Thank you for your welcome.

I’m very pleased to have this opportunity to address your conference today.

I think it’s a telling reminder of the kind of country we are that in the space of an hour you will have been addressed by the President of the New Zealand Combined Trade Unions (NZCTU), the Manager of Employment Relations Policy for Business New Zealand, and by me, the leader of a centre-right Government.  

And that, in each case - I hope - we have been listened to, and found points of agreement.

It’s not in every country that unions, business, and government would so willingly share a platform.

In fact there have been times in the history of our own country that this may have seemed an unlikely event.

Too often, the views and objectives of employees, employers, unions and government have been characterised by their differences, rather than the things they have in common.

Too often those differences have been highlighted for political, rather than economic, or social ends.

And, too often, everyday workers have lost out as a result.

So, let me begin my address today by congratulating all of those who have been involved in the Workplace Productivity Education Project (WPEP).

Union delegates, workers, employers, industry groups, government officials -  you came together on this project because you saw that everyone stood to gain from it.

The Workplace Productivity Education Project (WPEP)

Having only been elected Prime Minister four months ago, I can’t claim any credit for this project.  Instead, I’d like to highlight three crucial aspects of it that I think can inform our future work together.  They are:

• The three-way relationship between unions, business and Government.
• The productivity focus.
• The practical hands-on approach.

Once I’ve addressed these aspects, I’m going to spend some time talking about the challenges facing the New Zealand economy, and the reasons we have for optimism.

The relationship between unions, employers and Government

The first, and crucial aspect of the WPEP project I want to highlight today, is the three-way relationship between the NZCTU, Business NZ, and the Government that made this project possible.

Getting the representatives of employers, workers, and Government around the table and constructively working together is something I want to encourage and continue.

Yes, there’s plenty we disagree on.   That will probably always be the case.

I fully expect unions to continue to oppose some Government policy and for business and employers to do the same.  Employers and employees will naturally come to loggerheads on occasion.  And, I reserve the right to criticise the approach and ideas of business, or unions, from time-to-time.

But the sum of our disagreements is no match for the weight of what we can achieve together. 

Last month’s Job Summit was a great example of what is possible when unions, business, and Government co-operate in pursuit of a shared objective.

In this case we were united by our shared desire to do as much as we can to keep Kiwis in work during this recession.

I was hugely impressed by the attitude of everyone who came to that Summit.  The hours of preparation they put into it.  The respect they showed each other.  The willingness to nut-out compromises.

We’ve already got good results to show for it.

Within two weeks of the Summit, the Government was able to announce a new job-support scheme based on the nine-day-fortnight idea, sketched out by Summit participants.

The policy will see the Government helping stave off redundancies by making a wage contribution to help employees through a period of reduced work-hours.

It will help keep potentially tens of thousands of New Zealanders in work, and it will tide them, their families, and employers, through what could be a tough few months.

That it happened so quickly is, in part, thanks to the tenacity of the NZCTU President Helen Kelly.

I don’t agree with everything Helen says but I certainly respect her motives.

Without wanting to get her out of favour with her delegates, let me say that Helen deserves recognition for the role she played both on the day of the Job Summit, as a work stream chair, and the determination she showed in progressing the ideas from the summit well after the final speeches had been given.

So thank you Helen. 

It’s that can-do spirit, and that willingness to work together, that I want to underpin the relationship between unions, employers, and Government.

The project we’re celebrating today shows it’s possible, the Job Summit showed it’s possible, and it’s up to all of you to decide what could be possible in the years ahead.

On behalf of the Government let me say we’re more than willing to come to the party.

Improving productivity growth

The second aspect of the Workplace Productivity Education Project (WPEP) I want to highlight today is the joint commitment it demonstrated to addressing one of New Zealand’s biggest challenges: The need to improve our productivity growth rate.

Everyone in this room agrees that we must lift the wages of New Zealand workers.

It’s just not good enough for us to be in the bottom third of the OECD for per-capita incomes.

The question is: how do we go about lifting those wages?

