NEW ZEALAND EMPLOYERS FEDERATION CONFERENCE

AUCKLAND

Ladies and Gentlemen..... thank you for inviting me to speak here today.

Your conference is focused on Global Directions in Industrial Relations. If there is one underlying theme to this, I think it must be the increasing recognition of what practitioners have known for years - that effective industrial relations and investment in people are a cornerstone of our continuing drive for international competitiveness.

Simply put, industrial relations is not an end in itself, but the means to the end. The end is a motivated, skilled and happy workforce who contribute to a competitive profitable economy.

If people in your enterprise are not motivated and rewarded, and do not feel part of your team, the chances are you will not be successful in business.

We all have a role in this. Our responsibility, as legislators and regulators, is to provide an employment framework which allows you and your employees to negotiate the employment, remuneration and training arrangements that best suit you, and which enable you to maximise productivity and meet the demands of competitive world markets.

The Coalition Government is working hard and succeeding, in creating the kind of environment you need for your business to prosper: an open, competitive economy with flexible labour markets and sound economic and fiscal management.

Government Progress
Unfortunately, public opinion of the Coalition Government's achievements seems to be driven by the latest and loudest headlines, rather than a rational assessment of what the Government has done to date.

Let me outline some facts for you here today - not just the speculation and beat-up rumour that so often captures our media.

The facts tell a different story - they show that we are the only country in the OECD that is able to:

cut tax rates for low and middle income families;

increase priority social spending;

reduce net Crown debt; and

run a consistent modest surplus, all at the same time.
To illustrate this:

government expenditure is down to 35% from 41% in 1991-92;

net Crown debt is now 25% of GDP, down from 31.1% in 1996; and

we are now entering our sixth consecutive year of Government surpluses, an achievement not matched by any other country.
The present Government has also set, and is strictly enforcing, a limit of $5 billion on new policy initiatives over its three year term. This is not throwing caution and money to the wind. Rigorous processes are in place to ensure we get value for this money - and the Government has made it clear that if external events make the $5 billion look imprudent, then we will revise the expenditure plans.

The automatic adjusters in the economy are doing their job too: in response to a worrying current balance of payments outcome, the NZ dollar has depreciated by 20% in the last six months. Given our appallingly low savings rate as a nation, you would have expected real interest rates to rise to attract foreign savings to pay for our excessive consumption level- and they have.

On the policy front, the Government has made significant progress in the areas of: employment reform, regulatory reform, getting more competition in key economic areas (such as petroleum distribution), ensuring stable immigration levels, encouraging greater participation in education and training, and fostering a more open economy free of unnecessary trade barriers.

However, the Government is not resting on its laurels. More change is in the pipeline. For example:

the July tax cuts will pump over $1.1 billion dollars back into the pockets of people who've earned them, priming growth;

plans are underway to eliminate tariffs on vehicles and some other goods;

major reform has or will soon be announced in areas such as electricity generation and retailing, and in accident compensation;

road transport pricing and management, resource management and local authorities are all under review;

the ownership of non-strategic state owned assets is under discussion;

changes are being implemented in immigration policy to reduce the rorts, increase the potential for earning overseas education dollars, and to reinvigorate immigration policy targets and marketing;

government is refocussing its help to small businesses;

there is a "six-pack" plan to reduce compliance costs on business;

initiatives in education which will be announced in the Budget; and

we are encouraging energy independence for NZ by reinvigorating the exploration programme with a refocused exploration regime.
These changes will reduce the input costs of New Zealand businesses and help give them the competitive advantage they need to flourish in today's global economy.

Furthermore, the changes in the past decade plus those in the pipe-line, have made the New Zealand economy much more resilient to external shocks such as the Asian crisis. A few years ago such an event would have killed growth and the economy. Now we can absorb the shocks and yet still grow at around 3 per cent a year.

Industrial Relations
In the IR field, the Coalition Government has also been actively pursuing a path to further enhance our country's performance, and is making good progress on the Coalition Agreement initiatives in industrial relations.

As you know, the Budget is almost upon us, and I'm pleased to be able to give you information about some of the moves that will be announced in the IR area very soon.

You are all aware that we have been undertaking various reviews of the functioning of the Employment Contracts Act and of, course, of the Holidays Act.

There have, however, been various rumours, half-baked leaks and unfounded speculation about the specific nature of the changes we are contemplating. I do not propose to fuel them further.

What I will say, is that we are looking at reducing unnecessary burdens on employers and improving the employment prospects of those not in, or new to, employment. The results of our work will be based on the principles of fairness, neutrality and flexibility which underlie the Coalition Agreement's industrial relations initiatives.

This work is virtually complete and the outcomes will be announced soon. Any changes will, of course, be subject to the usual Parliamentary Select Committee processes.

Let me comment on the moves we are making in respect of the Employment Tribunal, and to continuing our commitment to eliminating discrimination in the workplace.

