• John Luxton
Associate Minister of Agriculture


Special Guests, Ladies and Gentlemen. It is a pleasure to be here today to open your Annual Conference.

There have been some recent reports in the media that business confidence has been dropping and that people are unsure of the direction of Government.

That assessment is a little unfair. The current mood perhaps reflects a coming to grips with MMP and the realities of coalition government and a flow on impact of the rapid revaluation of our currency over the last year, particularly on our traditional export sectors.

But we still expect growth in 1997 and 1998. But to get better growth we need to keep up with the changes happening elsewhere in the world. Gone are the days when Government could pick winners.

Globalisation is continuing at pace. Our country's border cannot prevent the free flow of capital, skills or technology into or out of our society. The best approach is to make the New Zealand business environment internationally competitive so that it attracts and retains capital, skills and technology that we need.

Given some of our natural disadvantages of market distance, small population base and local market, we need to lead changes rather than follow other developed economies to become internationally competitive,.

I want to give you a personal perspective of what I believe needs to happen to the economy.

If we want to get the jobs, security, and the healthy environment that all New Zealanders want, it is important that we increase the size of the economic cake. To get this growth, my personal view is, that we need to work on a trifecta of areas.

The first part of the Trifecta is to reduce the size of Government in the economy to about 20% of GDP.

Government does not create wealth, it merely transfers it at a cost so we need businesses to invest in people, jobs and ideas to add value. Getting a bigger government doesn't give a bigger economy.

However, good government does have a role to play in making the size of the cake bigger. We need to lighten the load on Government to become more mobile rather than continue to increase the load and size of Government.

To achieve this end, we need to continue to privatise businesses that are not core activities of Government. In the recent budget, the Treasurer announced the privatisation of Government Property Services, some small power stations and signalled that other assets may be privatised on a case by case basis. I believe other activities involved in Government ownership need to continue to be looked at, including local government assets, such as power companies, airports and Local Authority Trading Enterprises (LATES).

Secondly, we need to continue to contract out services that private enterprise can do better. In my own portfolios of fishing and lands, we are working towards more contestability and contracting out in areas such as research, and in the provision of some services such as registries.

In Social Welfare we have seen many services contracted out to organisations such as CCS and others. In education and health we have seen services such as cooking and cleaning contracted out. However, there is still scope for more gains to be made in this area. Recently there has been some publicity regarding contracting out of security and prosecutions.

Thirdly we need to continue to improve Governments efficiency in the core roles that it still undertakes.

I noted with interest, your excellent publication 'Getting More For Less' which talks about achieving greater efficiency in local government through contracting out.

These comments refer both to central and local government because local government has a large impact on business and the economy.

I note your publication states "competition is only one of the many benefits that the contracting out option offers local authorities in the delivery of local government services". Other benefits include:

Better planning
Guaranteed costs
Guaranteed performance
Better resource utilisation".
You then go on to say that the average cost savings available from contracting out local authority works and services, are between 20 and 30%. These are gains, I believe, both domestic and commercial ratepayers would be extremely pleased to get benefit from. I note that while there has been progress in the local government area towards contracting out and the setting up of LATEs, I would agree with your statement "if a LATE is the best option why does it need to have guaranteed council work?"

I fully support your Federation's efforts in providing information to local authorities on the benefits of this option. It is something that we could also do with more of in central government.

I note with concern the growth in some areas of both local and central Government spending and the inability of some locally elected representatives to get the efficiency gains possible by refusing to contract out. Like central government, bigger local government doesn't mean a bigger local economy.

Papakura City Council is to be congratulated on their leadership in this area. Some of the wishy washy so called "do gooding" councils would do well to follow suit. Papakura is a good example of what can be achieved for both ratepayers and the community. It is a win win situation. However these changes are not without their opponents in the community.

The second leg of the Trifecta is to free things up more.

We need to have a free, open and competitive economy to allow the productive sector to get on with the job. We have seen many benefits from good competition in telecommunications, airways and supermarkets. Currently, we are doing further work in the energy area and occupational regulation. I believe there is still further scope with more central, local and other areas, such as in health, education sectors and producer boards.

