Year in review - 1998

YEAR IN REVIEW 1998

Policies and Progress

Prime Minister Jenny Shipley

9 December 1998

Today, this minority National Government publishes its first Budget Policy Statement setting economic and fiscal parameters for the next 12 months, and an economic and fiscal update forecasting the nation's prospects to 2002.

It is one year this month since I took office as Prime Minister. Notwithstanding the mythology that this minority Government is drifting, this has been 12 months of very solid achievement. The future is, moreover, built on the past.

This document therefore provides, alongside the December Economic and Fiscal Update and Budget Policy Statement, a brief A-Z summary of the progress during 1998, under 56 policy headings, as a ready reference for those interested in tracking the Government's achievement.

Competition Policy

ACC
Government is introducing competition into the delivery of workplace accident insurance. This will permit employers to have a choice among insurance providers.
Employer choice is expected to place providers under competitive pressure, improve workplace accident compensation management, reduce rehabilitation costs, and increase the focus on workplace accident prevention.

A Select Committee considering draft legislation reported back on 30 November. The Government is aiming for implementation from 1 July 1999.

Animal Products Act
The Government is introducing a new Animal Products Act designed to tighten hygiene standards, safeguard meat sales overseas and, at the same time, retain the existing rights of farmers and hunters to butcher their own meat.
The new Bill, intended to replace the Meat Act 1981, will also improve the management of the risks surrounding the home-kill service industry.

APEC preparation
The Asia-Pacific region takes 70% of New Zealand’s exports, and plays a critical role in this country’s future. The development of objectives for the period of New Zealand’s APEC chairmanship next year is well advanced.
New Zealand’s objectives include a reduction of barriers to trade and investment in the Asia-Pacific area, and using APEC to assist a restoration of growth and confidence in the economies of the region.

The Government is also well under way with preparations to host the APEC leaders’ meeting in Auckland next year. An Infometrics study has put the net gain to New Zealand gross domestic product as a result of 7500 guests attending the conference at $27 million.

The intense international media focus on New Zealand during this meeting offers a unique opportunity to highlight the country’s business expertise and showcase its tourist attractions.

ARST
Negotiations with the Auckland Regional Services Trust and Auckland local authorities have resulted in landmark legislation transforming the Trust into a new organisation now known as Infrastructure Auckland.
Infrastructure Auckland, with assets approximating $900 million under its control, will make grants to land and passenger transport and stormwater projects for the development of the infrastructure of the Auckland region and the benefit of its communities.

Asset sales
During the year, the Government has sold its shareholdings in Auckland International Airport, Wellington International Airport, and several smaller regional airports.
The Government also floated Capital Properties New Zealand Ltd, comprising nine properties formerly included in the Government Property Services Ltd portfolio.

The proceeds from those sales, which totalled over $650 million, were used to reduce public debt. Asset sales also reduce the commercial risk borne by the taxpayer, and can help to improve efficiency and competitiveness.

The Government has also decided to offer Contact Energy for sale on the basis of a 60% public float with a 40% cornerstone holding. Commercial advisors are likely to be appointed by Christmas with a view to sale by the middle of 1999. This would be the third biggest float in New Zealand history.

During the year, the Government also offered Solid Energy, formerly CoalCorp, for sale but the bids received did not at this stage represent adequate value for the taxpayer, and the Government decided not to proceed.

Business development programme
Government has completed policy decisions to permit a wider range of business development providers in towns and cities throughout New Zealand. The new programme will direct funding towards small companies in a form designed to improve management skills and enhance their competitiveness.

Electricity reforms
Government has passed legislation for the splitting of electricity line and energy businesses. Many consumers, domestic and industrial, are already being offered significant price benefits from the resultant increase in competition.
Reductions offered to some consumers range as high as 15%, improving disposable incomes, business profitability and international competitiveness.

The Government has also announced that competition will be stimulated in the electricity generation sector by splitting ECNZ into three separate units, and offering Contact Energy for sale to create additional private sector competition.

These decisions are expected to deliver additional efficiency gains and further price reductions at the wholesale level of the electricity market.

Immigration
This year the Government has changed its immigration policies to increase the number of highly skilled immigrants to New Zealand.
English language qualification requirements have been altered to make it easier for immigrants to settle here and learn English in New Zealand. Visa arrangements have been simplified to encourage more tourists and business people to visit from Latin America.

