State of the Nation speech. Full text at http://johnkey.co.nz//archives/1113-Our-Economic-Challenge.html

Social Media

Ladies and Gentlemen.

This year is about building a brighter future for New Zealanders and their families.

That is only possible if we lift the country’s economic performance, and by doing so deliver the jobs, higher incomes and better living standards New Zealanders aspire to and deserve.

That means making responsible decisions now, as the economy picks up, to increase national savings and reduce the country’s debt.

In less than two weeks, on the first day of Parliament, I will deliver a Statement which sets out our full programme of action for the year, across all the different areas of government.

But today I want to concentrate solely on the economy, because our economic performance is the most important challenge facing New Zealand.

The good news on the economy is that 2011 is expected to be a better year than 2010.

Treasury is predicting growth in excess of 3 per cent this year, together with higher wages and falling unemployment.

As in 2010, there will no doubt be bumps in the road.

But regardless of what unfolds, it is important to look through the quarter-to-quarter economic figures and focus on the longer-term challenge.

That challenge is to build a lasting recovery based on savings, exports and productive investment.

New Zealand has been through a recession and a global financial crisis. We have a chance, now the economy is gathering steam again, to build a solid platform for future growth.

If we get this right the possibilities are exciting.

Our trade is rapidly shifting towards Asia, which is growing much faster than our traditional markets in Europe and the United States.

New Zealand is a food-producing country and world demand for food is rising. Global prices for dairy, forestry, meat and other commodities are high.

We have a genuine competitive advantage in agriculture and other primary sectors. We have world-class firms engaged in high-tech manufacturing, software, film and other industries.

These are great opportunities for New Zealand.

But as a country we have to reach out and grasp those opportunities or we risk missing the boat.

The way for New Zealand to get ahead is to sell more to the rest of the world.

That means making some changes.

Growth over the last decade was built on all the wrong things – debt, consumption, and government spending.

People borrowed heavily to buy houses and farms, property prices soared and New Zealanders felt wealthier as a result. They spent a lot on consumer goods, which led to a bubble of economic activity.

The Labour Government thought this bubble, and the tax revenue it generated, would go on forever and spent up large on permanent new spending programmes. The Government’s spending increased by more than 50 per cent in just six years.

High government and private sector consumption generated inflationary pressures, pushing up interest rates and discouraging productive investment.

High interest rates in turn led to an over-valued exchange rate which smothered the internationally-competitive sectors of the economy, like agriculture, horticulture and manufacturing.

Our exporters found it hard to sell their products at competitive prices overseas because of the high value of the dollar.

The internationally-competitive sectors of the economy actually went into recession in 2004, and experienced a 10 per cent drop in output over the next five years.

In contrast, the domestically-focused side of the economy grew strongly. Since 2004, almost 60 per cent of new jobs have been in heavily government-dominated sectors.

As a country we imported far more than we exported, leaving a gaping balance of payments deficit that persisted for year after year.

All this could never be a solid basis for growth.

Subsequent events proved that very clearly.

By the time the National-led Government came into office at the end of 2008 the economy was deep in recession, and inflation was the highest it had been in 18 years.

The Government’s books had been left in a mess, with Treasury projecting no end to budget deficits and government debt spiralling out of control.

As an incoming government, we moved quickly to steady the ship, help the economy through the recession and set a credible path back to surplus.

Even so, when we tally up everything the Government is spending this year, we still need to borrow $300 million a week on average to pay the bills.

In the worst of the recession, running a budget deficit was the right thing to do, as it gave much-needed support to the economy.

Now, as the economy recovers, borrowing $300 million a week is unaffordable and is holding the economy back.

It is crowding out our internationally-competitive sectors of the economy, keeping the exchange rate high, and tying up resources that could be better used elsewhere in the economy.

And this borrowing will, of course, have to be repaid in future years, with interest.

Annual interest payments on our debt will, in four years time, cost more than spending on the Police, defence and early childhood education combined.

Rising government debt adds to New Zealand’s total indebtedness to the rest of the world.

Through decades of under-saving, over-spending and over-borrowing, the public and private sectors have together built up a net foreign debt equivalent to 85 per cent of GDP.

