Speech To The Wellington Chamber Of CommerceTreasurer
It is one of my firm beliefs that the more often we speak with and listen to members of the wider community, the more likely it is that government and its leaders can support the aspirations of New Zealanders. After some time in government I have learned to do it more rather than less. Because our future achievements will be based less on government driven change and more on relationships and networks of which government is a part.
The sweeping changes of the last 15 years in New Zealand in hindsight look relatively simple - now we have the more demanding job of building on the simple principles of good government and good economics.
We will in the next 15 years be dealing with more complicated issues, in addition to the economic basics - the interaction between the global economy and our national identity, the challenge of turning a society built on commodity production into a society thriving on the economic value of ideas, the vital task of reconnecting those New Zealanders right outside the economic mainstream to the possibility of prosperity.
Today I will confine my comments to more immediate matters which are the beginnings of government in the new century. I want to discuss
- the economic fundamentals driving good government
- the egalitarian values that New Zealanders have
- the new way this government is doing business, and
- the role of government in these changing times
As a recently appointed Minister of Finance, I am one of a new generation of front bench Cabinet members and of the National Party.
But at the outset, let me confirm my commitment to some core principles that have served as the cornerstone of New Zealand's economic policy for the last nine years and which continue to be important to New Zealand's ability to succeed in the world.
These principles, which I will continue to foster are:
- an open and competitive economy
- low-rate broad-based taxes
- price stability
- flexible labour markets, and
- a fiscally disciplined government
A great many New Zealanders now regard these principles not as radical new ideas, but as a common sense approach to economics. And that common sense has been exemplified by Bill Birch who has stuck to these principles through six years of turbulent politics .
Mrs Shipley has laid out a transition for economic management from Bill Birch to myself. We have different ways of approaching issues and different styles of communication if only because we are different generations.
We always seem to reach the same conclusions though. This is in no small part due to our shared belief in this core set of principles that National has followed.
These principles used to be controversial, they used to be divisive.
The reality is that they are now embedded in the minds of New Zealand citizens, the nation's politicians and the swath of economic commentators that crowd our airwaves.
That is evident as we watch opposition parties trying to both copy and criticise - depending on the audience they are addressing - what has become a mainstream, common-sense approach to government.
Today's public expects good economic management from their government - full stop.
There are a lot of questions about whether New Zealand has achieved the economic performance we expected form the world beating changes we made. Lets not forget what has been achieved. If the forecasters are near right, New Zealand will average over 3% growth for the decade 1991-2001. In the previous decade we averaged less than half that.
But its not the numbers that matter most.
On Monday I was in the heart of my electorate, down south in Otautau, and visited what had been a struggling sawmill. This was bought by an American family firm that came to New Zealand because they like our labour law, our competitive transport system and our workforce. They have subsequently spent $7 to $8 million upgrading it and doubling the workforce from about 40 to currently 90 and another 20 or so jobs to come.
I met one of the staff who we'll call Kevin. Kevin had not had a job for 10 years, and in Otautau it was never going to be easy to find another. Now he is being trained on the job for a range of tasks around the mill. He'll stay. He will be a better father, a better citizen, a person with hopes and aspirations. That's how good economics changes our community for the better, and we should be proud of it.
In fact every week National has been in office since 1991, around 600 New Zealanders have found new jobs - 600 every week.
And that's what the economy means to most people - a set of fairly simple issues:
- have they got a job or can they get a better one?
- will the job still be there in a months time
- are their teenagers ever going to get out of the house and get a job?
- will there be a few dollars left over at the end of the week to buy the children some new netball shoes or rugby boots?
There is more to life and more on the minds of most New Zealanders than economic fundamentals.
The nation's economic framework is not important as an end in itself. It is important as a means to an end.
Which brings me on to the issue of values. On the one hand our economic framework encourages New Zealanders to achieve, on the other hand we share an enduring set of egalitarian values. On the one hand we want greater wealth, on the other we value our unique lifestyle in our special country.
We all want to get ahead, but we also want to be sure that other people in our community are doing reasonably well too. It is interesting that when we look at surveys of public opinion of things like the economy, or the health service, or education - they all show one consistent conclusion. For me things are going well, but they aren't going well for others. I have used the health service and it worked really well for me, but I don't think it works for other people.
These reflect two things, first of all the bad news machine which is an inevitable part of the modern media, but secondly a genuine concern that New Zealanders have that others are doing as well as they can.
As a party, and as a government, we have worked to reconcile these inclinations - the inclination to get ahead, alongside the inclination that we want others to do well, the drive to create wealth, and the desire to put other values ahead of economic success.
We have broadened our focus to consider social matters alongside economic matters, and while we are proud of what we have achieved, we have only laid a foundation.
Like other social ministers I spent many hours as a Minister of Health working with those in our community who struggle with the simplest of life's daily demands and needs - getting to a doctor, getting children to school, getting out of the house to look for work.
The efforts weren't so much frustrating just because it was hard work, but also because the traditional government way of helping those who need it most simply hasn't worked - too many people have missed out on basic social services theoretically available to every New Zealander.
We have picked up sound economic principles and the best examples of what works now, and set social services off on a path of local control, better integration, more sensitivity to local needs .
Right now more and more community-type organisations, iwi or faith-based organisations work in partnerships with central government so they can more effectively reach people cut off from the economic mainstream. This process will grow in greatly in sophistication in the next century.
As a government we have become more creative, and certainly much more committed, about dealing with issues related to poverty, and to long-standing failure of some government services to reach the people who really need a good quality education and access to health services.
