Mr Peter Townsend, Chief Executive, Canterbury Employers' Chamber of Commerce, President, members, ladies and gentlemen, thank you for inviting me here today. I want to talk about the proven policies New Zealand is now following, about the next steps we must take and allow you to compare them with the populist theories being promoted by some which would take us back to the time when the Government was all knowing.

We've got some big decisions ahead of us as a nation. It's important that we confront them with honesty and real facts. In the remaining four months before the October 12th election I invite my political opponents to seriously address the real issues. New Zealanders don't want half-truths being used to construct a false picture of New Zealand today. Nor do they want political parties apologising for the real progress we have made as a nation.

What the voters know is that if we want prosperity, if we want the wealth to pay for all the benefits of a fair, 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. We all know that a nation cannot be built on a foundation of mediocrity. We must therefore encourage people to strive to do their very best. I feel confident that our children and grandchildren 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.

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 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. New Zealand still has vital interests in Europe, but we now also have vital interests in North and South America, in Asia and elsewhere. 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. I will talk more of MMP a little later. You no doubt recall our strategic document Path to 2010. Then let me give you an interesting fact. This year's Budget confirms us on a growth path that will see the average New Zealander 50 per cent better off in 15 years - 2011. We are on target to do great things for New Zealand.

The New Zealand economy is already 25 per cent larger than it was when I became Prime Minister. That's excellent progress but to keep up we must press on. As a Government we must constantly seek ways to reduce costs to industry so that industry's growth can add to the 200,000 plus new jobs created in the past four years. You might have heard about the OECD report released last month which commented that New Zealand is likely to remain one of the fastest-growing economies in the OECD. That's no fluke. It is about management. As the report says, and I quote, while other OECD countries have pursued similar policies, few, if any, have done so in the context of such a coherent overall framework, stressing predictability, transparency and accountability.

High praise and a great base on which to develop this year's Budget. The Budget addressed many issues but in essence set out to achieve three important goals. To clear up the problems of the past by repaying a further $8 billion in government debt, by rewarding the present by significant tax cuts and by investing in the future by directing significant extra spending in the key areas of education, health and the environment. Let me look at these three areas in a little more detail.

New Zealanders must see a dividend for their work and the country's success. Tax reductions worth $3.3 billion will boost their take-home pay substantially, starting from 1 July. A family with two children and one working parent earning $25,000 will be $61 a week better off by next July. The same family with three children gains $81 a week. Show me a hard-working family who will not welcome that. There is no need to convince those families of the economic sense in healthier pay cheques. It also makes sound economic sense for the country. When ordinary New Zealanders can maximise the benefits of working, the whole country gains. That's how we get ahead and create the wealth that will sustain us in the future.

Further investment in key social areas is also important. We must deliver the best health, education and community services that we can afford. So an additional $3.7 billion will be invested over the next three years in education, training, the environment, health, family assistance and family safety. In the broadest sense, that is an investment in security. A nation that is well-educated, healthy, safe in their families and communities is secure and stable.

Take one area at the core of our effort. Excellent education cannot be a choice for just a few. It must be an opportunity for every New Zealander. For New Zealand to succeed at the highest levels of economic excellence we must aim to achieve high levels of academic excellence.

The next step up the ladder for New Zealand will require skills of the highest order to add further value to, and extract further value from, the market for traditional and non-traditional products. An example of this goal is that chilled lamb is worth over $8,000 a tonne compared with carcass lamb that earns a little over $2,000. Or, according to reports, that chilled beef is worth $4,000 a tonne more than frozen beef.

We need to focus the intellectual horsepower necessary to develop entirely new products to meet today's market demands. In investing in education both individuals and the future prosperity of the country benefit. I am passionate about that. Hence our commitment to more classrooms, better schools and top-quality teachers. Top-quality teachers should be paid more.

Our focus on the future means we must also reduce the burden of government debt now. By reducing government debt by a further $8 billion over the next three years we will have reduced New Zealand's net public debt from 52 per cent of GDP in 1991/92 to below 20 per cent of GDP. Further government net foreign debt is forecast to be nil by the end of 1996/97 year. Debt reduction is vital and I'll give you a simple reason why. In less than 15 years, New Zealand will face the demands of a rapidly ageing population.

