward to the 2011 Rugby World Cup. That is because we are passionate about New Zealand and its potential, and we in this Government will do whatever we can to see our country succeed.

Now it is time to move to the next level in the economic transformation agenda. Our country still needs more globally competitive firms. We need higher productivity and business investment and skills levels, and more innovation in the economy. We need to remove the infrastructure constraints that have held back world-class performance in Auckland—our only city of international scale—while ensuring our regions continue to thrive. And we need to work very closely with business, workers’ representatives, educators, scientists, regions, and communities to lift our level of ambition about what can be achieved for our country and to lift our country’s economic performance further. In Māoridom the Hui Taumata has already pointed the way ahead.

This year the Government will be working to advance all those objectives. The top priorities will include, firstly, the major review of the structure of business taxation. That forms part of the confidence and supply agreements with United Future and New Zealand First. Proposals are being prepared for public consultation in the middle of the year, and they will be aimed at encouraging business growth and productivity. Already, legislation is before Parliament to allow for accelerated depreciation rates on short-life assets. We will also be taking a fresh look at regulatory frameworks. Feedback from business suggests that higher-quality regulation would lead to more growth in investment, and we want to engage with business on how to achieve that.

It has become very clear that new initiatives are needed to get faster Internet access and at more competitive prices. Broadband is a critical enabler of productivity, growth, and economic transformation, yet New Zealand continues to lag behind on many broadband indicators. For example, our connection-speed offerings are, on average, still too slow. Our standard upload speed has been too slow for many users, and has inhibited some important applications and the development of advanced services. We are one of the few countries where restrictive data-caps have been the norm. The latest OECD rankings on the average per-person investment in telecommunications infrastructure placed us at 22nd out of 30 nations. Similarly, the OECD’s mid-2005 rankings for the level of broadband uptake also placed us at 22nd out of 30. Those results are unsatisfactory. Although recent announcements of price reductions and other changes are welcome, the Government will be addressing the relevant policy, legislative, and regulatory settings as a matter of urgency. We do want to work with other parties on solutions that not only enable New Zealand to catch up with the rest of the world but also enable us to keep up as these technologies develop further.

We will be looking to boost science and research funding further this year and to develop a more secure funding path. We also want to strengthen the incentives for greater collaboration between the Crown research institutes, tertiary institution researchers, and industry. That will help to realise the potential for far more commercialisation of our innovations here in New Zealand. We will be refocusing spending programmes in the economic development area to impact more directly on productivity and innovation and on export potential, leading up to the Export Year in 2007, as agreed with New Zealand First. Sector strategy development, alongside industry, will be important in key areas like food and beverages, where a task force is currently working, and in primary sectors like forestry and pipfruit, which face challenging international market conditions.

I want to now refer to rolling out the major infrastructure programmes. Investment in energy projects, overall, has picked up, but critical decisions are due on how best to guarantee power to Auckland for the longer term. Once the Electricity Commission has reported, firm decisions can and must be taken. Transpower has put its option on the table. The job of the Electricity Commission is to test whether Transpower’s option, or other options, should take precedence. But only one outcome is acceptable, and that is an adequate and a secure power supply for Auckland.

Equally critical for Auckland is progress on the land transport infrastructure. That will be challenging, given that high oil prices have reduced fuel consumption and, therefore, reduced the revenue from fuel tax. As well, the pressure on construction capacity has been escalating costs. The Government will be working closely with the transport agencies, with local government, and with Auckland stakeholders and communities to meet the goals that are set for major improvements over the next decade. Auckland cannot realise its potential as a world-class international city if people and goods cannot move rapidly through it. Ports of Auckland and Auckland International Airport are first and second respectively in forwarding our exports by value. Auckland International Airport is the second-busiest airport in Australasia, and it greets 70 percent of our international visitors. Those two great infrastructure assets cannot perform to their full potential if the local transport infrastructure lets them down.

Meeting New Zealand’s Kyoto commitments and maintaining the integrity of our environment are also part of the economic transformation agenda. The old polluting ways will not do. President Bush, in his State of the Union address this year, said that the US must end its addiction to oil. We too must be at the forefront of the new cleaner technologies and biofuels and of sustainable development. In the coming months, the Government has a Kyoto-related work programme running across policy for land use, forestry, energy, agricultural and transport emissions, science, research and technology, regulation, and emissions trading. We are looking for solutions that enable our economy to be cleaner, more energy efficient, and more sustainable, and to create opportunities for our companies to be more profitable, too. The work the Green Party is doing with the Government on the energy-efficiency issue will be important in reaching those goals.

Decisions were taken last year on lifting the value of spending on tertiary education and skills, and cutting out the opportunities for wasteful spending on poor-quality courses, which were inherent in the old funding system. Further initiatives will be taken this year to ensure that spending lines up well with New Zealand’s economic and social needs.