The changes are designed to lift our skill level and stimulate economic growth.

Border management
Cabinet has decided to implement cost recovery policies for New Zealand’s border control operations. A discussion document has been commissioned to examine implementation issues.
Border protection using a multiplicity of agencies is expensive. Service improvements and cost savings may be available from a single combined agency. Terms of reference have been prepared and an independent review will begin early in 1999 on ways to improve the efficiency and effectiveness of border control arrangements including consideration of a single border agency.

Continental Shelf Project
In the last two months, the scoping phase of the Continental Shelf Project has been completed. It recommends a 5-year programme to survey the outer boundary of New Zealand’s ocean claim under the UN Law of the Sea.

Open skies access
Nine very liberal air services agreements have been concluded during 1998 with countries including Chile, Denmark, Norway, Sweden, Germany and Belgium, increasing New Zealand’s world tourism and trade opportunities.

Parallel importing
The Budget decision to allow parallel importing has brought down the price of many consumer goods and reduced the cost of inputs to business.
The Government supports and endorses the protection afforded by international law to the originators of ideas and merchandise, but does not think the State should intervene selectively on behalf of distributors. Imports of good quality branded goods are likely now to be available at significantly cheaper prices, especially for end-of-run goods and superseded models or styles.

Postal deregulation
Postal deregulation has allowed further competition to develop in the postal market. Business and domestic customers have new choices about who they want to deliver their mail. The cost of domestic mail has already begun to come down in specific instances.

Producer boards
During the 1990s, the Government has implemented a raft of measures creating a world-class policy framework for successful primary industries.
Those measures include the Employment Contracts Act, reforms to accident compensation, major efficiency gains in the electricity industry, the modernisation of telecommunications, a programme for the complete elimination of tariffs, the Reserve Bank Act, port reform, major funding for public-good scientific research, setting meat inspection services on a modern commercial footing, and the establishment of food safety standards which benchmark and exceed the highest requirements of customer countries.

Agricultural commodity prices have, however, declined by 38% in real terms since 1980. Real export prices for dairy products are down 32% since 1960. Real export prices for meat have tumbled 50% and wool 70% in that period. Many areas have switched into forestry, but their trees remain many years yet from harvest.

The Government therefore wants to be assured that primary producer industry boards are examining every available means of improving the future for farming families and rural communities.

Nine agricultural industries covered by producer board legislation were asked to put forward strategic plans to meet the challenges of the international and domestic marketplace. The plans were submitted to Government on November 15 and are now under consideration.

The Government regards improved access for primary products to major markets including the US, EC and Japan is a key element in any future improvement of the rural future.

Concerns in some of those countries about state-sanctioned monopoly marketing of primary products require serious consideration by the Government, producer boards and all rural people.

Rating powers review
The Government in September released the terms of reference for the review of local government’s rating powers. The aim is to bring the funding powers of local authorities into better alignment with their responsibilities and functions. The objectives of the review are to create greater transparency and fairer targeting of costs. The changes will increase efficiency, and ensure that the impact of local government on local communities is more even-handed.
The Government will work closely with local government officials during the review. Discussion papers are to go out late this year or in the early part of 1999.

Resource Management Act review
A wide-ranging public consultation process is being completed on the substance and implementation issues of the Resource Management Act.
Changes under consideration should speed up the consent process and lower costs. They should also generate more certainty about the rules surrounding building and subdivision, while preserving environmental quality. Amending legislation will be considered early in 1999.

Better Roads
The Government has completed development work on its Better Roads proposal, and has released full details to the public to give new local body councillors throughout New Zealand a chance to understand the proposal and provide feed-back, before final decisions are taken.
The proposal aims at better quality investment in roads, reduced congestion, a fairer method of paying for roads, and better environmental outcomes.

Elimination of tariffs
The removal of tariffs on motor vehicles has cut $3000 to $6000 off the price of new cars. The overall reduction in tax revenue as a result of the removal of vehicle tariffs is estimated at $177 million for 1998 year. This fall in new car prices has also helped bring down the price of second-hand cars.
Decisions taken recently on the general tariff review have given certainty to employers and employees and will allow New Zealand to phase out all tariffs by the year 2006, well within our APEC deadline of 2010. They will reduce costs by $154 million in 2001-02, the first full year of the new reduction process.

