Budget 2009 – The Road To Recovery
Address to the Trans Tasman Business Circle post-Budget lunch

It’s a pleasure to be speaking to people who are such keen observers of trans-Tasman events.

I’m sure you all know that the Australian and New Zealand budgets both typically come out in May, and that they don’t always take the same approach to fiscal management.

So at this time of the year there are often a lot of people comparing and contrasting the two budgets.

This year I haven’t noticed much interest in that.

I suspect that is because the global recession is so deep, and so synchronised, that all developed countries are facing the same sorts of fiscal challenges and are addressing them in broadly the same sorts of ways.

In Australia, in New Zealand, and in almost every developed country, the government will run a budget deficit this year, next year, and for a number of years to come.

The fiscal stimulus this creates will be added to by increased government investment in infrastructure.

Across the world, government debt will grow significantly to fund those deficits and to fund that infrastructure investment.

Projections show that over the next few years gross debt in both the United Kingdom and the United States will head towards 100% of GDP. In Japan, gross debt is already more than 200% of GDP and heading higher.

Prudent governments will be starting to think now about how they are going to limit the growth of their debt and begin to pay it back.

That was the approach taken in the Australian Budget earlier this month and it is also the approach that we have taken in our Budget.

I agree with John Whitehead, the Treasury Secretary, that this is the most important Budget in 25 years.

It starts New Zealand on the road to recovery.

It puts in place policies to ensure that the New Zealand economy emerges strongly from this recession and provides the strong growth, high incomes and quality public services this Government wants into the future.

In preparing this Budget we have focused on three main objectives.

The first is helping New Zealanders through the recession and supporting jobs.

The Government’s approach here is pretty simple, and it is shared by most other developed countries.

We are using the strength of the Government’s balance sheet to absorb much of the shock of the recession.

We are therefore able, as much as we can, to cushion the effects of the recession on everyday New Zealanders.

What that means, in plain language, is that we are keeping up spending on public services, and on entitlements to income support, despite the fact that the Government’s revenue is dropping significantly.

We have to borrow money to do that. However, we are in a good position to do so, at least in the short-term.

This is because successive governments – both National and Labour – have brought Government debt down to relatively low levels.

They brought debt down because of the risk of an economic shock sometime down the line – a risk which has now turned out to be a reality.

Our approach of keeping up spending will provide a considerable stimulus to the economy and stop it falling further into recession.

In yesterday’s Budget we maintained all entitlements to income support, including Superannuation, benefits and the Working for Families scheme.

This Government is not prepared to turn its back on our most vulnerable citizens when they most need our help.

We also increased spending on front-line public services, particularly in health, education, and justice, and in doing so we fulfilled many of our election commitments.

I want to talk about one of these initiatives in particular, and that is our investment of $323 million over the next four years in a campaign to make New Zealand homes warmer, drier and healthier.

The New Zealand Insulation Fund will allow more than 180,000 New Zealanders to receive kick-start grants of $1,800 to insulate their houses and install clean heating devices.

If your house was built before 2000 and it's inadequately insulated, or lacks efficient heating devices, then you will be eligible for this assistance.

A number of electricity companies, city councils and banks have indicated they will do their bit by offering loans to cover any extra expenses incurred.

This policy will have a range of benefits.

It will stimulate the building and construction industry and create jobs for the men and women who will do the retro-fitting.

It will improve energy efficiency.

And, in the longer term, New Zealand families and children will experience warmer, drier, and much healthier living conditions.

The Budget also includes funding for measures we announced earlier in the year to help take the sharpest edges off the recession, including the ReStart package for people made redundant, the small business relief package, and the 1 April tax cuts.

It includes funding for initiatives that came out of the Job Summit in February. These include $50 million for the New Zealand Cycleway project, the nine-day fortnight scheme, a boost to the Workplace Literacy Fund, the introduction of summer research scholarships for university students, and increased investment in international education promotion.

In total we will deliver a net increase in new operating spending of $5.8 billion over the forecast period, out to 2012/13.

That amount of new spending is quite restrained, at least by the standards of recent budgets. The 2004 Budget, for example, included new spending of $11.8 billion over its forecast period.

But by continuing to spend, and not locking our chequebook away, we are improving public services in New Zealand, helping to keep up economic activity, and providing much-needed support for New Zealand jobs.

In addition to this new spending there has been a considerable amount of reprioritisation within existing levels of government spending.

When we came into office we found there were a number of programmes that weren’t very effective, that departments themselves weren’t keen to continue with, but that the previous Government wouldn’t let them touch.

We’ve started to address these in the line-by-line reviews we undertook in the lead-up to the Budget.

We identified a total of more than $2 billion in spending over the forecast period that either did not accord with our priorities, or that had a relatively low value.

We have used that money to fund other, more valuable, initiatives.

It is important to recognise, however, that the Budget is not just about the short-term, and in particular is not just about the recession.

This year’s Budget looks beyond the current recession, and is the first step towards positioning New Zealand to take advantage of the eventual global recovery.

So our second objective in this Budget is lifting productivity and raising New Zealand’s international competitiveness.

Over the last decade, New Zealand has suffered from poor productivity growth and a relative decline in the internationally competitive sectors of the economy.

Export growth has been patchy in recent years and our current account deficit has grown unsustainably large.

These weaknesses were largely papered over when the economy was growing, but they are very evident now that a slowdown has occurred.

This recession will pass. But unless we do something about the fundamental problems in our economy they will be a handbrake on future growth.

In particular, we have to increase our productivity, because in the longer term only increases in productivity will permanently raise New Zealanders’ living standards and create well-paid jobs.

Over the past decade, this country’s productivity has suffered the equivalent of death by a thousand cuts.

This Government’s job is to revive New Zealand’s productivity so that this country can grow strongly out of the recession and into the future.

Our initiatives to lift productivity fall into four broad areas.

We are increasing the Government’s investment in infrastructure, by spending $7.5 billion on new capital initiatives over the next five Budgets, including investments in new roads, rail and ultra-fast broadband.

We are removing roadblocks to growth by improving the regulatory environment under which businesses operate. That includes reviewing the Resource Management Act, the Building Act, and the electricity sector, amongst other reviews.

We are putting in place a range of initiatives to lift knowledge and skills, including:

· a funding boost of just over half a billion dollars for the 21st Century School Building Programme

· additional frontline funding for raising achievement in our schools including targeted funding to assist students who are not meeting our new National Standards in literacy and numeracy

· a significant and enduring investment in primary sector innovation through the Primary Growth Partnership, which will be matched dollar-for-dollar by industry.

Finally, we are improving the productivity of the public sector by, for example, shifting resources from the back office to the front line. One of the key things the Government can do to improve overall productivity in New Zealand is to get its own house in order, and the public sector makes up around a quarter of the economy.

The third objective in the Budget is taking steps to keep Government debt under control.

During this recession the Government will be spending more than it raises in revenue, and will be borrowing to make up the difference.

That is the right response to the economic conditions we face. However it is not remotely sustainable in the longer term.

The current downturn is of such a magnitude that we won’t get our growing debt under control simply by waiting for the next up-cycle.