Those and many more initiatives are central to the Government’s drive to take economic transformation to the next level. Yes, New Zealand has made a lot of progress but we need to lift our sights and our level of ambition even higher. As fast as we make progress here, others elsewhere are coming up fast behind us—not least the mega-economies of China and India, and the new member countries of the European Union, which will be looking to rival New Zealand’s living standards. We have to stay ahead. Going back into our shells will not do the trick; we have to build on the open, competitive economy we have now.

That means continuing to give top priority to our trade policy agenda of opening up markets for New Zealand. The next few months are crunch time for the World Trade Organization round, which could deliver especially big gains to our primary sectors. As well, our negotiators will be going into the sixth rounds of free-trade agreement negotiations with China and Malaysia, knowing that success there will also deliver for our economy. Legislation giving effect to the new trans-Pacific trade agreement with Singapore, Brunei, and Chile will be passed this year.

What is critical is that the gains we make for our primary sectors, from lower tariffs and better access, are not just banked as a reason for failing to make further change in those sectors. Although the primary sectors are making real progress in moving more of their exports away from commodities and are moving upmarket, there will need to be faster progress yet. We cannot compete on volume and price with mega-producers like Brazil, and with others like Argentina and Chile. We have to compete on value, innovation, and branding. The Government will do whatever it can to work alongside the primary sectors to speed up the rate of change required to secure New Zealand’s future prosperity.

I come back to the present state of the economy at this point of the business cycle. It is in neither crisis nor recession, despite the fervent prayers of the Opposition. At the bottom of the cycle, growth is continuing at rates that would have been deemed very respectable in most of the developed world in recent years. Unemployment is low and there is a continuing demand for labour. The latest international consumer confidence survey actually found New Zealand was the second most optimistic country in the world. The latest merchandise trade figures reported a rebound in exports and a fall in import values. December’s dwelling consent figures surprised on the upsize, inflation in the year to December was down, and the Government’s fiscal position is sound. New Zealanders can continue to rely on the Labour-Progressive Government putting in place good policies for the medium and long term to strengthen the economy, and managing through the dip in the business cycle in a measured way. That stands in stark contrast to the vacuous slogans and banshee wails of the Opposition.

The second major priority area for the Government this year in this term is ensuring that our families, young and old, are able to be secure and to have the opportunity to reach their full potential. On 1 April this year we will see a big extension to Working for Families, with 60,000 more families becoming eligible. All up, 350,000 families—350,000 families—will be entitled to family tax relief in 2006. On 1 April the rate of New Zealand superannuation will be increased, in line with the confidence and supply agreement with New Zealand First, to boost senior citizens’ living standards. On 1 April there will be no interest payable on student loans for those staying in New Zealand. That is very positive for our families and our young people, who have not been able to get ahead because of the weight of their student loans on their pocket.

On 1 July there will be big improvements in the rates rebate scheme, easing the burden of rates on many superannuitants and on others on modest incomes. The next phase of the roll-out of more affordable primary care occurs, extending lower doctors’ fees and prescription charges, through the primary health organisations, to 45 to 64-year-olds. Paid parental leave is extended to the self-employed, and the qualifying time for a second period of leave is reduced to 6 months. From 1 April next year workers will be entitled to 4 weeks’ minimum annual holiday.

On 1 October income thresholds for both out-of-school care and childcare subsidies increase, making more families eligible for help with those costs. This year the Government will also be working to get in place the planned improvements in access to early childhood education and childcare, with 20 free hours for 3 and 4-year-olds due to take effect in 2007. The following year new teacher to child ratios of 1:15 in new-entrant classes are planned for introduction. Paid parental leave, 4 weeks’ holiday, and access to affordable, quality child care are all critical to achieving a better work-life balance for our families.

This year the legislation setting up KiwiSaver will be before Parliament. The new scheme encourages savings for retirement and for first home ownership. The Government will also be developing policy on shared equity initiatives to help first home buyers, drawing on the United Kingdom’s experience.

In health there are important targets to meet in the delivery of orthopaedic and cataract surgery, and work to be done on lifting productivity across the sector. Again, the United Kingdom experience on targets and contracting may be useful. Labour has targeted child-health initiatives in its election policy across well child, hearing, and preschool checks, and we will be looking for fresh policy to tackle child obesity. Our New Zealand rates are disturbing and will deliver poor health long term to many of our people, at very high cost to the taxpayer.