There have been many complaints about delays in the Employment Tribunal, particularly in the provinces, where the Tribunal has been forced to limit its services as a result of budgetary pressures. These were largely caused by a higher-than-expected increase to Tribunal Member salaries by the Higher Salaries Commission. This had the unfortunate effect of reducing the resources the Tribunal had available to it, and limited its ability to hold adjudication hearings outside of the five centres where the Tribunal is based. Many of you have rightly expressed concern at this situation.

I am pleased to advise you that this year's Budget will include an extra $0.773 million to cover the costs of the Higher Salaries determination and $2.275 million to cover funding that would otherwise have ceased. In addition, the Tribunal will receive another $0.258 million in the 1997/98 Supplementary Estimates. This funding will ensure the Tribunal can maintain its current capacity and restore its previous level of activity in the regions. The result will be that employees and employers continue to have the ability to have their disputes resolved as quickly as possible, whether they live in a main centre or a smaller town.

The industrial relations changes I will be announcing soon will include measures to strengthen the role of the Tribunal, and make its processes more certain for the parties appearing before it.

I am also pleased to tell you about another Coalition Agreement initiative the Government has implemented in the EEO area. We recognise that EEO practices not only work towards eliminating discrimination in the workplace, but also help businesses develop better relationships with employees and customers, thus benefiting their bottom lines. That is why the National Government established the Joint Equal Employment Opportunities Trust in 1991.

A recent review of the Trust found that it is effective in its job of promoting the business benefits of EEO and provides high quality services that are demanded by employers. I am also pleased to acknowledge the major role played by the Federation in supporting the work of the Trust and contributing to its success.

The Trust is currently funded on the basis of $1:$1 between Government and the private sector - this will now, as proposed in the Coalition Agreement, double to $2 for every $1 that is funded by the private sector. The Government is also extending the current funding for the Trust of $445,000 through to 1999/2000 and beyond.

The ILO
On the international stage, the Coalition Government is also promoting change, and will not endure outdated rules and regulations that do not support our need for a flexible and highly skilled labour market.

Bodies such as the International Labour Organisation continue to act as prisoners of their own history.

While the ILO is a unique and potentially effective body, it often seems to be stuck in the first half of the century.

One example of this is the regional conference I attended late last year. Its agenda had been set two years prior to the meeting by a Council remote from the affairs of the Asia-Pacific region. There was no input from the region or space for discussion of any substance, let alone relevant substance. Indeed its format consisted of a series of set piece speeches with no room for debate from the floor. In such circumstances it was very difficult for members to talk about their needs, and for the ILO to respond effectively.

As Minister of Labour I am committed, with your help, to doing all within my power to bring the ILO into the 21st century, rather than having it take us back to the start of the 20th.

Nothing is to be served by drowning in a sea of irrelevant resolutions and conventions with scant relevance to the diverse needs and situations of the various member states and economies. The conventions and resolutions of the ILO need review against the needs of modern, globally-focussed economies, while retaining the key principles of the ILO to which we all subscribe.

The development of relevant and meaningful international standards will not be served by the tendencies of a moribund bureaucracy. Rather, it requires concerted efforts of Government and employers to ensure that their concerns, as stakeholders, are clearly heard and taken heed of, as well as those of employees.

The ILO needs to reform its structures and processes to ensure that it is subject to the same disciplines that face us all and is able to develop broad, flexible, and meaningful standards.

This is the message I will be taking to the ILO Conference in June, and I hope it is one I will hear reinforced there by your representatives also.

Business Confidence
To recap, the Coalition Government is, in spite of appearances to the contrary in some parts of the media, making progress at the macro level, micro level, and on the international stage.

Despite this, we acknowledge there is a lack of confidence in business within New Zealand at the moment.

Interestingly, this lack of confidence appears to be a reflection of concern about what is supposed to be happening - rather than what is happening. For example, the National Bank's February survey of business confidence had a net 6% of firms positive about their own activity. However, when asked about general business conditions - that is the outlook for other businesses as well as theirs - confidence fell to a negative 24%. That is a 30 point change from December and almost 60 points less than the 35% net confidence in November.

Such community concern is commendable, but does not accurately reflect the underlying health of our economy.

Talking up negativity - for no sound reason and unsupported by the facts - helps no one. Rumour and speculation feed on each other; negativity fuels yet more negativity. It's hardly surprising that confidence disappears and with it, motivation.

In this context, your recent survey and its call for stronger Government leadership is disappointing, if understandable, against the background of pervasive negative sentiment in the media.

New Zealand's low inflation, low unemployment, positive growth yet highly competitive environment is a background many other countries would kill for. However, confidence is a brittle mood, achieved with great difficulty, but destroyed easily.

Leadership is not solely down to the Government. Now is the time for business to lead from the front - to put in place international best practice, to embrace the opportunities afforded by the current economic environment rather than joining the merchants of doom, sitting and waiting, in vain I might add, for the Coalition Government, the economy and New Zealand to falter.

Don't be the possum in the headlights. Don't wait for Government to fix all the problems. I want to challenge all of you here today to seize the opportunities before you, and to take a front seat role in making the most of the environment the Government has created, and continues to modify for New Zealand's success. We will play our part in a difficult political and economic environment, but so must you.