Without any policy response, the Government’s gross debt was forecast to reach 70% of GDP by 2023.

That translates to around $45,000 for every New Zealander.

For a family of four, it would be like having a second mortgage.

That kind of outlook is completely unacceptable.

So, as part of the Budget, we have put in place policies that will enable us to get our budget balance back in surplus, to keep the increase in Government debt to a manageable level, and to eventually lower that debt.

As a result of these measures, the Treasury projects gross debt to reach a peak of only 43 percent of GDP in 2016/17 before beginning to decline. The operating balance returns to surplus in 2018/19.

Those are the current Treasury projections, but the Government is intent on working towards an even better fiscal position as conditions permit.

Our measures to keep debt under control and return the budget to surplus have been recognised by the ratings agencies.

Yesterday Standard & Poor’s took us off negative outlook. Moody’s confirmed our Aaa rating, with a stable outlook.

That’s great. It is external confirmation that this Government has a credible, medium-term fiscal plan to help New Zealand out of this recession.

This recognition from ratings agencies will help keep down borrowing costs for businesses, households and the Government in the years that follow.

More than that though, high levels of debt in the future would be a millstone around the country’s neck, with effects for generations to come.

Achieving the results we have in this Budget has involved making a number of difficult choices.

Anyone who has picked up a paper this morning, or watched the news last night, will know what these are.

The first is to reduce the Government’s operating allowance for new spending in future budgets to a maximum of $1.1 billion.

Let me put that in perspective.

The average new operating allowance over the last five Budgets was $2.8 billion.

The operating allowance we allowed ourselves in the Budget Policy Statement last December was considerably smaller, at only $1.75 billion.

By finding savings within government departments we have been able to limit our new spending to $1.45 billion a year.

Now we are planning to spend only $1.1 billion a year in the 2010 Budget, with future allowances rising by 2% in each Budget.

That is going to be an ongoing challenge and is going to make our focus on value for money in the public sector even more important than it already is.

On the revenue side, we have reluctantly decided to delay the personal income tax cuts that were scheduled for 2010 and 2011.

We have long said that lower personal income taxes benefit the economy, by providing incentives to work hard and get ahead. Lower taxes also make New Zealand more attractive for skilled people and graduates.

Already we have put in place over half the value of our total tax cut package, but to carry on with the 2010 and 2011 tax cuts would have required us to borrow heavily.

This is because the recession has come on so strongly and so quickly that, even with the measures we are taking in the Budget, the Government will still be in deficit to the tune of $7.7 billion next financial year and $9.3 billion the year after.

We will already be borrowing to fund this deficit, and implementing tax cuts would mean borrowing even more. That would be reckless.

It would also be reckless to borrow money to continue making full contributions to the New Zealand Superannuation Fund.

It is important to remember that the Super Fund was set up to invest budget surpluses, putting that money aside to help with Superannuation expenses in the future.

The most obvious parallel is a household investing money that it saves, so it can be used to pay for things in the future.

As a result of the recession, however, budget surpluses no longer exist, and will not re-emerge for a number of years.

To make full contributions to the Super Fund would therefore require borrowing around $30 million a week, or around $1.5 billion a year – a figure which will rise in future years.

Committing the Government to an even bigger debt-raising programme, in a world where the United States, the United Kingdom and other governments will be hoovering up available funds in their own debt programmes, does put the New Zealand economy at some risk.

That is like a household borrowing money to invest in the share market, on top of having a big mortgage, a car loan and a whopping credit card bill.

Or, perhaps more relevantly, it is like saving for your retirement using your credit card.

The Government has therefore decided to take the sensible step, and hold off making full contributions to the Super Fund until the Government runs an operating surplus sufficient to fund those contributions.

I cannot stress enough that this move does not have any detrimental impact on New Zealand Superannuation entitlements, either in the short-term or in the longer term.

The bottom line for this Government is preserving current Superannuation entitlements.

We will maintain payments at a minimum of 66 per cent of the average wage, and people will continue to be eligible for Super when they reach the age of 65.

Future funding at this level is locked into the Government’s long-term spending path and is reflected in all of the Budget projections.

In fact it is quite correct to say that, far from putting anything at risk, the combination of measures we have taken in this Budget actually secures Superannuation entitlements in the future.

In the mid 2020s, when demographic pressures begin to push up the total cost of NZS, it is important that the Government is in surplus, has a moderate level of debt, and is not burdened with high borrowing costs.

That is a situation we are now forecasting, thanks to the measures we have taken in this Budget - including temporarily suspending Super Fund contributions.

In conclusion, let me reiterate that this Budget focuses on three main objectives:

· helping New Zealanders through the recession and supporting jobs

· lifting productivity and raising New Zealand’s international competitiveness

· taking steps to keep Government debt under control.

The policies we have put in place start New Zealand on the road to recovery.

Ladies and Gentlemen, this Budget has been delivered against a backdrop of dark economic clouds.

However I believe that every cloud has a silver lining.

This is a truly global recession – every country will be affected by it. In fact we are in better shape than most countries.

As we work our own way through the recession, we have the opportunity to outperform other countries, on a relative basis.

The fact that we are taking steps now to improve New Zealand’s productivity and international competitiveness, and to limit the growth in Government debt, means that we have a strategic advantage over other countries.

We already produce things the world wants, and will continue to demand in the future.

We have a clean and green country.

We have a skilled workforce and a can-do, entrepreneurial attitude.

The challenge now is to focus on an economic agenda that can fulfil the aspirations of everyday New Zealanders.

This Budget is part of that ongoing agenda.

We have a plan, we know what we are going to do, and we are getting out there and doing it.

It’s good to be here today to discuss some of the international issues affecting New Zealand. 

I am reminded that the founding members of this organisation first met against the backdrop of a world economy shattered by the Great Depression. 

In fact among the first issues this institute canvassed 75 years ago was the impact of the ‘Slump’ on the lives of New Zealanders.

The focus of that work was on putting New Zealand’s localised economic pain into a global context.

Last year you again addressed the implications of a global economic crisis for New Zealand’s prospects in the international context.

The OECD Secretary-General Angel Gurria delivered a lecture last July on the Global Financial Crisis and its implications for OECD countries.

He concluded that the economic crisis was a worldwide problem which needed a global solution to build mutual trust and keep our markets open and growing.

It is this reality – the need to work for a global solution to the economic crisis, and in particular to position New Zealand so it survives and then thrives – that is my Government’s immediate focus.

Our bilateral, regional and multi-lateral relationships with the rest of the world are an important part of the solution. 

The importance the Government places on these relationships is underscored by the fact that I spent my first week in office in a foreign country.

Within a day of being sworn in as Prime Minister I was on a plane travelling to the APEC Leaders meeting in Peru. 

At that meeting I took the opportunity to address the APEC CEO’s summit about New Zealand’s views on the economic crisis, what it meant for a small country like ours and our desired response. 

I stressed then, as I continue to stress, the importance of strengthening, not weakening our trading relationships. And, vitally, I met and built relationships with leaders from across our region.

It was a great opportunity and a great start to my time as Prime Minister.