It will be a big challenge in the new century to further develop such a new culture, a new language, and a new approach to government where people feel supported rather than threatened. People support change if it is change for the better
What has this to do with economic policy? Economic policy is about a means to an end, and our end is a prosperous secure community. We don't want to leave people behind, and the public will not support policies that restrict opportunity only to some - a sound economy offers opportunity to everyone. Economic policy needs to reflect our community values as well as the wider world.
Of course we would expect this year that there will be a lot of discussion about National being in power too long, running out of ideas, and that it's time for a change.
We're not afraid to meet those arguments head on.
This government is doing business in a new way, which is the third point I'd like to cover this morning.
We are focusing, particularly with the energy of our Prime Minister, on the power of ideas. We are delivering initiatives, policy, and programmes that connect with the aspirations of individuals, families and communities across New Zealand.
In education we are aiming for the best quality school system in the world. A lot of that is about not being afraid to set standards, not just for our pupils, but also for our teachers. Not being afraid to have organisations like the Education Review Office which make sure those standards are kept. It is surprising how the presence of parents of young children around the Cabinet table does seem to focus the discussion repeatedly on the education system.
With social services National has initiated a series of changes that respond directly to the vastly complex society in which we now live. One of the most innovative ideas is a programme called Family Start. It is about getting in early when families need help, in fact at the birth of the child, and organising services around those people, instead of expecting them to find their way around the complex organisation of social services
We've had to organise ourselves better . The Prime Minister has set up teams of ministers who are working across traditional sectoral boundaries. It has been interesting for me coming in to the core of the Budget process at the stage I did to see just how well the team approach was working in putting together the Budget.
The final point I'd like to cover this morning concerns the role of Government. Two months into my new role as Minister of Finance and Revenue, I am now more familiar with the depth and breadth of government in the New Zealand economy.
After over a decade of market based reform, the central government still takes 35 cents of every dollar earned and the activities of government still account for almost 20% of the total economy. That's far larger than any other sector.
Numbers like those mean that the government as an entity is far and away the largest single participant in the economy. As it stands, every dollar the government soaks up is a dollar that must be used effectively because it could have been more productively employed in the private sector to create jobs and wealth.
Our team approach means government can more readily do what every other organisation has to do and that's take a strategic view of how its using resources. As Ministers we have the job of setting the strategy for our own huge chunk of the economy. That will help the public service to raise its game another step. We are a bit self satisfied about our public sector reforms - now a decade old. The public have moved on and so must we who serve them. The public expect high quality services, continuous improvement, service which is about their individual needs for health or education.
People value the health and education services now not so much for who it comes from, but for what it actually delivers to them. And they're not particularly concerned what effect that has on the government accounts.
They are however concerned with what effect it has on their pockets. Along with education, and social issues, taxation will be a big issue this year.
National is committed to lower taxes. In recent years we have delivered on lower taxes especially for low and middle income working families with family tax credits. A Mataura freezing worker on $30,000 per year with two children is now $101 per week better off than two years ago, with the same gross income. IRD tell me that as they process tax returns over the next few months, 50,000 families who have not yet claimed their tax credits will get a cheque in the mail. They will receive an average of $3400.
That means more choices, better reward for work, the chance to realise some small aspiration or a large hope for a better future.
Lower taxes are good for jobs and investment. However tax reductions must go hand in hand with secure high quality social services. It takes good economic management to increase social spending and lower taxes. That is our record, and that is the future with National.
Tax is a big issue for business. We have a choice about the direction for tax on business. We can choose to have no tax breaks and lower rates, or tax breaks for some inputs and higher rates. I hear calls for both. National has taken the position that business decisions are best taken for profit and growth rather than for tax reasons. We favour lower rates for all businesses, rather than tax breaks for some. I'm sure that will be debated this year.
Compliance costs are an issue every politician is familiar with. I could comment in detail on several issues of current interest, such as ACC, but I want to make a general point. It's time we got down to the nuts and bolts of compliance costs. I don't think another public policy review will relieve the frustration that our business community feel on this issue.
We need to take a good look form the bottom up, not the top down. We need government and business to get together and build confidence by solving some practical problems. Then we need to look at what reasons the regulators themselves have to get it right - we have some legislation with fine principles but irritating application of those principles.
We are an instinctively pro-business party because most of us have been in business - its time to apply the same common sense instincts that make business tick.
There are a range of key economic issues we could discuss - better employment law, the need to turn around our poor performing agricultural sector, the need for long term planning of our investments in roads - the growing costs of local government; the new economy driven by ideas and innovation and government's key role in its development.
We are all learning to lift our game - its like the super 12 - everyone in the game is big and fit and fast - success is about consistency, the best strategy, the best sense of cohesion, the strongest will to succeed. And so it is with economic policy in the future We are building better strategy for the government's third of the economy. We will focus more sharply on how government interacts with the wider economy and the business community in tax, regulation, education, and one I haven't discussed - research and development. We will build on more of the familiar principles of economic policy.
To conclude, we have the opportunity to build on the economic foundation created over the last 15 years by the efforts of thousands of New Zealanders. We are familiar now with the idea that there is going to be a new economy. It is part of government's job to build that new economy of ideas and innovation, new ways of extracting value, and therefore creating jobs, from everything from wool to wide band internet transmission.
We also need to build on the foundations of social policy. The realisation that the changes of the last 15 years have had a social impact and that that social impact has to be dealt with rather than ignored.
Politics has changed with MMP - that's clear to everybody - the economy is changing, and the way government does business is changing - and that is what is so exciting about being a politician at the turn of the century.