One argument says that the Government should simply raise the level of the minimum wage.

And yes, that’s a small part of the answer. 

That’s why, even in the midst of extremely challenging economic conditions, the National-led Government lifted the level of the minimum wage this year.

But, in reality, lifting the minimum wage rate will only take workers so far.

If we are to see New Zealanders paid better across the board, to assure them of enduring  employment opportunities, and if we’re to ensure workers can aspire to wages that keep pace with their increasing  efforts and abilities, then simply raising the minimum wage is not the answer.

In the end, it is productivity that drives wages. 

So the answer is to ensure that businesses are more productive, and more profitable, and that employers are therefore able to pay their workers better and improving wages.

Yes, fair employment law and other laws are part of it.  And yes, we can have arguments about the balance those laws should strike. 

But what everyone can agree on is that making our businesses, and indeed our economy, more productive is the first critical step on the pathway to better wages. 

So I share the CTU’s concern, and indeed the concern of many, that in recent years New Zealand’s productivity growth has fallen behind that of other countries.

The WPEP project was a practical step to address the problem, and it should be applauded as such.

But more must be done.  And more will be done.  You can be confident that my Government has its eyes firmly focused on the productivity problem.

We share your desire to improve New Zealand’s productivity growth rates:

• It’s why we are unblocking New Zealand’s growth arteries by stepping-up investment in our vital transport networks.
• It’s why we’ve introduced a bill to reform the Resource Management Act.
• It’s why we’re stripping out some of the red-tape and compliance costs that get in the way of ingenuity and good ideas.
• It’s why we’re committed to investing in a nationwide ultra-fast broadband network.
• And it’s why we’re focusing on getting better value out of the government sector through a focus on frontline services.

All of these steps are important. 

But I know that there’s more to the productivity solution than these steps.   Because in the end, improved productivity relies on individual workers being able to make a bigger contribution business-by-business, industry-by-industry.

Yes, getting across Auckland with less traffic helps, as does being able to expand the factory without excessive resource consent delays.

Yes, spending less time form-filling helps, as does an ultra-fast broadband connection.

But ultimately it’s about people.

It’s about making sure people have not only the skills needed to do the job as well as possible, but also ensuring they have adequate opportunities to use those skills.

Government has a critical role to play in equipping people with those skills. 

It starts with an excellent education system that gives kids the grounding they need. 

That’s why the National Government is introducing literacy and numeracy standards into primary and intermediate schools.  That’s why we’re expanding the provision of trades-based training in high-schools.  And it’s why we will give 16 and 17 year-olds a greater range of educational choices through our Youth Guarantee.

I’m passionate about ensuring today’s young people get the education they need to succeed.  Education is a liberator.  It’s what makes it possible for a kid from even the most challenging background to climb the ladder of opportunity.  

The Government also has a role to play in up-skilling the workforce of today. 

You can expect the National-led Government to show an ongoing commitment to apprenticeships, industry-based training, and skills development. 

These training programmes are critical to ensuring workers have the skills that industry needs and they are critical to ensuring each worker can make the most of their abilities.

But, as you know, and as the WPEP project showed, the Government is only one part of the workplace productivity equation.

That brings me to the final aspect of this project that I want to highlight: The practical, hands-on approach. 

WPEP was about promoting productivity improvements in workplaces by getting alongside employers, and employees.

Its key message was that every worker and every business can make small improvements that will add up to an overall increase in productivity.

Whether it’s getting staff involved in designing a user-friendly IT system, getting workers input into how to improve processes on the factory-floor, improving quality management systems, or improving communication between workers.

All of these little things matter.  And every individual has a role to play.

This message is particularly relevant in the challenging economic times New Zealand is currently experiencing.

Facing New Zealand’s Economic Challenges

I believe that what we, as a Government, but also as employers and workers, can each play a part in taking the sharp edges off the recession, and in preparing the economy for stronger productivity growth.

The challenges are obvious.   We are witnessing a global economic downturn on a scale not seen in more than a generation.  What began as a financial crisis in the Unites States and Europe, has morphed into an economic crisis that extends to every region of the world. 