Six months later we are continuing to experience major impacts on the world economy.

Firms with household names have fallen over. World trade flows have shrunk for the first time since WWII. In OECD member countries there are 25 million more unemployed than there were in 2007.

In addressing these challenges, New Zealand must position itself both for the short and long term. 

Quite what the future opportunities will look like is not yet clear. But compared with 75 years ago the international landscape is vastly different, and in many ways more conducive to achieving the global solution the OECD Secretary-General called for.

New Zealand in particular has much to gain from our international relationships. 

As I said at this forum last year, China and the Asia Pacific region more generally look set to be the powerhouse for the world economy for as far ahead as we can reasonably see.

More recently, with its massive (USD 580 billion) domestic stimulus, China looks like it may recover from the crisis – perhaps slowly by its standards – in a time frame that would help the regional and global economy.

I am keen to see New Zealand make the most of the opportunities presented by China’s economic strength.

Our FTA is off to a good start, and in the year since its signing, trade in both directions has grown, despite the state of the global economy. Two-way trade between China and New Zealand grew by 19% to more than $9 billion New Zealand dollars in the year to February 2009. 

I believe there is considerable room for future growth.

When we signed the Free Trade Agreement we opened an important door, and now our task is to boldly walk through it.

That is why I chose to visit China as a matter of priority this year. I believe there is much more our two countries can achieve together for the benefit of both our peoples.

My meetings with both President Hu and Premier Wen was very positive, with Premier Wen describing the relationship between China and New Zealand as the strongest it has ever been.

I was accompanied by representatives of several of our major exporters who wished to learn more about China, to strengthen relationships and to seek out future opportunities. 

Those opportunities range from increased trade in agricultural products through to tourism, education and resources.

I have also asked Government agencies to focus on ways to help New Zealand companies make their mark in China. As part of that commitment we are investing heavily in our trade presence in China, with Consulates-General in Shanghai and Guangzhou and a major new business centre in Shanghai.

We are also planning to develop smaller business offices in cities that New Zealand businesses are typically less familiar with including Shenzen, Qingdao and others. We are committing heavily to the Shanghai Expo in 2010 and I hope to lead a New Zealand business delegation to the Expo in July next year.

We continue to build our relationships with other countries in the Asia-Pacific region. 

Japan is a close friend and we are steadily pursuing ways to work with them to study the relevant issues as a precursor to an FTA.

We are moving into an FTA negotiation with India. Stimulated by entrepreneurial wealth and vigour and by new generation ideas and technology, India is transforming its economy. I want to see New Zealand making the most of the economic opportunities that presents us. 

We are engaged in an FTA negotiation with Korea. And, of course, we have just signed an FTA with the ten ASEAN nations, which potentially connects New Zealand to the embryonic single market in East Asia (CEPEA).

New Zealand must be part of a web of bilateral and plurilateral trade links that are being established throughout the Asia-Pacific region. 

We want FTAs to be high quality and regionalism to be open. We are supportive of developing plurilateral arrangements including the possibility of a Trans-Pacific Partnership, a closer economic partnership for East Asia and the APEC Free Trade Agreement in the Asia/Pacific. 

We expect the Obama Administration’s outlook on trade will have Asia as a major focus. 

New Zealand has an interest, too, in being part of the rapidly evolving political ‘architecture’ of the region and in efforts to establish an Asia/Pacific community. We are already an active member of the existing regional process led by ASEAN. 

We need to be plugged into the security arrangements that govern peace and stability in the region. These are multilateral arrangements, but our bilateral security relationships in the region are also important. New Zealand has a strong interest in robust US engagement in the region. 

Beyond Asia, we are pursuing important new trade and economic opportunities for NZ in the Middle East, including through negotiation of an FTA with Saudi Arabia and the Gulf States.

After considerable diplomatic investment, New Zealand’s relationships with Latin America are showing a new maturity with economic links driven by investment from New Zealand, not commodity trade.

My aim is to help New Zealanders capitalise on new opportunities in a globalising world. In focussing on the new we are determined not to neglect the potential to come from long-standing relationships. We seek to deepen our links with our traditional partners.

Building up further our important relationship with the US is a core focus of this Government’s foreign policy.

We have an excellent relationship with the US. We are old friends facing new opportunities. New Zealand sees itself as a small but important partner for the US and with our shared values we believe New Zealand can work with the US on efforts to enhance global peace and security. 

As previously outlined, New Zealand is undertaking a review of our contribution to Afghanistan. We will be looking at what we have achieved in Bamiyan and further afield, and at what we may be able to do in the future.

I discussed this and other issues recently with President Obama 

We are also giving increased focus to developing and strengthening our relationship with Europe - especially the member states of the European Union which collectively represent our second largest export market, and an important source of new technologies and innovation for the NZ economy. 

I talked with EU President Barosso earlier this year about the potential to do more together, and we now have agreement to explore the scope for a comprehensive bilateral agreement covering political, security and economic areas.

This would be the most far-reaching agreement we have negotiated with the EU. 

In our immediate neighbourhood my Government’s approach is shaped by the crucial need for a secure, stable and prosperous Pacific region.

We have devoted considerable time and energy to growing our relations with the Pacific. 

Fiji is clearly a focus, concentrating on how to help that country break out of its ‘coup cycle’ and find its way to restoring democracy. 

The Pacific Forum took action to suspend Fiji from 1 May with deep regret, but little alternative, in the clear absence of any forward movement from the Fiji regime. 

Recent months have in fact seen a further deterioration in the conditions in Fiji, with the abrogation of the Constitution, the muzzling and intimidation of the press, suspension of the judiciary, with a handful of judges only just appointed in recent days, and a clampdown on the legal professions.

Bainimarama also told the Fijian people, and its regional neighbours, there can be no elections before 2014 – a full eight years after the coup. 

This is simply not acceptable, and we and other Forum members have said as much. But the Fiji regime only listens to those telling it what it wants to hear – whether inside Fiji, although this is an ever decreasing pool – or outside.

I have spoken before about Bainimarama handing the Fiji people a passport to poverty, where through the regime’s actions and omissions it is patently failing to cope with the economic challenges buffeting the country.

But we do stand ready to help, with people, resources, finance – when Fiji shows it is genuinely prepared to move in the right direction.

The tragedy of the situation in Fiji is also that it has diverted attention away from the other huge challenges confronting the region, particularly for economic development.

Most Pacific Island countries are not well-positioned to weather the economic down-turn. 

Australia and New Zealand share a special responsibility to assist our regional neighbours through these troubled times. In particular, we are undertaking a Joint Study into the effects of the global economic crisis on the Pacific region which will be completed prior to the Cairns Pacific Islands Forum in August.

With the increased focus on the promotion of sustainable economic development in our aid programmes, we want to explore how we can assist our Pacific neighbours address the increased challenges they are now facing. 

The New Zealand Government has already announced an increase in our overall aid budget from $471 million to $600 million over the next four years, and this support will be increasingly targeted at the Pacific region.

Trade remains a key driver for economic development in the Pacific. 

