Reflections from New Zealand: Address to the Menzies Research Centre John Howard Lecture

Thank you for your welcome.

Can I start by acknowledging some of the special guests tonight – former Prime Minister John Howard, Leader of the Opposition Tony Abbott and members of his Parliamentary team.

And I’d like to thank the Menzies Research Centre for inviting me to give this lecture.

The Menzies Research Centre has made an important contribution to public policy thinking in Australia over many years. It is an impressive institution.

I was delighted to accept its invitation, because I have a great deal of respect and admiration for John Howard.

I always remember the week I became Leader of the National Party, towards the end of 2006.

I was scheduled to fly to Canberra in my previous capacity as Finance Spokesperson, but instead made the trip as the new Party Leader.

At short notice, Prime Minister Howard made time in his extremely busy schedule to see me and to dispense his best wishes, along with some good centre-right advice.

Aside from the personal encouragement he gave me, it was a very public signal that helped me, as a new Leader, settle into my role.

Over the following years we developed a close relationship.

John was a great Prime Minister of Australia.

And he was a great friend of New Zealand, working hard to strengthen the relationship between our two countries.

In doing so, he worked closely with my predecessor Helen Clark, despite their domestic political differences.

Following that example, I, too, have enjoyed a good, constructive relationship with Kevin Rudd and with Julia Gillard.

I learned a lot from John Howard, both from my discussions with him, and through watching him as Prime Minister.

I admired the economic programme he oversaw in Australia, his steady leadership through difficult times, and his tenacity.

By the time you’ve been Prime Minister for 11 years, let alone twice been Leader of the Opposition, you’ve fought a lot of battles and faced a lot of challenges.

It reminds me of a story about the Civil War General Ulysses S Grant.

After a day in which his forces took a real beating, his second-in-command General Sherman found him sitting under a tree chewing a cigar.

“Well,” said Sherman, “we've had the devil's own day, haven't we?”

“Yes,” said Grant. “Lick 'em tomorrow, though.”

That’s what being a Prime Minister is often like.

Can I also say that it’s a great pleasure to be here in Australia.

Australians and New Zealanders – all 27 million of us – share a very special corner of the globe.

Geography, our shared colonial history, and our cooperation in peace and in war, have made our two countries very close.

Our soldiers have served together in many distant parts of the world, and continue to do so today in Afghanistan. These deployments are not without risk, and I want to acknowledge the SAS soldier who lost his life in Uruzgan just three days ago.

For a long time our two countries were isolated from the rest of the world.

We had little to do with the Asian countries to the north and west of us, and England was anywhere up to six months’ hazardous sailing away.

Nowadays the world is a much smaller and far more interconnected place.

Yet our countries remain as close as ever.

We have a comprehensive trade and economic agreement without the drawbacks of a common currency.

Australia is New Zealand’s most important trading partner and our most important source of foreign investment.

And at a practical level we are always there for each other.

That was reinforced for New Zealanders in the aftermath of the Canterbury earthquakes and the Pike River mine disaster.

When 300 Australian Police arrived at Christchurch airport they were met by a spontaneous standing ovation. It was a moving and visual demonstration that we weren't on our own. You had our back.

In return, New Zealand has always been there to help Australia, most recently after the Victorian bushfires and the Queensland floods.

In your time of need we also gave you one of our best rugby coaches – Robbie Deans.

I hope that makes you more competitive, because from the time I became Prime Minister in late 2008, the head-to-head record between our national rugby teams reads All Blacks 9 – Wallabies 2.

I’ll leave you to draw your own conclusions about that.

Tonight I want to talk about my approach to politics, what drives me, and what the Government I lead in New Zealand has been doing.

I want to make it clear that I am not here to suggest any particular policies or approaches for Australia. That is for Australian politicians and Australian voters to decide.

But I can give you a sense of where I come from and how the National-led Government has been dealing with some the challenges facing New Zealand.

And there certainly have been challenges.

One has been to begin the long process of rebalancing the economy.

The New Zealand economy lost competitiveness in the 2000s because growth was built on all the wrong things – debt, consumption and a 50 per cent increase in government spending in just five years.

Those factors acted together to suffocate the tradables sector in New Zealand, which was effectively in recession from 2004 onwards.

So we have been doing a lot of work to change some of the key settings in the economy, help keep the pressure off interest rates and the exchange rate, and ensure the public sector isn’t diverting too many resources away from the tradables sector.

Another test for the country has been the fiscal challenge posed by the combination of a domestic recession, the impact of the Global Financial Crisis, and the cost of the Canterbury earthquakes.

From the beginning of the recession, in early 2008, the New Zealand economy shrank 3.3 per cent in 18 months, and tax revenue fell 10 per cent.

And while most of the damage from the earthquakes is covered by insurance, the Government is still expecting to face a final bill of around $13 billion, or around six-and-a-half per cent of GDP.

As a Government, we absorbed much of the cost of the recession and the earthquakes on our balance sheet, thereby cushioning New Zealanders from the worst impacts.