We need to remove trade barriers. In the last budget, we announced that we will be continuing with tariff reviews and accelerating tariff reduction programme. Currently over 90% by value of goods coming into New Zealand are tariff free. We should be tariff free on the remainder by the middle of the next decade.

We need to free things up so that we get the investment that we need to get things done

With the rapid developments in technology and resulting globalisation, we need to ensure that we attract investment into New Zealand. A good idea without investment is just a good idea. But with investment it can build into a fortune. For example, Bill Gates and his garage plus a bit of money.

It is also important that we get the investment in infrastructure to enable our economy to function smoothly. In particular, transport infrastructure is pretty important. In the last term of Government we saw the freeing up of coastal shipping and various other freeing up in the transport sector. Recently the Minister of Transport, released a report on options for road transportation. It is important that we get the incentives right.

We need to free things up so that we can get the innovation that we need

We need innovation to add value. New Zealanders have been great at growing grass and producing commodities, such as meat, wool, dairy products, forestry and fish. However, we need to make sure that we can get the investment and innovation to add the value that we need to optimise the benefit to New Zealand.

Also to progress innovation, we need to ensure that we have the legal framework and intellectual property rights that enable those who make the investment to capture the benefits.

We need to free things up so that business is not constrained from doing things because of unnecessary regulation and compliance costs

The freeing up of Coastal shipping, which was strongly opposed by some has dramatically lowered shipping costs, and actually increased jobs on the coast. But there are still many regulated areas unnecessarily increasing costs and restricting opportunities.

You may be aware that I recently announced a major review of compliance costs. I am expecting an initial report in September. This is a three pronged review which looks at the compliance cost assessment framework, best practice policy development, and monitoring and reviewing existing regulation.

We need to free things up in education, immigration and employment areas so that we can improve the skills and expertise in our workforce and firms

It is vital for our future, if we are going to compete in a rapidly changing world market, that we have the learning and the skill levels required to maintain our competitiveness. I would have to say that I believe it is particularly important that we free things up in the children's education sector, in particular away from the dominance of two major unions. My personal belief is that these unions place far too many restrictions in an area that is vital to our future. They reduce and stifle the innovation and best practice that our children deserve.

We need to allow Kiwi ingenuity to have a go and increase New Zealand's standard of living, improve education and other Government services.

We need to free things up in some important sectors of the economy currently restrained by legislation from changing and keeping up

If we are to have growth, we cannot afford to have out biggest export earner constrained in a straight jacket and not perform to potential. Dairy farmers deserve the opportunity to evolve and progress their industry in a carefully managed way so that their standards of living can improve.

The third part of the trifecta is to continue to push in the international arena for free trade.

We need to continue our push through the likes of the Cairns Group, APEC, WTO and Bilateral free trade agreements with the likes of the USA and the South American countries. As a small island nation it is important in order to earn income and increase the size of the cake for New Zealand, that we have access to markets. I would agree with some who say the international marketplace is not always a level playing field. I believe this is one of the few core roles that central government should still have in the future.

Interestingly the most successful industries around the world tend to be those totally exposed to the global marketplace with all its vagaries and pressures. They are inevitably more responsive to the marketplace.


If we work hard at these three areas of the trifecta we will get the jobs, security, health and the environment that all New Zealanders want.

This Government has continued to move positively along this path. However the movement may not be as fast as some would like. While there has been some drop in business confidence, which some have attributed to the political environment, as a Cabinet Minister on the inside, the reality is that in general the coalition is working well.

In conclusion, ladies and gentlemen, I would like to thank you for having me along to talk to you today. I would like to congratulate the Federation on its work to date, in particular in the areas of encouraging local government to think about the best options for providing cost effective and sensible services to the rate payers.

I would like to wish you well for the rest of your conference and now officially declare the New Zealand Contractors Federation Annual Conference open.

Thank you.