7 March 2006

Hon Trevor Mallard: Improving our export performance

Speech to Export New Zealand Breakfast for Exporters, Wellington

Thank you for the opportunity to speak to you this morning. As you will be aware, the government has made economic transformation one of our central goals for the next three years, and the export sector is a critical part of that.

I'd like to start today by saying don't let the doomsayers get you down!

The New Zealand economy is in a much stronger position than it has been in the past, and while we are likely to experience a dip in economic growth over the coming year, the fundamentals remain good.

Economic growth will remain positive, even if lower than in recent years.

Let's not forget that a few years ago we would have been delighted with forecast growth of 1.5 percent that's the lowest it is forecast to go.

The National Bank Business Outlook released recently noted that we are currently experiencing the second longest expansion period in New Zealand's economic history since World War II.

The bank also notes that as we move through the current dip in the cycle, this could become the longest period of economic expansion.

We still have the lowest unemployment rate in the OECD and the growth outlook for our trading partners is good. We have a lot of reasons to feel optimistic.

But we can't be satisfied with where we are - we need to look forward. As the Prime Minister noted in her speech to the opening of parliament:

- We need more globally competitive firms
- We need higher productivity, business investment, and skills levels, and we need more innovation in the economy
- We need to remove the infrastructure constraints which are stopping New Zealand perform to our full potential

More globally competitive firms are essential for the growth of our export industry.

In 2001, just 151 firms were responsible for 78 percent of our exports. Only 590 firms export more than $5 million per annum.

Sixty percent of our exports are in land-based products, twenty-five percent are manufactured goods, and 10 percent is oil and gas.

The key challenge will be scaling-up existing export activity, and diversifying into new markets.

Our existing export activities will remain critical. We are a country of vast natural resources, and sectors like agriculture and horticulture will continue to be a cornerstone of our export industry.

However we also need to branch out into highly innovative, creative industries. We need to look at how we can add value to our existing exports, and we need to play to our natural strengths.

You only need to look at the film industry to see how successful we can be when we combine our ingenuity, commitment, and vast natural resources together. The results can be truly spectacular.

It is obvious that New Zealand cannot and should not want to compete with low-cost exporters and manufacturers like China, or even India.

But we shouldn't ignore the opportunities these massive economies could provide. New Zealand can be part of the production process for the low-cost manufacturing offshore, by concentrating on the high-value components in the process - such as product or systems design.

The importance of improving our export performance cannot be understated.

We have a small domestic market, so our performance in export markets will be the main determinant in how prosperous we are as a country.

Exporting will help us to improve productivity through exposure to international competition, innovation and best practice, and by allowing kiwi firms to develop the scale and specialisation that leads to improved productivity.

Improving our export performance will also help us to address the balance of payments issue.

With the exception of a few years during the 1970s, New Zealand as a country has spent more than we have earned for all of the last forty years.

The relative strength of the New Zealand dollar in recent years has compounded the problem. Kiwis have taken advantage of lower prices for commodity goods and overseas holidays, and understandably so.

Increasing our level of exports, coupled with increased savings, will help us to remedy the balance of payments deficit, hopefully without dramatically raising the price of consumer goods or increasing the cost of holidays.

But we need to be realistic about what is going to drive that. One thing is clear to me we can't rely on a low kiwi dollar to grow our export industries.

It's worth reminding ourselves of the giddy heights the kiwi has reached over the decades. Pre the oil crisis it was valued at over $US1.50. Although this sort of level would be extreme in today's context - a strong kiwi has always gone hand in hand with a strong economy.

Anyone who is building their medium-term business planning around a dollar worth 40 or 50 cents vis a vis the US dollar needs to seriously rethink their strategy.

New Zealanders are never going to enjoy the higher standard of living we all aspire to off the back of a low kiwi dollar.

The future growth of our export industries will rely on us all working together.

Our government is committed to working in partnership with industries, businesses, and communities to grow our export sector.

Unlike our opponents, who regard any government involvement as 'corporate welfare', we believe the government has a legitimate role to play in helping to grow our export markets and develop a foothold in foreign countries.

The Beachheads Programme, is a prime example of a programme which provides valuable support in-market, through a private-public partnership, to businesses looking to expand offshore.

Seventy companies have joined the Beachheads programme, 35 in the last year alone. It provides office solutions, clustering with other New Zealand companies, access to expert in-market advice and support, and an entry point to the contacts and networks needed to grow a business.

Entry is highly selective. The contacts received can be very valuable and we don't want the standard lowered by people without expertise.

Through New Zealand Trade and Enterprise, the government is also providing a range of other assistance such as capability development grants, market development grants, business mentoring, and in-market assistance through our overseas trade commissioners.

Over the coming months we're going to be taking a close look at how we can streamline and review the current range of business assistance programmes.

There are some problems associated with the current fragmented approach, with agencies and organisations duplicating efforts, and in other instances failing to work in alignment with each another.

In the long run, improving New Zealand's export performance is going to be largely dependent on everyone focusing their efforts.

Finally, I've been asked to comment briefly on our successful bid to host the 2011 Rugby World Cup.

This is a great example of what we can achieve when we work together. A full year's work was put into the New Zealand Rugby Union's bid, underpinned by a successful government-rugby union partnership, and we came out with nothing less than what we deserved.

Winning the rights to host one of the world's largest events is a fantastic
opportunity to showcase New Zealand on the international stage.

It is estimated that the tournament will attract around 60,000 visitors to New Zealand, generate an extra $408 million to the economy, plus an extra tax take exceeding $90 million. And that's not to mention the estimated 3.4 billion people who will watch the games on television.

It is an enormous vote of confidence in our country's ability to host major events that we have been granted this opportunity, and is further testament to the international standing we have as a small, but influential country.

Importantly, it is also credit to our country's ability to join forces and come up trumps.

When the International Rugby Board heard the presentation of the New Zealand bid, they heard the voices of our entire country. The Prime Minister, the best All Black ever, and the heads of the New Zealand Rugby Union presented a world beating tight five, superbly led by Jock Hobbs.

If we hadn't worked together, would New Zealand be hosting the 2011 Rugby World Cup? The answer is almost certainly no.

Our bid to host the Rugby World Cup highlights the benefits of working in partnership. I look forward to seeing more successes throughout the economy as we work together to achieve our full potential as a country.

Thank you for the opportunity to speak with you today.

ENDS

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