ISSUES OF MOMENTPrime Minister
It's been a wild 12 months since we last met.
New Zealand has suffered one of the most serious droughts in the last 50 years. Thankfully a moist, mild winter has followed in most regions.
The country has seen the tiger markets of Asia lose their confidence, though thankfully there are signs that New Zealand businesses are succeeding in doing business despite that.
The high dollar that so many of you were frustrated by last year has come down significantly and will inevitably be to the benefit of many producers. I am sure you are aware that a five per cent sustained drop in the currency is equivalent to a seven per cent increase in income at the farm gate, particularly if inflation remains stable and there's every sign that this will be the case.
Interest rates that have also been high and of frustration to farming families are showing steady signs of a downward track and are expected to continue.
Inflation remains under control and competition policy, even though it is controversial in the passing, is delivering real benefits to those in agriculture at either the farm or industry level.
International toll call charges, electricity charges, and the cost of fuel, are all seeing downward pressures and these trends are expected to continue.
Overall these sentiments are leading New Zealand producers and exporters into a phase of quiet, cautious optimism.
As I listen though to agricultural producers, there are three issues that seem to be on the minds of Federated Farmers' members more than most.
our economic prospects
and the future of Producer Boards
Firstly, the economy. It affects us all. People want to know what Government can do. This Government has a three pronged approach designed to respond to the economic uncertainty and turmoil in Asia but it will also stand New Zealand in good stead for sustained economic growth in the future.
The first response, and most important, is to let the economic structures and processes that have been developed over the last few years do their work.
This Government has spent years developing one of the best economic management systems in the world.
We have floated the exchange rate, which means that business judgements of people in the market can quickly determine how prices should move.
We have opened surveillance of our banking system, which means that the managers of the banks have the responsibility and the independence to adjust their commercial positions to keep bank balance sheets robust.
We have a flexible wage fixing system so that managers and their employees can establish sensible pay arrangements which can boost productivity and meet individual needs.
We have an independent Reserve Bank, which gives everybody the assurance that there will be a continual focus on keeping prices under control.
These major institutional arrangements are our key strength. Everybody here knows that New Zealand can never be so strong as to be immune from international pressure and market changes.
However, we can make sure that we are highly adaptable and responsive to changes in the world scene. We can already see the changes that are occurring in New Zealand as a result of the events of the last few months.
Exports to Asia have been reduced to many markets and that is understandable.
Encouragingly though exports to the US have increased strongly. This is partly through our improved competitiveness as a result of relative exchange rate moves, but also a result of the great flexibility of New Zealand business people, who are able to adapt quickly because they are working in a stable and sensible regulatory environment.
Our first key policy approach is to maintain this stable and sensible regulatory environment and let it do its work. While some in the agricultural sector have criticised the framework, overall it has delivered considerable advantages to the productive sector and I am confident this will continue to be the case.
Our second policy approach is to make sure that the Government ?s own books are in order. It is inevitable that a change in the world scene will affect New Zealand?s commercial activity and that clearly affects our tax flows and could affect social welfare costs, if unemployment arises. As a result, it will be more difficult to maintain our fiscal surplus ? to keep us in the black.
The Government?s response to this is based on our medium-term plans for fiscal management, as outlined under the Fiscal Responsibility Act. For some time, we have said that so long as the Government?s debt remains high, we will maintain a fiscal surplus.
Our debt has been reducing but it is still higher than the target we have set ourselves as the maximum prudent level of debt which is 15 per cent of GDP. It is therefore important that we take sensible steps to maintain our surplus.
The cuts that the Government announced yesterday are on top of the $300 million buffer that we established in the Budget. The combination of these two is a significant modification of our $5 billion spending plans and shows that this Government is prepared to make serious efforts to maintain a sound medium-term fiscal position.
This is in stark contrast to others on the political left who would put up taxes and increase spending. Such policies will hurt the productive sector not help it.
Government's third policy response is our intention to continually improve the environment for commerce, trade and business. Any modern society requires complex regulations to ensure that day-to-day activities are safe, that the environment is reasonably protected and that commercial activities are carried out in a reasonable way.
As time goes by, the pressure of regulation makes day-to-day business ever more complex. My Government is determined to lean against this complexity and to ensure that business is carried on in an open and competitive environment with as little interference from the Government as possible. Some major changes have already been announced as part of this third stage of our response to the uncertainty over Asia.
The introduction of competition into the ACC will offer a huge opportunity for employers to establish new and fruitful relationships with insurers as they go about their business. The removal of tariffs on the motor car industry has had an immediate favourable impact on business, especially in rural New Zealand. Similarly, the removal of constraints on parallel importing will allow New Zealanders to profit from commercial opportunities and to access cheaper products from throughout the world.