That makes us heavily reliant on overseas lenders who can at any time decide that we are just too much of a risk. And if we can’t raise money overseas, or can only do so at a high price, we face the risk of a protracted recession, with a significant loss of jobs and a fall in the value of everyone’s homes, businesses and farms.

To put it in context, the only other developed countries with a foreign debt the size of ours are Greece, Portugal, Spain and Ireland.

That is very uneasy company indeed. And it is precisely the difficulties those countries are in that has led to Standard and Poor’s putting New Zealand on negative outlook.

So as the economy picks up, it is crucially important that our growth is not based, as it was in the 2000s, on debt, consumption and government spending but instead is built on the solid foundation of savings, exports and productive investment.

The National-led Government was elected in late 2008 to build that stronger growth.

We have made considerable progress already with our six-point plan for a stronger economy.

As part of that plan we undertook the biggest reforms of the tax system in 25 years to increase the incentives to work hard, save and invest; and to remove distortions and clamp down on loopholes. Importantly, we designed these tax changes so that they won’t result in extra government borrowing across the forecast period.

We hauled back new budget spending allowances and reduced the size of the bureaucracy.

We invested in much-needed infrastructure, to unblock the arteries of the economy.

We have progressed an ambitious free trade agenda.

And we introduced a number of regulatory changes to make it easier to do business.

But structural change in the economy does not happen overnight. It is a bit like turning a super-tanker around.

New Zealand’s economic imbalances have built up over several decades, so it will take more than a year or two to fix them.

It will take a number of years and considerable effort.

In our first Budget, in 2009, the Government’s focus was on getting through the recession in as good a shape as possible.

In last year’s Budget, we concentrated on reforming the tax system.

This year the theme of the Budget will be savings and investment.

The Government agrees with the Savings Working Group, in its interim report, that New Zealand as a whole needs to save more, spend less and reduce our reliance on foreign debt.

Over the last year or so, New Zealand households, businesses and farms have begun to save more, spend less and borrow less as a proportion of their incomes.

This is an encouraging change of behaviour but needs to be cemented in for the long term. And government needs to stop pushing the other way.

The Savings Working Group is due to present its report to the Government in a few weeks. We will consider this very carefully, including ideas around tax, KiwiSaver, and investment products.

The Government has already made tax changes that are pro-savings. We remain conscious, however, that effective tax rates on some forms of savings remain very high.

The Government is also interested in ideas that increase participation in KiwiSaver and raise national savings, but which don’t result in an ongoing and unaffordable fiscal cost, which again would have to be borrowed.

And in terms of investment opportunities, the Government is interested in the Working Group’s thoughts on how to expand the range of investment opportunities available to New Zealand savers.

It would be better for both investors and the economy as a whole if people had the confidence to save more and invest in a wider range of assets, not just in property.

These are all areas where the Government may be able to influence the level or allocation of private sector savings.

But a point which has been made to us very clearly, by the Savings Working Group and others, is that the government is itself a crucial part of the national savings equation.

The government simply has to get its finances in order if New Zealand is to achieve a long-term improvement in its economic prospects.

Therefore I am announcing today that the Government intends to borrow less in the future than is currently forecast.

That is going to involve action on two fronts – on the operating side and on the capital side of the Government’s spending.

First, in terms of operating spending, the Government has decided to run a tighter fiscal policy than has previously been indicated.

When we are borrowing $300 million a week, have an overvalued exchange rate, and face the prospect of a credit rating downgrade, the Government believes it should be spending less and therefore borrowing less.

I have therefore challenged my Ministers to balance the books more quickly.

Government spending will continue to increase each year in dollar terms, but at a slower pace than the rest of the economy.

As the first step in reducing spending growth, we will run a tighter Budget this year than was indicated in the Budget Policy Statement in December.

Currently we have a new spending allowance of $1.1 billion each year, compared to Labour’s average of $2.8 billion a year over its last five budgets.

Our plan is to reduce that new spending allowance in Budget 2011 even further, to around $800 to $900 million.

