Speech to the Human Resources Institute of New Zealand

I thank Jane Speirs for inviting me to address you this morning. I would also like to acknowledge the President of the Auckland branch of the Human Resources Institute of New Zealand, Julia Stones.

Human Resources are at the heart of New Zealand's ability to grow our economy and lift our standard of living.

In comparison with other countries, we are not over-endowed with natural resources, although we certainly want to make the best use of those we have got. We are not large enough to have a critical mass in many global industries, although we do have world-leading expertise, ideas and niche capabilities.

We do have people. Allowing and encouraging people to make the most of their skills and ideas is the way to our future prosperity.

Toady I want to give you a taste of what we will be doing in the Research, Science and Technology area to unlock and expand our human resources.

Last week, the Prime Minister set out his agenda for 2010. He noted that last year had been difficult. New Zealand was not immune from the global recession that was battering every nation. However, we had come through in better shape than many. 2009 was a year of consolidation. This year, the priority is  the economy.

The Prime Minister emphasised science and innovation as the key to our future prosperity. He used the examples of Weta Digital, Icebreaker, Zespri and Fonterra as innovative companies that have grown through the application of ideas.

He did not pick these companies at random. Each in its own way highlights how success can be attained.

The success of the movie Avatar has confirmed Weta Digital as the world leader in its field. It has got to this point by intensive research and development. Last year, we announced a very substantial TechNZ grant to Weta Digital of $5.8 million.

This was more than matched by Weta themselves in committing over $13 million to future research. They know they cannot rest on their laurels. Avatar 2 or whatever the next benchmark is will be as groundbreaking is the current one, just as Avatar pushed the state of the art well beyond that of Lord of the Rings. To maintain its competitive edge, Weta needs to keep innovating.

The other lesson of Weta Digital is the need for scale. You cannot be a world leader with a few people working in a couple of sheds. Over 900 people at Weta Digital worked on Avatar. Yes, the Government supported them through the Large Films grant and we more than recovered that money through taxes, GST and the impact that that workforce had on the economy.

Zespri is another example of how we can keep our competitive edge. Most countries can grow kiwifruit. What they cannot do is develop new varieties that can be brought into production quickly and are what the market is willing to pay a premium for. Kiwi Gold has been a big success. Zespri is now hard at work on its successor. The aim is quality over quantity. Again, the Government, through the TechNZ scheme, has granted $15 million over seven years to co-fund the development of future cultivars.

And finally, he mentioned Fonterra. This one company is responsible for around 30% of our total export revenue. From a basic resource of high-quality milk protein, it has developed a huge range of products tailored to many different markets. Constant product development is needed to keep at the forefront.

Fonterra is a giant by New Zealand standards. It has to be nimble and innovative to compete with the huge food giants.

The common denominator in each of these countries is that they have been research-intensive. They have used brains, not brawn, to establish their place in the market. We need more companies like these. New Zealand's future will be determined not by how big we are, but by how smart we are.

If research and innovation is the answer, what are we doing about it?

The first thing we had to confront was how to ensure that we get the most out of every research dollar. Last year, I undertook a series of initiatives to boost research.

The first thing we did was fulfil our election commitments. We increased Vote R+D. We put $9 million more into the Marsden Fund for fundamental research. We boosted the Health Research Council funding by $8 million. We also added $10 million to the Crown Research Institute (CRI) Capability Fund.

That was just the beginning. We appointed Sir Peter Gluckman as the country's first Chief Science Advisor. His input has been invaluable. He has brought a sharp focus and clarity to where science fits into the bigger picture, and how we can build science capability.

Given the overall economic situation we found ourselves in upon taking office, I believe this has set a solid platform for reforms in 2010.

Today I want to update you on my priorities for 2010. How will I give effect to the Prime Minister's vision, and advance the agenda I have set out?

Last year, I established a CRI Taskforce, chaired by Neville Jordan, the Wellington-based science entrepreneur. A lot of our scientific knowledge resides in our eight CRIs. They are a vital resource for business, and for the nation.

The problems for CRIs are two-fold. First, the current funding system results in duplication and fragmentation. It is too short-term focused. Therefore, it does not encourage collaboration. It also can inhibit the flow of research into the broader economy.

Second, over time the CRIs have lost clarity of purpose. They are encouraged to think short-term rather than long-term. We need them to become more sharply focused on what their core missions are and how they can help New Zealand tackle its most pressing priorities.

The taskforce has looked carefully at the functions, operations, governance and funding of CRIs. They have consulted widely. They have completed their report, which will be considered by Cabinet and released shortly. I don't want to pre-empt their report, but I can tell you that they have come up with a comprehensive list of recommendations, and we will be acting on many them over the next few months. What we will see is the most comprehensive package of improvements in the CRI structure since they were introduced back in 1992.

Part of the CRI work will greatly improve the ability of CRIs to get their science put to use by businesses. We will also look at ways that will encourage firms to interact with CRIs and harness the knowledge they have.

