Rt Hon Winston Peters

New Plymouth Chamber of Commerce

Devon Hotel, New Plymouth.

12.15pm Friday 12 July 2002

2020: A Vision

New Zealand’s economic performance has been poor since the mid 1980s.

We need to change that.

One reason for our poor performance has been the myopic focus on the reduction of inflation.

In 1985 inflation in New Zealand was running at 17.3% (as against 5% in Ireland for example). Last year our inflation rate was 2.4% while Ireland’s was 4.3%

This, of course, has been claimed as a great success.

This so-called success with inflation has come at a huge price.

Let’s look at a few facts: New Zealand’s average GDP volume growth since 1985 was 2.0%.

Compare that with other first world nations.

Every year for 16 years we have been falling behind!

Predicted growth of around 3%, while being described as “robust’ by the present government continues to lag behind predicted growth in other OECD countries and is far below both our potential and our requirements.

New Zealand is now placed at the lower end of “developed’ countries, and our position has been deteriorating. We are sleep walking to the third world.

When we compare our performance with other countries of similar populations but fewer resources the picture is even gloomier.

New Zealand exports (in $US) $3,600 per man, woman, and child.

That figure for Ireland is $19,300, over 530% more.

And at almost 10 times the New Zealand rate each Singaporean exports $34,700(US).

There are a number of major factors in this poor performance:

- an emphasis on the interests of the financial sector at the expense of the productive and exporting sector;

- for far too long we lived with over valued exchange rates coupled with high interest rates;

- a myopic focus on inflation exacerbated by uncontrolled immigration; and

- programmes of privatisation.

The combined effect of these and other factors has seen the development of an economy skewed towards the financial sector and overseas borrowing, without providing a capacity to service rapidly increasing overseas debt.

Another plain fact is that New Zealand does not have a big enough savings base. Remedying this situation is one of the keys to our future.

There needs to be a fundamental change¡K¡Knot of the sort brought about by Roger Douglas, Richard Prebble, and Helen Clark and company after our last July election back in 1984.

Neither is it a case of turning the clock back.

From SMPs, to tariffs, to quotas, to price freezes, to mini budgets: we have seen the full range of government intervention and neglect.

And now we have another increasingly arrogant Labour government looking to rule on its own and continue with a demonstrably failed economic prescription.

So, can we fix it?

Yes we can!

New Zealand First’s economic policy prescription is based on the promotion of sustainable export-led economic growth.

Unless we can grow rapidly the size of our economy then we can not rebuild our infrastructure and have the quality education and health systems enjoyed by the first world.

What New Zealand needs is a plan that puts exporters first, that enables our exports to really grow.

What we need is a government that will provide the conditions under which exporting entrepreneurs and innovators can flourish.

Responsible business leaders are now recognising that pure market forces have failed to deliver either economic gains or social justice.

Adjustments to the economic environment need not be wholesale but do need to be well directed.

The budgets we presented in 1997 and 1998 took major steps towards providing the conditions for economic and social progress.

And the amendment to the Reserve Banks policy targets agreement, which we made, on becoming government in 1996, has contributed greatly to an improved export performance.

But we cannot settle for more of the same.

Already we are seeing disturbing signs that the good times are gone.

Worse, there is an expectation that this is so.

My message today is a simple one.

Achieving economic growth of 6% by 2006/2007 is a realistic goal.

New Zealand First recognises that any such improvement is absolutely dependent on export success.

In 2003 we will promote a CAMPAIGN FOR EXPORTS.

New Zealand First’s plan is to treble exports, in real terms, well before 2020 and we will set export goals to reach that target.

This, then, is the plan:

Monetary Policy

The more flexible monetary policy prescription and widening of the inflation band to 0-3% introduced by New Zealand First in 1996 contributed to a substantial lowering of both exchange and interest rates.

New Zealand First will:

- promote a balanced and flexible monetary policy of low exchange and interest rates conducive to real export and employment growth;

- amend the Reserve Bank Act and make export, growth, and employment objectives part of the policy targets agreement between the new government and the Governor of the Reserve Bank

We will not accept the continuation of the myopic focus on inflation at the expense of growth, or a Reserve Bank that has misinterpreted the intent of the widening of the band and has often remained within the old 0-2% band - something which it had failed to do on many occasions prior to 1996.