Nonetheless, this year’s Budget will continue to prioritise new spending to health and education in particular, and to initiatives that promote economic growth.

At the moment, Treasury is projecting the budget to return to a meaningful surplus in 2015/16. With a tighter Budget this year, and assuming revenue stays on track, the budget will in fact return to a meaningful surplus a year earlier, in 2014/15.

In addition, until we get back into surplus, we are going to allocate any upward revenue surprises to further reducing the deficit.

Throughout this year, we are also going to consider longer-term sources of savings.

In particular, the Government is determined to reduce the costs of running its own business. That process has started, but the public sector is still a long way from being a lean and efficient organisation.

Crucially, this year there will be no room at all for extravagant election promises.

We are going to campaign on being responsible managers of the economy, who make the right decisions to build a platform for future growth.

Any party that wants to ramp up spending is being economically irresponsible.

The only way to spend more money is to borrow it or to raise taxes. Borrowing more would lift our debt to dangerous levels, while raising taxes would snuff out the recovery and send even more Kiwis overseas.

In terms of capital spending, the Government is committed to building assets that will help create a stronger economy and deliver better public services.

In December, the Government released its first Investment Statement which shows what we own, how much it is worth, and how much we expect to spend on buying new assets in the future.

The Investment Statement shows that the government, on behalf of taxpayers, owns $220 billion of assets across a whole range of social, financial and commercial investments – everything from hospitals, roads, prisons, schools and Police stations to the Super Fund, electricity companies and coal mining operations.

We also expect to acquire $33 billion of net new assets over the next five years, including new schools, operating theatres, ultra-fast broadband and major investments in our state highways and other transport infrastructure. That is a considerable spend by any reckoning.

At the margin there are two ways we can acquire new assets – either we can borrow more or we can change the mix of assets we own.

As I have said, the government can’t keep building up debt forever.

As a country we have to fund more of our own future.

So we need to look at where we can change the mix of assets we own – identifying where new assets are most needed and where we have more money invested than we absolutely need to.

The greatest scope to change the mix of assets lies with the government’s portfolio of commercial assets.

In particular, the sort of mixed-ownership model under which Air New Zealand operates – where the government owns most of the company but there is a minority of outside equity – gives the best of both worlds.

Under this model, the government has a controlling stake in what is a crucial piece of transport infrastructure and guarantees that it will be majority New Zealand owned. But by not owning 100 percent of the airline, the government also has capital free to invest in other assets.

This model could be extended to more of the government’s commercial assets.

As well as freeing up capital, there are three other potential benefits of a mixed ownership model.

The first is that it broadens the pool of investments for New Zealand savers, either directly themselves, or through investment funds such as KiwiSaver.

New, quality listings on the stock exchange would give “mum and dad” investors the option of putting their savings into large and proven companies, rather than relying, as is so often the case, on property investments.

The second is that the company reaps the benefits of sharper commercial disciplines, more transparency and greater external oversight.

Under the mixed ownership model Air New Zealand has been a creative and innovative company and a model corporate citizen. It has also offered some very competitive prices for air travel.

I am convinced that Air New Zealand would not be run as well, nor provide as good a service to customers, if it was owned 100 percent by the government.

And the third potential benefit is the opportunity for the companies involved to obtain more capital to grow further, without depending entirely on a cash-strapped government to support them.

For all these reasons, the Government has asked Treasury for advice on the merits and viability of extending the mixed ownership model to four other state-owned companies – Mighty River Power, Meridian, Genesis and Solid Energy.

In each case, the government would retain majority ownership and control, and the freed-up capital would be used to purchase other public assets, thereby reducing the government’s need to borrow.

The Government has also asked Treasury for advice on the merits and viability of reducing the government’s shareholding in Air New Zealand, again while retaining a majority stake.

Only the companies I have just mentioned will be considered for a mixed ownership model. But the Government will continue to look for commercial arrangements in other areas where private involvement can help drive performance, in the way we have been doing with public-private partnerships, for example.

I can see a strong appetite from New Zealand investors for participation in a mixed ownership model. Between KiwiSaver, other managed funds, iwi, mum and dad investors and the government’s own investment arms – including the Super Fund – there is a very substantial capacity to invest in quality New Zealand assets.