The Pacific Agreement on Closer Economic Relations (PACER) is the plurilateral framework that will underpin the future development of trade across the region. This agreement envisages a free trade agreement between Australia, New Zealand, and Pacific Island countries.

It will not be a typical ‘self interested’ free trade agreement. Rather it will complement our Official Development Assistance efforts by assisting Pacific Island countries to capitalise on potential for trade to fuel their economies.

Our relationship with our nearest and closest neighbour Australia is, quite simply, unlike any other in the world – whether we’re talking people-to-people contacts, academic or political links, trade or economic issues, security and defence, the environment or foreign policy.

When we met in March, Kevin Rudd and I set out an ambitious agenda of initiatives. 

To build prosperity, we want to break down barriers at the borders, whether for investment, tourism, or for people flows. 

We want to erode barriers behind the borders, by exploring further harmonisation on climate change, science and innovation and domestic regulation where that makes sense. And we want to tackle barriers to prosperity beyond our borders, by promoting open markets and healthy capital flows around the world.

When I go to Australia again in August, Kevin Rudd and I will review progress on those initiatives, and set new goals towards creating a truly single, economic market. The importance of that in raising New Zealand’s performance and productivity cannot be understated.

Australia and New Zealand are relatively lightly exposed to the problems of global financial markets. Our banks are highly-regarded. Our track-record for quality regulation, good management of public accounts and robust monetary policy is well-established. We are both stable, open economies, with flexible product and labour markets. 

But we are also exposed to the misfortunes of our important trading partners, whether in Asia, North America or Europe. A robust Single Economic Market gives us the extra economic weight that will help us to weather the current economic storms. And a vibrant and robust trans-Tasman economy will position us strongly to grow and prosper together when the worst of the global recession has passed.

At times of global uncertainty, small countries like New Zealand rely even more heavily on effective international rules to help roll back protectionism, protect resources and deal with global challenges such as terrorism, weapons proliferation, climate change, the threat of a pandemic, and the effectiveness of international financial and economic institutions.

North Korea’s nuclear test yesterday is another reminder of the unstable global environment we face. 

At the heart of the world's ability to take global action lies the United Nations. 

I plan to go to New York in September to the annual meeting of the UN General Assembly, where I and other leaders set out our expectations for the global agenda.

No-one pretends that the United Nations has achieved all the ambitions set out for it when it was established sixty-four years ago. It has not saved succeeding generations from the scourge of war. Human rights abuses continue, daily. Standards of living have not improved for many.

It is in our direct national interest that the UN works better to promote solutions to international and regional conflicts; and develops effective international rules to manage trans-boundary and resource issues.

A tangible example is the recent confirmation, by the United Nations Commission on the Limits of the Continental Shelf, of New Zealand’s right to approximately 1.7 million square kilometres of extended continental shelf seabed. Thanks to the United Nations no-one can challenge New Zealand’s rights to whatever natural resources might be there.

We have had to work hard to protect interests like these, but we do not have to work alone.

We all have shared interests in making the United Nations, and indeed the “Bretton Woods” international financial institutions, more effective and accountable. 

We welcome the new US Administration’s interest in multilateralism, and we plan to work closely with them and other friends who want to make the UN and its agencies more relevant.

Development reform, championed by Helen Clark as head of the UN Development Programme, coupled with changes of emphasis in the Government’s approach to development assistance, is another way New Zealand can work under the multilateral system to improve the lives of everyday people. 

Many of the poorest and most vulnerable live in Commonwealth countries, including in small island states in our own region. My goal at this year’s Commonwealth Heads of Government meeting in Trinidad and Tobago is – likewise - to make that organisation a vehicle for improved delivery of practical benefits to citizens, as well as a voice for their rights.

It is on this note that I will finish. 

Seventy-five years ago the New Zealand Institute of International Affairs was formed in recognition that New Zealand was not immune from events beyond our shores.

That still applies today. New Zealanders have a keen interest in what happens overseas – and this goes far beyond academic curiosity.

A child dies from influenza in Mexico, and soon after New Zealand is responding to threats to our tourism market in Japan, and facing the prospect of bans to our meat trade in certain other markets.

We are connected. We react to international events, and we can help shape them as well.

I must admit to being surprised at the extent to which I have been drawn into the foreign policy sphere, on a daily basis – and it is a challenge I am thoroughly enjoying. 

New Zealanders can and do make a difference in international affairs – where we bring all the qualities that mark us out as unique.

It reflects the skills of our representatives offshore, whether from government or NZ business, supported and sustained by robust and informed debate back home, in Parliament, in the media, and in forums such as the Institute over these last 75 years. 

Your voice in promoting discussion and understanding of international issues that affect New Zealanders will always be an important one.

I congratulate the institute on its first 75 years and wish you all the best for your future.

Speech to the Hotel Industry Conference 2009

It’s great to be here this morning to open your conference and to talk to you about such an exciting subject.

It is a privilege to be New Zealand’s Minister of Tourism, to lead tourism in our beautiful country, and to promote our incredible scenery, our fine food and wine, our rich Maori culture, and the 100% pure experience.

Tourism is one of New Zealand’s most interesting industries. It has many different operators and many different customers.

And its success is hugely important for our future. Already, one-in-ten working New Zealanders are employed in the tourism sector. It accounts for around one dollar in every five of our export earnings. And it makes up about 10% of our economy.

We need to keep this in mind, because it shows just how much we stand to gain if our tourism industry keeps lifting its game.

As hoteliers, you play a central part in tourism’s success.

You provide our visitors and businesspeople with the quality accommodation they need to enjoy their holidays and do their work. Most importantly, you provide the hospitality they will remember when they return home.

Today I want to speak about the challenges and opportunities that you – and our tourism sector – face.

I will lay out my vision for tourism. And I will explain how we can work together to achieve that.

I will also make a pre-Budget announcement on one of the initiatives that came out of the Job Summit.

Confronting the recession

In many ways, hotels are tourism’s frontline. By looking at your occupancy rates and your forward bookings, you can tell just how well the tourism sector is doing. And because tourism is such a big part of our economy, you can get a feel for how well New Zealand is doing.

Recently the news has not been good.

Since January, visitor numbers have been down around 5% on last year’s numbers, and that’s leading to a similar drop in guest nights and occupancy rates.

I know that you will be working hard to get through this difficult patch and that some of you will be hurting at the moment.

However, I am extremely optimistic about New Zealand tourism and the part it will play in our future success.

There are a few reasons for this.

The New Zealand economy, and our tourist numbers, are holding up better than in many other countries. What’s more, although visitor numbers are down, the overall tourist spend has barely declined at all, and confidence in the tourism sector actually increased in May over where it was a month earlier.

As the world recovers from the downturn, more people will get wealthier, and more of them will travel.

And New Zealand has some big competitive advantages that will allow us to benefit from this.

Broadly speaking, I see these advantages falling in three areas.

Firstly, we produce high-quality food that is in demand.

Secondly, our people have a great deal of ingenuity and creativity.

And thirdly, our outstanding scenery is the best in the world.

Tourism draws on each of these.

Our restaurants and wineries, which are increasingly important to our visitors, depend on the produce grown by our world-leading farming and fishing industries.

