Hon. Michael Cullen
12 October 2004
Speech Notes

Address to Rail and Maritime Transport Union Annual Delegates Conference

Matai Room, Porirua Police College

It is my pleasure to address your 2004 Conference. The last year has been a momentous one for the New Zealand rail industry, and this morning I would like to review what has been achieved, and the progress that is being made towards making rail a pivotal part of our economic and social infrastructure.

2005 will also be a momentous year for the country at large. It will be an opportunity for New Zealanders to elect a Labour-led government for a third consecutive term, thereby cementing in a set of policies which has seen growth and jobs return to our economy, alongside long-term investment in social services such as health and education. It is also a set of policies which assumes that working through issues in partnership (whether those issues relate to conditions of employment or to balancing the interests of various communities in the seabed and foreshore) is an infinitely better approach than one based on division and confrontation.

We believe economic and social progress flows from investment in skills, in public services such as state pension and health system, and in ensuring that all New Zealanders have a real and tangible stake in the future.

So this morning I would also like to address the question of why this union, and the union movement in general, needs to set its shoulder to the wheel to work for another Labour victory in 2005.

First, let’s look at what has been achieved in rail.

The rail network is now back in public ownership, bringing to an end one of the most disastrous privatisations in New Zealand history. The buy back of the network is a cause for celebration in itself, as well as being a key plank of the government’s National Rail Strategy, which was released last month. This is a strategy for realising the full potential of rail as a properly integrated part of the nation's transport infrastructure.

The fact is, the 1990s were years of underinvestment in rail. As we are beginning to realise, they were also years of underinvestment in roading and in infrastructure in general. It will be a major task to fix the problems caused by the neglect of the last National-led government and get New Zealand business and commuters moving again. Our deal with Toll Rail is one way we are addressing that task head on.

As you will know, the deal involves Toll Rail investing $100 million in rolling stock, while the government is committed to investing $200 million over four years on upgrading the track and replacing worn out parts of the network.

Thus far the transition appears to be going well. Toll Rail and the new publicly-owned company, Track Co, have established a good working relationship and are meeting initial milestones. I understand that the transfer of the workforce into the new structure is proceeding smoothly.

My government takes very seriously the need for a strategic approach to transport issues. For a start, we have grasped the nettle on the question of long-term transport funding, committing $18.7 billion for transport over the next ten years. We have also recognised the need to involve all participants in the planning process, from service operators and users to local councils.

And for the first time we are coordinating planning and investment in all modes of transport, including road, rail and shipping, to ensure that money is spent effectively and efficiently to achieve the best outcomes in terms of return on investment, congestion reduction and improved outcomes for business, commuters, local communities and the environment.

A properly equipped and efficiently managed rail system provides unique opportunities to ease road congestion, and provide a cost competitive and environmentally sustainable alternative to road transport. We have, I believe, created the conditions in which those opportunities can be realised.

What the government is doing in rail is of a piece with a larger strategy of building a strong economy. Next year we will be seeking a renewed mandate to see that strategy through to its next phase. Our achievements so far for ordinary working New Zealanders are undeniable.

In these last five years we have made significant advances in terms of economic growth, and the wide distribution of its benefits through job growth and growth in incomes.

Economic growth has been consistent, and in OECD terms impressive. We have maintained annual growth at around 3½ per cent or more since 2000, with growth for the June year just ended coming in at a very pleasing 4.4 per cent. Much of this growth has occurred in domestic sectors (for example, construction, education, and hospitality), which have benefited from high population growth, low interest rates and, until recently, high farm incomes.

It has also been job-rich growth. The number of people in work has risen considerably in the last 4 years – a combined rise of 193,000 or 10.8 per cent between March 2000 and March 2004 quarters. Meanwhile, the unemployment rate has fallen from around 7 per cent in 1999 to 4 per centin June 2004, a 17 year low and the second lowest rate in the OECD.

Not only are New Zealanders in work, they are also enjoying increased incomes and increased wealth. For example, total gross labour income increased 7.5 per cent between June 2003 and June 2004. That is what is driving domestic demand, with private consumption expanding 5.7 per cent, and residential investment 13 per cent in the year to June.

So the economic growth we have achieved is not being captured by a small elite, but is being spread through throughout the working population and beyond. My government has also distributed that wealth more widely by maintaining and in some instances increasing the value of benefits and pensions, and by increasing expenditure on social services such as health care, housing and education which benefit all sectors of the community.

And – as I am duty bound as Finance Minister to point out – we have achieved this while maintaining a tight fiscal policy, reducing Crown debt and making significant investments in the New Zealand Superannuation Fund in order to safeguard the future affordability of the state pension.

In short, we are a government that has delivered for ordinary working New Zealanders.

A growing economy is the result of getting a range of factors working effectively. One of the keys is a workforce that has the right skills, is fully engaged in the task of increasing productivity, and enjoys pay and conditions that are competitive in a global labour market. Our deliberate choice as a government has been to aim for an economy based on high skills, high added value and high motivation.