It is our firm intention to continue to work within this third area of response. That is, we will continue to improve and strengthen the regulatory environment in New Zealand so as to make it easier and more straightforward to do business. We are working our way through what to do with the Resource Management Act and the Employment Contracts Act. Reform measures will be announced later this week.
Another area where there is potential for significant gain throughout New Zealand, especially rural New Zealand, is the evolution of the Producer Boards. I will come back to this later.
We are also looking beyond this range of policies across the whole scope of Government activity to see what issues will promote and enhance the conditions for producers and exporters to do business. These areas may include:
further measures to improve New Zealand's competitiveness as a trading nation
measures to encourage immigrants who will make a positive contribution to our country
measures to improve our savings environment to increase investment funding
explore tax change options to assist the productive sector
Government must create positive conditions for business to do business. Business must then get on with doing the business and creating wealth and jobs.
Government has done and is doing its share; $300 million deferral of expenditure in May's budget, a further $316 million yesterday and in early September the Government will review what further steps are needed to maintain the momentum of economic adjustment.
And so to matters Maori. Much has been said in the last few days regarding Maori aspirations and Maori disadvantage. It?s in all New Zealanders' interests that we address these issues. We will all benefit if they are addressed. We will all suffer if they are ignored.
This will only work however if we remind ourselves that there are two Treaty partners not one - each has responsibilities and obligations. As we seek to understand and interpret these we should not attempt to rewrite history but instead build on the Treaty in a way that sees the intentions behind the Treaty delivered on.
At the risk of restating the obvious, the Treaty delivers us three challenges.
Firstly, there is one Government in New Zealand. National intends to see this works for all New Zealanders and that the rights promised in the Treaty are protected without threatening the interests of the majority.
Secondly, it promised Maori access to their land and resources and where that was interfered with or wrongs were done, the Waitangi Tribunal now has the responsibility to Government of recommending how those wrongs can be put right. It is then up to Government to determine how that can occur.
National is committed to seeking full and final settlement of proven, well founded historical breaches of the Treaty and we hope to settle major claims by 2000. Settlement packages once handed over to the claimant Iwi become their responsibility to manage and use. That is a matter for Maori to sort out and for the Iwi authorities to be properly accountable to their beneficiaries.
Thirdly, that participation and citizenship must be available to all New Zealanders. This presents us with the challenge of trying to get equal health status, educational attainment and participation rates and employment rates. That is a challenge for Government agencies, Iwi authorities both urban and tribal, social services agencies, and business. The days are gone where Government has a Maori Affairs Department dishing out special programmes. Today in health, in education, and in housing, Maori programmes and providers are tested by the same standards and monitoring criteria.
I make the point that that's as it should be. Recent Tribunal recommendations in relation to social service providers do not find in favour of more access or greater resource allocation to Maori relative to other service providers. Instead it advocates balance and a concept of mutual support and obligation of each partner to the other.
New Zealanders in my experience are fair minded. They want progress, inclusion, mutual respect, tolerance and diversity, but most of all a commitment to a successful future for New Zealand in every sense. This is possible if New Zealanders feel it is not at the unreasonable expense to others. We are making progress and we can deliver on this.
I also make the point that from my reading of it, the Waitangi Tribunal's report does not have flow-on implications for that settlement of kind or resource claims.
Finally, the future of Producer Boards and their statutory powers. I have made it clear to the Producer Boards that the Government will not impose a structure on them. Clearly, each Board is different. They have their own commercial imperatives and work within their own markets. We are determined to allow each Producer Board the opportunity to develop its own proposals as they move forward to change.
However, change we must. It is clear that the world market is evolving and this Government intends that New Zealand will evolve with the market rather than stick with outmoded regulation in farming, just as we are avoiding outmoded regulation everywhere else.
Federated Farmers regularly calls for Government to free up or get out of the road of businesses' ability to do business. This is a good case in point.
It is worth noting that changes to Producer Boards in recent years have not been initiated by Government but by Boards wanting to be free of Government restrictions. Further, there has been growing questioning of the way Boards operate by producers and growers.
In recent years there have been ongoing changes in Producer Boards, such as a shareholding base being created for the Dairy Board, on-shore deregulation of the kiwifruit industry and the Producer Board Reform Act, which considerably changed the legislative base for the operation of the Meat, Wool and Game Industry Board. In that case you had a Parliamentary select committee dictating the governance structure of your industry. Is that what you want in the future?