But that money has to be paid back, so we have put a huge amount of effort into making savings and, in particular, into changing some of the long-term term drivers of government spending, so we can get back to surplus over the next few years and start getting our debt down again.

The challenges we’ve faced haven’t just been economic, of course.

We have also been dealing with long-standing social problems that have defied easy solutions.

The 2000s in New Zealand were characterised by the idea that big increases in government spending, dispensed across a whole range of areas and in a relatively untargeted way, could transform society.

However, that particular experiment ran out of money in 2008 with little genuinely transformational to show for it, and the problems still remain.

As Prime Minister, I am responsible for leading the Government’s responses to these and other challenges.

As John F. Kennedy once said, we in government are not permitted the luxury of irresolution.

Everyone else can debate issues forever but, in the end, the government has to cut through all that and make a decision, which will invariably please some and disappoint others.

In making those decisions, my Government is very pragmatic.

We are guided by the enduring values and principles of the National Party, but we are also focused on what is sensible and what is possible.

Partly, that is the nature of the political system in New Zealand. It is sometimes said that politics is about convincing 50 per cent of the population plus one, and that has never been truer than under the MMP system we have in New Zealand.

But, in any event, I think government is a practical business.

You don’t start with a blank sheet of paper; you start with the country as it is.

And by making a series of sensible decisions, which build on each other and which are signalled well in advance, and by taking most people with you as you go, you can effect real and durable change, which won’t simply be reversed by the next lot who come into government.

Over time, a series of moderate changes can add up to a considerable programme.

That has been our experience in New Zealand.

In terms of the fiscal outlook, we have effected a significant turnaround.

The advice we had from the Treasury when we first came into office was that if we continued with the settings we inherited, net government debt was likely to reach 60 per cent of GDP by 2026.

Now, after all the changes we have made, net debt is projected to be zero in 2026, despite the Government also picking up much of the cost of the earthquakes.

We have also implemented the biggest changes to the tax system in a generation, to increase the incentives to work hard, save and invest, and decrease the incentives to consume.

That has included increasing GST, bringing down personal tax rates across the board, and dropping the company tax rate to 28 per cent.

We have reformed our planning laws and labour laws, and we are investing heavily in New Zealand’s infrastructure, including state highways, ultra-fast broadband and the national electricity grid.

We have embarked on a process of selling minority stakes in four state-owned energy companies.

We are making significant changes to the welfare system, including work obligations for sole parents when their youngest child turns five.

And we are undertaking a long-term programme of public sector reform. This includes a real focus on results – getting traction on difficult issues like reducing crime and long-term welfare dependency.

Throughout this time we have been consistent and up-front with New Zealanders about what we are doing and why.

And we have retained pretty broad support across New Zealand.

I want to stress, however, that while I think government is about practical, considered decision-making, it is not a technocracy.

In the end, the biggest, most fundamental decisions governments are called on to make are not reducible to calculation in a spreadsheet.

Those decisions rely on the judgements of politicians around concepts like fairness, opportunity, and the balance between individual and social responsibility.

As a politician, my own gut-level judgements have been hugely influenced by my upbringing and my life experiences.

I was a kid who benefited from both the welfare state and a mother who pushed us to improve ourselves through hard work.

My father died when I was young. We had no other family in New Zealand and we had very little money. My mother was on a Widows Benefit for a time, before she started working as a cleaner.

The State provided us with somewhere to live, and ensured my mother had food to put on the table when we most needed it.

The State also gave me the opportunity to have a good education at the local high school and at university.

My mother made sure I seized that opportunity with both hands.

She was a very strong character, and had escaped persecution in Austria before the Second World War. What she gave to my sisters and me was far more valuable than money. Her constant refrain was that, “you get out of life what you put into it”.

My early life was therefore a mix of strong influences: a close family; an emphasis on individual responsibility and hard work; first-hand experience of the welfare system; and a realisation of the opportunities that education offers to kids from even the humblest of homes.

Those influences have undoubtedly shaped my views on the appropriate role of government.

I believe in a government that looks after its citizens and provides them with opportunities to flourish, but recognises that people are responsible for their own lives and the well-being of their families. The way to a better future is ultimately in your own hands.

I believe in a government that gives people security in times of misfortune and hardship but doesn’t trap them in a life of limited income and limited choices. I’ve often said that you can measure a society by how it looks after its most vulnerable. Yet you can also measure a society by how many vulnerable people it creates – people who are able to work, yet end up depending for long periods on the State.

I believe in a government that supports people’s hard work and enterprise, and encourages them to set high aspirations.

I have had a successful career in international finance.

But I have learned that the most valuable assets in life are those closest to home. As a husband, and as a father of two wonderful children, I can say that families are in my view the most important institution in our society.

So I believe in a government that supports families.

At some point, years ago, I found that my own personal beliefs and drivers were a natural fit with the principles of the National Party.

Those principles won’t be a great surprise to you because the origins of the New Zealand National Party are broadly similar to those of the Australian Liberal Party.