We would envisage these groups being at the front of the queue in any offering, and taking the majority of any stake that was offered.

In particular, I think it would be great if Kiwi mums and dads had more of a stake in the New Zealand economy by owning shares in good Kiwi companies. That, in my view, would be progress towards building a better savings and investment culture in New Zealand.

Ownership by New Zealand investors would of course be on top of the government’s majority stake, which is held on behalf of all New Zealanders. That majority stake would always ensure New Zealand control for the benefit of New Zealanders.

As far as possible, without compromising commercial sensitivities, the Government will publicly release the advice we receive from Treasury.

We have always been clear that if there was to be any change to our policy on state-owned assets in any way, we would seek the support of New Zealanders at an election, and that is exactly what we will do.

Our final policy will be decided prior to this year’s election, and we will seek a mandate from the electorate before proceeding with any change.

The mixed-ownership model presents the possibility of real benefits for New Zealanders.

But let me be clear – we will only proceed with a mixed ownership model if it meets the following tests:

the Government would have to maintain a majority controlling stake by owning more than 50 per cent of the company;

New Zealand investors would have to be at the front of the queue for shareholdings, and we would have to be confident of widespread and substantial New Zealand share ownership;

the companies involved would have to present good opportunities for investors;

the capital freed up would have to be used on behalf of taxpayers to fund new public assets and thereby reduce the pressure on the Government to borrow; and

the Government would have to be satisfied that industry-specific regulations adequately protected New Zealand consumers.

In particular, I want to stress that the Government is interested in what works, not in following any particular ideology.

Governments of all stripes, all around the world, regularly consider the mix of assets they own and whether they are deployed in the right places. That is what we are doing as well.

I want to finish by emphasising the importance of getting the New Zealand economy back on a solid and durable growth path.

We got off that path in the mid-2000s, and doing so has proven very harmful.

Getting back on the growth path again means playing to our true strengths – allowing our export industries to start expanding again, and not tying up resources in less-efficient, domestically-focused government sectors.

Increasing national savings is key to supporting this shift.

That is why the theme of this year’s Budget is going to be savings and investment.

We recognise that New Zealand’s high level of foreign debt is our biggest vulnerability.

We have asked the Savings Working Group to consider policy options to increase national savings.

But the Government is already committed to playing its part. We have to increase our own savings and reduce public sector debt.

That is why the Government is going to reduce growth in its spending, get back to surplus faster than previously indicated and look to better allocate its assets across competing uses.

As I said at the outset of this speech, New Zealand has some great opportunities to get ahead again and have a more prosperous future. But to do so we have to give our internationally-competitive sectors the platform to succeed.

This Government is prepared to do that. We will take the steps required to build stronger growth, and build that brighter future for New Zealanders.

New Zealanders deserve nothing less.

Social Media

Ladies and Gentlemen,

The stage I stand on today is a small stage – too small to hold the four million New Zealanders who would like to express their deepest sympathy this afternoon, and show solidarity with this community at the time of its greatest suffering.

But you can rest assured that those four million people are behind you today as they have been since that fateful afternoon almost two weeks ago.

New Zealanders as a whole are not an overly-religious people and are not given to public outbursts of emotion.

But on Friday, November 19, 2010, when the news came through of an explosion in the Pike River mine, New Zealanders – in their own way and in a quiet way – began to pray.

First, we prayed that the 29 missing men would simply walk out, perhaps supporting or carrying others, in the way mates do.

In places like Gallipoli and Alamein, Kiwi men have shown that in the face of terrible adversity and peril, they can rally an inner strength.

Had circumstances given them a chance, we know the men in the Pike River mine would have done just that.

But those men did not appear on the afternoon of Friday, November 19.

So New Zealanders began to pray that the men were alive but trapped somewhere underground.

We hoped that they would stick it out for as long as it took. We hoped that, as in Chile, they would eventually emerge from the depths of the Earth to embrace their wives, parents, partners and children.