New Zealand is a small open economy and this downturn has serious implications for us.

The effects can already be seen. Falling export volumes. Lower growth rates. Struggling businesses. Climbing unemployment.

Faced with these facts, and the dire predictions in the media, it’s tempting for all of us to throw up our hands in despair.

But it’s my sense that New Zealand is in fact in a much better position to weather the global economic storm than many other countries.

Yes, we are in for a rough period ahead.  I don’t doubt that.  To argue otherwise would be to ignore the obvious links between our fortunes and those of the wider world.

But while plenty of time has been spent describing the challenges presented by the global economic downturn, I don’t think nearly enough time has been spent looking at how our country might emerge from it more strongly than many of our competitors.

I, for one, am confident that New Zealand can come out of this recession stronger than many other countries.   

These tough times could be a springboard for much better times ahead.

The evidence for my view falls into two categories.

• The first is the quantifiable evidence, the stuff of economists, the hard-data if you will.

• The second is the ‘softer’, but critically important evidence about the character of New Zealand and our people, and the relationships between us.

Let me start with the hard-data.

First, we know that our banking system has not been nearly as badly hit by the credit-crunch as banking systems in the rest of the world.

Our banks have been much more conservative in their lending practices than banks elsewhere.

New Zealand law doesn’t encourage people to send their house-keys to the bank manager when the mortgage payments get tough.  And, by and large, we’ve not seen the kind of rinky-dink housing and finance deals that led to bad-debt problems in the rest of the world. 

The result of this conservative approach is that we simply haven’t seen the widespread collapse of financial institutions seen in the United States, Europe, and elsewhere.  The collapses that shattered confidence and started this crisis in the first place.

This, combined with the Government’s retail deposit and wholesale credit guarantees means that, unlike elsewhere, credit lines are not broken in New Zealand.

In many parts of the world, credit for individuals and firms has dried up, sucking the very life out of the economy.  In New Zealand, by contrast, credit has continued to grow. 

In the year to January 2009 credit growth to households was up 4%, and critically, it was up 23% for the agricultural backbone for our economy, and 12% for other businesses.

This is an important difference between us and many of our competitors.  It gives New Zealand a head-start in the fight for economic growth.

The second advantage we have is the timely and effective way our monetary and fiscal policy-settings have responded to the global downturn.

Our Official Cash Rate had a long way to fall and it has fallen quickly. 

Not only that, but unlike in many other countries, the cuts in the OCR have flowed quickly through into the fixed and floating interest rates available to everyday borrowers.

While fixed rate mortgages are down only around 1.5% in the US and UK, they’re down more like three percentage points here, with floating rates down as much as four percentage points.

This is good news for our economy as it means New Zealanders don’t have to spend as much to service their debts. In fact, economists predict that if New Zealand interest rates held at current levels, the cost to households of paying off their mortgages will drop by about $4 billion.  If interest rates continue to fall that figure gets even bigger. 

That figure represents funds that will be freed up for growth-enhancing investment. 

And it’s joined by a significant fiscal stimulus. 

The New Zealand Government has recognised the role it must play in keeping the economy going and has chosen not to tighten the screws.

New Zealand’s fiscal stimulus, including tax cuts and increased government expenditure, is amongst the biggest in the world. 

And, economists predict that here, as in Australia, the stimulus will result in more bang for the buck than the stimulus package in, for example, the United States.  That’s because our stimulus is going into the productive parts of the economy through initiatives like tax-cuts to workers, and more infrastructure spending, rather than into the seemingly bottomless pit of financial bail-outs.

This combined with lower interest rates is a great recipe for better consumer and business confidence.

The third reason we have for optimism is the nature of the goods we sell to the world and the ability for our productive sectors to react quickly when recovery comes. 

In tough times people still have to eat. 

What they don’t necessarily have to do is continue to buy luxury cars or top-of-the line electronics. This means that some exporting nations are being much harder hit than New Zealand by the global fall in demand. 