Our innovative tourism experiences, from bungy jumping to jet boat rides, are products of Kiwi ingenuity.

And our unique Maori culture and its stories, as well as our reputation for a clean and green environment, are rooted deep in our outstanding scenery.

My vision for tourism

With this in mind, I have a vision for tourism in New Zealand.

It is one simple goal.

My vision is that we make the very most of our competitive advantages, and that we seize the many opportunities they provide.

I believe there are five things we need to do to achieve this.

We need to make New Zealand a higher-value destination. We need to respond to the world as it changes. We need to improve the business environment. We need to work more closely with each other. And we need to make the most of the Rugby World Cup.

I’d like to spend a few minutes exploring each of these points

Making New Zealand a higher-value destination

In my vision for tourism, we will make New Zealand a higher–value destination.

To do this, we need to improve the quality of the products and experiences we offer, and we need to develop new products that attract higher-value visitors.

When wealthier tourists decide where to spend their holiday, they make a choice that is based less on price, and more on quality. So we need to become more conscious of the expectations higher-value tourists have for the products and experiences we offer.

We must also live up to our environmental responsibilities.

Our environment is a huge part of our brand. Climate change awareness, resource shortages, and intolerance of environmental degradation are playing a growing part in the choices that tourists make – especially those from wealthier markets.

The Government will work to protect the resources that tourism providers rely on – clean air, clean water, and unique landscapes. At the same time we will work at home and on the world stage to reduce greenhouse gas emissions and build global alliances that further the goals agreed at Kyoto.

But we must also acknowledge that our environment is not just there to be protected. It is there to be enjoyed.

Almost half our country is set aside in conservation estates, parks, and reserves. In itself, that is an important competitive advantage. We need to develop new tourism experiences that make the most of this in an environmentally responsible way.

A good example of this is the national cycleway.

The National Cycleway

The cycleway is an idea that came out of the Job Summit in February.

Since then we have been looking at it in more detail, and I’d like to spend a few minutes talking about it now.

I see the national cycleway developing from a series of “Great Rides” through some of New Zealand’s most beautiful scenery. Our long-term goal is to create a network that links these “Great Rides” into a uniquely New Zealand set of cycling experiences that connects and passes through our cities.

The routes for these Great Rides will be influenced by existing cycleways, facilities, and tourism attractions. We are working with councils and community groups to identify suitable routes that can boost employment and our regional economies.

It’s my great pleasure to announce today that the Budget will allocate $50 million over three years for the New Zealand Cycleway Project. I expect this investment will generate extra contributions to the Great Rides from regional organisations, community groups, businesses, and individuals.

The cycleway will help create jobs. It will create a high-quality tourism asset that will help attract higher-value cycle tourists and complement our 100% pure brand. And it will help unite and inspire regional communities in these difficult economic times.

We will shortly set up an advisory group to help local groups develop proposals for the “Great Rides”, and I’m looking forward to announcing further details about this in coming months.

I hope that the cycleway is just the first of many ideas, both from government and from business, that make the most of the advantages that our unique landscape provides.

Responding to a changing world

In my vision for tourism, we will respond to a changing world.

It is essential that our brand continues to capture the imagination of customers in our key tourism markets – even as their expectations change.

We need to ensure our marketing efforts are focused on the right countries. That means the markets that have traditionally generated many of our visitors, such as Australia and the United Kingdom. But it also means developing newer markets with a growing number of wealthy tourists, such as China.

China has around 53 million outbound tourists a year but only 100,000 come here. As it gets wealthier, there will be a lot of potential growth we can tap into.

That’s why tourism was one of the big issues on the agenda when I visited China last month. And that’s why we have signed a tourism cooperation agreement between our two countries. This will lead to greater coordination between Tourism New Zealand, our Ministry of Tourism, and the China National Tourism Administration.

In every international market, we must make the best use of our limited assets.

As we outlined in our election policy, we want to bring together our primary agencies – Tourism New Zealand, the Ministry of Foreign Affairs and Trade, and New Zealand Trade and Enterprise, to help promote and market New Zealand on the world stage. We will have more to say about this in coming months.

We also need to boost the amount of money we spend.

The world tourism market is hugely competitive and we are up against some very big players. And yet tourism marketing hasn’t had a funding increase for about eight years.

Don’t get the wrong message here. There won’t be a big boost in this year’s Budget.

But I do expect that over the next few years the Government will put more into the pot.

Working together better

In my vision for tourism, we will work together better.

As Bill English said in his speech to Chief Executives a few weeks ago, we are looking for good ideas and it doesn’t matter where they come from.

As a government, we know we don’t have the answer to every problem, and we certainly know we don’t have all the good ideas.

I am keen to explore ways we can work more closely with businesses and Regional Tourism Organisations.

One idea that came out of the Job Summit was a tourism fund to provide contestable funding for good ideas in the sector. It could work like this. We put in a certain amount of money. Then RTOs, businesses, and other tourism bodies can contest that money if they put in some of their own.

We’ve already done a bit of this. Just last month we announced that the government is providing an immediate $2.5 million boost for tourism promotion in Australia. Air New Zealand matched this with another $2.5 million.

Our research suggests that this could create around $65 million of revenue for New Zealand and deliver about 35,000 extra tourists from Australia. It is early days, but it looks like the number of tourists coming out of Australia has increased since this funding boost.

Improving the environment for business

In my vision for tourism, we will improve the environment for tourism businesses.

We have begun the first phase of reforms to the Resource Management Act. This will reduce the costs, delays, and uncertainties associated with tourism developments.

We have also begun to review other important regulations such as the Building Act, the legislation governing the electricity sector, and the Overseas Investment Act.

On top of this, Rodney Hide is looking closely at rules and regulations across all sectors.

And we have launched our Small Business Relief Package. This cuts red tape and makes it easier and less expensive for small businesses to manage their cash flows and pay their taxes.

We also want to cut red tape at the border.

When I visited Australia earlier this year, Prime Minister Rudd and I agreed to streamline the customs and immigration at international airports for trans-Tasman flights. Our thinking is that the more we can get Trans-Tasman travel to feel like a domestic flight, the more Australians will come to New Zealand.

I expect we’ll be able to make some announcements about this when I head to Australia again in August, but it’s fair to say things are progressing well.

The Government is boosting infrastructure investment in state highways, schools, and broadband – areas which will bring benefits to the tourism industry in coming years – but there are also some important elements of our tourism infrastructure that need some work.

There is no doubt that business visitors tend to be higher spenders than regular tourists, and when they come to a country like New Zealand for a convention they tend to tack on a nice little holiday. So we are looking at what we can do to tap into this higher-value market.

Another area where I am keen to see some real improvement is in the facilities and experiences we provide for cruise-ship visitors. We make a bit of money out of cruise-ship passengers, but we are yet to really make the most of our opportunities.

The number of visitors we get from cruise ships is set to boom in the next few years and we need to lift our game. We are looking closely at what can be done to boost investment in this area.

Making the most of the Rugby World Cup

In my vision for tourism, we will make the most of the Rugby World Cup.