Again, had circumstances given them a chance, we know the men in the Pike River mine would have done just that.

But, as the hours passed, we had to start thinking the unthinkable. These 29 strong, fit, men, who were all sons, and who were also fathers, husbands, and brothers, were not going to walk out of that mine.

And so we prayed that when death came to them, as it will come to all of us, they did not suffer.

I hope there is some comfort in the recollection of bus driver Tony Nicol, who drove half the miners to work on that fateful day, and recalled them being unusually jovial.

It was a Friday, and summer was on its way. They would have been sharing a joke. They would have been looking forward to the weekend. And I’m sure they were looking after young Joseph Dunbar, aged only 17, who was having his first day on site.

They went happily to work on November 19, 2010, but never came home.

How that day went so tragically wrong will now be the subject of a Royal Commission of Inquiry.

The Royal Commission will spend a good deal of time down here on the Coast as it seeks to answer the questions we all want answered – how and why did those 29 men die, and what can we do to prevent such a disaster ever happening again?

What happened at Pike River has become a fresh, new, raw part of the story of New Zealand.

It has made news all around the world. But it has had by far the most impact in the kitchens and living rooms and bedrooms – some now empty – of homes only a few miles from here.

This is a small, tight-knit community. You do things for each other.

I want to thank all those people who rallied round to support the families of the miners. I know your work is not done and will continue for many months and years to come.

I want to thank those who worked so hard on the attempted rescue and especially those who were on standby to go into the mine. I know you wanted to bring your fellow miners home alive, but that was not to be.

I want to thank all those who offered support from throughout the country and indeed from around the world.

And I’d like to say something personal to the families of the lost miners, and in particular to those mothers of children who have so cruelly lost their fathers.

Amongst all your other emotions and pain there may be fear for your children growing up without the father who loved them.

Because I was such a child, I know that the absence of a parent is a heaviness you learn to carry in your own way.

It is a terrible thing to happen. But it doesn’t mean your children will not go on to live happy, worthwhile and fulfilling lives and, in time, experience joyfulness and love in new families, yet to be created.

And even if those children’s memories of their fathers fade, his legacy will live on in each one of them.

Any sudden death in a close-knit community like this would be hard felt. To have 29 deaths in a single, terrible incident is almost beyond imagining.

What makes it even harder is that you have not had the opportunity to lay your men to rest in a place and manner of your choosing.

I do not know whether some or all of your men are in their final resting place.

But I do know that where they lie now, in the Paparoa Ranges, is a very beautiful place.

Conrad Adams

Malcolm Campbell

Glen Cruse

Allan Dixon

Zen Drew

Christopher Duggan

Joseph Dunbar

John Hale

Daniel Herk

David Hoggart

Richard Holling

Andrew Hurren

Koos Jonker

William Joynson

Riki Keane

Terry Kitchin

Samuel Mackie

Francis Marden

Michael Monk

Stuart Mudge

Kane Nieper

Peter O’Neill

Milton Osborne

Brendan Palmer

Benjamin Rockhouse

Peter Rodger

Blair Sims

Joshua Ufer

and Keith Valli

You are so near and yet so very far from us now.

Some of those men are a long way from home.

We think of those from overseas because they were for a time part of this community. Now they will be part of it forever.

Their names will be etched alongside those of our own Kiwi sons, on some yet-to-be-determined monument to honour and commemorate the lost miners.

Most of the four million New Zealanders did not know these 29 men personally or had even heard of them two weeks ago.

But I know they are all men that this community would have been proud to introduce to the rest of New Zealand.

Sadly, we came to know of them too late.

I am proud to lead a country whose people care so much about each other.

The miners’ families have told me that although their personal grief is immeasurable, they have deeply appreciated the expressions of support from all over the country, and from overseas.

In the streets of Greymouth, and all along the Coast, the intensity of this loss has weighed heavily on every heart.

But the human spirit is resilient, and people are by nature, hopeful.

I hope the knowledge of the nation’s support helps you through.

Your men were our men. And even if many of us know them only as names, and faces and stories, their deaths touched our lives, and we will remember them.

May they rest in peace.