Work will be stepped up this year on a new benefit structure aimed at offering the same range of case management services for employment to people across the current separate benefit categories. The aim is to help all on benefits reach their full potential and to see that those who can work get both the chance and the support to do so. The Government is pleased at the continuing drop in overall benefit numbers. They are now down 25 percent—almost 100,000 people—since 1999. Unemployment benefit numbers have dropped 70 percent in that time. In the past year the numbers on the domestic purposes benefit have decreased, and there is a steep decline in the growth rate of the numbers on the sickness benefit and the invalids benefit. Those results have been achieved by opening up real opportunities, not by impoverishing beneficiaries or placing them on make-work schemes—that is other people’s policy.

This year has been designated the Year of the Veteran, and events will be held around New Zealand to honour our veterans and their service to our country. Work will be done by the Government and New Zealand First on the development of a seniors card.

In the justice and security area we will begin the build-up towards the 1,000 more police promised for this term. We are to get more prison capacity in place to accommodate rising prison populations but also to take initiatives aimed at reducing that trend. We will be giving priority to law reform proposals, already received from the Law Commission, that update key statutes—for example, in the property law area. Other legislation to be prioritised this year will include the Lawyers and Conveyancers Bill, an amendment to the Employment Relations Act clarifying the position of vulnerable workers, and bills on an independent prison complaints authority and on pandemic preparedness.

The economic and social policy successes of the past 6 years have been a source of pride to many New Zealanders. Indeed it is very hard to build a strong, proud nation without having economic and social success. But there is much more that New Zealanders take pride in about our country, too. We celebrate our sporting and cultural successes, our creativity and unique heritage, our cosmopolitan lifestyles and great outdoors, and our ability to live largely at peace with each other in our multicultural society. There is an evolving New Zealand way of doing things, and a stronger New Zealand identity is emerging. It is important to develop that distinctive New Zealand style, identity, and set of community values. As a Government, we will continue to prioritise policies that contribute to a strong sense of national identity.

A remarkable sporting year in 2005 was capped by winning the right to host the 2011 Rugby World Cup. That was achieved by a partnership between the New Zealand Rugby Union and the Government, and that partnership will be ongoing in order to ensure that New Zealand gets the maximum economic benefit and leverage from hosting the cup.

Two thousand and five was also a remarkable year for New Zealand - made movies. Who could have imagined a decade ago that two of the three blockbuster movies released pre-Christmas worldwide would have been made in New Zealand by New Zealanders? The major international investments in King Kong and the Narnia film were secured with the support of the Large Budget Screen Production Grant scheme, set up only 3 years ago. The New Zealand movies keep coming too, benefiting from increased Government funding. The World’s Fastest Indian, River Queen, and No. 2 have all premiered recently, all telling different aspects of the Kiwi story—of the determined Southlander, of colonial settlement and Māori resistance to it, and of Pacific peoples’ settlement in our country. Through film, and through the successes of our music and other performing and visual arts, New Zealand is growing its international reputation as a creative nation that has much to offer the world.

Critical to our nation-building is our ability to reconcile our past and adjust to the diversity of our present time. Both can be uncomfortable, but the efforts New Zealand is making are pioneering, both through the Treaty settlement process and through the efforts we make to build social cohesion and tolerance. More Treaty settlement legislation will be before Parliament this year.

Part of the emerging Kiwi identity too is the extension of our support for reconciliation and respect for each other at home, to the international arena. Kiwi peacekeepers are respected wherever they are deployed. We are perceived to be a voice for dialogue and moderation across civilisations and faiths. Next month our country will be a co-sponsor of the Asia-Pacific interfaith dialogue in the Philippines. Peace and tolerance in our region and the world matters to us.

In the last 2 years the Growth and Innovation Advisory Board surveyed New Zealanders’ attitudes to economic growth. Although not negative towards it, support for growth came with strong conditionality. New Zealanders do not want growth to damage our unique environment. Environmental and biodiversity protection, and the conservation of our wild and scenic places loom large for our Government in maintaining New Zealand as a special and unique nation.

Our strong national identity is also founded on an understanding of the forces and the events that have shaped our nation. Our Government has worked to boost recognition of our history and heritage in many ways. This year a New Zealand memorial will be dedicated in London in recognition of New Zealanders’ huge efforts and sacrifices in support of the United Kingdom’s defence in the past century. Work and planning continues on the New Zealand memorial park and precinct adjacent to the National War Memorial. As well, the exhibition created by Te Papa on the Treaty of Waitangi is travelling throughout the country, and community dialogue on issues arising from the Treaty is being developed by the State Services Commission.

New Zealand in 2006 is, in many ways, a work in progress. Our country is on a journey: away from the old economy to a new one, to improving the health, education levels, and living standards of all our people, and the services that support our needs, and to building a nation from what is an increasingly diverse population. Our Government’s task is to provide leadership and sound policy to support that journey. I look forward to the challenges and opportunities 2006 will bring, and to working with all those parties supporting or involved with the Government in some way, to take New Zealand ahead.