In recent months I have announced that the Government is providing some investment for several sports stadiums that will host Rugby World Cup games.

The potential around the Rugby World Cup is absolutely huge. It is the third largest sporting event in the world. It has a worldwide audience in the billions. And it runs for a very long time – 44 days – at a time that can extend our summer season by a couple of months.

As Prime Minister and Minister of Tourism I have three priorities:

• Make sure that we have the right infrastructure in place and that the tournament goes smoothly.
• Make sure that we make the most of the opportunities the World Cup presents.
• And make sure that we win!

Admittedly, I don’t have much say in that third bit – but that’s not what I’ll tell my son if we come out on top.

Every single person in the tourism industry needs to realise that it may be some time until we get another opportunity as big as the World Cup.

We need to remember that a large proportion of the people who travel to New Zealand for the World Cup won’t just come for the rugby. They will come for the festival atmosphere associated with the rugby – the wine and the food, the unique cultural experiences, our world-famous hospitality. We must make sure they get what they are looking for – and more, and that they tell all their friends about it.

Making the World Cup a success is one of our absolute priorities and there is a lot of work going into this.

The Cup will stretch our resources in a way that no other event has. We need to make sure that what we provide is up to standard. Visitors must leave New Zealand singing our praises and yearning to return, not complaining about the experience they have had.

Your role

Which brings me to the final point I want to make today.

The burden for providing a high quality World Cup experience falls just as heavily on our hotel industry as on any others, since you will provide accommodation for most of our visitors.

Ultimately, the experiences our World Cup visitors – and all tourists to New Zealand – have here don’t have much to do with government policies, marketing campaigns, or tourism initiatives. They have more to do with the skills, the facilities, and the attitudes of people working in the sector.

As I pointed out at the beginning of this speech, tourism is one of New Zealand’s most interesting industries. It has many different operators satisfying many different customers. This adds up to a challenge for government.

We know that we don’t have all the answers. We know that there is only so much we can do.

Yes, we can provide leadership. Yes, we can provide direction. But if New Zealand is to make the most of our competitive advantages, if we are to seize our opportunities and lift our game, the best ideas, the hardest work, and the greatest contribution, will need to come from people like you.

Conclusion

Ladies and gentleman, tourism is hugely important for our economy and our future. It is experiencing some challenges at the moment, and as hoteliers you are at the frontline of these.

But New Zealand has some important competitive advantages, and we have much to gain if we can keep lifting our game.

I have a clear vision for tourism – that we make the most of our advantages and seize the opportunities they provide.

To do this, we need to make New Zealand a higher value-destination. We need to respond to a changing world. We need to work together better. And we need to improve the environment for business.

We also need to make the most of the Rugby World Cup.

We can do these things – and more – but we can only do them by working together.

In the months and years ahead I’m looking forward to listening to your ideas, working with you to develop them, and making the most of the advantages we have.

Let’s get down to work.

Thank you and best wishes for your conference.

Today represents an important milestone in the first term of the National-led Government. 

It's around six months since we were elected. It is also three weeks until Bill English delivers our first Budget.

Given the state of the world economy, the red ink in the Government books and the tough choices facing Ministers, I could probably take this opportunity to complain about just how hard it is to be in government right now.

But I don't feel that at all. I feel as privileged to be leading this country today as I did the day I was elected.

What's more, I feel incredibly positive about New Zealand's ability to get through this tough time and to come out all the stronger for it.

I know it's hard for many of you at the moment. You may be losing customers, or having to cut costs, you may be worried about your job or the jobs of your employees. I share your concerns.

Despite this, I'm here to tell you why I think the future for New Zealand is still very positive, and why, in spite of everything, we can use this recession as an opportunity to boost our future prospects.

So today I'm going to talk about my hopes and goals for the New Zealand economy, National's plan for achieving those goals and the role Bill English's first Budget will play in getting us there.

Because in a turbulent world where all the economic news seems to be bad, it's easy to lose sight of where it is we are headed to, and the many reasons we have to be grateful.

What the Global Downturn means for New Zealand

Let's start by putting a little perspective on our current predicament.

New Zealand has not been as badly hit by this recession as many of the countries we compete with.

Unemployment in New Zealand was today recorded at 5%, up from the 4.7% it was measured at past quarter.

I am very conscious that this percentage represents real New Zealanders who are out of work.

Increased levels of unemployment are the harshest result of the global recession and I feel for those people. 

The Government's Jobs and Growth plan aims to have as many people in work as possible during this recession, while ensuring recovery, and the jobs it will bring with it, comes as soon as possible.

It's no easy task, and I'm not going to stand here today and claim we have a magic wand that will create new jobs over night.

But we are very aware of the problem.

That's why we had a Job Summit to bring together ideas for pulling through the recession, it's why we've introduced a nine-day fortnight scheme, it's why we're fast-tracking infrastructure projects.

It's also why I've put such a priority on protecting entitlements and providing boosted support for those hit hard by redundancy, as provided by our ReStart package.

But amidst the gloom it's worth remembering that New Zealand's unemployment figures aren't as high as they are in Australia at 5.7%, the UK at 6.7% and the US at 8.5%.

This is small solace for those out of work, but it does show that New Zealand has not been as badly hit by the global recession as many other countries.

Similarly, our banking system is in relatively good shape.

Our retail deposit and wholesale guarantees are working.

Unlike Gordon Brown or Barack Obama's Governments, New Zealand hasn't had to pour hundreds of billions of dollars into bailing out collapsing financial institutions.

The reality is that banks in New Zealand are ranked amongst the best in the world.

The stability of our financial system gives New Zealand a huge advantage as we strive to get on top of this recession.

So does the make-up of our export base.  Because in tough times people still have to eat.  They still want our dairy products, our wine, our meat, and our fruit.

What they don't necessarily want to buy is LCD TVs.

This means that many countries have been hit much harder by the global fall in demand than New Zealand.  Japan, for example, has experienced a 70% drop in car exports in the past year.

Alongside this, our exchange rate is working for us, with a falling dollar having made life a little easier for our exporters.

In addition, New Zealand's monetary policy is working well.  Our interest rates had a long way to fall and they have fallen quickly, with the benefits flowing through to everyday Kiwi borrowers.

Since this time last year, the cost to Kiwis of paying off their mortgages has, according to some economists, dropped by about $4 billion.

That, combined with the billion dollars of tax cuts delivered in April, adds up to significant new funds available to New Zealanders who are looking for breathing space in this recession.

Those funds provide an economic stimulus but they do so in a way that doesn't distort the underlying incentives in the economy.  While the UK has been pushing up the top tax rate, and the US has been bailing out car manufacturers, New Zealand has been able to stimulate our economy with growth-enhancing tax cuts and effective monetary policy. 

Finally, while the Government books aren't looking as healthy as we would like them to, we will not be borrowing nearly as much in relation to how much we earn as the US, the UK or many other countries are planning to.

These factors -  our relatively low unemployment rate, the health of our banking system, our export base, reductions in tax and interest rates and our Government finances, mean New Zealand is relatively well placed, despite the global downturn.

