RE-ENGINEERING GOVERNMENT'S INVOLVEMENT WITH BUSINESS

  • Max Bradford
Enterprise and Commerce

Mr Dave Starr, ladies and gentlemen, thank you for inviting me to speak at your conference today.

We live in troubled economic times, little of our own making.

Following over 20 years of indifferent, to downright appalling, economic performance between 1970 and 1990, we have enjoyed positive economic growth for nearly a decade.

Over that time, New Zealand's economic pie increased by a third.

Nearly 200,000 new jobs have been created since 1991, compared with a loss of well over 100,000 jobs between 1985 and 1990.

New Zealand found it could compete in every market around the globe once it's businesses and workforce put their minds to it.

This creditable economic growth came to a shuddering stop early this year.

The Asian economic crisis, and the contagion of financial paralysis caused not by a collapse in the productive capacity of the region, but by the quality of, and confidence in, the financial sector, has caused that.

But more of this later.

I would like to acknowledge the enormous contribution your industry has made to New Zealand becoming a world leader in agricultural and horticultural production.

It is also an industry that has weathered some tough times. This was particularly so when farming subsidies were cut back in the 1980s.

Top dressing has since come through that difficult period, but will always be an industry vulnerable to fluctuations in the economy and dependent on farmers' priorities.

But while the origins of your Association was in agricultural aviation, for over 40 years you have expanded to represent the totality of general aviation in this country.

Because of our geography, because of our distance from our markets, and because of the thin population spread in a large area, aviation is without doubt a key artery of New Zealand's transport system.

It needs a strong representative organisation like yours, to represent the industry's interests and concerns to the wider public as well as the Government of the day.

And because of the inherent danger in aviation, it needs a body to protect the public safety interest, and the Aviation Industry Association has made it clear that the first and foremost of the four commitments of the AIA is to "do its utmost to enhance aviation safety".

Today, I've been asked to speak more broadly about the economy. As Minister for Enterprise and Commerce, and leader of the Government's new Enterprise and Innovation Team, my own and the Government's overall objective is to create the opportunities for New Zealanders to achieve higher standards of living for themselves and their families.

New Zealand presently faces a very volatile world economy

This was brought home to me during recent visits to China, Hong Kong, Malaysia and Singapore. But we are not alone, and in fact, no countries are immune from these events of the last 9-12 months.

We have already been badly affected. We have lost a full year's economic growth, and our fiscal surpluses are off the table for two years as well.

The effects are obvious.

We are losing jobs with the low or negative growth rates.

The Government budget has come under severe pressure, at a time when the community's expectations for more spending on health, education, superannuation and welfare are outstripping our capacity to pay for it - unless we want to borrow for it.

The National minority government, with the willing co-operation of our centre/centre-right partners are not prepared to do this.

We will not pass on another dollop of debt to the next generation, which profligate Labour and National governments did in the 1970's and 1980's.

What we have done, and must continue to do, is get ourselves into good shape for the inevitable turnaround that will happen in the world economy, while at the same time tightening our belts a little to preserve the gains of the last decade.

And gains they have been.

Most countries in the Asia-Pacific region are facing 5-15 percent falls in economic performance.

Because of our economic and financial reforms over the last 15 years, New Zealand is facing a drop of only 1 percent.

That only happened because of the economic reforms and our ability to completely repay the country's Government held foreign currency debt, and billions of our domestically held debt.

The economy is now highly competitive.

We can weather the storm in good shape short of a substantial collapse in the world economy.

But I have to say that to avoid plunging into debt or raising tax rates, we need to promote prudent and consistent economic policies to increase further our international competitiveness.

This will drive higher growth and improved incomes.

Government's objectives are about getting ourselves ready for the next world-wide economic recovery, and especially the inevitable recovery in the Asia-Pacific region.

The reforms of the past ten years have been directed at building the foundations for sustainable economic growth in an increasingly interdependent global economy.

The future prosperity of all New Zealanders depends on our ability to be more competitive, more innovative, better marketers, smarter and more energetic than our competitors.

This has led to the Government setting the following priorities in the Enterprise and Innovation areas:

* driving down the costs imposed on business by government;

* improving the quality of regulation and regulate only where it is vitally necessary;

* extending effective competition to all sectors so that New Zealand business is faced with an economy wide cost structure better than that facing our competitors, and at world best-practice standards;

* ensuring that New Zealand is an increasingly attractive place to invest, for both domestic and overseas investors. This is about expanding the revenue side of the country's income and expenditure accounts, rather than solely focus on cost-cutting and fiscal rectitude, as we have done for the last decade;

* aggressively pursue the interests of New Zealand Incorporated in international markets and forums, maximising on our opportunity as host to the APEC leaders meeting next year;

* improving the dialogue between Government, business and academia.

As I have said, a priority for the Government - and one the business community rightly continues to stress - is the importance of reducing the costs of government interaction with business.

Significant progress is being made, for example, in the complete removal of tariffs by 2006, and the ACC reforms.

