Rt Hon John Key
Prime Minister

25 January 2013 Speech

EMBARGOED UNTIL PRIME MINISTER DELIVERS SPEECH
Speech to North Harbour Club
North Harbour Stadium, Albany
Ladies and Gentlemen

I hope you all had a good Christmas break and that you’re starting 2013 eager and energised.

I know I am.

And I know the Government is, because there are a lot of things to get done this year.

We have a re-energised team of Ministers, which I announced earlier this week.

And we have a very busy agenda.

Whether it’s welfare reform, law and order, education, the rebuild of Christchurch, or continuing our improvements in public services, it’s full steam ahead.

But the big focus for New Zealand remains the economy.

The economy will be front and centre this year.

The Government has a very substantial programme of work ahead of it.

I have told Ministers I want them to get on with the job.

And I’ve told them to step up momentum, building on the work we’ve already done over the last four years.

That work has been substantial.

We’ve made a huge turnaround in the government’s books, we’ve brought in the biggest changes to the tax system in a generation, and we’re making significant changes to reform the welfare system and strengthen work obligations.

Among other things, we’ve introduced 90-day trials; set time limits for the consenting of large projects under the RMA; introduced a competitive new system for awarding oil and gas exploration permits; got ACC back into good financial shape; and kick-started a multi-billion dollar programme of infrastructure investment.

And throughout that time we’ve been dealing with three major challenges:
• an economy that was left unbalanced, and in poor shape, by the previous government
• the impact of the Global Financial Crisis
• and the Canterbury earthquakes.

Each one of those challenges is still with us.

Around the world, for example, the recovery from the financial crisis is proving the most difficult since the Great Depression of the 1930s.

Europe is struggling with high levels of government debt and poor productivity. The United States has well-known fiscal issues to deal with. And, only yesterday, the IMF again downgraded its expectations of world growth.

But I remain hugely positive about the future for New Zealand.

Our economy is robust.

Since the bottom of the recession, in mid-2009, the economy has grown at an average of just under 2 per cent a year, and economists are expecting that to strengthen further.

Our employment rate is very high in comparison to other countries, with over three-quarters of all New Zealanders aged 20 to 64 in work.

There are still too many people looking for work who can’t find it. But forecasts show employment continuing to increase and unemployment falling.

Interest rates are at 50-year lows. Prices for primary exports are holding up, and our terms of trade remain high.

That is helping to support a high New Zealand dollar, which is proving a head wind for other exporters and firms that compete with imports.

But the flipside of a high dollar is that goods priced on world markets are cheaper than they otherwise would be. This includes goods that are crucial to households like food, clothing and fuel. So inflation is running at less than one per cent a year, food on the whole costs less than it did a year ago, and businesses are taking advantage of cheaper capital goods to invest in plant and machinery.

Looking ahead, New Zealand faces some big opportunities.

Our trade and investment links are increasingly with Asia, which is the fastest growing region in the world. Over the last four years, our exports to China have trebled.

And New Zealand faces a domestic construction boom.

That will be centred, of course, on Christchurch, where the spend is now estimated to be around $30 billion.

But construction is also expected to pick up in other areas, and manufacturers across the country will be gearing up to supply materials.

The Government, for its part, is going to press on and expand its economic programme.

We’ve been very clear and consistent about that programme.

We’re managing the Government’s finances to get back to surplus and start reducing debt.

And we’re pressing ahead with a wide range of measures to build a more productive and competitive economy.

That’s an economy where growth is based on the solid foundations of investment, exports and savings.

Investment is crucial.

Because the truth is, you only get jobs and growth in the economy when people invest money, at their own risk, in setting up a business or expanding an existing business.

Why has Australia been doing so well over the last few years?

Because there has been massive investment in its economy.

Investment in Western Australia, for example, has seen the lowest unemployment rate, and highest population growth, of any Australian state.

Over this side of the Tasman, the Taranaki region has attracted significant oil and gas investment. It has a low unemployment rate and workers’ incomes have grown faster than anywhere else in the country.

The key factor is investment, and not just in oil and gas.

So here in New Zealand we have to be a magnet for investment.

That’s investment by individuals and small businesses as well as big businesses; and it’s investment by people from overseas as well as Kiwis.

The more investment we get, the more jobs will be created.

That’s not to say there won’t also be jobs lost.