At the turn of the century there will be around four people in work and paying taxes for every superannuitant in the country. By 2040 there will be just two people in work for each superannuitant. That change in the balance between the age groups has very far reaching implications for the country's earning capacity and for government spending. It's figures like this that demand we make responsible decisions on the provision of New Zealand superannuation.

The Government's proposal to the opposition political parties is that there should be 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 per week. And for a single person it would be 75 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 their super payment, and a single person could earn $10,296 in addition, before any reduction.

The proposal means that a retired couple would have a total income of $34,900 per year before they lost any of their New Zealand super. We believe the above proposal is fair and we want to secure the agreement of the other political parties to put it into place before the October election. For the Alliance, Labour or New Zealand First to demand more for the wealthiest 10-12 per cent of retired New Zealanders is not responsible, especially knowing what we know now about the future cost of New Zealand super.

Superannuation has been a very difficult issue for New Zealand for the last 20 years. In less than another 20 years the total cost of superannuation will start to increase very sharply because of the increasing numbers of retired New Zealanders. In my view we should settle on a fair basis now so that younger New Zealanders know what to expect and can make their own savings plan. Looking out to the future all prudent New Zealanders should save some for their own retirement.

I want to now speak a little about MMP. The '96 election is four months away and pressure is mounting as people seek to determine how the first election under MMP will go. After you vote will individuals have improved security or chaos? That is one of the central issues of this campaign. MMP changes the rules. The most important and far-reaching rule it changes is that voters no longer directly elect the Government unless a single party gains more than 50 per cent of the MPs.

What happens now is that 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 shouting has died down and the votes are counted the various parties, through their leaders and other senior personnel, will sit down and 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 practical implications of the change are enormous and it is apparent that a large percentage of voters, including many journalists and commentators and I suspect many MPs, do not really understand the full implications of the change.

First, it requires an entirely different way of thinking about politics which leads to an entirely different way of approaching politics and the formation of a government. The last three years has shown that MPs elected from different parties can work together when there is broad agreement on policies.

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 that single decision gave New Zealand stability instead of chaos. Back to 1996, may I state 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 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 we, the political leaders, don't deal the political hand that has to be played after the election. That hand is dealt by the collective choice of the voters and it is up to political leaders to then produce the best government they can for New Zealand. This is the approach I have followed since '93 and it's worked to provide stable, forward-looking government. I can hear someone say but what if two or more parties have absolutely different policies on certain key issues? The answer is simple.

Such differences may make it impossible to form a coalition. But equally when the party leaders sit down after the election they may find that an acceptable accommodation can be reached or they may decide that the issues should be put to one side and left there for another time while a coalition is formed on the other important issues where there is broad agreement. There are reasonable men and women in all political parties and I say now, on October 13, the day after the election, my door will be open to those who want to talk about the formation of a responsible Government.

I will pursue every option for the good of the country, because that is what voters want. That is leadership. Not slamming the door now because it might win a few points in the next opinion poll. We have already proved that we can co-operate with people from other parties. It is that sort of flexibility, to make sound working arrangements with sensible people, that will be the key to good government in the future. You will have seen that National has chosen its party list for the election. That, too, was a question of balance.

The list will guarantee that National returns a mix of experienced men and women, along with new faces who will reflect the diversity of New Zealand. The talkshow host mentality played no part in making up our list. We have chosen men and women who reflect the diverse nature of New Zealand in the 1990s, who will bring real talent to Parliament.

I'm proud that our party list gives prominent places to Maori, Pacific Islanders and other ethnic groups. Pansy Wong, from here in Christchurch, will be a wonderful asset to Parliament. I'm equally proud of the percentage of women on our list. The National Party will campaign throughout the country to maximise our list vote. And we have every reason to be confident that we will be the largest party in the new Parliament. I am confident, therefore, that we will lead the next Government.

We will be at its core. Over the last three years on the policy front, that has been a matter of achieving the balance I have talked about - between social spending, tax cuts and debt repayment. 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. It shouldn't frighten us, after all the Government has been doing just that for the past three years.

Ends