Social Media

This afternoon New Zealand has been devastated by the news we have all been dreading.

A second explosion at the Pike River Mine confirms our very worst fears.

The 29 men whose names and faces we have all come to know, will never walk amongst us again. 

This is a national tragedy.

A tragedy for the men's families, their workmates and friends, their community and our nation.

New Zealand is a small country.  

A country where we are all our brothers keeper.

So to lose this many brothers at once strikes an agonising blow.

Today, all New Zealanders grieve for these men. 

We are a nation in mourning.

Where this morning we held on to hope, we must now make way for sorrow. 

Our heartfelt sympathies go out to the families of those 29 brave men. 

After days of waiting, of both preparing for the worst and hoping for the best, they have been delivered the cruellest of news.

So to all those who have lost a loved one in the Pike River mine let me say: 

New Zealand stands shoulder to shoulder with you. 

Though we can not possibly feel this pain as you do, we have you in our hearts and our thoughts. 

Like you, we all longed for that miracle to occur, that your men would be returned to you.

Tonight, on behalf of the people of New Zealand, we send our sympathies to the children who have lost their fathers, the parents who have lost sons, the wives who have lost their husbands, the girlfriends who have lost their partners, the siblings who have lost their brothers. 

This is a tragedy for the communities of Greymouth and its surrounding area.  

This loss will be felt in every home.  They leave behind them a hollow space, that will not be readily filled.

We must also acknowledge that Australia, South Africa and the United Kingdom have lost men in this tragedy as well. 

Tomorrow, I will travel to Greymouth to express my condolences to the families and to express our thanks to all those who have worked so hard on the attempted rescue of these men.   

From the moment of the first explosion, they have spent every waking hour tirelessly working, searching for a way to bring these men home alive.  That was not to be.   Their enormous effort can not go unmarked. 

In Parliament, Deputy Prime Minister Bill English will move a motion in my absence, providing all political parties an opportunity to express their sympathy.   Then as a mark of respect to the victims and their families it is the Government's intention to lift the House.

I have also directed that tomorrow all flags on Government buildings will fly at half-mast. 

Questions must now be asked and answered about how such a  tragedy was able to occur and how we can prevent another happening in the future.

It is my expectation that Cabinet will confirm the details of a Commission of Inquiry at its next meeting on Monday, along with any other inquiries that may be deemed appropriate. 

At this time of national pain, let us not lose sight of what truly makes New Zealand great.

We are a tough and resilient country.  We care deeply for our fellow countrymen and women.  We are a series of communities knitted together by a set of values and principles that have guided us together through good times and bad.

It is this spirit that will see us through.

Social Media

It's a pleasure to be here this afternoon.

I'd like to thank Don Nicolson and the members of your National Council for the invitation to speak to you.

I want to take this opportunity to outline the Government's position on overseas investment and talk about the changes we are making to the approvals regime.

In summary, we recognise the huge contribution that overseas investment makes to Kiwi jobs and Kiwi incomes.

New Zealand benefits from openness, both in trade and in investment.

However, New Zealanders have legitimate concerns about some aspects of overseas investment, particularly when it comes to land.

I share those concerns.

Good policy is a matter of striking the right balance.

We have reviewed the rules around overseas investment. For the most part, we think those rules are appropriate and the overall legislation is sound.

However, we have made a few adjustments to the approvals regime and given ministers increased flexibility to consider a wider range of issues when assessing proposed investments.

I'll talk more about those changes later.

What I want to say first is that you, as individual farmers, and as members of Federated Farmers, have been right in the middle of recent debates about overseas investment, because a lot of those debates have been about land.

I'm sure that between you, you have some strong views and quite possibly some mixed views about overseas investment.

Unfortunately, much of the debate in recent months has been stirred up by politicians who are more concerned about getting on the news than they are about well-thought-out policy.

We are likely to see more of this tub-thumping and political posturing in the lead-up to next year's election.

Politicians who were unwavering advocates of trade and investment when they were in government have somehow turned into defenders of Fortress New Zealand while in opposition.

Their views appear to have changed 180 degrees, for the sake of politics.