Improving skills and keeping them current with the demands of a changing economy is a major focus of our investment as a government. With lower unemployment, we’ve seen skill shortages emerge. A labour shortage is now the main constraint on output for one in five firms – and a net 29 per cent of firms reported increased difficulty finding workers in the June 2004 quarter – an all-time high.

We are addressing that issue on a number of fronts. We have altered our immigration policy to attract the specific skills that are in short supply, rather than inviting in immigrants with skills that are poorly matched to local labour market conditions.

We have made great strides in industry training, increasing participation to around 127,000 trainees in 2003, a 56 per cent increase since 2000.
Employer involvement in industry training has also steadily risen, as more businesses seek the benefits of industry training. By 2003, around 29,000 employers were participating in industry training, an increase of 19 per cent since 2000. We have adopted a target of 150,000 trainees during 2005, and Budget 2003 provided an additional $84 million over four years for industry training to achieve this target.

We have also reintroduced the concept of apprenticeships, and have increased investment in the Modern Apprenticeships programme in each year of its existence, so that as at March 2004, there were 6,580 Modern Apprenticeships throughout New Zealand in 30 industry areas.

Improving skill levels is one aspect of increasing productivity; but more is required. The notion of productivity gains got a bad name during the 1980s and 1990s when it was associated primarily with cost cutting. That is a wholly inadequate view (although one that still has its supporters among the more doctrinaire business lobbyists and within the right of centre political parties).

Productivity is primarily about working smarter, and that means constructive workplace partnerships where management and employees work together to increase efficiency and effectiveness and – very importantly – share its rewards. The jury on this question is most definitely in: enterprises that constantly improve their productivity are those that use collaborative models to identify and implement business practices that improve timeliness and quality, minimise costs and waste, and promote innovation and the uptake of new technology.

The issues are complex and varied, however, and that is why in February 2004, the government established a Workplace Productivity Working Group to advise on ways for industry, businesses, unions and employees to work smarter and more productively. They are looking across the board at ways to improve the return on investment in our workplaces – whether it is new plant and equipment, new workplace practices, new technologies, new skills.

The Workplace Productivity Working Group is tripartite - business, union and public sector representatives - and is a good example of a partnership model in action. The working group will not be answering all the questions about productivity, but will stimulate the debate, pull together information, and help identify priorities for further work.

So higher skills and better productivity are important goals for the workforce we are aiming to create for the future. So too are pay and conditions that are globally competitive.

We have worked hard since we were first elected in 1999 to turn New Zealand into a globally competitive employer. Important changes have been made in employment relations, health and safety, and holidays, minimum wage and paid parental leave entitlements.

In 1999 we repealed the Employment Contracts Act and passed the Employment Relations Act in 2000. Generally, the ERA is working well.

Union membership is now steady on around 22 per cent (21.9 per cent at March 2003). And the latest available figures for the year ending December 2003 show industrial action at historically low levels, with 28 stoppages being recorded that that period. That is the second lowest figure for almost the last 20 years – the lowest being 21 stoppages in 2000. This compares with a high of 72 stoppages recorded under the ECA in 1996.

The increased emphasis of the Employment Relations Act on mediation as a tool in the resolution or ‘cooling down’ of disputes has seen mediation services being used in an increasing number of bargaining situations, either before or after stoppages have occurred. Increased access to mediation services has assisted in many collective agreement negotiations, resolving or averting a number of potential or actual stoppages with significant economic consequences. Over the past two years, when mediation has taken place, around 77 per cent of problems are settled there.

As you will be aware, a Bill amending the Employment Relations Act has just been reported back to the House. It contains a range of fine tuning provisions which will add further strength to what is already a very effective piece of legislation.

As a government we have also been active on other fronts. On health and safety issues, in which the RMTU takes a keen interest, amendments to the Health and Safety in Employment Act were passed in 2003. Key changes were:

- One Act coverage for all employees;

- Recognition of stress and fatigue as potential work hazards;

- A mandatory requirement to involve employees in the development of health and safety processes at work; and

- Two days paid leave each year for health and safety representatives to attend health and safety-training courses.

On ACC we repealed the Accident Insurance Act 1998, which privatised the Work Accounts, and restored accident compensation to management by a publicly operated and accountable organisation.

Last year we amended the holidays legislation to introduce four weeks annual leave from 2007, increase entitlements to sick and bereavements leave; and clarify payment for public holidays.

We have also steadily increased the minimum wage, introduced paid parental leave, and established a fund to improve workplace knowledge, productive relationships and health and safety awareness and understanding.

What all of these measures boil down to is a simple message which we will be taking to the electorate next year: this is a government that is working – working for the economy in terms of building the platform for ongoing growth, working for families in terms of sustaining and improving the services that they need and expect, and working for New Zealand workers in terms of creating an environment in which they have clearly established rights to bargain over pay and conditions, and a very real stake in finding solutions to the challenge of increasing productivity and hence strengthening our economic prospects, collectively and individually.

We are also the government that is working for rail, as a mode of transport with a central role in a long term transport strategy. Our aim is to secure a future for this industry, supporting growing New Zealand businesses and thriving New Zealand communities. Thank you.

ENDS

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