Pre-Budget Speech to Business NZ

Nau mai. Haere mai.

Tēnā koutou, tēnā koutou, kā nui te mihi ki a koutou.

Thank you for the invitation to join you here today.

I’d like to acknowledge your CEO Kirk Hope.

And sponsors of today’s event, Fujitsu - Managing Director Michael Bull and Vice President of Strategy, Marketing and Change Management Megan Keleher.

I’m also grateful that my colleagues Grant Robertson, Shane Jones, James Shaw and Fletcher Tabuteau are here to show the importance this Government places on connecting with the business community.  But not just connecting; listening, debating, and moving forward. We are after all a positive and stable government that knows that fixing long term problems requires fresh thinking and energy.

As we are just two weeks out from Grant presenting the Government’s first Budget, I’d like to talk to you a bit about that today. Without giving too much away, of course.

I will outline our plans for the economy and how we want to partner with New Zealand businesses to bring about transformative change for the good of all New Zealanders.

We promised we would be a Government of change. Because it is clear that a shift is needed. Change can require some adjustments, I know. It can bring uncertainty. But it is inescapable. For the world is changing and we know it is changing rapidly.  We must adapt and change with it or be left behind.

As business people, I’m sure you know that change can bring great opportunity. And I’m sure you’re also aware that during change it is important to always keep focus on what you want, so you are better able to seize the opportunity when it is presented. My Government is keen to do just that.

We are committed to enabling a strong economy, to being fiscally responsible and to providing certainty. We have a clear focus on sustainable economic development, supporting regional economies, increasing exports, lifting wages and delivering greater fairness in our society.

We have already spelled out our ambitious agenda to improve the wellbeing and living standards of New Zealanders through sustainable, productive and inclusive growth.  Now we want to work with business and investors to get on with it and to deliver shared prosperity for all.

My Government is keen to future-proof our economy, to have both budget sustainability and environmental sustainability, to prepare people for climate change and the fact that 40 percent of today’s jobs will not exist in a few decades.

If we are to stay ahead of the curve, we need to develop a robust plan. To do that, we have to work together. We can’t do this alone.

We said at the time of the Future of Work Commission report, which Grant Robertson was very much the driver of in Opposition, that a key principle was collaboration with stakeholders.

That’s how we built the report. But it’s also how we’ve operated. A few weeks ago I sat down with a group of business leaders and discussed their key issues, opportunities and concerns.

A key theme was the future of their workforce, and training, finding the skills they need, and ensuring they are adaptable.

That is why I’m very pleased to announce today that we are establishing a tripartite Future of Work Forum – bringing together the three key partners in the economy – the Government, Business New Zealand and the Council of Trade Unions.

I have asked Grant Robertson to lead this work with Kirk Hope and CTU President Richard Wagstaff. Thanks Kirk, and Richard, for your support on this.

There is much the forum can focus on. For example, technology – we need to do better at understanding and harnessing the new technologies that are emerging such as Artificial Intelligence and robotics, and supporting workers to adjust to these new technologies.

No-one has the same job for life any more. We may well have several careers so it’s vital that workers are equipped with the foundation skills that will enable them to transition to other careers, that our school leavers are easily able to transition from school to work, and equally so we have an education and training system that readily responds to changing skills requirements. 

We also know that a low carbon economy is our future if we are to meet the challenges of climate change and safeguard our country. That will also impact on workplaces so we need to support communities, workers and industries in making a just transition to that low carbon future.

The productivity challenge is another key area I see for the forum. We have stated our commitment to lifting R&D spending. But we also need high performing workplaces that provide flexible environments; that are responsive to new ways of working.  

Over coming months we will do further thinking together on the themes that will inform the key work areas for the forum.

Ultimately, the forum will be focused on helping us shape the policies we will need so workers and businesses can be equipped to adapt to the rapidly changing nature of work.

