Hon Jim Anderton
27 August 2000 Speech Notes

Embargoed until delivery, 6:30PM Sunday 27 August 2000

Australasian Foundry Conference

Address to the Australasian Foundry Conference opening

Skyline Restaurant, Queenstown.

6:30PM 27 August 2000

I welcome the opportunity to speak here.

The Government has come in for its share of criticism recently from those who say we are anti-business. I’ve flown from Auckland today, to speak in Queenstown, as an example of the Government’s commitment to communicating with business audiences.

As Minister for Economic Development I am travelling the country to speak to as many groups like this as possible.

There are twenty regions of New Zealand. I’ve visited almost all of them this year.
I’m making an interesting discovery as I travel around New Zealand.

Most of the rest of New Zealand is far ahead of the Government in taking a pro-active, partnership-based approach to economic development.

There is a very high level of awareness about the potential for co-operation among local authorities, private businesses and community organisations such as Chambers of Commerce, manufacturers and employers, and Maori economic entities.

In regions all over New Zealand, economic development partnerships are being formed to create and develop natural advantages. The aim is to stimulate business, employment and the economic well-being of communities.

The Labour-Alliance coalition Government recognises the benefits of that approach.

The Government is committed to doing our bit as well.

We need to lift the performance of the New Zealand economy.

Our GNP per capita is falling behind other developed countries. It’s been falling behind for twenty-five years.

Our current account deficit is chronic. We have had twenty-seven consecutive years of failing to pay our way in the world.

There was considerable alarm among some commentators last week when our dollar fell below 43 cents US.

This was thought by some to be a reflection on the policies of the present Government, as if the level of the dollar was some kind of rough score card for how the economy generally is doing.

In my view the dollar’s current level is driven by factors that suit our political opponents rather less.

It should be remembered that when our dollar was worth 70 cents US a couple of years ago, our export industries were being crucified. Its level then was driven by the highest real interest rates in the developed world. Overseas investors knew they were on a one-way bet – the Reserve Bank at the time could not afford to allow the value of the dollar to fall because of the potential inflationary effects. And interest rates were being hiked up to try to suppress domestic demand.

The result was that the economy’s debt increased massively. To put it bluntly, we were living on the credit card.

The current level of the dollar is largely a predictable response to the explosion in the balance of payments. We were importing too much and exporting too little, and now we are experiencing the so-called ‘correction’.

New Zealand’s overseas debt is a serious problem. We owe more overseas than the entire economy can produce in a year.

It is certainly true that a country can’t get rich by having a low-value currency. But it is also true that a country can make itself poor by having an over-valued currency. That is what New Zealand was doing for far too long.

I want to quote from the conclusion of a commentary that was prepared recently by the Association of Crown Research Institutes. There is no political agenda behind it. It’s a simple statement of the way things are:

It says the economy as it is now cannot guarantee improved quality of life in New Zealand.

‘We must build knowledge-based exports by levering off endowments and creating competitive advantage. Government has a critical role. The narrow focus on efficiency over the last fifteen years has limited our ability to catch up with other OECD states.

‘We must change to improve our quality of life. If we don’t, it’s all downhill.’

In other words, ‘hands-off’ hasn’t worked. It’s time to try something new.

We need to transform New Zealand’s economic base.

If we want to increase the incomes of New Zealanders and lift our overall economic performance, we have to develop far more high-value, high-technology industries. Products that people want to buy.

New Zealand is the lowest exporter of high-tech products in the OECD.

Our current levels of high-technology exports are similar to those of other countries a quarter of a century ago. We are losing, rather than gaining market share.

We import five times as much high-technology production as we export.

Even Greece, which is the next worst of all developed countries, imports a little over three times the value of its high-tech exports.

We think of ourselves as a great trading nation. When it comes to commodity exports, it’s true that we’re good at it.

But close scrutiny of our export base shows how precarious our position is.

New Zealand only has a very narrow export base.

Only 4% of our companies are exporting: That’s only 8500 businesses out of 259,000.

95% of our exporters sell less than $5 million a year worth of goods and services overseas.

Only thirty companies earn half of our foreign exchange.

What this adds up to is a very narrow, and shallow, export base.

New Zealand is highly dependent on a relatively small number of large exporters.

We need to grow our small and medium exporters into larger companies. More small and medium companies need to become successful exporters.

One of the reasons that I am very pleased to be here is that the foundry industry is a high-tech, manufacturing industry that has enormous potential for export gains for New Zealand.

It is an example of the kind of industry we need to grow.

It is estimated that the New Zealand foundry industry already earns more than $100 million a year from exports.

The industry in New Zealand has risen to the challenge of competition and developed the technology to not only defend its domestic market but to compete effectively on both price and quality.