Tariff reductions are therefore offering opportunities to choose among a wider range of goods, and to purchase them at substantially lower pric

es.

Tax cuts
The third and final round of the 1996 Tax Cuts and Social Policy Programme was implemented in July 1998. In total, more than $3 billion a year has been returned to the public in tax reductions and increases in family assistance.
The changes, which included a new Independent Family Tax Credit for low and middle income working families, have significantly improved the disposable incomes of families in that category. A one-earner household on $25,000 with two dependent children is, for example, better off in cash terms by $61 a week.

The programme also made important changes in abatement rates to improve the rewards of beneficiaries for working part-time. A sole parent on the DPB with two children, earning $180 a week part-time, is for example better off by $62 a week as a result of these changes.

Tax simplification
The Government has streamlined the tax system. The resultant simplification means that 1.2 million wage and salary earners will no longer have to fill in tax returns, a major saving of effort and cost for them and the administration.

Tourism initiatives
The tourism industry earns $4.3 billion a year in foreign exchange for New Zealand, equivalent to 14% of the nation’s total foreign exchange earnings. Government has committed an additional $12.5 million to offshore tourism promotion to boost the numbers of people considering coming to New Zealand. This should help stimulate the economy as it comes out of the current downturn.
Government is particularly targeting markets which have held up well during the Asian economic crisis. Notwithstanding a decline of 5% in tourist arrivals, tourist earnings fell by only 2% this year. That illustrates the value of the Government’s strategy focus on US and EC visitors.

Year 2000 computer compliance
Government set up a Y2K Taskforce to report on IT problems associated with the Year 2000.
Acting on a key recommendation from that Taskforce, the Government has established a Y2K Readiness Commission to ensure that critical New Zealand economic and social infrastructure components are able to manage the transition from this century to the next.

The Y2K Readiness Commission will increase the understanding of what is required to manage Year 2000 compliance through promotion to key sectors, assist co-ordination efforts within sectors, encourage the sharing of information on Y2K preparedness and report to Ministers on progress in addressing the Y2K problem.

Maori Issues

The Government has made notable progress during the year on Treaty Settlements and policies to improve outcomes for Maori.
Customary fishing regulations

After significant analysis and negotiations with Maori and other fishing interests customary fishing regulations in both the North and South Islands have been completed, and are now being implemented. Iwi are working with MAF on the preparation of training materials to assist that process.

Maori language and broadcasting
The broad framework for a Government strategy on public sector responsibility for enhancing the status and use of Maori language has been approved. Development of the strategy is expected to be completed in the first half of next year.
The Government is also near completing its Maori television policy for the promotion of Maori language. It has consulted the many sectional interests associated with the issue to ensure that their views have been taken into account.

Ministers expect that a trust will be established without undue delay, based on further discussions late this year or early next year. Consultation with Maori broadcasters and other interested parties in July of this year indicated that no changes are required to the present structure or funding of the Government's Maori radio policy. As a result of the hui, criteria for assessing licence applications have been clarified.

Frequencies are reserved for Maori radio to meet the Crown's Treaty and legal obligations in respect of the Maori language.

Rural and Maori housing initiatives
Government recently released a series of important Maori housing initiatives under the Policies for Progress programme. They are designed to help low-income rural Maori families buy their own home. They are expected to increase home ownership significantly among that target group in rural areas.
The housing package includes:

• Improvements in the Low Deposit Rural Lending Programme;
• The introduction of Group Self-Build Housing;
• The development of partnerships between iwi groups and Government housing agencies.

The Rural Lending Programme will be expanded from Northland and the East Coast into the Eastern Bay of Plenty and Wairoa.
It includes a seven-year fixed interest rate of no more than 7.95 per cent, and reduces the required deposit from 5 per cent to 3 per cent.

Ngai Tahu Settlement
Agreement was achieved late last year for the comprehensive settlement of all of the Ngai Tahu historical claim, which included this country’s largest land claim.
The Ngai Tahu settlement, worth $170 million, became final with the passage of the settlement legislation in September 1998.

