The National Government: Standing Proudly On Its Record

It is often observed that things become clearer with the benefit of hindsight.

Tonight I want to begin canvassing a bit of recent history that has been forgotten remarkably quickly and which, when seen with the benefit of hindsight, makes both where we as a party have come from, and where we are going, a lot clearer.

As 1998 began New Zealand Inc was in a precarious position.

Korean export and tourist markets had fallen over in late 1997. By early 1998 it was Indonesia's turn to go for a slide. Thailand and the Philippines had already been subject to an IMF intervention.

The impact on New Zealand was huge. Forestry contractors were losing their shirts en masse as the Korean log trade dried up overnight. Simultaneously an El Nino drought was crippling the East Coast from Gisborne to Otago.

As the year progressed New Zealand and Australian sharemarkets continued to slide.

The depth of the difficulties in Japan began to emerge around March and the so-called Asian Contagion became a byword of financial publications throughout the world. By mid-year the Chinese peg against the dollar looked very shaky as the Yen declined to record lows of 147 to the US Dollar.

In the first part of the year the Kiwi Dollar fell with the Yen and by mid-year it had reached record lows of around 48 US cents. If this wasn't frightening enough, commentators were fond of pointing to the fact that, like several of the countries who had seen their currencies collapse and economies destroyed, New Zealand had a large current account deficit.

A headline from mid-June aptly captured the economic climate when a commentator observed in response to new foreign debt statistics which showed NZ Foreign debt at an unprecedented 104% of GDP - "take to the lifeboats".

There was a clear risk - expressed at the time even by the Reserve Bank - that if international financial markets took fright, then New Zealand could suffer a credit crunch. This risk was real and few now appreciate just how bad things could have become.

The Government in its Budget was swift and smart in its response to the deepening crisis. As Minister of Commerce I was able to lift car tariffs - and we lifted them overnight. Instantaneously dropping the price of new and used cars.

At the same time we changed the rules on parallel importing bringing lower input costs to businesses and consumers alike. One of the objectives was to remove the threat of inflation, and to encourage interest rates to fall and stimulate the economy. History now records of course that this is exactly what happened.

When all around us governments and commentators were panicking, our response to the crisis, and it was a crisis, was fiscally responsible and smart.

You will also remember that around that time we also commissioned a special set of economic forecasts from Treasury to be presented in September.

On a political front the weakening economy put pressure on the Coalition Agreement with New Zealand First. In August the disagreements became too difficult to bear internally and what happened next has been well recorded.

The breakup was convenient in many ways as it widened the number of options we had available to nurture the New Zealand economy back to health. Since then the National Minority Government has come a long way. It is often forgotten that in reality, while this is a third term National Government, we are in fact only eight months into the term of the current National Minority Government coalition.

History now records that this new Government did not get distracted from its task. Rather it stuck to its knitting, kept its nerve, and navigated New Zealand through a very dangerous period.

And now as can be seen from the polls, we are reaping the benefits.

Policies for Progress, which we delivered in October, has been often criticised in the media for being politically naive. It was in fact realistic.

For proof of this you need look no further than the response of international financial markets to the Government's actions.

Did Moody's credit agency lose faith in New Zealand Inc's ability to pay its bills- No.

After much humming and hahing NZs credit rating was downgraded to the same level as Australia. But this can hardly be seen as a potent criticism of our management . It was remarkable indeed that our sovereign debt rating was for a considerable period, higher than Australia's.

In October the Asian-Contagion came to a head again as US and European sharemarkets "corrected" in the wake of a Russian collapse and on fears of South American mayhem. Fears that undisclosed banking losses were looming behind the scenes again had the money men on the run.

This time however they weren't running from New Zealand. For a short period in October the New Zealand sharemarket in fact outperformed the mighty Dow.

What was happening in retrospect was remarkable. From being perceived as a potential basket case, the New Zealand economy soon became a clearly defined safe-haven for international capital.

Rather than suffering from a credit crunch, New Zealand's interest rates soon fell to record low levels.

This Wednesday the Reserve Bank is expected to set its first "cash-rate" - a new method of governing monetary policy - at around 4%. The current level for 90-day-bills is already close to a 30 year low. And economic commentators are busily commenting that there are seemingly no signs of any inflationary pressures in the NZ economy.

After years of paying close to a 2% premium for money, New Zealand interest rates are now at similar levels to US interest rates. No wonder business confidence is back close to a record high.

On the political front the National Party's election prospects have followed a similar roller-coaster to perceptions of the New Zealand economy.

This is of course perfectly normal. Voters have always had one overwhelmingly powerful voting influence, the state of their bank balances.

And so we see the gap in the polls closing. The latest polls, after showing Labour being substantially ahead of National for some time, are now nearly neck and neck - notwithstanding the continued media obsession with distractions such as the Tourism Board row.

Late last year a "sleepwalk to victory" theory was prevalent among political commentators. It was widely thought that the New Zealand Labour Party, like their UK brethren under Tony Blair, simply had to say nothing and they would almost certainly win.

Now the theory has virtually no currency at all. Funny that.

Another factor in all of this of course is the fact that the Labour Party shot themselves seriously in the foot with their Greed Tax - which on the face of it was their response to the Asian Crisis.

Since when did anyone ever vote for a party that wanted to put up taxes- One has to wonder what planet they are on.

There is some irony in the fact that while the media will so often attribute electoral impacts to perceived public relations failures on the part of any Government, in fact the key drivers in voter opinion are probably precisely the opposite.

In my mind the Labour/Alliance bloc in truth can only blame themselves for their declining poll results. And the more they preach an agenda of doom, gloom and higher taxes, the more ground they will lose as we approach polling day.

