Good morning and thank you for inviting me to speak today.

Amongst my portfolio responsibilities I must admit that the wine industry is perhaps the most enjoyable and one that I've always taken a close personal interest in!

I would like to acknowledge your Chairman Stuart Smith, your Deputy Chair Stephen Green, members of the Board and delegates.

First, I would like to congratulate you on the phenomenal growth gained by your industry over recent years. Your industry has seen average export growth of almost 24% per year for the past 20 years. When I entered Parliament in 1994, I recall annual wine exports being around $70 million. Today, to be looking at close to $1 billion in annual exports is an absolute credit to you all.

This is the type of growth that most other industries in New Zealand can only dream about and each and everyone of you deserves to be congratulated for the role you have played.

In April this year, I had the pleasure of speaking alongside Stuart in the Beehive at the launch of the New Zealand Institute of Economic Research wine industry report.

The report provided concrete evidence of this outstanding growth - the generation of $3.5 billion in revenue through direct and indirect sales, supporting 16,500 full time equivalent jobs as well as the invaluable contribution the wine industry makes to ‘brand New Zealand.'

Your industry's greatest achievement in my mind is your reputation in the international marketplace as a provider of premium branded wine. The value of this is almost impossible to quantify.

This growth has not been by chance - your focus on premium branding has been critical and is a great example to other primary sector industries.

However, the dark clouds of the economic recession continue to cast a shadow over world demand for our export products, and wine is not immune.

Your recent annual report makes for sobering reading, and it is clear that the last year has been characterised by increased competition and downward price pressures.

I am also aware, through MAF's monitoring of growers in Marlborough and Hawkes Bay that vineyard returns have dropped significantly over the last year.

While difficulties in overseas markets contribute, a more critical factor is that New Zealand's wine supply is showing growing pains, and for at least a year or two has produced in excess of demand.

Despite this stark assessment, I was encouraged to see wineries working closely with growers last season to constrain yields to levels that better matched market requirements.

For our part, the Government will continue to work hard to improve market access for all of our exports, and wine is no exception.

Let's look at India for example - a growing economy and massive population base, with a rapidly expanding middle class. It currently imposes a highly complex import duty and excise structure on wine, plus many additional state taxes.

A successful Free Trade Agreement with India would have obvious benefits for New Zealand wine exporters. We expect to begin negotiations later this year.

New Zealand has had key successes with other trading partners including China, Thailand, a combined agreement with ASEAN and Australia, and the Trans-Pacific Agreement with Chile, Brunei and Singapore.

Negotiations are also currently underway with South Korea and Hong Kong and we will continue to work closely with our two largest export markets - Australia and the European Union - in order to manage and enhance current trade access.

To this end, when I visited Brussels last month I raised the issue of a bilateral wine agreement with the EU Commissioner of Agriculture and received a favourable hearing.

International trade negotiations are critical but the Government is also taking practical steps now to help exporters through these difficult trading conditions.

Since the start of this year, short term trade guarantees underwritten by Treasury's Export Credit Office have provided a $150 million credit facility, to help facilitate companies exporting into difficult markets. I understand that many small to medium wineries have found this assistance invaluable.

Another crucial issue to the future of the primary sector is research and innovation.

That's why in this year's budget we announced an increase in funding for innovation through the Primary Growth Partnership (PGP).

Government will provide $190 million over four years. When fully operating in 2012/13, the partnership will see the Government investing $70 million annually in primary sector innovation.

The Government's commitment will be matched dollar-for-dollar by industry, leading to a total investment of up to $140 million a year.

This partnership is not about ‘business-as-usual' - rather it is clearly focused on supporting ambitious projects that offer real benefits for both industry and the wider economy.

The priorities and strategic direction of PGP will be determined by those industries that choose to be involved.

To this end, there is funding available for your industry and I hope that New Zealand Winegrowers will work with others in your field to make sure you are part of the Primary Growth Partnership.

The ball is in your court and I encourage you to take the opportunity.

While innovation is a critical component to growth, other inputs are just as important. It should come as no surprise to find water management high on this Government's agenda.

New Zealand currently irrigates 600,000 hectares. However, we have the potential to quadruple this irrigated area.