We know the challenge is coming, we need to be ready and together I am hoping we can work through these issues.

And most importantly avoid the mistakes of the past where economic shocks damaged communities up and down New Zealand.

That is why we have tasked the Ministry of Business Innovation and Development with our Just Transitions work programme so we can prepare now.

A strong and resilient economy is our ultimate aim.

Business can be assured that this Government will support those who produce goods and services, export and provide decent jobs for New Zealanders.

We are in favour of trade. We wish to be an outward-looking trading nation that supports and delivers on our people’s basic needs.

We understand the need for security, while also staying true to our guiding principles for open borders, free trade and international responsibility. The Government I lead is determined to prove that it’s possible to have a trade agenda that is both progressive and inclusive.

We are not alone in wanting a new approach to trade agreements. On my recent visit to Europe, both President Macron of France and Chancellor Merkel of Germany, underscored to me the need for FTAs that have broader scope – ultimately it’s how we can build wider public support for these agreements.

We have recently embarked on a consultation process with the public on our new Trade for All Agenda so we can build consensus for the framework we take into future FTA negotiations.

We’ve already got some runs on the board in this regard. The reworked Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTTP) which was recently signed, will significantly improve New Zealand’s access to a wider range of export markets – especially Japan, pointing to a brighter future for New Zealand exporters. The benefits of this deal are so clear that apparently even the United States, amongst many others, is talking about the deal.

My Government knows what we want. We will encourage the economy to flourish, but not at the expense of damaging our sovereignty, our natural resources or people’s well-being. Our plans have been spelled out from the beginning, in the Speech from the Throne, in the first 100-days plan, and very soon you will see more detail in our first Budget.

Our first Budget will be presented in just two weeks on Thursday May 17. So, what will you see in it?

You will see a clear plan to build a robust, more resilient economy. You will see a strong focus on delivering economic growth, on running sustainable surpluses and reducing net debt as a proportion of GDP.

We know we have to live within our means and we will.

At the same time, we want to lift productivity, education, research and development, and address skill shortages.  This will involve increases in both public investment as well as incentives for business.

You will see a clear commitment to investing in the critical services we rely on and addressing areas of neglect.

I’m sure everyone here is aware that sometimes more investment is required. This Government will make targeted investments to address our social and infrastructure deficits.

The critical public services we rely on – such as transport, health, housing and education – must be adequately funded so they function well.  It is time to acknowledge that public services are under pressure, unplanned growth has left roads congested and our cities crowded while our regions have been left behind.

We will improve public infrastructure and access to critical core services. There will be significant investments in these areas in this year’s Budget.

You will have heard already about some of our plans for investment in transport. Together with Auckland Council, we recently unveiled a record investment of about $28 billion under a new 10-year funding package aimed at unclogging our biggest city.

We now have an overarching 30-year blueprint for tackling Auckland’s transport issues, which we all know are a nightmare. About $8.4 billion will go into the construction of a rapid transit network featuring light rail while about $940 million will go towards heavy rail improvements.

This is expected to allow for the development of 124,000 additional homes across the Auckland region, with another 30,000 homes being able to be built in greenfield sites. 

This is a huge civil construction project with a detailed and fully costed plan. Clearly, we can’t keep growing our population and not put the money into infrastructure to support it. And we also cannot do it alone – in order to finance and deliver these projects we will need to work with infrastructure partners.

And the regions need not fear they will be neglected. We have committed $1 billion per annum towards the new Provincial Growth Fund and over coming months there will be more detail about how this spending will be targeted. After all, nearly half of us live outside our main cities and our provinces also need to thrive if New Zealand is to do well.

The Provincial Growth Fund aims to enhance economic development opportunities, create sustainable jobs, contribute to community well-being, lift the productivity potential of regions, and help meet New Zealand’s climate change targets.

We are aware that all these issues can’t all be solved within one Budget. One Budget cannot fix all the systemic issues. But this is the first of three budgets by this Government and we are confident of seeing some real improvements in that time.

