Dominion President Mr. David Cox, Your Excellency the Governor-General, Minister of Defence, Paul East, Chief of Defence Force, Commissioner of Police, Mayor Blumsky, distinguished guests, members, ladies and gentlemen, I am very pleased to be able to join you again today.

This is the sixth year I have addressed this conference as Prime Minister, and on this occasion, I would like to talk a little more broadly than I have in the past about the direction our country is headed. No doubt many of you will be watching the media with much interest at the moment, as analysts of all sorts make their predictions about the country's future. I wonder how the breathless tone of it all - with its predictions of uncertainty and calamity - strikes you. You can recall grimmer days and greater uncertainty, I'm sure.

For those of you who set sail for Egypt, or Italy, or the Pacific, with little idea of what lay ahead of you, the notion that New Zealanders are heading into dark and uncertain days, because the system of voting is changing, may well seem to be overstating the case a little. So today I would like to speak about the political changes that are in store this year, and what they mean, and I would like to also talk a little about the spirit New Zealand needs to carry it through its challenges. There are many lessons for us in the sacrifices you and your colleagues made in the service of your country.

One, I think, is particularly important. That is your commitment to do your very best. The story of New Zealanders at war is one of fighters who were braver and more able than most. In particular, you hear again and again about the determination of the Kiwis. In peace time, that spirit of determination is equally important. If we want prosperity, if we want the wealth to pay for all the benefits of a fair and just and prosperous society, we must be prepared to work hard for it.

Success in the world economy comes from being the best, and it will rarely come easily or without effort. So do New Zealanders have that spirit of determination today? I strongly believe that the great majority do. There is no doubt that these years of reform have encouraged individuals and companies to rise to new challenges and succeed. Every time a New Zealander develops a better product or service, the whole country benefits.

Each time a New Zealand exporter makes a successful deal in another part of the world, this country's prospects lift. The need to do your best, to do something to be proud of, to pursue excellence, has been the driving idea behind the economic reforms of the past decade. We all know that a nation cannot be built on a foundation of mediocrity. We therefore must encourage people to strive to do their very best.

I am very optimistic that our children and our grandchildren will live in a country that is progressive and prosperous. I feel confident, also, that they will build a New Zealand that will honour the efforts and sacrifices of earlier generations of New Zealanders, which is what nation-building is all about. Of course in building a nation, we must expect growth and change.

We started as a pioneering farming nation. While farming in all its forms is still very important we have moved to many other fields of endeavour. Life at the end of the 20th century is more complex, but in many ways more rewarding. In this new age of high technology and an international economy we see a different world. The medium of television delivers the world in all its greatness and all its terror to our living rooms every day. And every day I am thankful that we live in New Zealand.

Every time I see a great sporting event like the upcoming Olympics or the All Blacks tour of South Africa on TV, I am grateful to those who through their abilities opened up the world for all to see, enjoy and learn from. Television is a daily and spectacular reminder of today's world. A world where technology plays such a large part in shaping the daily lives of citizens. The reach of technology helped to destroy communism by exposing it as an empty ideology. The reach of technology is helping to tear down barriers to trade which is to New Zealand's advantage.

It is also to New Zealand's advantage to be locked into the world economy and attract our share of world investment so as to enable us to grow. There is much nonsense spoken about foreign investment. The fact is that New Zealand has enjoyed the benefits of foreign investment since the first British merchants decided New Zealand was a good place to invest. The same holds true today although now many New Zealand firms invest overseas themselves. So both

New Zealand and the world have changed dramatically in the 50 years since the end of World War II. New Zealand still has vital interests in Europe, but we now also have vital interests in North and South America, in Asia and elsewhere. Our broader-based interests are being reflected in New Zealand becoming a more multi-cultural country. Many people from a wide variety of cultures and races now live with us and that requires higher levels of tolerance and understanding. With all of this comes a diversity of views, of opinions and ways of doing things. It may well be that the new political system of MMP will help us to listen to those dissenting views and find a way to draw the threads together.