That is a shame, because at stake here are New Zealand jobs, New Zealand incomes, and New Zealand futures.

The reason we allow investment to flow between countries - both into New Zealand and out of New Zealand - is because it benefits New Zealanders.

We don't do it for any other reason - we do it because we benefit from it.

In particular, overseas investment in New Zealand 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.

Overseas capital makes New Zealand a vastly more productive country.

So there is absolutely no way we could enjoy the standard of living we do without overseas investment.

And part of that standard of living is being able to afford the education, law and order, and health services that our families want.

A recent study concluded that overseas investment in New Zealand lifted national income by around $5 billion between 1996 and 2006. That is an estimate of the return to New Zealand from overseas investment, over and above the cost of paying interest and dividends on that investment.

One example of where overseas investment benefits New Zealand is the wine industry.

We are rightly proud of New Zealand wine.

Our top wines are among the best in the world and last year we exported over a billion dollars worth of wine. Wine exports are now 25 times what they were a decade-and-a-half ago.

Since the year 2000 the number of wineries in New Zealand has almost doubled, and the industry directly employs 6,000 people.

This expansion of the wine industry into one of our most important export industries has largely happened because of overseas investment.

That investment has not just been into big producers, like Montana, but smaller wineries like Craggy Range, Sacred Hill, Dry River and Te Awa.

Overseas investment has allowed the industry to grow exponentially, and also develop from being a small and family-based sector into a more capital-intensive and technologically-advanced industry with real global connections.

Overseas investment also plays a positive role in New Zealand agribusiness, providing a vital source of capital for ongoing expansion and growth. PGG Wrightson, Synlait, CRV Ambreed and Anzco are good examples of such investment.

Overseas investment in New Zealand agriculture also leads to a valuable exchange of expertise, as in the case of PGG Wrightson and Agria, and access to highly lucrative markets, as we have seen with Synlait and Bright Dairy.

Investment is a two-way street, however.

New Zealand businesses and individuals are themselves investing abroad.

There has been considerable investment, for example, by New Zealand dairy farmers in overseas farms. Fonterra, of course, has processing facilities in a number of different countries.

A free flow of investment also allows New Zealanders to diversify their savings across different countries and different industries. Most of the savings that are in the Super Fund, for example, and in many KiwiSaver funds, are invested overseas.

In fact, the total amount of equity investment into and out of New Zealand is surprisingly balanced. According to the latest figures, New Zealanders have around $53 billion of equity invested abroad while overseas investors have $61 billion of equity in New Zealand.

So international flows of investment - both into and out of New Zealand - are very important for our standard of living.

I do understand, however, people's concerns about overseas ownership of New Zealand land.

I'm sure most people have these concerns from time to time, because as New Zealanders we have a very real and very profound sense of attachment to the land.

For one thing, our economy is based on agriculture so we recognise and respect that the land has an important economic value.

We also have a strong tradition of aspiring to own land - our own house, section, lifestyle block, farm, or block of native bush. We are not entirely comfortable as tenants - we want to put our roots down and call some place our own.

We also value outdoor pursuits - tramping, hunting, fishing, camping and picnicking - and even when we don't do those activities, we like the fact that we could if we wanted to.

Our tourism marketing is very focused on New Zealand's natural beauty, and we're proud of it.

I have recently said myself that we don't want to end up in a position where New Zealanders are tenants in their own country.

So I think the fact that people are concerned with overseas ownership is perfectly legitimate.

But we should be careful not to let those concerns get out of hand.

For a start, about a third of New Zealand - including our most iconic land - is protected by being in the conservation estate. So no-one from overseas can come in and buy Mt Taranaki or the Franz Josef Glacier, for example.

Second, it is a simple fact that land can't change nationality. People can change nationality, of course, and factories can be relocated overseas. But a piece of land in New Zealand will always be here in New Zealand.

Because it will always be here, the use of that land will always be subject to New Zealand laws and regulations. And ultimately we as New Zealanders get to determine what those laws and regulations will be.

Third, and contrary to what some people might think, there hasn't been an acceleration of overseas sales in recent years.

