New Zealand Executive Government Speech Archive

WEDNESDAY 15 MAY 1996

ADDRESS BY
RT HON J B BOLGER
PRIME MINISTER

NEW ZEALAND EMPLOYERS FEDERATION AND COMBINED BUSINESS
ORGANISATIONS CONFERENCE
"MOVING FORWARD"

TO MARK THE 5TH ANNIVERSARY OF THE EMPLOYMENT CONTRACTS ACT
ELLERSLIE CONVENTION CENTRE, AUCKLAND

Simon Holdsworth, the New Zealand Employers' Federation and combined business organisations, ladies and gentlemen. Two days ago I returned from a visit to Japan, the Republic of Korea and Hong Kong. The significance of the Asia-Pacific region to New Zealand cannot be over-emphasised and my visit reaffirmed the priority we attach to those relationships.

In New Zealand we rely on the Asia-Pacific for some 70 per cent of our foreign trade and most of our foreign investment. Korea alone is now our fifth largest export market and, if present trends continue, may soon overtake Britain, our most important trading partner only a generation ago. Japan - our second largest market after Australia - despite some recent difficult years, because of its size and sophistication remains the engine of growth in the Asia-Pacific region.

The visit strengthened my view that New Zealand's future is as a value-added international trader. To compete and thrive in that dynamic Asian marketplace we have to be competitive. The economic changes and gains we have made over the past decade provide us with that competitive base, but the drive to succeed must come from the leadership of individual firms.

It was good to see a New Zealand firm like Logan Clothing had opened retail outlets in Tokyo to compete in the casual wear market with quality goods. Their effort is closely linked to New Zealand's success in the America's Cup. Snowy Peak, the Christchurch knitwear manufacturer, is also in Japan promoting quality New Zealand goods.

It was also good to see that major New Zealand corporates now have more people on the ground in Tokyo. By comparison, Seoul, Korea, had virtually no one despite the fact that Korea is New Zealand's fifth largest market. I repeat, the Government can create the economic framework for success, it can provide assistance through organisations like Tradenz, but the drive, the skill and flair needed to succeed in world markets must come from the private sector. Financial and labour market reforms have strengthened our economy to give us an economic growth rate averaging four per cent a year from 1991-1995 and sustained low inflation averaging under two per cent since 1991.

This has allowed us to repay debt, reduce taxes and invest far greater sums in higher quality education and health. A pillar of the economic recovery has been the freeing up of the labour market through the Employment Contracts Act, the fifth anniversary of which you celebrate here. That significant change was crucial to creating the open, competitive economy we have today. The ECA not only helped the economy and business, it also benefited working people.

Since the labour market reforms were introduced, in excess of 200,000 jobs have been created - real work for real people. To put it another way, our unemployment rate has come down from a peak of 11 per cent to one of the lowest in the western world, around six per cent. That's the lowest rate of unemployment in New Zealand since December 1988. Workers have not just benefited from increased job opportunities. The ECA has removed barriers in the workplace and promoted more efficient bargaining structures.

It has allowed the labour market to respond more easily to changes in the wider economy. Workers and employers are coming up with working arrangements that suit their needs and productivity has increased. This is what brings you all here today and rightly so. Strong economic growth, strong job growth, low inflation - those have been the hallmarks and foundations of the gains we have made and must seek to retain in future years. As the political debate gathers momentum over the coming months various political parties will argue for a return to the past.

But we should not forget that New Zealand has moved from being one of the most regulated, and poorest performing economies in the OECD, to one of the most liberal and high performing economies in the world because we dared to make far reaching changes. The economy is now 25 per cent larger than it was in 1990. Without that growth unemployment would be over twice what it is today, debt would be much higher, interest rates much higher and investment in health and education much lower.

In short, we would be a much poorer people. It is also worth highlighting that while in percentage terms our economic growth is expected to ease this year, in dollar terms the amount of growth is likely to be similar to the previous year, that is, about $3-4 billion. A recent study commissioned by the Ministry of Commerce noted there is now a generally positive attitude towards the environment in which firms operate. That compares with over 70 per cent having an unfavourable impression in 1990.