While things are tough, we are not experiencing nearly the level of economic shock as the US, UK or many other countries.

Against this backdrop then, the real question for New Zealand is not whether we will come through this recession. The question is how we can come out stronger, and better placed than before.

My job, and the job of my Ministers, is to spend every day focused on the answer to that question.

That is what we have done for the past six months, and that is what has guided us as we've prepared this year's Budget.

The good news is that we remain optimistic about New Zealand's prospects and we think that this recession can be a springboard for better times ahead.

We believe that by making smart decisions now and avoiding some potential pitfalls New Zealand can emerge from this recession much stronger than some of the countries we compete with.

But to do so, we need to remain focused on the big picture and we need to make the changes to the New Zealand economy that were needed before this recession hit and that are even more urgent now.

New Zealand's Longer-term Economic Prospects

Because this Budget isn't just about planning for next year, or the year after that.  This Budget is about laying the path towards a brighter future for this country. 

It's the promise of that brighter future that brought me into politics.

I have a very clear vision of where New Zealand can get to and what it is we're going to succeed at.

I believe we are capable of leap-frogging the other countries we compete with economically so that New Zealanders are much better off on a relative basis.

We can be wealthier than we are now, we can offer our children better opportunities, we can provide more financial security for our families, we can provide better-paying jobs for our young people and we can have better schools and better hospitals.

This can be a country that more New Zealanders living overseas want to come back to.

It's more than my sunny nature that's contributing to this optimism, although that helps too.  But on any clear-eyed analysis of this country, it is obvious that our potential is huge but under-utilised, and that we have considerable strengths to play to. 

We are experts at food production, and the growing middle classes of China and India are increasingly demanding better quality food products. 

New Zealand has the potential to make much more of this market and to fill pantries and fridges throughout the world with high-quality, efficiently farmed products.

We are blessed with a beautiful landscape, a unique culture and a clean green environment that tourists want to experience. 

We have only just begun tapping into the tourist markets in Asia, and if we can continue to grow those markets and encourage those tourists to spend more then it can have significant flow-on effects for the economy.

We have some of the smartest niche companies and entrepreneurs in the world.  From specialist digital-effects producers to makers of merino clothing, our Kiwi ingenuity constantly shows what is possible on the smell of an oily rag. 

Now ultra-fast broadband is the breakthrough technology that gives these firms, and others not yet imagined, the ability to overcome the tyranny of distance and to reach new consumers throughout the globe.

What's more we are situated in the high growth region of tomorrow's world.

Asia is shaping up to be the economic engine of the new century, with booming middle classes, increasing prosperity and an increased capacity to buy goods from the rest of the world.

New Zealand has strong and long-standing relationships with these countries, and we have laid the ground with the trading agreements needed to make the most of the opportunities they offer.

We already have free-trade agreements (FTAs) with China and the ASEAN countries, and we have begun negotiations for further bilateral FTAs with Korea, Malaysia and Hong Kong. 

Taken together, I am in no doubt that we have much more to offer as a country. 

But to make the most of our potential we have to improve the economic fundamentals of New Zealand.  We have to make this a better place to do business, to invest, to work and to get ahead.

That's why our Government campaigned on a Jobs and Growth plan for New Zealand. 

Our plan is comprised of a number of important goals.

They include reducing the tax burden, removing the regulatory road-blocks to growth, investing in productive infrastructure, putting discipline into government spending and improving frontline services, and lifting the literacy and numeracy skills of our young people.

National campaigned on making those improvements, and New Zealanders elected us because they wanted them done.

They are designed to improve our productivity growth and to ensure Kiwi businesses can produce more with the same amount of inputs, so that they can grow, create new jobs, invest and pay their employees more.

It's a plan that values enterprise and entrepreneurialism, that rewards people for effort and encourages them to get ahead under their own steam.

This is the brighter economic future National campaigned on, and it's the brighter future the National-led Government is determined to deliver.

The changed context

But there is no escaping the fact that the context for delivering this future has changed significantly since the General Election last year.

The reversal in the world's fortunes since that time has been dramatic.

In October 2008 the world economy was forecast to grow by 3% in 2009.  By April 2009, that forecast had been replaced by a prediction that the world economy would shrink by 1.3% in 2009.

Worse still, the predictions for New Zealand's trading partners slipped from 3% growth in 2009, to a 2% shrinking.

Inevitably this means the immediate economic outlook for New Zealand has worsened in the short to medium-term.

Our economy has shrunk, businesses have made less money, wage growth has slowed, many have lost their jobs, and investments have lost value.

The Government has had a two-pronged approach to addressing these issues which has seen us taking immediate steps to take the sharp edges off the recession, while continuing to prepare the economy for future growth.

The immediate measures have been significant.

We've maintained retail deposit and wholesale guarantees for our banking system.

We've implemented a Restart package to help those hit hard by redundancy.

We've fast-tracked $500 million of infrastructure spending to stimulate the economy.

We've introduced a $500 million small business relief package.

And we've introduced a nine-day fortnight scheme to help protect jobs in stressed businesses.

The Government has taken all of these steps because we are determined to take the sharp edges off the recession and to get this country through the current downturn.

We've also resolutely stuck to our plan for strengthening the fundamentals of the economy, so that when this recession ends our economy can grow as strongly as possible and provide long-term jobs.

We have resisted the urgings of some to throw fiscal discipline and economic good sense to the wind, and we've continued to roll out the changes we campaigned on making.

We've introduced significant personal tax cuts, making a Kiwi on the average wage $18 a week better off.

We've got started on our Build New Zealand Infrastructure Plan by boosting state highway investment by more than $1 billion a year for the next 10 years, and we've layed out our preferred investment model for ultra-fast broadband.

We've been removing roadblocks to growth with a regulatory review programme, the introduction of legislation to reform the Resource Management Act and a plan for improved Auckland Governance.

We've started improving frontline services by putting a focus on value for money in government spending, and ensuring more resources are pushed to the frontline in the form of things like Herceptin medication and Plunketline services.

And we've brought a resolute focus to addressing the underachievement in too many of our schools by legislating for National Standards in literacy and numeracy and working with schools to implement them.

The 2009 Budget

These are just some of the steps the Government has taken to strengthen the economy since we took office. 

This month's Budget will set out the next steps in our plan for the future of New Zealand's economy.

There's no getting away from the fact that this Budget has been prepared in much leaner times than I, Bill English, and indeed all New Zealanders had hoped for during the election campaign. 

The Government's books give a very different picture than they did six months ago. 

As you will have read about today, when we were campaigning in October 2008 the Government books were in surplus to the tune of $3.4 billion.  They're now in the red by $7.7 billion.

The red ink includes $5.3 billion worth of losses on the Government's investments.

It's also the result of a falling tax take, almost $2 billion lower than forecast before the election and, to a lesser extent, increasing outgoings in the form of unemployment benefits, borrowing costs and other expenses.

While some of these losses will be recovered as the world economy comes right, there is still a growing gap between what the Government is earning in its tax take and what it is spending. 