In fact, as at a couple of days ago, only 11, 203 hectares of land has been sold so far this year. That is certainly well below the peak of 380,000 hectares that were sold in 2006.

Fourth, the issue of whether businesses and properties are owned by New Zealanders or people from overseas, is for the most part, squarely in our own hands.

What I mean is that no-one can be forced to sell their business to an overseas investor, just as no farmers can be compelled to sell their land to foreigners.

Obviously with mortgagee sales or receiverships things get a little more complicated but, in general, people who feel very strongly that New Zealand-based assets should remain in New Zealand hands are free to sell only to New Zealanders.

Moreover, New Zealanders can always buy land and other assets back. What makes that difficult isn't the rules around overseas investment, it is the fact that New Zealand has a poor savings record and therefore a relatively small stock of capital available for investment.

If, as a country, we saved more, we would own more of the assets in New Zealand, including land, as well as being less in debt to overseas lenders.

Finally, there are specific safeguards contained in the Overseas Investment Act and in the regulations which the government makes under that Act.

Over the past year or so the Government has been reviewing this system of rules, to make sure we have got the balance right between three key objectives:

• welcoming desirable investment, in recognition of the benefits it brings for New Zealanders
• providing a stable investment environment, where the rules are settled and everyone is clear about what they are; and
• addressing public concerns about overseas investment, particularly in regard to land.

This review has come to three conclusions.

The first conclusion is that the Overseas Investment Act is a fundamentally sound piece of legislation.

The Act makes it clear that it is a privilege for overseas people to own or control sensitive New Zealand assets.

In particular, it lays out that foreign investment in land is only acceptable if it substantially benefits New Zealand, according to a range of factors which include, among other things:

• the creation of new job opportunities in New Zealand
• the introduction into New Zealand of new technology
• increased export receipts for New Zealand exporters
• the introduction into New Zealand of additional investment for development purposes
• increased processing in New Zealand of New Zealand's primary products
• protection of native bush and other indigenous vegetation; and
• protection of game species and walking access.

In addition, farm land has to be offered on the open market so that New Zealanders can bid for it as well.

These are very stringent criteria.

In fact, these are the very same criteria that Phil Goff was trying to pass off as brand new policy a few weeks ago. I welcome his endorsement of the current provisions of the Overseas Investment Act which, of course, was passed by his government back in 2005.

The second conclusion we came to in this review was that the existing process - not the key rules themselves - was too slow, cumbersome and costly.

We therefore made some changes last year to simplify some of the less-important regulations, cut red tape and speed up processing times for applications.

Those changes have been very effective. In the year to date the average time for processing an application has dropped from 63 days to 42 days.

The third conclusion we came to was that a couple of additions should be made to the existing rules.

These additions would make sure that all public concerns about overseas investment, both now and in the future, could be covered off under the rules.

So the Government is adding two more factors that ministers must consider when they assess the benefits of a proposed overseas investment in New Zealand land.

The first new factor is very wide-ranging and looks at whether New Zealand's economic interests will be adequately promoted by overseas investment.

This will allow ministers to consider, for example, whether any of our key exports are in danger of being controlled by an overseas entity, or whether there are non-commercial motivations driving a proposed overseas investment.

The second new factor is a "mitigating factor" which looks at whether the investor has a meaningful commitment to New Zealand involvement in the running or oversight of the investment.

That could include, for example, part ownership with New Zealanders, appointing New Zealanders to the board, or listing on a New Zealand exchange.

These two new factors will be weighed up alongside all the existing factors when ministers consider applications for investment.

We are also going to outline the Government's policy on foreign investment more clearly by amending the Directive Letter issued to the Overseas Investment Office.

This will make things clearer for both the Office and for overseas investors.

So in conclusion can I stress that we allow overseas investment to flow between countries - both into New Zealand and out of New Zealand - because it benefits New Zealanders.

With the appropriate checks and balances in place, this investment is good for jobs, wages and growth.

After reviewing the overseas investment regime, and making some amendments to it, the Government is satisfied that we do now have the appropriate checks and balances.

I wish you well for the rest of your Council meeting.

Social Media