It may well help us to identify what it is that we do agree on, and act on that, and to leave aside, for further debate, the changes we cannot agree on. It is only four months until the first MMP election so let me talk a little about the way MMP will work. The most important and far-reaching aspect is this: voters no longer directly elect the Government unless a single party gains more than 50 per cent of the MPs.

The voters with their two votes elect local MPs and they vote for the party of their choice on the list. The list vote is the most important because it will determine the number of MPs each party has. When the votes are counted and the various parties know how many MPs they have, they, through their leaders and other senior personnel, will sit down and negotiate to form a coalition government which will comprise two or more parties.

This is different from, say, Australia, where two parties campaigned as a coalition and won and formed the new Australian Government. The next point to make is that MMP requires an entirely different way of thinking about politics, and that leads to an entirely different way of approaching politics and the formation of a government. That thinking will not suddenly descend on us in four months' time. It has already been going on for the better part of three years.

It started shortly after the '93 election when the Labour MP for Eastern Maori, Hon Peter Tapsell, accepted my invitation to become Speaker. In doing so he broke totally new ground in modern New Zealand politics, and in the following three years, you have seen the evolution of thinking and practice in politics leading to a coalition government being in place at present. That leads to the most important point in forming a coalition government. The coalition should be formed not on personalities but on the policy content that the parties can agree are in New Zealand's best interests.

To reach that position will often require 'give and take' but then that happens within parties now anyhow. The next point to make is that it is foolish for commentators to be dogmatic in advance about which parties may form a Government after the election, and it is equally foolish for party leaders to emphatically proclaim who they will or will not be prepared to work with after the election. After all it is the voters who will determine the political hand that is dealt on election day and it is then up to political leaders to produce the best government they can for New Zealand, based on the choices the electorate makes at the ballot box.

This is the approach I have followed since '93 and it's worked to provide stable, forward-looking government. The latest edition of Time magazine quotes the Global Competitiveness Report recently released by the World Economic Forum which lists New Zealand as the third most dynamic economy in the world. We can all be proud of that acknowledgment because it is the more dynamic economy that enabled us in the recent budget to achieve three broad goals. To clear up the problems of the past by significantly reducing government debt, by rewarding the present by giving significant tax cuts and by investing in the future by directing significant extra spending in key areas like education, health and the environment.

Since then the Government has also put a proposition to the Superannuation Accord parties. The Government proposal to the other political parties is that there should be a universal provision of superannuation until the income received by a married couple in retirement is the equivalent of 10 per cent above the average ordinary time wage - $671 a week. And for a single person it would be 80 per cent of the average wage, or $448 per week. What this change would mean is that a married couple could earn/have $15,444 a year in addition to super before there would be any reduction in the super payments, and a single person could earn $10,296 in addition before any reduction.

We believe the above proposal is fair and we want to secure the agreement of the other political parties to put the proposal in place before the October election. Superannuation has been a very difficult issue for New Zealand for the last 20 years. In my view we should settle on a fair basis now so that younger New Zealanders know what to expect and can plan their own saving programme. The Superannuation Accord is an example of sensible agreement between political parties. To achieve it required a new approach and new attitudes to politics.

Since the night of the '93 election when the referendum for MMP was carried, I have worked to prepare New Zealand for change. I knew that night that I had the responsibility to provide the leadership for the transition to the new electoral regime that voters opted for. We had to begin the move towards more consensus and consultation that voters were asking for. And we had to demonstrate that sound policies would still be possible with a new style of politics and coalition governments.

Politically, it has been a question of identifying like-minded interests in other parties and working constructively with them. That is what MMP requires us to do, and that is what my Government has been doing for the last three years. I believe the next three years can show the world that New Zealand is still dedicated to building an outstanding society - one that is progressive enough to prosper, and one that cares enough to share that prosperity. Our challenge is to prove that, like the generations who fought for our future, the generations to follow will be just as resilient, just as clear-sighted, and just as determined to make this a nation to be proud of.
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