We believe we’re getting the balance right to support all New Zealanders to get ahead and to have confidence in the future.

Confidence in the future certainly helps. And that is often an issue of perception. The perceptions you have determine your actions – whether you invest, whether you export, whether you take risks.  It can also determine how you feel about all those things.

Whether or not our perceptions are accurate is another question. Our perceptions are often influenced by our beliefs in general, or our assumptions.

We all know that reported business confidence levels reflect this.

I have been known to speak openly about the reports I read of business confidence surveys. It’s the elephant in the room and I’m quite happy to point that out. I know the perceptions we face, but I will always focus on improving New Zealand’s reality with the goal that perception will then reflect that.

The news is good. The IMF, following its annual visit this month, said New Zealand has a favourable outlook with strong annual economic activity expected and our fiscal, monetary and prudential policy settings are appropriate.

The major credit rating agencies recently positively reviewed my Government’s economic plan and priorities. We are making steady progress. We’ve got record-high terms of trade and a positive outlook for incomes.

Over the next four years, economic growth is set to remain strong, averaging 3 per cent. Unemployment is forecast to fall to the Government’s 4 per cent target, and wages are forecast to rise on average by more than 3 per cent annually.

I note too that official figures released yesterday show unemployment in the March quarter has fallen to its lowest level since December 2008 at 4.4 per cent.

We are in good shape.

The Budget Policy Statement and the Treasury’s Half Year Economic and Fiscal Update show we can deliver our promises while running sustainable surpluses and paying down debt.

I can assure you Grant Robertson takes the Budget Responsibility Rules seriously. These mean we will operate budget surpluses, bar significant events like a Global Financial Crisis or an earthquake. We will get net Crown debt to 20 percent, Crown spending will sit at roughly 30 percent of GDP, and at the same time we will invest in the infrastructure we need.

So business can be confident in this Government. And I am determined to prove that.

Surveys show that businesses are actually feeling pretty good about their own activity. I look forward to hearing the same level of confidence expressed about the economy as a whole.

It’s important to see clearly.  We do not want to view the world as worse or as better than it is, but to see things as they are. Only then will our actions be able to make a real difference.

On that score how we measure our success is important. In the past we have used economic growth as a sign of success. And yet a generation of New Zealanders can no longer afford a home. Some of our kids are growing up living in cars. Our levels of child poverty and homelessness in this country are much too high.

We all want a strong economy. But why do we want it? What is it for? It is vital that we remember the true purpose of having a strong economy is for us all to have better lives.

The centre of our work will always be the wellbeing of people.

For that is absolutely the purpose of government. Surely that is also the purpose of business. Just think about why you first went into business and investment. What were you looking for? I am sure you wanted to improve your wellbeing, and that of your family and the community around you.

We all have wellbeing as our common goal. And we must not lose sight of that purpose which underlies all we do.

That is why my Government is making a formal change to move beyond narrow measures of economic growth and broaden the scope and definition of progress.

We want to ensure that the Budgets we produce are not just narrow fiscal documents which consider success only in financial terms.

Next year we will be the first nation in the world to report our annual progress against a range of measures in a living standards framework which tracks the wellbeing of our people and our environment alongside the traditional measures of economic growth.

The Government sees this approach as a core element for future Budgets, giving a more rounded measure of success and of how government policy is improving New Zealanders’ wellbeing. The Government’s fiscal strategy then becomes the means to the end of supporting New Zealanders to have better lives.

After all, if economic growth is not reflected in the well-being of your people, then what is it for?

We’re being really honest that we can’t do this alone. So I ask that you join us.

We can make an enormous difference if we work together.  And we should, not just because I know we have a set of shared goals, but because many hands make light work, and a problem shared is a problem halved.

Together, we can do this.

Tēnā koutou, tēnā koutou, tēnā koutou katoa.