New Zealand Executive Government Speech Archive

Summerfruit New Zealand chairman Martin Clements; Fruitgrowers' Federation chairman Ron Becroft; Members of the Summerfruit New Zealand executive; Ladies and Gentlemen.

Nineteen ninety-six heralded a new era in the central administration of the entire fruitgrowing industry. At the launch of Primary Industry Management Services, I said I believed the new structure, with greater independence for sector-specific groups, represented sound common sense. It gives growers of different fruits the power to focus specifically on issues affecting your sector, instead of being lumped together as if your products and marketing strategies should all be the same. So I'm pleased to speak here today at what is your first AGM under the new, more sensible structure.

It is not necessarily the best time for summerfruit growers. Exports are expected to be down to around $9.9 million FOB to the year ended 30 June 1996, from $13.2 million the year before. The main reason for that was the destruction of much of our cherry crop earlier this year. But the general export trend over time is up.

I'm going to focus mainly today on economic issues as we move towards our first MMP election. But I do want to mention one or two issues of specific interest to summerfruit growers.

The first is your application for a compulsory levy under the Commodity Levies Act 1990. I know that you were one of the first to apply for a levy under the act and held a ballot in the winter of 1994. And, since then, you've felt a sense of frustration over the delays in getting a decision from the Government.

I make no apology for the fact that the Act includes safeguards which makes it difficult for organisations to get the power to levy. A levy is in effect a tax, and we need to be careful when we provide for an organisation to have that power. At the same time, I regret that confusion over your ballot paper meant your initial application had to be turned down, and that there have been delays since.

Nevertheless, I'm pleased to announce that yesterday Cabinet did authorise the levy and it went through the Executive Council as the Commodity Levies (Summerfruit) Order 1996. That makes your future more secure and will stop further depletion of your R&D programme.

Later this month, I'll also be taking to Cabinet a plan to strengthen New Zealand's agriculture border controls. The Government has already spend $3.7 million dealing with the fruitfly incident in Mt Roskill. The cost will go to over $4 million with the operation continuing until spring.

We don't begrudge having to spend that money. In the context of protecting $1.4 billion a year in exports, a one-off cost of $4 million is money well spent. But we are not keen to have to spend it too often again.

Progress after the fruitfly incident has already been made. We've put pressure on airlines to show inflight videos and include onboard announcements about the declaration of quarantine material, and the penalties for not doing so. We're negotiating with the Australians about aligning quarantine declarations, in English and foreign languages, so that travellers get exactly the same message on both sides of the Tasman. Six extra staff at Auckland International Airport are being used as a result of a new shift roster. MAF's random searching programme has been extended. In May, MAF leased an X-Ray machine and installed it at the Overseas Mail Clearance Centre in Auckland. New quarantine signs and announcements have been trialed in arrivals halls and national introduction began on 11 June.

This is only the start. The plan I will take to Cabinet will include provision for X-Ray machines at major airports, greater use of sniffer dogs and enhanced inflight and arrival hall education. We haven't been able to find any information to follow up on Jim Sutton's suggestion that we introduce sniffer pigs.

This all represents a comprehensive strategy, and it will minimise the risk of fruitfly coming into New Zealand again. Some risk, of course, will remain. We can have confidence from MAF's ongoing, successful operation in Auckland that if fruitfly ever does get into New Zealand again - and, let's be honest, despite our best efforts, they may well - we have the skills to eliminate them.

Many exporters are concerned about the current value of the New Zealand dollar and the recent rise in interest rates. I want to address those issues head on.

There is a perception that the Government's so-called obsession with keeping inflation low is increasing interest rates. It's said that both our inflation advantage over our competitors and those interest rates are causing the dollar to rise. Some choose to take the argument further back and blame immigration for increasing property prices, which in turn are contributing somewhat to inflationary pressures.

That allows them to claim that exporters are having difficulties because of Asian immigration.