It will benefit a total of 29,000 Ngai Tahu people through, for example, social and cultural services, support for entrepreneurial activities and education grants and scholarships.

Ngati Turangitukua
In September this year, an agreed settlement was reached of all of Ngati Turangitukua’s historical claim on the Turangi township lands.
Measures were also confirmed to address all ancillary claims within the area. The settlement means memorials can be removed from the titles of SOE land in Turangi.

Fiscal Management

Sound fiscal management is a key Government commitment.
During the past year, as the global impact of the Asian economic downturn became more apparent, the Government took steps to moderate its short-term spending intentions and improve its medium-term fiscal position.
The Government regards it as a priority within a reasonable period of time to restore an appropriate fiscal buffer against any further future external shocks.

Decisions this year have reduced the previous Coalition Government’s $5 billion limit on new policy spending during the three-year term of the present Parliament by $750 million, and improve the fiscal track by more than $2 billion over the next 10 years.

The Government took a three-stage approach to the reinforcement of its operating balance as the international situation unfolded throughout the year:

• In its May 1998 Budget, the Government decided against proceeding with $300 million of the extra spending which had been foreshadowed in the December 1996 Coalition Agreement.
• In July 1998, a additional $300 million reduction was announced.
• In September 1998, the Government’s Policies for Progress package announced further measures. They included decisions to:
  • Continue moving NZ Superannuation in line with the Consumer Price Index rather than wages while it remains more than 60% of the average wage;
  • Establish a Superannuation 2000 task force to seek long-term sustainable solutions for publicly-funded retirement incomes;
  • Scope Contact Energy Ltd for potential sale.

In its December 1998 Budget Policy Statement, the Government announces that it will now limit spending on additional policy initiatives to a maximum of $600 million a year, a reduction of $200 million a year on the previously published technical assumptions.

Sustainable Environment

Policy initiatives on sustainable management of the environment during the past year include:

Climate change policy
The Government contributed to the Kyoto Conference on Climate change by successfully advocating control measures that most suit this country.
New Zealand will remain actively involved in these discussions in coming years, to ensure that this country is not disadvantaged in the development of global climate change policy.

Emergency Management
The new Ministry of Emergency Management and Civil Defence was established during the year. In conjunction with local authorities, it has been implementing new strategies for assessing and managing risks arising from natural and technological hazards.

Indigenous forests management
Good progress is being made on the South Island Landless Natives Act—SILNA—and the West Coast Accord to ensure that all indigenous timber production in New Zealand is on an ecologically sustainable basis.
The Government has been consulting people affected by these initiatives and a resolution should be reached during the early part of 1999.

Marine reserves
The Minister of Conservation and other interested parties are making good progress on the establishment of further marine reserves around the New Zealand coastline. This will ensure that representative sections of New Zealand’s coastline are protected for the enjoyment of future generations. It will also bring benefits to the commercial fishery, recreational fishers and divers.
Hauraki Gulf Marine Park
A bill to create the Hauraki Gulf Marine Park has been introduced and referred to a Select Committee. The Bill provides a framework for the needs of fisheries, conservation and resource management.

Social Assistance

Government undertook to introduce initiatives delivering effective high quality social assistance this year. They include:

EMPLOYMENT

Community Wage
Government has completed the legislation for and implementation of the Community Wage - the income support payment received by job seekers from the Government. This change is designed to ensure that all those who are out of work maintain contact with the labour force.

Work expectations for DPB
The Government has also made it clear that people receiving the DPB, as their youngest child reaches the age of six and their childcare responsibilities decrease, should begin actively to plan how they intend, over time, to re-establish their financial independence.

Work and Income New Zealand
The Government has completed the integration of three State services to create Work and Income New Zealand (WINZ) as a one-stop-shop for welfare and employment services. This will ensure people will receive co-ordinated assistance as they seek to find jobs.

Work capacity assessment
Government is trialling a process to assess the capacity of people to participate and contribute to the workforce regardless of which benefit they may be on.
In early 1999, an initial trial will be conducted in six sites. It will be voluntary and will involve a self- assessment process and an interview with trained independent assessors.

A subsequent trial, using the lessons learned from the first trial, will then commence towards the end of 1999. Where appropriate, it will include facilitative assistance to help people into employment if they have an assessed capacity to work for fifteen or more hours per week.

