NBR BUDGET BREAKFAST 1998Prime Minister
Wellington Town Hall
The 1998 Budget is a budget for our times.
It makes a clear promise of future reforms. It delivers on promises made which can be afforded. It avoids making promises which can't be afforded. It promises fiscal discipline and prudence.
It also promises to continue to manage the demands of the political, economic and social environment in a responsible but progressive way.
It will deliver in our best interests for businesses, communities, families and all New Zealanders.
For businesses, not so many years ago, it would have passed unsaid that their expectations of a budget would be for the Prime Minister to recite a litany of tax concessions, industry protection initiatives or straight subsidies to favoured sectors of the economy.
I think it is a sign of our growing maturity and sophistication as a nation that business no longer looks to government for industry specific assistance, but rather for commitment to a sound economy and to an ambitious but achievable micro-economic reform programme.
The Government remains committed to running fiscal surpluses and to continuing the process of reducing the cost of government. The expected current year crown surplus of $2.8 billion is the fifth surplus in a row and is over $1 billion above forecast.
Public debt repayment remains a priority. This is signalled firmly in the Budget by our decision to reduce the Government ?s net debt objective from the current 20% target to a goal of less than 15% of GDP.
The wisdom of our fiscal conservatism has been vindicated by recent developments in Asia and the sharp deterioration in New Zealand?s Balance of Payments.
A high current account deficit, for whatever reason, necessarily means investors demand a higher risk premium. And that means New Zealanders face higher interest rates.
But imagine for a moment what would have happened if we had listened to those who accused the Coalition Government of a miserly approach to the spending of government surpluses. How much more difficult would New Zealand?s position be if the Government were adding to the current account deficit rather than actively reducing it?
Keeping our own books in order is perhaps the most critical thing the Government can do to provide the conditions within which individuals and firms are able to prosper.
But it is not the whole story.
The social and economic policies outlined in the 1998 Budget build on our firm fiscal foundations and constitute a comprehensive programme to reduce the costs of doing business in New Zealand.
We have listened to business concerns about the high cost of accident compensation insurance. And from July next year, employers will have the choice of insuring with other providers.
We have heard complaints that the earlier reforms to the electricity sector haven?t done enough to produce real competition. Our move to end ECNZ?s dominance of electricity generation and to require separate ownership of distribution and retail activities will mean lower costs for consumers and better investment decisions.
We appreciate the costs imposed on businesses and families by high tariffs and we last night removed all remaining motor vehicle tariffs, effective immediately.
We acknowledge the importance to firms of being able to buy imported goods and machinery at the best possible price. To achieve this the removal of restrictions on parallel importing is a practical and effective step.
Our plans do not end there. Over the next few months, the Coalition Government will announce a range of specific and detailed initiatives to further lower compliance costs and increase the returns from investment in New Zealand.
But if minimising the costs facing business is a precondition for higher growth it will not on its own sustain that growth.
A government that wants to claim the mantle of being ?good for business? must do more than just minimise the costs it imposes on business. It must also do more than just limit the extent of its expenditure.
A good government must focus as well on the quality of the spending it does undertake. Specifically, while we should continue to focus our energies on reducing government consumption, we must not be blind to the need for government investment in our country?s future.
We need our schools producing graduates with the requisite skills and attitudes to propel individual businesses and the country as a whole into the next century.
That?s why we?ve committed an extra $1.7 billion towards education at the same time as we?ve introduced measures to improve the performance and responsiveness of our schools and tertiary institutions.
We need to ensure the timing and extent of investment in our roading and other infrastructure is appropriate to the needs of our businesses today and in the future.
That?s why we?re looking at major changes to the way we fund and manage New Zealand?s roading network.
But nowhere is our emphasis on sound investment more pronounced than in relation to our new approach to welfare and employment assistance.
Our work focused approach marks a shift from viewing taxpayer support simply as a right without responsibilities, to seeing people in terms of their unrealised potential to contribute positively to New Zealand?s future and enhance their own lives.
This is not rhetoric. We are backing our changed stance with radical changes to the way in which help into real work is delivered - the one-stop-shop. We are also introducing tangible improvements in the level of child care assistance and in compensation available for costs incurred in participating in community work.
In the short term, these changes won?t save the Government money. But for every individual assisted off a benefit and into real work the immediate personal return - better skills, improved self-esteem and greater motivation - will translate into savings further on down the road. This makes sense in fiscal as well as in economic terms.
Difficulties in some of our main markets have cast an element of uncertainty over New Zealand?s immediate economic prospects. However the programme that the Coalition Government is pursuing - and which has been given fresh impetus in the 1998 Budget - should give all New Zealanders confidence for the future.
We have made it our business to promote and implement policies that are good for business. They are also policies that are good for New Zealand and our future success.