Japan, for example, has experienced a 70% drop in car exports in the past year.  

New Zealand’s export base, by contrast, is still largely driven by commodity products.  And people worldwide are continuing to eat. Yes, prices for our goods have fallen but demand is still there.

What’s more, the exchange rate is acting as buffer.  Firms in some industries, including for example, sheep meat, venison, and even niche manufacturing, are I’m told, getting better incomes as a result of the lower currency. 

In the medium-term, as the global economy recovers, we can also be confident that our export industries will be able to react quickly, and that their products will again fetch strong prices on international markets.

That brings me to my fourth reason for optimism, New Zealand’s position in the world and the strength of our trading relationships.

While the economic downturn is having significant effects throughout the world, it is having, and will continue to have, more pronounced impacts in some regions than in others.

The US and the UK are particularly hard-hit.  By comparison, Australia and parts of Asia are viewed by some economists as not only coping better now, but due to a range of factors, as having the capacity to recover better in the future.

Australia and the countries of Asia make-up some of our largest trading partners.  We have free trade arrangements (FTAs) with many of them and are negotiating FTAs with others.  These countries demand our products, pay good prices for them, and will continue to do so.

So we can be confident that if the Asian region is the forerunner in the race to economic recovery then New Zealand is well-placed to ride the wave.

Finally, economists will tell you that New Zealand’s macro-economic settings mean that not only are we able to react quickly to the current crisis but that we are well-placed to adapt to a changing global economy.

In part that’s about our history.  Our firms have had to favour efficiency over subsidies for some time.  Most of our workers have been employed in more than one job, career, or industry, and they therefore have skills that they can be more easily transferred from one area of the economy to another. 

In recent times, many of our highly skilled workers have chosen to use their skills and capital overseas, with many making their life in the UK.  We can expect to see many of them choosing to use those skills here in the future.

These five key factors – the health of our banking system; our monetary and fiscal policies; our export-base; our position in the world and our capacity to adapt - are a good base for recovery.

As Prime Minister, I am determined to build on these strengths so that when the world starts growing again New Zealand can be running faster than the other countries we compete with.

But perhaps what’s more important than any of these economic factors is the attitude we bring to the problems before us.

As I said at the Job Summit last month, we’re not a country of whiners, slackers, or selfish individuals.

We’re a gritty country with the smarts and determination needed to weather this storm.

We are a people who know how important it is to look after each other and give back to the communities that make us.

In short, we have what it takes to rise above our current predicament. 

The Jobs Summit, and events of recent weeks, have made me even more confident of this.  Events like this continue to make me confident of it. 

Because, fundamentally, what Kiwis are showing in this crisis is that we trust and believe in each other.

When you look at the events that have unfolded throughout the rest of the world, what you see is a draining of the faith institutions and people have in each other.

There’s a sense that their bigger homes, their financial institutions, their economic growth, have all been built on a house of cards.

And, as the house of cards has fallen, the trust in each other has eroded.

I don’t feel that here.  Instead what I sense is an unshaken belief in our strengths as a country. 

Our capacity to produce food, our beautiful landscape, our natural ingenuity, our ability to find practical solutions to problems.

And I sense that in these tough times, New Zealanders are pulling together.

Yes, we don’t all agree with each other all the time.

Yes our political differences remain. 

But, no, we’re not using this recession as an excuse to retreat to our different corners.

In fact, we’re using this recession as a new impetus for co-operation, and a reminder to work together on shared challenges.

Conclusion

Let me finish by saying that in recent times the CTU has shown leadership in New Zealand’s fight for economic growth. 

You’ve been prepared to work with the Government, and with employers, to find solutions. 

I want to keep building on that relationship. 

There is a lot to gain from each of us understanding each other better, from working out what we have in common, and deciding where we can deliver more together.

I absolutely share your vision for a more-productive, higher-wage, higher-skilled economy, producing goods and services valued throughout the world.

And I look forward to working with you to make that vision reality.

Thank you.