WELFARE

Benefit reform
Government has completed a significant number of areas of benefit reform. They include:

• Aligning the Sickness Benefit with the Community Wage;
• Clarifying the eligibility conditions for receipt of the Invalids Benefit;
• Tightening the Emergency Unemployment Benefit eligibility;
• Clarifying the Disability Allowance eligibility criteria;
• Altering the indexation of superannuation.

Code of Social Responsibility
The Government has made clear that it does not intend to develop a legislative Code of Social Responsibility. The Government has, however, advised that issues strongly recommended by New Zealanders in the feedback process will be fully investigated. The Government has agreed to evaluate ten key areas. They are:

1. Mandatory referral to budget advice after repeat applications for emergency income support;
2. Lowering the age at which children can be prosecuted for an offence, and giving Courts powers to make parents set curfews and/or attend parenting courses;
3. Exploring ways of facilitating adequate housing arrangements for extended families;
4. Improved targeting of Well-Child health provision to families with higher support needs;
5. Increasing parent education, skills and support services;
6. Earlier/better care-giving information, budgeting and life skills for teenagers in schools, including education on the implications and responsibilities of parenthood;
7. Encouraging health, education and welfare agencies to provide, as appropriate, information on ante-natal care, child health checks and dental care and similar services;
8. Extending early intervention and home-based visiting programmes, for example Family Start, “Wraparound”, Youth Aid, and truancy services etc.;
9. Promulgating good ideas, good practice, and successful local initiatives in health, education and welfare communication strategies;
10. Promoting the use of existing resource materials and information on shared parenting, and putting children’s interests first when parents separate.

Veterans
A wide-ranging epidemiological survey for the Inquiry into the Health of Veterans’ Children, intended to find out whether exposure of soldiers to Agent Orange and other chemical toxins has caused birth defects, cancer or other health effects in children, will be submitted to the Government later this month.
A further phase early next year is expected to review and recommend on policy options for medical assistance.

Youth initiatives
The newly established Prime Minister’s Youth Advisory Forum met for the first time in October 1998. Youth representatives made presentations to the Prime Minister on:

• How to stop young people from offending;
• Keeping kids at school;
• Alcohol and drugs;
• Student loans;
• Consistent approaches to ages.

The forum signalled that it wished to raise additional issues with the Ministers of Police and Education, both of whom will attend its next meeting. The Government is also implementing a youth services strategy aimed at rehabilitating and reintegrating young people with behaviours which are difficult to manage.

This includes the development of risk and needs assessment tools, improved case management, the establishment of special group homes, and associated training of specialist care-givers.

HEALTH

Geriatric rest home care
Government has completed a review and extended the threshold provisions of the Income and Asset Test to make them fairer. Thresholds have been increased for:

• Single people from $6500 to $15,000
• Married couples from $13,000 to $30,000
• Married couples with one partner in care, from $40,000 to $45,000.

Child health strategy
Government has completed the publication of this strategy and is well on the way to implementation. This is being overseen by a group of Ministers working closely with service providers in the wider community.

Child health strategy focuses on:

• Strengthening families;
• Co-ordinated delivery of services;
• Services based on best practice;
• Focus on prevention, early intervention and health promotion;
• Immunisation.

Additional funding has also been announced to support programmes delivering services to children who currently have difficulty in accessing services.

Mental health assessment
A Mental Health (Compulsory Assessment and Treatment) Bill has been introduced into the House and will be considered by a Select Committee. Its purpose is to tidy up the administrative arrangements around compulsory treatment. It addresses issues in existing legislation which have attracted widespread public comment.

Surgical booking system
A new booking system for non-urgent elective surgery is being introduced progressively throughout New Zealand. It is designed to ensure that people with the most urgent need get access to surgery first, and to clarify rights to elective surgery.
The system is underpinned by clinical guidelines and assessment processes which “score” the needs of patients. People in greatest need will then be given definite times for their surgery, instead of going on a waiting list which gives no certainty about whether or when surgery may be provided.

The new system has been implemented across 70% of specialities in hospital and health services. People on the old waiting lists are being reassessed progressively to determine their level of need for surgery. The system will clarify the rights people have to elective surgery.