In any three-month period in New Zealand, between 100,000 and 200,000 jobs disappear, and between 100,000 and 200,000 new jobs are created, as businesses start up, expand, contract and close altogether.

The labour market is a very dynamic place.

But the only way net new jobs can be created is by private investors putting their money into businesses in New Zealand.

Governments can encourage investment but they can also discourage investment.

A government can load up big costs and uncertainties onto business.

It can make people unwelcome because they are considered to be the wrong nationality to invest here, or in the wrong industry.

And it can lock up the resources of the country.

That would certainly discourage investment.

But as I said, we have to be a magnet for investment.

That’s why my Government is working hard to reduce costs and uncertainties for business.

That’s why we welcome investment that benefits New Zealand.

That’s why we are keeping our own costs down.

That’s why we are ensuring people have the right skills to contribute to the workforce.

That’s why we are ensuring the country has the infrastructure it needs to grow.

And that’s why we’re focused on opportunities to use our natural resources productively and sustainably.

This programme is set out in our Business Growth Agenda, which details a large number of initiatives in six main groupings: skilled and safe workplaces, infrastructure, natural resources, exports, capital markets and innovation.

There is a lot to that Agenda, but today I want to pick out a handful of things which are either new or where I really want us to step up this year.

Skilled workplaces

First, in terms of skilled workplaces, the big challenge for New Zealand over the next few years – especially in the context of Christchurch – is to have people in the right place to do the work that’s available, and to have people with the right skills.

Put simply, there is going to be a lot of work in Canterbury, and there are going to be people in other parts of the country who need that work and could do it, particularly if they get the right training.

The first element of that – getting people in the right place – is going to require some initiative from workers, but also a good deal of innovation from businesses involved in the rebuild, and from the Government.

We aren’t going to micro-manage that process, but we can help it. That’s what we’ve done – for example, with the new Canterbury Skills and Employment Hub, which provides a one-stop shop to link local employers with people looking for work, before turning to immigration.

We’re also looking closely at how we can encourage people to work in Christchurch.

In terms of skill-matching, we are focusing in particular on young people and on vocational training.

This year we are launching five new vocational pathways that clearly signpost the subjects young people should take to prepare for vocational careers in construction, manufacturing, the primary sector, the service sector and social services.

This year there will be over 4,000 places available in trades and services academies, allowing young people to explore vocational career opportunities while still at school.

And there will be around 8,700 Youth Guarantee places for young people to study fees-free outside the school environment.

But the big changes we are making this year are to industry training and, in particular, to apprenticeships.

Under Labour’s wasteful management, up to 100,000 people a year listed as being in industry training were in fact “phantom trainees” who achieved no credits and in some cases were no longer alive.

So we have been streamlining this scheme, reducing the number of qualifications and putting the emphasis on achievement rather than token participation.

That has freed up some very significant funding to re-invest in expanding apprenticeships.

Currently, Modern Apprenticeships are only available for people who begin their training between the ages of 16 and 21 and they attract a significant top-up in funding to pay for advice and mentoring. The top-up is in fact greater than the subsidy that supports their learning programme.

So today I am announcing a new initiative to expand and improve apprenticeship training.

This has a number of parts to it:
1. From 1 January next year, we are going to combine Modern Apprenticeships and other apprenticeship-type training under an expanded and improved scheme called New Zealand Apprenticeships. These new apprenticeships will provide the same level of support, and the same level of subsidy, for all apprentices, regardless of their age. Fewer than half the people doing apprenticeship-type training are actually funded as proper apprentices, through the Modern Apprenticeship scheme, and we are going to change that.
2. We are going to boost overall funding for apprenticeships. The current top-up for Modern Apprentices will be redistributed across all apprentices, regardless of age, as an extension to their learning subsidy. In addition, overall subsidy payments will be increased by around $12 million in the first year, rising over time. Increased funding for apprenticeships will allow industry training organisations to invest in the quality of education for apprentices, lower fees for employers and encourage growth in the uptake of apprenticeships.
3. We are going to boost the educational content of apprenticeships. At a minimum they will require a programme of at least 120 credits that results in a level four qualification.
4. We are going to set clearer roles and performance expectations for ITOs, and give employers other options if their ITOs don’t perform; and
5. To lift the profile of, and participation in, apprenticeships, we are going to give the first 10,000 new apprentices who enrol after 1 April this year $1,000 towards their tools and off-job course costs, or $2,000 if they are in priority construction trades. The same amount will also be paid to their employers.