The fact is that if New Zealand is going to be a low-inflation, growing economy - the prerequisites for job growth - our dollar will trend upwards. It may not move ahead quite so quickly as it has recently, with the dollar increasing in value by slightly more than our inflation advantage would appear to justify. That's probably why it has dropped back a little recently. Nevertheless, prosperous countries tend to have increasing-value currencies, and the Government's goal is to become an ever-more prosperous country. It's likely the dollar will trend steadily upwards over time.

Despite that, some political parties are promoting policies which they say would reduce the value of the dollar. They are quite entitled to point out that a falling dollar would mean a short-term shot-in-the-arm for exporters. I'm quite entitled to point out that New Zealand had a falling dollar throughout the 1980s and through to 1992. Through that time, some exporters did well and some did badly. And since 1992, when the dollar has been rising, again, some exporters have done badly and some have done well. The dairy industry is the best known of those to do well, with dairy farmers receiving a 23% increase in revenue this year - a record payout. Whatever short-term shot-in-the-arm a falling dollar would give you and me, as exporters, it is hardly credible to say that the value of the dollar is the most important factor - or even a major factor at all - in the long-term success of an export industry. Marketing simply dwarfs the importance of the dollar.

The second most popular political party in New Zealand says it would abandon the 0-2% inflation target and instead keep inflation below that of our trading partners. There would be major difficulties in implementing that policy because we don't know in advance what the inflation rates of our trading partners will be. There is also a further difficulty in that the most recent figures I have show that Japan had an inflation rate of -0.5%. It is difficult to imagine the extreme monetary policy which would be needed to keep our inflation below that. Even if you trade-weight the inflation rates of our major trading partners, they have about the same inflation as we do now. New Zealand First's own policy means it is not in a position to seriously argue that it would relax monetary policy.

The same is true with the Labour Party. It says it would allow inflation of between -1% and 3%. If that really is its intention, it too cannot say it would be in a position to relax monetary policy.

What I believe is frightening for all businesspeople is that these parties also promise extra spending above the increases provided for in this year's Budget. In other words, they would maintain low inflation targets while increasing Government spending. All borrowers know what happens when a Government tries to keep inflation low while spending up large on social policy. We pay higher interest rates.

I find it difficult to attack some of what the previous Labour Government did in opening up the economy. But I have no difficulty attacking them for their over-reliance on monetary policy to control inflation. Under the previous Government, overnight interest rates passed 100%, while 90 Day Bank Bills went over 25%.

In contrast, interest rates remain far lower under this Government, despite the current political uncertainty. And that is simply because we do not over-rely on monetary policy to control inflation. We back it up with sensible fiscal policy. Throw away that sensible fiscal policy, while still seeking price stability, and you'll be left with nothing but monetary policy to control inflation. Interest rates will go through the roof.

These things you might like to consider as voters. As businesspeople, you need to assess the likelihood of it happening.

Nothing is surer than that this election will be very, very close. I think you will find that New Zealand First's support will slip in the lead up to the election as people come to see that party as a risk not worth taking, and its leader a loose cannon. But it is unlikely that any one party will be able to govern without the support of others. And no party appears to have an obvious coalition partner.

It is difficult to predict the shape of the Government that will emerge some time after 12 October. But there will have to be some form of Government. And I believe there will be sufficient MPs in parliament after the election who will have the common sense not to throw away the gains New Zealand has made over recent years; MPs who don't want to risk much higher interest rates for all borrowers; MPs who will form or support a National-led Government.

Those are my thoughts on where we are heading. I think there's a good chance we can look forward to stability on the political front. That means we can look forward to stability on the economic front. Along with yesterday's commodity levy order, that will enable summerfruit growers to plan with confidence into the next season and beyond.

Thank you for your invitation to be here today. I wish you all the very best - particularly cherry growers, after this year's disaster - and I look forward to addressing you again next year as Minister of Agriculture.