The public knows the National Minority Government is doing a good job because they can see it in their wallets.

The current 91 octane petrol price is now under 80 cents in many parts of the country.

Electors like that kind of politics.

Japanese imported cars are now free of duty and are consequently cheaper than ever.

Electors like that kind of politics.

In much of New Zealand, consumers are now being offered competitive electricity and telecommunications services.

Electors like that kind of politics.

The vast majority of taxpayers are now paying less tax than they were two years ago.

Electors like that kind of politics.

And most important of all, the interest rate component of many mortgages has nearly halved.

Electors especially like that kind of politics. It is politics with a message that is easily discerned.

The fact is that the Labour/ Alliance bloc opposed every move to bring down petrol prices, electricity prices, car prices and taxes last year. These changes have put $80 per week into the pockets of the average wage earner. When it comes around to election time in November, the electors will remember that. Which is why my confidence that we will win the next election continues to grow with every passing day.

When it comes down to the facts, we can prove, no matter how many column centimetres are devoted to expressing a contrary view, that our Policies for Progress were exactly that.

We are the thinking person's Government and the Labour/Alliance bloc are going to have to come up with a lot more than a sudden case of affection for the Producer Boards to win this one.

I would like to make a few more observations on the Government's record.

While it is no doubt true that we have a long way to go yet, and we remain committed to smart government, the facts indisputably show that National is delivering.

Since the end of 1991 250,000 jobs have been created in New Zealand. 600 a week on average. Unemployment has dropped from 10.9% to 7.4%.

NZ groceries according to a recent OECD study were among the cheapest among the 24 nations studied with the sole exceptions of Turkey and Portugal.

We know, and have always known, that the future New Zealanders want is not that of a low wage economy. And this Government is well on the way to delivering a smarter, better educated work force. Under National the number of New Zealanders in tertiary education has increased from 141,000 in 1990 to 214,000 in 1997.

Where Labour cut the number of police during its term, by the year 2000 we'll have put 1000 extra police on the beat. And it is making a difference. Total recorded crime is down 3.5% for the year ended June 1998.

In Education and Health - the areas where New Zealanders clearly express a preference to have their money spent - we have been following their desires. Budgets of late have become arguably a little boring.

The reason for this is simple - practically all the extra money we believe we have available has been going into Education and Health. Since 1990 an extra $2000 per household is being spent in each of these vitally important areas.

At the same time, substantial and long needed reforms in health are finally enabling us to look realistically at issues of equity of access. New Zealanders deserve that level of accountability from their government and while the occasional statistical release on the subject can be embarrassing, the National Government believes in the public's right to know how well it is being served.

The National Party has a great story to tell.

When it comes election time the story will be told, but it will not be the rhetoric that gets us re-elected. Rather it will be the intrinsic truth in what we are saying - and which electors will be able to read in their bank balances - that will give us the clear advantage.

Finally I would like to talk a little about two of the greatest challenges that face this Government over the coming year.

The issue of genetically modified food poses huge challenges to New Zealand. Not only is it clearly a matter of considerable public interest, but it also has implications for trade, critical implications in our Research Science and Technology sector, and raises vital issues regarding the future of New Zealand as an agricultural product producing nation.

The debate is now moving very fast and later this year working with ANZFA - the Australian New Zealand Food Authority - we expect to finalise new standards for the labelling of food. For my part I agree with the Prime Minister, and it seems most of the Parliament, that the consumer has the right to know what they are eating.

The challenge will be to find a solution to the problem of labelling that does not increase the price of food nor result in a meaningless system of labelling in which all foods are labelled "may contain genetically modified material". I am confident a solution will be found.

However this will only provide a short term solution to a small part of a far larger problem. Like it or not, genetic science and biotechnology is about to change forever the nature of the world we live in.

At this stage, the debate on the potentials and risks of genetic science is in its infancy. As a technologically advanced agricultural producing nation, it seems likely that New Zealand will not only need to participate in the global debate on these issues, but that it may need to become a world leader in the area of public understanding of the new science and its implications.

Another significant challenge for New Zealand this year, perhaps the biggest and almost certainly the most critical to the nation's future, is the objective of freeing up world trade.

The European Union announcement on the Common Agricultural Policy last week, suggests that the debate in the EU is at this stage far from over.

There are threats as well as opportunities contained in the proposals presented thus far. We will need to keep a close eye on the EU as the debate progresses.

Simultaneously on another front my colleague Trade Minister Dr Lockwood Smith is becoming something of a rising star in world trade circles with his work leading up to the next WTO Round. This is due to kick off shortly after the APEC meeting in Auckland in September, and we want to be in a position to use our chair of APEC this year to push for as much progress as possible.

For the Government all this work is part of a cohesive whole, leading towards the objective of freeing up global trade generally and thus benefiting New Zealand's exporters and businesses by providing them with new markets. Experience has shown us that New Zealanders, when delivered an opportunity, are quick to exploit it and turn it into new export returns.

Like the challenge posed by genetic science, our work on trade liberalisation is complex, hard, politically difficult and on occasion frustrating. That said, the benefits are potentially huge, an estimated $30,000 per dairy farm is considered the likely consequence of a free trade agreement with the US.

Just as significantly perhaps, like the challenges posed by genetic science, the challenge of pursuing free trade is something that New Zealand simply has to stand up to.

As we address these two challenges you can be assured that we - the National Minority Government - will commit ourselves to the tasks with the same degree of excellence we have shown in every other aspect of our conduct.

And in November we will go to the polls on that record. And we will win.