As a result of these changes, and stimulated by the boom in construction and other trades that is already underway in Christchurch, we estimate that around 14,000 new apprentices will start training over the next five years, over and above the number previously forecast.

The whole idea is to kick-start new apprenticeship opportunities ahead of the curve, so that thousands of New Zealanders get to learn a new trade that will last them a lifetime.

Infrastructure

Moving on to infrastructure, the Government will this year continue its significant programme of investment, which supports thousands of jobs across the country.

And we are doing so in a way that involves private sector disciplines as much as possible.

The first major public-private partnership ever undertaken in New Zealand will open this year, with the first group of students attending the new Hobsonville Point primary school.

A new secondary school at Hobsonville is also being developed through a PPP, as is the new prison at Wiri and the Transmission Gully project.

By the middle of this year, around 300,000 businesses and homes will be able to connect to ultra-fast broadband, and around 1,300 schools and 30 hospitals will have fibre to the gate. In addition, almost 100,000 rural homes and businesses are expected to have access to faster broadband through the Rural Broadband Initiative.

The Government is also continuing to support the development of water infrastructure. Earlier this week we announced we would be establishing a new Crown-owned company to invest in commercial-scale water storage and irrigation projects, and set aside $80 million for the initial stages of its operation.

In terms of housing, the Government is itself planning to build more than 2,000 houses over the next two financial years but, more importantly, wants to work with local councils on the underlying problems of land supply, building and resource consents and provision of infrastructure.

We need more houses built in New Zealand, at a lower cost.

That means we need more land available for building, more streamlined processes and less costly red tape.

This doesn’t require the Government to spend a lot of money. We are already a huge player in the housing market and I’m very wary of spending more of taxpayers’ money.

But there are plenty of private sector investors who want to invest in housing – if only we can remove the roadblocks that are slowing down the process and driving up costs.

It’s ridiculous, for example, that developers can wait six to 18 months for a resource consent.

It’s ridiculous that we allow councils to demand almost anything as a condition for the consent.

And it’s ridiculous that we allow them to charge whatever fees they want.

Unless these sorts of issues are dealt with there won’t be more affordable housing built.

Labour’s so-called ‘plan’ to build 100,000 houses doesn’t do anything to fix the actual cost of building – so will either fail miserably, deliver dwellings that people don’t want to live in, or require massive taxpayer subsidies.

It’s dishonest and it doesn’t stack up.

As I said, we want to work co-operatively with local councils and I believe our goals in the end are the same.

In particular we are keenly awaiting the Auckland Council’s spacial plan, and I’m expecting it to include multiple options for both greenfields and brownfields residential property developments.

But if councils aren’t able to change their planning processes, then the Government would have to get a lot more proactive, because we are very serious about resolving this issue.

Natural resources

In terms of natural resources, I think all New Zealanders are aware that our economy and natural resources are closely linked.

New Zealand is rich, for example, in minerals. The Greens and Labour oppose it, but we are going to continue to encourage development of our country’s oil, gas and mineral resources.

Looking across our resource base as a whole, what’s clear is that we need a much better system of planning and resource management – one that enables growth and provides strong environmental outcomes, and does so in a timely and cost-effective way.

We’ve already made changes to the resource management system and we’ve got more in the pipeline. There is a Bill already in Parliament to set a six-month time limit on the processing of medium-sized consents, and to establish a streamlined process for Auckland’s first Unitary Plan.

But as a country, we’re still not planning well enough for our future.

The RMA is constantly cited as a source of frustration, both by investors wishing to develop on their land, and by communities left waiting for years to know the outcome of a project.

There is not enough national consistency. Across New Zealand’s 78 local authorities there are over 170 resource management planning documents. Consistency is important because New Zealand is a small country and local decisions have significant effects on our national economy and national environment.

We also need to ensure that local plans aren’t overly restrictive and that consent processes are proportionate to the scale of the activity.

Public participation on whether an individual builds a deck on their property, for example, is profoundly different from a decision affecting water quality in a lake.

So the Government is working on a comprehensive package of reforms to the resource management system, which we’ll release in the next few months.

I want to see big improvements in this area and it’s going to be a high priority for the Government this year.

Export markets

In terms of developing export markets, the Government is currently negotiating free trade agreements with 11 countries in the Trans-Pacific Partnership, including the United States, and separately with a number of other countries including India, Russia and Korea.