The National Party was formed in 1936 from the merger of existing liberal and conservative parties. It was formed to consolidate opposition to the Labour Party, which had won its first general election the previous year.

The name “National” was chosen in part because the new party sought to represent the whole country, without favouring any one class, region, gender, race or religion.

The name “National” also emphasised that the Party’s principles and policies were rooted strongly in New Zealand.

Its first leaders were men born and brought up in New Zealand – Hamilton, Holland, Holyoake and Marshall – who thought of themselves first as New Zealanders, not Irish, Scots, or English.

Keith Holyoake, for example, was a fourth generation New Zealander, all eight of his great-grandparents having arrived in New Zealand around the 1840s. While he maintained New Zealand’s traditional links, he also told Britain quite bluntly that he saw New Zealand as a totally independent nation.

The Party’s founders were not people who saw the world in terms of a fundamental class conflict, where people’s destinies were largely foretold. In fact the Party was set up to oppose that view.

On the contrary, the early leaders of the Party had a belief in the capabilities, and also the responsibilities, of individuals and their families.

People had choices and could make better lives for themselves. The government could help them by enabling better choices, but couldn’t and shouldn’t tell them what to do.

Neither should the government get in the way of people exercising those choices. Holyoake, for example, said that while he believed in everybody having the opportunity for success, he did not believe that, “success in one individual should be thwarted by efforts to prevent the failure of another”.

Many in the new Party were practical farmers and businesspeople who wanted common sense solutions to New Zealand’s problems.

As I said, they didn’t see New Zealand as a battleground where a conflict between workers and capitalists was playing out.

Nor were they interested in many of the things British conservatives and liberals exercised themselves about.

It seems to me they were a fairly straightforward and pragmatic bunch of people who wanted to continue building what was still a relatively young country.

They didn’t believe in uniformity – they thought that was a socialist idea as well. Rather, they thought that the individual freedom promoted by National involved many diverse groups with conflicting interests. Tolerance was the key to working through those conflicts – giving everyone a say, but ensuring the Party ultimately focused on the good of the country as a whole.

The National Party has also always understood that businesses large and small create jobs and prosperity.

It is extraordinary how many people, including a lot of Opposition MPs in New Zealand, think the economy is something separate from the normal life of the country – something that will just keep chugging along while Parliament worries about supposedly unrelated social issues, like employment.

In fact – as I am at pains to point out most days in Parliament – jobs are only created when business owners have the confidence to invest their own money to expand what they are doing or to start something new.

Giving businesses that confidence is the most important thing the Government can do to ensure people have jobs, and that those jobs are sustainable and well-paid.

So those are the general principles the National Party has been promoting for the past 76 years: individual responsibility; equality of opportunity; competitive enterprise; tolerance and respect for all New Zealanders; and an essential pragmatism – a belief in the practical and the possible.

Policies change over time, of course, as knowledge develops, attitudes change, and new challenges arise.

But principles and values are an intergenerational guide that ensures the essence of the Party remains the same, even though individual policy prescriptions may differ.

And they are an important guide for the future.

When they elect a government, voters accept that that government will have to make decisions on issues yet to reveal themselves, and react to situations no-one could have predicted.

It is important that voters have some idea of the considerations that will inform those future decisions.

Sometimes voters have been thoroughly surprised by the government they elected.

Those governments have never worked out very well.

So one of the things my Government has tried very hard to do over the past three-and-a-half years is to be predictable, consistent and upfront with voters.

John Howard made the same point about the Liberal Party in his lecture to this Centre in 2009.

“Love us or loathe us,” he said, “and there were plenty of both, the Australian people knew what we believed in and what we wished to achieve for their country.”

That is the approach we have been taking as well.

In particular, we have sought a mandate at each election to implement certain policies, we have made assurances about others, and we have stuck closely to our word.

Looking forward, the biggest challenge to New Zealand is the on-going debt crisis in Europe and the prospect of subdued world growth, or even recession.

New Zealand makes up less than a quarter of one per cent of the global economy so we can’t help but be affected by events in the rest of the world.

But I remain optimistic about New Zealand’s prospects.

We have sound economic and financial institutions.

We are producing the sorts of products, and providing the sorts of services, that will be in demand over coming decades.

Sixty per cent of our exports now go to Australia, East Asia or Southeast Asia. A strong Australia is critical for New Zealand. And Asia is the most vibrant and growing region in the world.

In addition, the rebuilding of Christchurch is effectively a massive stimulus programme.

Compared to many other developed countries, New Zealand faces a relatively favourable set of circumstances and opportunities. From what I can see, looking across the Tasman, so does Australia.

Our corner of the world, with its 27 million inhabitants, is in a good space. It’s now a matter of making the most of the opportunities that are out there for us.

Can I conclude by again thanking the Menzies Research Centre for inviting me to give this John Howard lecture.

A combination of Menzies and Howard represents an imposing total of 30 years of Prime Ministership.

The test of a Prime Minister is whether you left the country in better shape than when you inherited it.

If I can do as good a job as John Howard in that regard, I’ll be more than pleased.

Thank you.