New Zealand is now beating many Australian, Asian and American foundries both on price and quality. The American market has huge potential.

The industry is changing. The emergence of demand for lighter weight magnesium and titanium components means there is rapidly growing worldwide demand for new technology to produce these goods.

I understand metal castings are being seen as likely to replace plastic in many of its current uses. Magnesium casting could replace plastic housing for computer screens for example.

If New Zealand can position itself at the forefront of these sorts of developments, then we can begin to meet the challenges I spoke of earlier – of exporting more high-technology, complex manufactured goods.

It’s not a matter of the old economy versus the new economy. That argument is pointless. It is about the transformation of old economy processes.

The forestry industry has been transformed by science: From the propagation of trees, and sophisticated research on which varieties grow fastest where, to the lasers being used in the field to saw logs, where once the job was done with a chainsaw and a tradesman’s eye.

Recently I opened the new Richmond meat plant in Hawkes Bay. Meat is supposed to be old economy. But here was a freezing works unrecognisable from the works I worked in during my youth. Richmond is revolutionising its packaging and marketing. So that is new economy.

A few days ago I visited a factory in South Auckland that manufactures health care products. It had a very impressive series of production lines and equipment that had been recycled from other production lines. Yet the heart of the operation was not the machinery, but a computer sitting on its own out the back. Every single piece of stock in the building was individually tracked, and the computer maintained a precise inventory and ordering system.

The advantage to the business is that it always operates at optimal stock levels. New stock is ordered precisely when it is needed. Delays because materials have to be ordered in are avoided.

In this way, the business can maximise its working capital. It doesn’t have a penny more than it needs tied up in holding stock in a warehouse. Not is it encumbered by frustrating delays in the production process.

The importance of what is happening in that factory is that it shows that even quite prosaic factory operations are being transformed. In this case, the electronic tracking and ordering system gave an e-commerce edge to a business based on manufacturing bottles of potions.

Information and communication technologies such as the Internet are fundamentally changing the structure of economies.

They offer New Zealand immense opportunities, particularly in reducing the distance from our markets in many key areas.

What is most important about the effect of the new technologies is that they highlight the importance of skills in producing higher incomes and a more successful economy.

High-incomes are dependent on high-skills.

New Zealand needs to produce more scientists, engineers and technologists.

I recognise that the Foundry Industry is showing leadership in the area of skills training, based on the idea of workplace competencies.

In the past a foundry would build moulds and cast products from designs and specifications provided by the customer.

Today, most of the growth in the industry is coming as foundries begin to carry responsibility for the design and manufacture of customer’s products.

In other words, the growth is coming in the most valuable area possible: From creativity and skill.

I recently opened the extension of the Ford Alloy Wheel plant in South Auckland, where a very exciting approach is being taken to skill development.

Around 340 staff there out of a total workforce of 500 have signed up to traineeships where the focus is on multi-skilling. The future of the industry will be based on a workforce with all-round skills, rather than just a single skill.

The development at the Ford plant is an impressive example of an investment in the workforce that is obviously valuable to the employees, and yet also helping to create a superior product and contributing to the wider economy.

Just as businesses are having to take a new look at ways of doing business, so the Government of New Zealand has to take a new look at out role in helping industries to develop.

The Government has established Industry New Zealand to take a partnership approach to boosting New Zealand’s economic development.

We will be present at multiple levels, from attracting new investment, to assisting innovative ideas to get off the ground and helping existing businesses to grow.

On 4 July this year we launched the first Industry New Zealand partnership programmes.

The first was a Regional Partnership Programme to deliver grants to regions of up to $100,000 to develop plans and initiatives to make the most of their unique strengths and competitive advantages. Up to $2 million per region will be made available to implement regional strategies and initiatives.

The second was an Enterprise Awards scheme that offers financial support of up to $10,000 to innovative entrepreneurs and small businesses to help them test and develop concepts with strong growth potential.

The third was an Investment Ready Scheme that will deliver skills training and assistance to business and entrepreneurs seeking finance and venture capital for innovative concepts.

These programmes are just the beginning.

Industry New Zealand, together with the Ministry of Economic Development, will be the face of Government in the partnerships of the future.

The approach we take will not be ideological. Simply put, if it works, we’ll do more of it. If it doesn’t work, we’ll stop.

What we won’t stop doing is committing ourselves to ensuring that the Government plays its role.

I would like to close by emphasising that the partnership approach Industry New Zealand will adopt presents both a challenge and an opportunity to your industry.

If there is any large project at risk of being produced off shore, or any opportunity for New Zealand in assisting a new development to get off the ground, then we are here to help.

Let me know, let Industry New Zealand know about it.

Together lets make sure the work and opportunities stay in New Zealand.

In doing so we can create and maintain jobs for New Zealanders, rising incomes, and stronger regions.

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