CRI's are not the only large-scale repository of scientific expertise. Universities also have a major role to play - not only in fundamental science but also in applied research. We are pleased with the work being done by uiversity commercialisation offices, and will be supporting that further. We will also be ensuring that businesses large and small know what scientific capabilities are on offer, and how they can access the science system.

These measures will be significant. But the major part of the programme will be supporting businesses to grow through innovation.

Twenty years ago, people would have laughed if you had told them that half of the world's top-grossing movies would be made in New Zealand, and relied on New Zealand expertise and flair. What could a nation of sheep bring to Hollywood?

In less than a generation, we have gone from zero to hero in the digital media game. It is a story that is scarcely believable. Of course it has been spearheaded by geniuses such as Sir Peter Jackson and Richard Taylor. Alongside them have been thousands of other talented people - not so well known to the public maybe, but giants in their profession.

Of course this has been helped by huge investment from movie moguls such as NewLine and Fox. What a turn-up for New Zealand, to have literally billions of overseas dollars flooding into the country, developing sophisticated technology. This filters into the wider economy. There is no environmental downside, only a colossal economic upside!

I defy any New Zealander who has seen Avatar not to have a little glow of pride to think that we did that. We believe that through judicious support and encouragement, we can replicate that story in other sectors.

There is one big lesson. 'Wellywood', spearheaded by Weta, has made what the market wants. People all over the world have flocked to see what they have made. Science made it real, but the market made it possible. When it comes to economic growth, we need to innovate around what people want. Science is not just for science's sake, it is to improve people's lives, whether it is through a better movie or a life-saving medical intervention.

New Zealand has become a world leader in niche areas of medical products. Twenty years ago, who would have thought that Fisher and Paykel Healthcare would be one of our largest manufacturers? It's been a long road from kitchen appliances to hi-tech health products, but the spin-off from the appliance company will soon eclipse its past.

Government could not have predicted those triumphs - or many others. What we can do is provide relevant assistance when the market has picked them as winners. There will be a major shift in business support - I can't give you details, but I can say that anyone who has research capability, bright ideas, and a market that is ready and waiting should listen very carefully come Budget time.

The last theme I talked about was simplifying the system. This is already under way. The Foundation of Research, Science and Technology has already streamlined and simplified many funding processes.

The CRI Taskforce has pointed the way to further simplification. We want scientists doing science, not filling out forms. And we want businesses to be able to access research and development support with a minimum of fuss. We will judge them on what they can do, not how many boxes they can tick.

There is one other thing that I want to talk to you about today. I have saved it till last, because it is a subject that is close to your hearts. That is people.

I have referred to our science ‘system'. The reality is that the system is nothing without the talented people that come up with the ideas and undertake the research. We want to train, attract and retain top science talent to keep our competitive edge.

New Zealand has over 24,000 people involved in research and development. Three-quarters of these are actual researchers. Over half work in universities. CRIs and other Government agencies employ around 3,400. The balance, of over 8,000, work in the private sector.

We are moving into a time of change. That can be difficult, as people who are potentially affected are uncertain about their positions or their prospects. Scientists are by nature curious, questioning, and analytical. They are often very focused on their particular work, to which they have a high level of individual commitment. The prospect of change can be unsettling.

My message is that the RS&T community can be very positive about the future. The changes we are proposing to the research system will directly benefit our scientists.

If they are working on science that is of direct importance to New Zealand, they will have a greater sense of mission, and more certainty about the funding environment. Those who are working in the commercial science space will have more opportunities for support. The flow of information and people between the science and business sectors will be made easier.

Already, we have taken measures that support our people involved in research. I referred earlier to the substantial increases in Marsden and HRC funding. We know that those funds are used to support science teams, primarily in universities. The objective is pushing scientific boundaries. It's science for tomorrow, not for today. 

We are also looking carefully at PBRF, to make sure that it is sending the right signals. In particular, we want to encourage institutions to attract and keep the very brightest researchers.

One measure of the quality of our scientists is the ease with which they can find employment overseas. Sometimes this migration can be seen as a loss to New Zealand.

However, overseas experience provides a useful - and some would argue necessary - means of gaining direct experience of international developments and techniques, and of generating valuable personal networks that can facilitate international connectivity on return to New Zealand.

It is important not to be complacent. New Zealand is not the only country seeing significant potential within the biological industries or high value-added manufacturing and services. Governments the world over see research as a driver of innovation and economic growth.

This means that there is a world-wide scramble for talent, made all the more competitive because many countries see the emerging opportunities in the same areas.

It is not enough for New Zealand to be a nice place to live. We need a stimulating research environment with conditions and facilities that are world class. We need businesses hungry for talent, and able to offer attractive packages for the people they want. We want people who have choices to perceive New Zealand as a place where they will be personally welcomed and professionally extended.

This is an exciting time for Research, Science and Technology. This Government is serious about harnessing our intellectual horsepower to drive economic growth. It is serious about using research and science to underpin our place in the wider world.

We have some fantastic stories to tell already, from film to food and beyond. My ambition is that we write further chapters in the New Zealand book of business endeavour. The steps we have already taken are just a start. This year will see a step up in science policy. I have given you a foretaste of what is to come. We have the talent, we have the capability and we have the desire to do better.