Business New Zealand, Corporate and Affiliated Industry GroupEconomic and Regional Development
Business New Zealand
Corporate Affairs and Affiliated Industry Group
Hunter Street, Wellington
Thank you very much for inviting me today.
And thank you for the relationship with Government, the willingness to share your perspectives, and the hugely valuable contribution the business community makes to New Zealand’s economic well-being.
I am sure you have heard the word many times. Last year was unprecedented. It required an unprecedented health and economic response and has required significant Government investment here and around the world to support businesses and protect jobs.
I would like to acknowledge the work BusinessNZ and its members have done over the past 12 months in helping our businesses and communities through the pandemic. Our collective response to this event is something that I think we should all be very proud of. So thank you.
In New Zealand, our careful economic management prior to COVID-19 meant we were in one of the strongest positions in the world to invest to cushion the blow and position the economy for recovery. Already we have seen employment, export and growth numbers that are better than expected.
And the Budget Policy Statement that was released yesterday further details the priorities for Budget 2021 and the 2021 Wellbeing Objectives.
Latest economic data
As we saw last week, the latest data from Stats NZ shows the recovering economy is continuing to add jobs, led by a record high for jobs in construction with over 21,000 annually being added.
In total employment rose by 17,000 in the December 2020 quarter, up 0.6 percent on the previous September quarter and very pleasingly women made up 10,000 of the increase in the last three months of the year.
While the unemployment rate fell from 5.3 percent to 4.9 percent. This compares with 6.8 percent in Australia and the United States, and 8.7 percent in Canada. The OECD average is 6.9 percent.
But the latest statistics do also show that annual wage inflation is slowing as fewer employees receive wage increases, and that over the past year, more than half (55%) of the positions surveyed received no wage increase.
New Zealand’s economic recovery is also reflected in the Government’s books which are again in better shape than forecast.
The Crown Accounts for the five months to the end of November 2020 were more favourable than forecast in the Half-year Economic and Fiscal Update (HYEFU).
The Operating Balance before Gains and Losses (OBEGAL) deficit at $4.3 billion was $1.9 billion better than that forecast in HYEFU, partly due to tax revenue coming in $0.7 billion above forecast, with GST revenue $0.4 billion above forecast
And we also saw a record 11,291 new homes consented in the December 2020 quarter
But we can’t rest on our laurels. New Zealand’s response to COVID would be insufficient if it were to simply return us to the way we were before the virus.
Through this term, this Government is keen to do three things:
- keep NZ safe from COVID,
- accelerating the economic recovery to support jobs and businesses.
- Laying the foundations for the future, such as our climate change and infrastructure work
Keeping New Zealanders Safe from COVID-19
The first objective of the Government will be to keep New Zealanders safe from COVID. In keeping New Zealanders safe, we protect jobs, livelihoods, and strengthen our economy. A strong health response has given the New Zealand economy the best chance at coming back stronger.
The Government remains committed to a strategy of elimination, but will always remain open to evolving ways of achieving it.
The first layer of defence is our border. Testing, infection control procedures, and professional and quality staffing will remain cornerstones of the response. But as we have shown through the decision to reserve 10 percent of places in our managed isolation for people granted exceptions, we know we must continue to look to create opportunities for businesses to access the skills they need.
The Government absolutely supports Kiwi businesses’ enterprise and resilience, and we have been taking measures and implementing initiatives, including changes to various visa settings, to help that.
Yet COVID brings complications and processes that didn’t exist before the pandemic. It’s critical that we all follow those processes, give adequate time to ensure the requirements of those processes are met, and all play our part to make sure New Zealand avoids the worst effects of this pandemic
I am also aware that MBIE MIQ has, and will continue to, engage with businesses on how best to address concerns as part of the ongoing evolution of the MIQ system.
A further area that the Government continues to work with other Governments on is opportunities for freer travel. As portfolio Minister for Economic Development, Tourism and Small Business I obviously have a very keen interest in progressing these opportunities.
My ambition is that once global borders open, New Zealand is considered by the world’s most discerning travellers as one of the top places in the world to visit.
Accelerating the Recovery
The Government’s COVID recovery plan is already underway. It will now be accelerated as the plans for recovery set out in our election manifesto are implemented.
The New Zealand economy has held up better than expected. Aggressive action to eliminate the virus; strong and early efforts to save jobs and support businesses; and innovative and nimble responses from our businesses have positioned the economy well.