Hospital changes
Hospitals are no longer called Crown Health Enterprises. They now operate as “Hospital and Health Services”, on a not-for-profit basis, and focus on delivering quality health services to the community.

Hospital Plan
The Government’s Hospital Plan defines future directions for the provision of hospital services in New Zealand. Those directions include:

• Need to maintain access to services
• Emergency service coverage systems
• Increasing technology and specialisation.

The Hospital Plan is designed to provide certainty of access to services. The plan designates current hospital services in respect of level of speciality, e.g. tertiary services, secondary services, sub-acute services and health centres.

Rural health policy
The Minister of Health has recently released a rural health policy statement describing the range of services designed specially for rural people.
This consultation document, designed to elicit feedback, is due for finalisation in February, in the light of public comment.

Services include for example:

• A community trust assistance scheme, to help local communities develop their own hospital facilities
• Incentives for GPs to practice in rural areas
• Rural nurse practice schemes.

EDUCATION

Fully funded option for schools
Government has completed the policy programme for this option and has offered schools the opportunity to enter this programme at a rate and time that they see fit.
More than 600 schools now have responsibility for managing their total school budgets, almost double the number since the new Fully Funded Option was introduced. The fully funded option gives schools and local communities the flexibility to use resources to meet their needs.

Literacy, numeracy, assessment
Government, as part of the Policies for Progress Initiative, has recently announced a significant initiative to ensure that all children at age nine will have adequate skills in literacy and numeracy.
$20 million will be spent over three years to help schools, teachers and students access support to lift maths, reading and writing success. A new national assessment system in primary schools is being developed, and will be implemented in the year 2000.

16-19 year-olds’ qualifications
Government has announced a new framework for 16-19 year olds’ qualifications ensuring students have relevant and useful qualifications when they leave secondary school.

Student loan scheme review
The student loan scheme has been reviewed. A number of new initiatives to reduce student debt and to limit access to loans for non-educational purposes have been introduced.

Special Education 2000
Government is near completing the policy and implementation procedures for its Special Education 2000 programme. It is being phased in and fine-tuned as it is put in place to ensure every child with special education needs gets the support they need now and in the future.
Up to $200 million new funding has been committed in last year’s Budget for the next three years.

IT strategy review
An IT strategy for schools was launched in October. This strategy provides for infrastructure to assist schools use IT and professional development for teachers and principals.

Tertiary education reforms
The Tertiary Education White Paper was released in November. The White Paper includes a new universal student tuition allowance which will fund all students enrolled in recognised courses. It will reshape the tertiary sector for the 21st century, including quality assurance, research and improved governance arrangements.

Strengthening families
The Government’s Strengthening Families strategy is designed to improve the health, education and welfare outcomes of children in disadvantaged families. The Government has this year agreed to pilot a new initiative, Family Start. This programme will provide a focused, home based, early intervention service to families through a family worker who will work alongside the family for up to five years.

The family worker will assess the family’s needs and help with things such as parenting skills, money management, making sure the family’s housing is right for them and help with getting access to other services. Family Start pilots in West Auckland, Rotorua and Whangarei are being established.

There will also be an expansion of a similar programme, Early Start, in Christchurch.

In addition, the Ministers of Social Services, Health and Education have extended nationwide a model of local co-ordination between a wide range of Government services and non-governmental agencies working to improve the outcomes for disadvantaged families.

Conclusion

The Government expects that the December Economic and Fiscal Update and the Budget Policy Statement will continue to be published together in the future, in December, near the end of the calendar year.

It may make sense in that context to continue the practice initiated in this summary of progress during the year just concluded, to provide a brief overview of policy developments for the media and the general public.

The establishment of published strategic priorities will, in future years, permit that progress to be monitored annually against explicit objectives.

During 1998, the Government has maintained a high rate of economic and social policy progress, despite an international backdrop of uncertainty about world growth, and a challenging political environment.

New policies implemented by the Government during the year will significantly improve the allocation of national resources and the international competitiveness of the New Zealand economy.

Continuous gains in those areas are central to the improvement of the incomes of all New Zealanders in the 21st century, and to the creation of the jobs required to employ our people in the future.

The Government's tax reductions and social assistance policies have consistently targeted those in greatest need, offering immediate help and improved incentives to recover, over time, where practicable, their independence.