We’re also about to begin negotiations for a new 16-nation regional free trade agreement across Asia and the Pacific.

Trade agreements can take a long time. But the TPP negotiations are well advanced and negotiators have been asked to try to conclude the broad outline of an agreement by October this year.

The Greens and their fellow travellers say the TPP is anti-democratic. That is nonsense.

A high-quality free trade agreement with the world’s biggest economy, that includes agricultural exports, would be a significant achievement.

The Government has also been ramping up its engagement with Asia, because we see there are huge opportunities there for New Zealand businesses.

This year, for example, we will continue to focus on Chinese tourism.

Before Christmas, some of our opponents thought it was a tremendous scandal that high-value, low-risk and well-travelled Chinese were able to get a New Zealand visa with a little less red tape.

I thought it was a scandal that we hadn’t done this earlier, because Chinese tourism has the potential to be huge for New Zealand.

Finally, on tourism, the best thing we can do to increase high-value tourist numbers – as I’ve said time and time again – is to facilitate the development of a national convention centre in Auckland. The sooner that can happen the better.

Capital markets

When it comes to capital markets, the biggest thing happening this year is the Government’s offer of shares in state-owned energy companies.

Subject to the Supreme Court’s decision, this will start in the first half of the year with our offer of up to 49 per cent of the shares in Mighty River Power.

We also want to proceed with another IPO later this year.

The whole share offer programme will be a shot in the arm for New Zealand’s capital markets.

It will give New Zealand savers an opportunity to invest in big New Zealand companies, and the companies themselves will benefit from better monitoring and market disciplines.

At the same time, the Government will maintain majority ownership of the companies, and will use the proceeds to invest in other public assets, like schools and hospitals.

New Zealanders will be at the front of the queue for shares in these particular companies, but in general we continue to welcome foreign investment in New Zealand.

That’s because overseas investment in New Zealand adds to what New Zealanders can invest on their own.

It creates jobs, boosts incomes, and helps the economy grow.

Overseas capital can make things happen here that wouldn't otherwise happen, grow businesses that wouldn't otherwise have the means to grow, create jobs that otherwise wouldn't exist, and pay wages that are higher than they would otherwise be.

So it’s sad to see the Labour Party that was such an advocate of trade and investment in the past somehow turning into the number one defender of Fortress New Zealand.

Innovation

Finally, despite tight times, the Government is continuing to put a real priority on science and innovation.

Research funding will be greater this year than it ever has been, because new ideas are a key driver for a modern economy.

In particular, this year will see Callaghan Innovation, the new advanced technology institute, up and running, and working with firms involved in high-tech manufacturing and services.

The National Science Challenges will be finalised in the next few months, and a greater proportion of resources put towards addressing these challenges.

So as you can see, we’ve got plenty on.

But I can guarantee you one thing – Labour will oppose almost all of it.

And the few things they might find to like, Russel Norman or Winston Peters will vehemently oppose.

And that’s the irony of the New Zealand Opposition in 2013.

They criticise the Government for being too hands-off; and yet between each of the Opposition parties they oppose every hands-on change we make to encourage investment, growth and jobs.

Tax changes – they oppose.

Major roading projects – they oppose.

A free trade agreement with the US – they oppose.

RMA changes – they oppose.

90 day trials – they oppose.

Work expectations for beneficiaries – they oppose.

Oil and gas exploration – they oppose.

The Hobbit legislation – they oppose.

A national convention centre – they oppose.

Every piece of legislation or policy we have developed to encourage growth and jobs they have opposed.

And that’s because there is only one type of activist government they know – the big-spending and big-borrowing kind that we know so well from the Labour Party and the Greens.

It’s called “chequebook activism” and New Zealanders know it well because they’ve seen it before.

As a country we are still paying for it – literally.

It means big, wasteful and unaffordable spending, charged to the taxpayer’s bill. And it means Labour and the Greens meddling and choking off private sector investment.

As for the National-led Government, our plan will encourage investment, strengthen the economy and boost jobs.

People know what that plan is, we have stuck to it and we will continue to stick to it.

And New Zealand is heading in the right direction.

The Government’s economic programme is laying the foundations for a stronger economy, sustainable jobs and higher incomes.

The world is full of opportunities for New Zealand over the next few years.

We need to seize those opportunities with both hands.

That’s why the Government is getting on with the job.

Thank you.

ENDS

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