Trans-Tasman Business Circle

  • Winston Peters
Deputy Prime Minister

Ballroom, Sydney Hilton, 295 Pitt Street

John Weiss, ladies and gentlemen.

It is not often a New Zealand politician agrees with the Australian Press. In fact it is not often that a politician agrees with any member of the press.

But an editorial in The Australian newspaper caught my eye the other day. A ``good first Budget'' it read. One that was ``fiscally responsible and generous....''

This is somewhat selective, of course, but it is nice to know that one is appreciated and on the right track on at least one side of the Tasman, albeit, your side!

New Zealand has a reputation for economic reform, especially since the mid-1980s. The Budget we brought down two weeks ago, and the Retirement Savings Scheme launched just 48 hours ago, show New Zealand is still at the cutting edge of change.

The Budget was historic. It was the first under our new Mixed Member Proportional system and it was produced within a very tight time-frame - nine weeks less than the normal Budget round.

It was also produced under demanding political conditions.

It is the cornerstone of the Coalition Agreement that binds together New Zealand First and National.

It delivers, not just in one year, but over the next three, policies for economic growth and social responsibility.

This in itself, is unique, as it is the first time that a New Zealand Budget forecast has included provision for Government spending plans for every year of its three year term.

We have set a limit of $5 billion for new spending over the three years to 1999-2000. And we are not prepared to go beyond this limit to pander to political whims and vagaries.

This will require considerable discipline.

Some of the key policy developments underpinning the 1997 Budget, and indeed subsequent Budgets are:

conservative and prudent fiscal management

an economic environment conducive to sustainable development and growth

innovative social policy that reinforces the social responsibilities we share as New Zealanders, and

a long-term strategy to manage the pressures of an ageing population.
The Budget strikes a balance between maintaining surpluses, being able to meet increasing demands in education and health, as well as reducing debt and taxes further. It also signals further reforms to boost economic growth.

The release of the White Paper on the Retirement Savings Scheme on Monday, also means all New Zealanders now have a concrete proposal for managing the pressures of an ageing population as well.

The Government has made it clear it will continue to run substantial surpluses rising from $1.5 billion in the coming year, to $2.6 billion in 1999/2000.

New Zealand is one of only four countries in the OECD which have been able to produce Budget surpluses, and we have been able to achieve this even at the bottom of an economic cycle.

As a direct result of that achievement, net Crown debt will continue to fall. By 1999/2000 we expect net Crown debt to fall to around 20.5% of GDP.

New Zealanders are looking forward to the legislated tax cut of 3 percent in July 1998. Further tax reductions totalling five percent are also planned.

The results of the referendum on the Retirement Savings Scheme in September will have a bearing on the shape and form of these future tax reductions.

The combination of the Government's economic policies together with a favourable world economic climate means that New Zealand can look forward to a solid economic performance over the next three years.

The 1997 Budget projects economic growth in New Zealand will rise to 4.2% in 1998/99, and then moderate to a more sustainable annual 3.5%.

This growth will be achieved within an environment of stable prices with inflation remaining at the lower end of the 0-3% target band over the forecast period.

We believe maintaining an open and competitive environment is fundamental to ensuring that New Zealand has an innovative and dynamic business sector. The Government intends to:

increase its efforts in every available forum to improve market access for exporters, and enter more Open Skies aviation agreements;

review vehicle tariffs by the end of this year to achieve a swift move to zero tariffs from the year 2000; and

set a timetable next year for complete free trade ahead of APEC's 2010 deadline.
That said, the Government must also look to ensure that its businesses face the same pressures to be innovative and dynamic. Crown owned assets total $55 billion.

The effective management of these assets will assist in the improvement in the overall performance of the economy. The Budget also signalled that the Government would:

retain the strategic Crown assets such as the Electricity Corporation, Trans Power and New Zealand Post, but consider divestment case-by-case of non-strategic assets.
It also signalled it would begin that process by scoping the sale of Government Property Service Limited and Vehicle Testing New Zealand Limited.

Ladies and gentlemen, as you will appreciate, investment is critical to strong economic growth.

New Zealand welcomes all investment that boosts employment, productivity and growth. To this end, the Coalition Government supports:

the development of the Multilateral Agreement on Investment in the OECD.
The Agreement will improve the climate for international investment, while protecting the national interest of members. It will clearly signal what we expect of potential overseas investors in New Zealand, and will provide them with additional certainty about the way they will be treated.