Change hasn't stopped.
Driving the changes are commercial imperatives to be more efficient, the need to find new opportunities and the need for new investment.
Government recognises that change is being driven by commercial and market-led pressures, but the Government also believes that it is inevitable that at some time in the future statutory powers will be removed.
Therefore it is vital that Boards must focus on a future without industry statutes. Commercial changes should be based around this coming reality.
There is still considerable discussion as to why the Government supports the ultimate removal of statutory powers.
Put bluntly, the way Boards are currently controlled puts the Boards in the politicians' hands by them being dependent upon Parliament for empowerment.
Now no business wants to have to turn to Parliament to sanction changes in the way they operate. With the rewards in the global economy going to the fleet footed, this is hobbling our major producers.
You will recall the New Zealand Wool Board requested in 1988 changes to the Wool Board Act to allow it to be more commercial and reflect current requirements of the sector in 1988/89. It took nearly 10 years, until December 1997, for these changes to be made. There's no competitive advantage in this sort of time lag!
Opportunities are restricted because Boards can only do what the legislation will allow them to do. For example, Parliament restricts the products that the Dairy Board may export. Is this appropriate in the growing high value international food industry? Believe me, Nestl é wouldn't put up with such restrictions.
Investment opportunities are reduced by the current system. I would have to question whether farmers have the capacity or the desire to continue to fund the capital development required if New Zealand is going to compete in the sophisticated international food market.
Further, in the case of non-trading Boards, should it not be the farmers who decided whether or not they want to contribute in excess of $65 million per year to the operation of the Meat and Wool Boards? In other words, are meat and wool farmers getting value for money? I also believe that many meat and wool farmers would question whether it is prudent in today's environment for $270 million to be held in reserve. In fact, I would challenge any here today to justify that that level of funding is adding substantially to your bottom line.
There has been a lot of debate as to what the Government wants from Producer Boards by November 15.
Government spelt out in the Budget and again at a meeting with all Producer Boards last week that the Producer Boards must lead the process of commercialisation for Producer Boards and the industries they represent best understand the complexities and issues involved in such a process.
The Government wants to see the minimum of disruption as this process is worked through and also ensure that existing shareholder value is preserved.
We are seeking industry-led plans outlining steps to a life without industry statutes, identifying key transitional issues taking into account commercial realities.
For individual Boards, issues will vary but their plans must take into account:
tariff quota allocation - this is non-negotiable from New Zealand's perspective
asset transfer arrangements
funding of industry activities
and other matters that Boards feel appropriate
In preparing plans the Government expects Boards to consult widely with the industries they represent. It will be far more satisfactory if all the players in any particular industry have an industry view on change.
I can assure you that the preparation of plans is not being driven by Ministers or officials and they have been specifically told that this is the prerogative of the industries. Some are keen to move quickly. Others, because of the complexity, may need to go through several stages. We accept there will be differences. However, if the industry does not respond Ministers and officials will be invited to take a view.
From these reforms it is the Government's belief that by freeing up the trading boards our agricultural sector will benefit from greater returns and this will be reflected in higher prices for New Zealand farmers, a win-win situation.
In the life of a country some issues are of more moment than others. As Governments on a daily basis manage the issues we will continue to be challenged by events that are sometimes beyond our control.
Over recent months we have been surfing along on the edge of the yen and its fortunes. Thankfully it appears that may be changing.
The strengths of our economy, the relationships between our people and the confidence that we share in building a better future, will all determine how successful we are as we approach the next century.
With respect to issues surrounding the Treaty, we are, I believe, closer than we have ever been in nearly 160 years to resolving and settling the intentions of the Treaty. It will take the goodwill of the majority. It will require tolerance of Maori. It will require restraint by those who hold extreme views, whoever they are. Truly the progress of a mature nation.
With respect to the current economic situation we face, we are soundly positioned to ride out what the global economy throws our way and for the rural sector, who are such an integral part of what makes New Zealand successful, we are again well positioned to change and embrace the opportunities increasing global markets and ever-increasing trade access offer.
Federated Farmers continue to lobby effectively on behalf of industry in the agriculture business. In my experience it states its policy preferences clearly. It gives praise when its due and lays the boot in where it believes appropriate. You are a well respected group who represent a large and important part of New Zealand's economy and I thank you for your work.
Out of issues of moment, through confidence and certainty, New Zealand will prosper and succeed. It only requires us to make the best of the opportunities as they present themselves. I know you in your respective areas will do that. I have much pleasure in declaring the Federated Farmers of New Zealand National Conference open.