We are also in the process of reviewing key pieces of legislation to minimise the costs they impose on business:

the Resource Management Act;
the Building Act;
the Electrical &Gas Safety legislation
the Privacy Act
the Health and Safety in Employment Act

We are reviewing business law with a view to aggressively reducing compliance costs associated with various aspects of the:
the Companies Act;
the Income Tax Act;
the Financial Reporting Act;
the Insolvency Act;
the Securities Amendment Act;
the Superannuation Schemes Act;
the Unit Trust Act

Taken together, this reform programme will represent significant improvements both in terms of costs and clarity of the legal environment for business.

There are also a number of areas in which legislative protection continues to create barriers to growth as a result of the lack of robust competition.

The Government has recently removed the prohibition on parallel importing of copyright goods. Consumers and producers are already beginning to see the benefits of cheaper goods and cheaper inputs into business.

For example, look at the ability now for people to buy quality cosmetics from the Warehouse, not just exclusive stores.

Consumers are also rapidly seeing the benefits of the new Electricity Industry Reform Act, as power companies begin offering choice and lower prices.

We're seeing advertising in the media and promotional activities never dreamed of before the reforms - all to the benefit of consumers.

We expect around $250-400 million in savings to business and household consumers annually from the electricity reforms alone.

The arrival of genuine competition in the petroleum distribution industry early this year has saved the average household between $100 and $200 a year, and the country around $240 million, much of it in overseas exchange.

The Government has also recently agreed to a framework for occupational regulation to give greater weight to improving the competitive environment - breaking down the remaining "closed" shop aspects of many occupations.

This will bring innovation, price competition and a greater range of services for consumers.

Another key piece of legislation is the Commerce Act - a central part of the Government's framework for competitive markets.

A comprehensive review of penalties and remedies under this Act is likely to soon result in higher penalties and remedies.

I want to see quicker and better detection of anti-competitive behaviour, so that those industries which are trying to foster competition are not frustrated by the abuse of market power by an entrenched and perhaps dominant players or players.

This means some change to the Commerce Commission and Court processes to assist the quick and effective consideration of litigation.

As you can see, there is a lot going on.

The Government is not sitting on its hands, paralyzed by the politics of MMP.

We are moving forward to clarify the goals and policies which will get progress. We will listen to, and work with, industry.

The recent decision on tariffs is a good example of Government working to find a solution that is good for industry and good for New Zealand.

On the producer board issue, the Government recognizes there are no simple solutions. We recognise that each industry is unique, and are taking that into account when working with 9 producer boards on their plans for their future.

The reorganisation of Cabinet responsibilities recently announced by the Prime Minister and the approach to be taken by the Enterprise and Innovation Team will also see quite a new, different and much more focused approach to Government assistance to industry over the next few months.

We want to build on what New Zealand does best, and ensure an environment in which the cost structures are internationally competitive.

I would like to stress that we are not talking about "picking winners" but about fostering those sectors that are already winners.

This includes exploring how we can encourage increased investment in relevant research and development, and how we can fast track the growth prospects of successful cluster industries such as electronics in Christchurch, boat building in Auckland, and defence manufacturing companies throughout New Zealand.

But first we need to provide a conducive climate for investment.

The Enterprise and Commerce portfolio is therefore about providing the conditions in which businesses can use resources most efficiently and compete successfully in both domestic and international markets.

The Enterprise and Innovation Team has the important responsibility for ensuring the Government's strategic micro-economic objectives are met across a wide range of portfolios, including the commerce, labour, food and fibre, immigration, trade, tourism and research and science portfolios.

As the team's wide ambit touches on almost every aspect of business life, so do the wide range of portfolios covered by the senior and experienced Ministers who are members.

The EIT has strong links with the agricultural sector.

The Government has no wish to return to the days of subsidies - or subsidising losers - but we are keen to foster much stronger relationships with industry so that find ways to improve present government policies for New Zealand's benefit.

Over the next few weeks I will be speaking with key industry and business groups about the potential they see for their sectors, and how the Government can best help them realise that potential.

In a lot of cases, the best way government can help is by setting a conducive climate - good commercial law, low inflation, low interest rates, and low taxes for example.

Sometimes that isn't enough.

Getting government out of your way is another - as little regulation as possible, a simple tax regime, flexible laws such as employment and accident legislation, and ensuring the competitive framework is effective.

Where Government does assist - through the small business development programme, or the R&D budget for industry - it needs to be clearly focused on promoting and enhancing success, rather than failure.

So what the EIT is doing is re-engineering the Government's involvement - in all of it's facets - in business and the economy.

We haven't finished our thinking, and will not do so before we listen to business.

The secret of our success as a country will be about improving the business environment, about improving the opportunities for sustained investment, by lowering taxes and costs to business, and aggressively attracting more capital to New Zealand.

It will not be about changing direction, or holding out promises of policy that past experience has demonstrated are failures.

Success for New Zealand will be about doing what we do now best, better and smarter.

Success for business will be about a partnership between business and the Government building on our successes, and nurturing and encouraging the wealth of ideas, enterprise and innovation that makes New Zealand such a great place to live.