We will not accept the continuing inflationary pressures of largely unskilled immigration that is out of control.

If bringing in half a million people to fill our skills gaps was working then how is it that we have a bigger skills gap in New Zealand than ever before?

The argument that New Zealand has a “skilled immigrant’ policy is nonsense! In fact nearly seven out of ten migrants are NOT constructively engaged in our economy.

Neither will we accept a rapidly appreciating Kiwi dollar that is detrimental to our export goals.

We should be exporting goods and services, not importing people looking for free education, free health care, and a nicer place to live.

Export Policy:

The export focus of New Zealand First’s plans provide the base from which a re-orientation towards high technology and further processing industries will lead the way to an export performance that builds on the best of the present and provides growth for the future.

- The focus on our trading performance will be supported by an expansion of development banking facilities and venture capital opportunities.

- We will consult with exporters to ensure that we have an export credit guarantee scheme that does work, unlike the bureaucratic maze it is now. Every other leading nation has one that works except New Zealand where not one application has got through the system!

- We will ensure that New Zealand’s Trade Development Board maintains and expands our present markets whilst developing emerging markets.

- We will require the promotion of industries where New Zealand has a clear competitive advantage.

- We will ensure innovation through tax incentives for research and development comparative to other first world nations.

- We will make sure that technology transfer occurs within both the public and the private sectors.

- We will increase the international competitiveness of New Zealand business by reducing red tape and compliance costs - we will conduct a full-scale independent inquiry into all Government red tape and compliance costs requiring that they be justified or if not jetisoned. The Committee of Inquiry into compliance costs will be required to report to Government within one year of the next election.

- Our long-term objective is for all New Zealanders to pay less tax.

I am not here today with an election year tax cut in the offing, but New Zealand First does undertake to reduce corporate tax in the short term.

But our economic priority in campaigning for exports next year, 2003, is clear and will be given impetus by one further element in our plan:

- The tax rate on new incresed export net profit will be reduced to 20%.

If Company A has net income from exporting of $10million this year, and if it achieves $12million next year then the tax on the additional $2 million will be at 20%.

- We will put the machinery and legislation in place to ensure that this system is honest and kept honest. Within five years we plan to put all exports on the same footing (of 20%).

So, is 6% economic growth possible?

Of course it is. Some of you are achieving that now. We simply need to lift dramatically the performance of the entire sector.

It is not a case of a government meddling.

It is not a matter of picking winners.

It is simply a situation where the government, as is done in successful overseas economies, provides the right conditions and our entrepreneurs and innovators will do the rest.

And this not just a message for exporters.

- Buy New Zealand First is another means of improving our balance of payments and of helping New Zealand business. It is an area where a government can provide leadership (by requiring government departments and SOEs to buy New Zealand made) and funding. The decision has to be taken: do we actively pursue a policy of import substitution or do we remain ideologically pure and watch our producers disappear?

We became far too reticent about giving a helping hand as a result of the New Right swing of the economic pendulum.

- Instead of going all out to remove tariffs ahead of the rest of our major trading partners we should emulate them in placing a buy New Zealand priority internally and on our foreign aid . If we are to build industries that are truly internationally competitive then we must be prepared to help them get established.

Why do most of our significant food processors now operate plants in Australia? What requirements and advantages lead to that situation?

New Zealand business must be given the conditions to compete from here.

With more production, more employment, and dramatically more growth taking place onshore then the government will take more tax, pay less benefits, and be able to afford a range of incentives.

It’s just common sense really.

Business policy in New Zealand today is, by any international comparison with sound economies, a mess.

Can we fix it?

Yes we must!

Just as we must put an end to the Treaty Industry.

Just as we must regain control of our streets.

Just as we must tighten the rules relating to immigration and make sure that those entering our country bring with them the capital and the skills to make a contribution. At the moment we have become the health camp for Asia and the Pacific¡K¡K.and Kiwis have to go to Australia for medical treatment and even further afield for well-paid employment.

While we import a New Plymouth and a Hawera each year we watch our children leave the provinces and then the country.

All of which presents New Zealand voters with the clearest choice they have had in a long time.

The insurance policies on offer are either Greens with their pro cannabis anti trade policies or New Zealand First.

ACT and National are irrelevant in any likely scenario.

What is your choice?

ENDS

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