Rt. Hon Helen Clark
20 May 2004

Malta Chamber of Commerce, Valletta, Malta

Thank you for the invitation to address the Chamber of Commerce today.

In my address I will speak about the state of the New Zealand economy and the strategies my government is pursuing for economic success in the 21st century.

But let me begin with some comments on the desire New Zealand has to update its relationship with Malta.

Our ties go back a long way to World War One, when our soldiers wounded at Gallipoli were evacuated to hospitals here.

Then in World War Two New Zealanders played a part in the defence of Malta with hundreds serving with the Royal Air Force and the Royal Navy.

Since Malta’s independence in 1964 we have been partners in the Commonwealth. And it’s our common connection back to the United Kingdom which sees us share the English language and the common law. As well, we share democratic values and have a long history of co-operation in international organisations.

These are all old and strong ties, but it’s time to do more.

The catalyst for New Zealand seeking to freshen the relationship up is Malta’s accession to the European Union.

The EU is our second largest trading partner, and we work very closely with it on many international issues. We have a big stake in our EU relationship, and seek to strengthen ties with the new Member States.

In the case of Malta, we have the strong base of that shared heritage to build on. What’s important now is to make the relationship as vital to today’s young New Zealanders and Maltese as it was to their grandparents’ and great-grandparents’ generation.

That’s why my government suggested to Malta that we negotiate a Working Holiday Scheme, so that fifty young people from each of New Zealand and Malta can live and work for periods of up to a year in each other’s countries and experience each other’s way of life. New Zealand has many such agreements and finds them of enormous value.

I’m pleased to say also that we are close to completing negotiations for a Social Security Arrangement, which will be very helpful to the retirement arrangements of our senior citizens who have lived and worked in one or both of our countries and wish to enjoy the benefit of a full retirement income.

I hope we will be able to find other ways of encouraging people-to-people contacts between our two countries.

Our economic relationship is rather a small one, and it is weighted heavily in New Zealand’s favour.

In 2003 we exported $12.9 million worth of goods to you, and you sold us $647,691 worth in return.

Our exports were mainly meat and dairy products, and they now face higher tariffs with Malta’s entry into the EU.

For that reason, we have advised the EU of our desire to negotiate compensation under GATT Article 24(3).

The New Zealand and Maltese economies are profoundly different in nature. Ours has long had a major primary sector base, while yours has had manufacturing and trans-shipment bases.

What we do have in common are our tourism sectors. Yours accounts for about a quarter of your GDP, while ours accounts for about one job in every ten to twelve and competes with our dairy sector as the largest earner of foreign exchange.

The New Zealand economy has been through some very tough years of restructuring. By 1984 the government’s budget deficit was around eight per cent of GDP, the primary export sectors were subsidised, and there was high protection around manufacturing. All that changed rapidly in the 1980s and 1990s, but with little regard for adjustment mechanisms. The rate of unemployment rose to double figures around the end of 1991, and stood at 6.8 per cent when my government was elected at the end of 1999.

Over the four-and-a-half years we’ve been in office, growth has averaged 3.5 per cent, and unemployment at 4.3 per cent is at its lowest in sixteen-and-a-half years. The government runs a healthy budget surplus. Government debt, at 28 per cent of GDP is the lowest it has been since the mid 1970s. Inflation is sitting in the lower half of the 1-3 per cent range agreed between the government and the Reserve Bank.

The New Zealand economy may be small, but it is also smart and strategic. We have adopted the objective of growth through innovation, and aim to move all our industry sectors up the value chain. The application of education and skill; research, science and technology; design and smart branding and marketing is as relevant to the land and sea-based sectors as it is to other newer sectors.

In our Growth through Innovation Strategy we’ve looked at where the government can add value to try and speed up economic development. We see our role as being a partner, a facilitator, a broker, a funder, and in key areas a provider of inputs to the economy.

Specifically we have prioritised:
Lifting education and skills levels in the workforce, including through talent-based recruitment of migrants. We make big investments in education and work-based training
Investment in research and development. We’ve increased government funding and improved the tax treatment of R & D. Between 2000 and 2002, private sector spending on R & D increased by over thirty per cent
Regional partnerships. We have funded the development of economic strategies in New Zealand’s regions around their core strengths, and followed through with funding for major regional initiatives which support the formation of strong industry clusters and centres of excellence
Industry strategies. We’ve worked through government-industry taskforces on strategies for industry sectors; both in new economy sectors like biotechnology, information and communications technology, and the creative sectors, and in established sectors like tourism, wood processing, niche manufacturing, and textiles, clothing and footwear, focusing on taking them all up market.
Export orientation. New Zealand is a very open economy with around 95 per cent of imports by value entering free of tariffs. That means that our industry sectors have to be internationally competitive. Then, because we are small, we need to export and to form strategic partnerships offshore to get adequate scale for our products and services.

Our trade and enterprise agency has programmes to support the growth of medium sized companies into larger ones, and to provide support to new exporters, including through offshore incubators and export platforms for New Zealand companies in the United Kingdom, the United States, and Singapore.

The agency’s investment arm looks for foreign direct investment which can add to New Zealand’s capacity in our areas of strength.

Our export orientation means that we are working hard in the WTO Round to open up world agricultural trade. We are also negotiating a free trade agreement with Thailand, and expect to begin negotiations on an FTA with China next year – the first developed country to do so. We already have FTAs with Australia and Singapore, and are working on a trans-Pacific agreement between New Zealand, Chile and Singapore.

In New Zealand today, the non-commodity aspect of our traditional primary sectors is increasing, and we have lively modern sectors in areas like specialist fruits, wine, aquaculture, information and communications technologies, niche manufacturing, and marine design and construction.

In addition, our tourism offers increasingly specialised services at the top of the market. Over the past fifteen years or so the education service sector has grown from being an almost nil foreign exchange earner to a billion dollar plus industry.

Then, success of our screen production industry is not only creating wealth for New Zealand, but is also helping brand us as we wish to be known in the 21st century: dynamic, creative, innovative, and unique – adding to New Zealand’s already positive clean and green image. The Lord of the Rings trilogy, rolling out over the years, and scooping this year’s Oscars, has been like one big promotion for New Zealand.

Yes, our exports have been affected in the past two years by currency appreciation against the US dollar, but our domestic economy has been strengthened by positive net inward migration and the spending power of increasing numbers of tourists. In today’s troubled world, New Zealand is very attractive as a place to live, work in, visit, and invest in.

In the brief time available, I hope I have been able to convey to you the dynamism and energy of the New Zealand economy and the strategy we are following to increase our wealth and prosperity.

I know that the people of Malta are very familiar with Australia’s economy because so many of your compatriots have settled there. Our free trade agreement with Australia makes our two countries into one combined, affluent market of close to 25 million people which should not be ignored. I hope we can find more ways of linking the Maltese and New Zealand economies in future.

Thank you.

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