These are economic and business gains that must not be thrown away. Providing greater security for families and children and preparing to meet the pressures further out created by an ageing population remain central to our economic platform. Debt reduction is an important part of reducing economic vulnerability. But it is not a goal in itself. We have an obligation to continue to help the future economic and social well-being of New Zealanders.

Debt reduction and prudent government spending has allowed us to start to deliver on these other goals:

That having been said, I know some in businesses are hurting. And that the higher value of the New Zealand dollar, itself a reflection of our economic progress, affects the profitability of exporting. Operating with a higher valued currency only reinforces the necessity of continuing to further improve the business environment in New Zealand. It most certainly doesn't support an argument for a return to the old cost plus inefficiencies of the past. In all the talk about success, New Zealanders mustn't lose sight of the fact that nations, especially small ones, do not remain wealthy as of right, or by nature or by chance.

They get wealthier, or may get poorer, by virtue of how their economies perform, how they use their assets and talents to develop. The story of the post-war world is of countries growing and developing and providing better lives for their people through sound, consistent economic and political leadership. I've said earlier, I see New Zealand's future as an active value-added international trader.

To achieve this, and retain the gains made so far, government, business and industry must remain focused. We need to continue to look at ways to improve productivity. By reducing costs and lifting production through, for example, technological advances. We will only maintain higher productivity through better education and training, better infrastructure, better government and better management.

We benefit most by exporting more skill-intensive goods and services. For this we need a highly-skilled and knowledgeable workforce. Government has been and remains committed to investing in education and training. Education will be a focus in next week's Budget. It is not unreasonable to expect that our children will need to re-train during their working lives. Here both the education sector and industry carry considerable responsibility.

We can learn from successful firms - those with strong visionary management. They show us we can make the transition from a commodity economy to one based on skill and talent. A good example of this is manufacturing. You may not be aware that since the ECA has been in place exports of elaborately transformed goods have risen by 75 per cent. Our exports of electrical and electronic goods now exceed those of apples and pears.

We now export more aluminium and steel products than lamb and mutton. To maintain these positive trends, New Zealand's domestic business environment needs to be enhanced and not constrained by international developments. That is why we are working through organisations such as APEC, CER and the World Trade Organisation to further lower barriers to trade. And last but not least there needs to be an effective infrastructure. Here government, both central and local, has common interests with business and industry. Higher growth has and will increase demands on both the public and private sectors for investment in infrastructure along with other priorities, like education and health. Growth has brought pressures on water supply, waste management and transport systems.

Central and local government can and will provide the strategic direction which benefits business and employers through certainty and stability. Together they can create the right policy environment to promote enterprise. We have seen this in recent years through the corporatisation of ports and new energy structures. Significant investment in infrastructure is required which must be based on the right economic signals from central government. Land transport is one of the strategic priorities of the Government.

A Land Transport Pricing Study is underway - focused on the cost of roading infrastructure. It is looking at roading as an economic good, along with safety and environmental factors. Pricing and other policies will be put in place to ensure an efficient level of investment in land transport. Infrastructure is not the sole responsibility of government. There may be scope for further private investment in infrastructure once the regulatory environment is right.

Let me recap on the points I wanted to make today. Firstly the successes of the last decade have been considerable: strong economic growth, strong job growth, low inflation. Secondly those successes did not happen by chance, but came within the Government's overall priorities of:

Thirdly, we are already working on the challenges and opportunities ahead to ensure the country has the infrastructure required for continued growth. Part of the future challenge and future uncertainty is the coming election. I strongly believe that while Government can manage the transition to MMP, other organisations can also play their part by using all the opportunities they have to inform people of the progress New Zealand has made thus far. Business can make a worthwhile contribution to this debate.

You have recognised this already with your conference today promoting the benefits and importance of the ECA to economic growth and jobs. I congratulate and thank you for that and wish you success.
Ends

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