In winegrowing regions from Hawke's Bay to Wairarapa to Central Otago we are reaching the limits of water available for irrigation and this problem is unfortunately not limited to your industry. Water management is a critical area that we need to get right.

In fact I consider that water storage and allocation is one of the biggest issues facing the horticultural and agricultural sectors.

New Zealand is blessed with an abundance of rainfall and clean water. The problem is that it doesn't always fall in the right place at the right time.

This Government has signalled that we intend to address the country's infrastructure deficit. The National Infrastructure Advisory Board has been announced and amongst its six members is Dr Terry Heiler, former CEO of Irrigation New Zealand.

Terry is there for a reason. He is there to help me pound on relentlessly that the quickest productivity gains to be achieved in this country will be through expanding the areas that can be irrigated, and delivering more reliability to areas already irrigated.

Recent public comments by the Prime Minister and I should leave you in no doubt of this Government's absolute commitment to support increased development in water infrastructure.

While water is a critical input, greenhouse gas emissions are a critical output. One of the big challenges facing our primary sector in this area is the need to measure the carbon produced by our primary products.

That's why there has been considerable work going on right across the sector in evaluating greenhouse gas footprints - in recent months I have launched the carbon footprints of industries ranging from dairy to kiwifruit to pipfruit.

It gives me great pleasure today to acknowledge the work the New Zealand wine industry is doing in this area to meet the growing market demand for this information.

Over time, the whole of our primary sector will be greenhouse gas footprinted and this information will be made available internationally.

While the numbers are important, the main advantage of GHG footprinting is that it gives us the ability to identify, and then strip out, sources of emissions along the supply chain.

This focus on sustainability is one that your industry does very well through the ‘Sustainable Winegrowing NZ' initiative and should be congratulated for. As market demand for sustainable products increases, New Zealand wine will be well placed to successfully meet that challenge.

Of course advances in trade, innovation and emissions reduction are of little value to Kiwi winemakers if New Zealand's reputation for safe and reliable produce comes under threat.

That's why of my three portfolio areas, biosecurity is the most important. A major breach of biosecurity would affect the livelihood of every New Zealander.

We need to constantly review the way we do things at the border, and not complacently accept that what we have now is as good as we can deliver.

Later on today, our Prime Minister and the Australian PM will be announcing plans to facilitate easier travel across the Tasman. Of course this has implications for biosecurity. In fact, if biosecurity wasn't a consideration, you could almost make trans-Tasman travel a domestic experience.

MAF recently completed a trial at Auckland Airport, where we profiled and selected 15,000 travellers as extremely low risk. Having assumed they would carry no items of interest to us, we then subjected them to same level of scrutiny as everybody else.

Of the 15,000 passengers, just 32 (0.2%) of passengers carried goods that were discovered by our hard-working beagle dogs.

A further 19 (0.1%) had products discovered when their luggage was then x-rayed.

The point of this exercise was that out of 15,000 passengers, we put considerable resource into 14,949 passengers for little real gain.

What this shows is that we can do things better at the border. By targeting our resources to those we suspect are potentially more dangerous to New Zealand biosecurity, I'm positive we will actually get better outcomes and deliver lower risk at the border.

In conjunction with the Prime Minister's announcement this afternoon we will also be announcing a number of other measures that are designed to strengthen our border biosecurity, and deal to those that fail to accept their responsibilities as travellers to New Zealand.

All of these changes will deliver a better, smarter, and more efficient biosecurity system at our border

To conclude, there is no denying that despite the remarkable growth to date, New Zealand's wine industry faces a raft of challenges and a tough short-term outlook.

Being an industry of independent character, I know that resolution in the first instance rests foremost with you. I also believe that some of the initiatives I have outlined will assist in grappling with these issues in the coming years.

In closing, I would like to draw on comments made by international judges at a recent New Zealand wine award ceremony.

Of the land - they said that New Zealand has a great climate capable of producing distinctive styles which gives it an edge internationally.

Of the people - they described an industry that is dynamic and committed, full of youth and confidence.

Of the wines - they said they have a purity and refreshment about them, a natural acidity and a brightness of fruit, a vibrant and expressive fruit character.

I believe that as you continue to harness the energy of land and people, then wines of superb quality will remain the hallmark of your industry.

I wish you all the best for the remainder of the conference and hope that the success and growth of recent years remains with your industry for the future.