Growth brings the security of more employment and higher incomes. Improving our nation's growth prospects is therefore a priority.

Over the last five years unemployment has fallen from a high of 10.9% in 1991 to around 6% as the economy grew strongly.

But real concerns remain.

Too many people are dependent on welfare in New Zealand. And too many children are missing out on a good start in life.

Nobody begrudges state funded support in New Zealand for those in need, but support does not excuse people from their responsibilities to themselves and their own family.

Our expectations are simple, fair and achievable:

if New Zealanders receive taxpayer support and are able to work, then that's what they should be doing, actively seeking work;

if they receive taxpayer support for their children, then they should look after them properly and ensure, for example, that they attend school; and

if they receive extra taxpayer support because they find it hard to organise their finances, then they should seek and follow budgetary advice.
These obligations are not asking too much. Every New Zealander has an obligation to support their family, to make sure their children get to school, and to make the most of opportunities to improve their skills.

In the future we hope to provide beneficiaries with a plan that details what the Government expects of them in exchange for the help they receive from taxpayers.

What we envisage is a code of social responsibility - a form of contract between a welfare recipient and the State. The Government will also introduce reasonable processes to ensure that we New Zealanders meet these obligations.

Two days ago the Coalition Government released the White Paper ``You and Your Retirement Savings''. Under this scheme, people will contribute some of their income to a private sector retirement fund of their choice - the Retirement Saving Scheme.

Contributions start at 3% in 1998/99, and will rise to 8% in five years. However, contributions will only increase if it is possible to make tax cuts broadly matching the increase in contributions.

For people born after 1973, the savings target amount is up to $120,000.

This target is the same for men and women.

The scheme will cover all New Zealanders, except temporary foreign workers.

All forms of taxable incomes will be subject to the scheme. And savings will be invested in the individual saver's name until the saver reaches the age of 65.

The saver will decide which fund or funds to invest in.

At age 65, the saver will purchase a whole-life-annuity - an amount that will be paid in fortnightly or monthly payments for as long as the person lives.

All New Zealanders, at the time they retire, are guaranteed to receive an income which starts at 33% of the average ordinary-time wage (after tax).

For those unable to save the target amount, the Government will make up the difference between their retirement saving scheme savings and the amount required to purchase an annuity.

Retirement income will therefore be a shared responsibility between the individual and the Government.

We believe the current tax funded New Zealand Superannuation scheme is not sustainable over future years, particularly when the baby boomers of the 1960s reach retirement age.

Government funded retirement income support has to be affordable. Not just now, but in the future.

The impact of Retirement Savings Scheme expenditure on the Government will be dramatically less than the current state funded pension scheme.

The transition from New Zealand Superannuation to the Retirement Savings Scheme has been designed to ensure a smooth changeover, and it will take 40 years.

In designing the scheme we have taken a very long-term view of the solution. We want a sustainable solution. We want to introduce certainty and security for all New Zealanders.

In conclusion, ladies and gentlemen, we believe the New Zealand Coalition Government is delivering on its strategy, a strategy based on:

conservative and prudent fiscal management

an economic environment conducive to sustainable development and growth

innovative social policy that reinforces the social responsibilities we share as New Zealanders, and

a long-term strategy to manage the pressures of an ageing population.
We believe the Coalition Government has made significant progress since it took office just seven months ago.

We have delivered our first Budget.

We believe it strikes a balance between increased spending and achieving surpluses to ensure continued debt repayment and tax reductions in 1998.

It is a Budget that demonstrates that this New Zealand Government is serious about lifting the momentum on economic growth.

Removing remaining tariffs, for example, is critical if New Zealand is to become more competitive in the things we do best.

It is a Budget that clearly signals the direction the New Zealand Government intends to take in reforming the welfare system. We want state assistance to reinforce the social responsibilities that all New Zealanders share.

Finally, the Government has delivered on it promise to present New Zealanders with a proposed Retirement Saving Scheme that responds to the demand for a long-term strategy to meets the demands of an ageing population.

These achievements in a very short time-span point to the fact that this historic Coalition Government in New Zealand is indeed delivering within the new political environment of MMP.