The ongoing impact of COVID on the global economy is the most significant risk to our future growth. The virus’ spread abroad will have a downstream impact on our exporters and impact economic activity domestically.
Governments 5 point economic plan
The key plank in how we can accelerate the recovery is through the Government’s five point economic plan. This revolves around the following 5 areas.
- Investing in our people.
- Creating jobs and improving productivity
- Preparing for the future
- Supporting small businesses and entrepreneurs
- Positioning New Zealand globally
Investing in our people
Supporting people to develop the skills and capabilities needed to realise their potential, succeed in the economy and adapt to change is also essential.
As you are all aware the skills and capabilities workers and businesses require in the future are likely to be different to that needed today. The Future of Work Tripartite Forum’s current priorities are: Industry Transformation Plans, support for displaced workers, in-work training, and better protection for contractors.
Particularly through my lead role on ITPs we will continue to ensure all ITPs have a focus on skills and ensuring a resilient and skilled workforce for the future. In this frame, each ITP is also seeking to develop skills initiatives that align with and leverage developments in the RoVE programme
As a member of the Forum Governance Group (with the Ministers of Finance and Education, Kirk Hope of BusinessNZ and Richard Wagstaff of the CTU), I am very much looking forward to continuing to work with Forum, to reflect priorities of the incoming Government.
We are also continuing to investigate how to leverage Government procurement to support broader outcomes and drive economic transformation. Government spends approximately $41 billion per year on Government purchases (13% of GDP), and there are several work streams aimed at implementing improvements to the Procurement system.
In my portfolios I am also keen to see opportunities to support Māori economic prosperity and the long-term wellbeing of Pasifika communities.
I am also keen to ensure that our immigration settings are optimising the use of migrant workers to supplement the domestic workforce where there is real need or advantage.
Migration policies that allow New Zealand firms to access low-cost foreign labour, while of short-term benefit to the individual business, are likely to inhibit the incentives to improve labour productivity through training and capital investment.
Conversely, immigration settings that target highly skilled workers and entrepreneurs can have positive spill-over benefits, including lifting labour productivity, attracting quality investment and helping support economic recovery.
Creating jobs and improving productivity and preparing for the future
Some of the factors contributing to our poor productivity performance include a small domestic market, geographic isolation, a lack of large firms competing internationally, shallow capital markets, lack of domestic competition, and lack of international connections.
These provide genuine challenges, but are not unique to New Zealand. Other small advanced economies have navigated similar challenges to deliver strong productivity growth and I believe New Zealand can do this as well.
At the sector level, we are continuing to implement our refreshed industry strategy through strategic partnerships with industries and workers to lift their productivity and support economic transformation.
Our refreshed Industry Strategy focusses on two core outcomes.
The first is that our path to success must be collaborative and partnership based as we work to drive change in our industries that face major transition challenges, whether it is tourism and export education post-Covid, decarbonisation in our energy sector, or overcoming entrenched productivity and workforce challenges in construction.
The second is supporting industries where New Zealand has a competitive advantage, to build clusters of highly productive firms that can take on global markets.
In this area we’ve prioritised three broad sectors for industry transformation plans (ITPs): advanced manufacturing, digital technologies, and food and fibre. The food and fibre sector includes work on the primary sector, food and beverage manufacturing, agritech, which we launched last year, and forestry and wood processing.
I must acknowledge here the constructive way that BusinessNZ and individual member organisations have engaged with government on our plans for individual sectors right across the economy.
This ranges from those in the Construction sector working on what is often referred to as the first ITP Construction Sector Accord and engaged with apprenticeships in this sector, to those in the primary sector engaged on the primary sector roadmap Fit For a Better World.
Thank you also to those actively engaged to support our tourism sector in its transition to a sustainable, low carbon, high skill and high wage industry
Tourism in New Zealand will never return to how it was before COVID-19 dramatically affected us.
New Zealanders expect a tourism sector that supports their communities and businesses.
We must attract high value and high spending visitors who buy into our own vision of sustainability.
We must therefore deliver high quality visitor experiences and exceed our visitors’ expectations.
No longer will New Zealand communities tolerate the worst of our freedom camping visitors, and nor should they.
We will also continue to investigate ways in which to improve our investment settings through incentives for investment in productive assets, improve access to finance and better investment delivery and management across Government and better access to information.
And in the forestry sector I’m focused on two key areas:
- the first is the encouragement of afforestation at scale that maximises the contribution of our forests to New Zealand’s social, cultural, environmental and economic wellbeing, and minimises possible downsides; and
- the second is the encouragement of a strong domestic processing sector to provide carbon neutral materials and energy to decarbonise the economy, generate skilled employment in our regions, and grow the value of our exports.
Getting this right will drive large scale afforestation on suitable marginal land with the ability to offset between a quarter and half of New Zealand’s gross emissions in 2050; and the development of a wood bioeconomy that is integral to a productive, sustainable and inclusive future.
And my Regional Economic Development priorities will ensure an evolution of our approach to ensure a more coherent and coordinated strategic framework, with a stronger focus on achieving collective impact by targeting and aligning investments.
Supporting small business and entrepreneurs
Specifically, in the Economic Development and Small business portfolios, we provided an extra $55 million for the Regional Business Partner network, to enable small businesses to utilise this money to obtain free expert advice to help them adapt and innovate to deal with the impact of COVID-19.
In 2021 I will be focussed on:
- Supporting the uptake of digital technology- The Small Business Digital Boost initiative supports small business owners to realise the benefits of digitising their business. This is done through:
- Digital Boost Spotlight Series showcasing small businesses that recently transformed their businesses by adopting digital tools and ways for working.
- Digital Boost Skills Training and Support building skills, confidence and trust to enable small businesses to realise the benefits of working digitally.
- Digital Boost Directory collecting digital tools, technologies, products and services into one depository for small businesses to pick and choose from.
- Investigating alternative sources of finance for small business
- Regulating Merchant Service Fees to support retailers
- Focus on making life easier for small businesses, including: implementing e-Invoicing; rolling out Business Connect; establishing a unit to minimise regulatory burdens; legislating for business to business prompt payment
I am also interested in how we might inspire more people to want to start and grow businesses as well as deepening the stock of entrepreneurial capital in New Zealand.
Positioning New Zealand globally
In addition to supporting small businesses locally, we announced $216 million to revitalise the international business sector.
One of the goals of this package is to significantly increase the number of exporters receiving intensive support from New Zealand Trade and Enterprise (NZTE).
This will provide access to tailored NZTE and NZ Inc. resources to connect with overseas markets and global partners. It will underpin business growth for 1400 firms, which currently provide over 200,000 jobs across the export sector.
More important is that this funding will boost NZTE’s reach locally with a suite of digital services and tools to help businesses. This will scale up NZTE’s digital and e-Commerce support to provide digital commerce content, tools and advice to more exporters.
Having access to expertise to support global moves is fundamental, and that is why we’ve ramped up NZTE’s team of business development managers in international markets. This is even more important while international travel remains restricted.
This team will carry out additional functions for companies in-market, such as meeting customers, vetting new employees, and selecting distributors.
Another goal is to strengthen New Zealand’s brand in priority markets by maintaining, promoting and broadening our national brand appeal. ‘Brand New Zealand’ is paramount.
We will continue to work on our reputation for safety, trust, resilience, ingenuity, innovation, sustainability and high-value goods and services through the highly successful New Zealand Story strategy and through the development of our sectoral ITPs which all have a strong focus on brand and story for each industry
Laying the foundations for a better future
Wellbeing continues to be a priority for Government this term with a focus on reducing child poverty, tackling climate change, and addressing housing.
As you will have seen from our response to the first set of Climate Budgets recommended by the Climate Change Commission, we will place a particular focus on sustainability, and pursuing carbon neutrality.
As the Commission has laid out, our climate change targets are achievable.
But action is needed across all sectors of the economy, with a particular focus on transport, agriculture and energy. There are also opportunities to reducing emissions whilst also creating new jobs, business and export opportunities, whilst also reducing a reduction in household energy bills.
I acknowledge BusinessNZ’s positive and considered response to the Commission’s Report and in particular the Sustainable Business Councils response to the report.
As you are aware, the Commission’s draft advice is open for consultation until 14 March and I understand the BusinessNZ Network will be running events with the Commission to give you a chance to hear directly from Chair Rod Carr, and representatives from the Commission's technical teams.
The shifts across the economy that we are looking for will not take place overnight. However, we are being deliberate about identifying them.
Much hard work lies ahead for government, for business, for families and communities. The pandemic will keep raging around the world. But we have a lot that is going right for us, here in New Zealand.
It can be said to be the year of the vaccine, and the year of recovery. At the heart of this economic recovery we will prioritise the wellbeing of people. We can both agree on that.
(Speech as delivered may differ slightly from text version)