Bill English has already pointed out in recent weeks that with no policy changes in this Budget the Treasury predicts that New Zealand could expect to see annual deficits of $10 billion or more well into the future. 

If New Zealand left that to happen Crown debt would blow out to 70% of GDP by 2023. 

Bill has put considerable effort in recent weeks into spelling out what's causing the deficits, what they do to Government debt levels, and what they mean for New Zealand's future borrowing needs.

I don't want to traverse the ground again today, but rather to repeat Bill's point that the Government is determined to get those borrowing levels under control.

If we don't do that, New Zealand risks being pushed well back in the queue of countries needing to borrow money.

A credit downgrade of that sort would mean lenders would no longer see us as a good credit risk, they would be reluctant to lend us money and when they did, they would charge us ever-higher interest rates.  

I don't want to see New Zealanders weighed down by that burden

So, as Bill has signalled, this Budget will see the Government taking some steps to get New Zealand's borrowing costs under control.

I make no apologies for facing up to this challenge.

New Zealand simply can't afford a runaway balance sheet.

In the end being a country is no different from being a household or a family: if you want to have the things that you think are important and deliver those things on a long-term basis, then you have to be able to pay for them.  Not just this year, but next year and the year after that, and the year after that.

So the Government will make some responsible decisions in this Budget.  These will include delaying some steps in our economic plan that we would have rather made sooner.    They will also include reducing the amount of extra spending available for future Budgets and making some savings in less effective areas of government spending. 

But we will make these decisions in a way that keeps New Zealand squarely on target for the brighter future we campaigned on. 

And we will do so in a way that makes the very best of the tough economic and fiscal position we find ourselves in. 

I want to make it very clear today that this will not be a doomsday Budget.

There is no way I will pull the rug out from under New Zealanders when they most need the Government's help.

In a time of economic uncertainty I think it's absolutely vital that the Government provide New Zealanders with certainty about the public services they can expect and the support they are entitled to.

In this Budget the Government will continue to maintain the entitlements New Zealanders rely on including unemployment benefits, Working For Families payments, superannuation payments and student support.

We will continue to fund the public services that New Zealanders have a right to expect.

In fact, we will be spending more than has ever been spent before on public services in health and education.   That is because health and education are priorities for this Government and we recognise that they should be funded accordingly. 

We will preserve entitlements and health and education spending because we believe it is fair on New Zealanders and because it is the responsible course for the long-term good of this country.    

Maintaining government spending is also the right economic response to the conditions we face, because it helps stimulates demand in the economy, and ensures those who are hit hard by the recession are provided with the safety net they need to recover.

But this Budget will also start laying out changes to ensure we get more value out of government spending and to ensure that increases in expenditure actually result in better frontline services for New Zealanders.

Because, while the Government will be spending more in this Budget than it has in previous years, and while we will continue to do so in the years ahead, we simply won't be able to keep increasing that spending at such a rate as we have for the past decade.

That will require ending some government programmes and reshaping others.  It will mean that just like any family with a big mortgage, the Government will have to carefully prioritise our funds and resist some luxuries. 

I have no doubt that the opposition will snipe at this.

They can't help but see the world through the lens of the high-rolling economic times they grew accustomed to in government. 

Under Labour, the operating allowance for new budgets - what they said they'd spend - averaged $2.96 billon over the past five years, while the final amount they spent was even higher at an average of $3.82 billion in the final year.

The world has changed, and that kind of additional funding simply won't be available to future governments.

Trade-offs will need to be made.

So the National-led Government will be working hard to get more bang for every taxpayer buck.

This Budget will also contain plenty of good news in the form of new measures for getting this economy moving.

These will relate to promises National and our support partners made in the election campaign and, in some cases, they will build on ideas raised at the Job Summit.

But most importantly, this Budget will start making the long-term changes that National promised to make and that are needed to lift New Zealand's long-term economic performance.

It will get us closer to realising the vision that brought me into politics.

But it won't get us there in one swoop. 

In fact, it may not get us there as quickly as I had hoped.

But it will keep us on course, and it will do what is needed at this point in New Zealand's history.

It will put in place the immediate steps needed to take the sharp edges off this recession, to get through this downturn and to maintain entitlements and public services for New Zealanders.

It will begin consolidating the Government's fiscal position by taking steps to reduce our need for future borrowing.

And it will start making the long-term changes that National promised to make and that are needed to lift New Zealand's productivity, improve our competitiveness, sharpen up our economic performance and raise our incomes.

Conclusion

Ladies and gentlemen, when I look at New Zealand with my business hat on, I can see that for a country as blessed as we are and with the capacity we have, then there's no doubt that we underperform.

We are capable of doing much better, of making so much more of our considerable potential.

But we need to make some choices and we need to stay focused on the big picture. 

It's all too easy to lament the tough conditions facing New Zealand. 

I prefer to see these challenges as providing an even bigger prize for getting it right.

So when I look ahead to where we can be a decade from now I can say:

New Zealand is going to change the position we have in the world.

We are going to become wealthier on a relative basis.

We're going to have better living standards.

We are going to be more attractive to New Zealanders wanting to come home.

We are going to be a more successful place to house a business.

We are going to provide better opportunities for New Zealanders from all walks of life.

All of these things are possible.

And my sense is that if New Zealanders put those things together, and weigh up what they would mean for them, then there is no doubt that they will understand why the Government is working so hard to make the right decisions in this Budget.

These may be tough times, but the National-led Government remains committed to the goals it campaigned on. 

Those are the goals and dreams that New Zealanders elected us to deliver.

That's why we're determined to deliver on the promise of making New Zealand a much better country.

Starting with this Budget, and continuing every Budget after that.

Thank you.

Today is an historic occasion

It is a great pleasure to be here to sign the Deed of Settlement for “pre-commencement’ aquaculture space.

This settlement covers the aquaculture areas of the Coromandel and Firth of Thames and the whole of Te Wai Pounamu.

It covers the vast majority of New Zealand’s most productive marine farming space. It also covers the rohe moana of many iwi and hapu in those areas.

This settlement makes amends for the impacts of establishing marine farms without regard to the rights of the iwi whose rohe moana was being used.

The settlement of Treaty of Waitangi grievances is a high priority for the new Government and a high priority for me. I want to see more settlements negotiated.

Settling these grievances will allow us to move forward as a nation.

It begins to heal the wounds suffered by tangata whenua created by past Crown actions, inactions and disregard for rights.

Settling grievances restores the Crown’s honour as a Treaty partner and shows a commitment to a shared future for our nation.

Treaty settlements go some way to restoring mana.

They also give financial resources to iwi and hapu to secure their economic future - resources to help them stand strong, economically independent and reaching their full potential.

I want to see this happen as quickly as possible.

The Government has set a target of 2014 for settling all historical Treaty claims. This is an ambitious target, but the Government believes all New Zealanders stand to gain from a faster completion of the historical settlements process.

If the Crown needs to work in different ways, if processes need to be made more flexible and pragmatic, if iwi and hapu need assistance, I want to find ways to make this happen.

Money is tight at the moment, but settling grievances is a high priority and we will try to find money to make settlements happen if that is what it takes.

The signing of the Deed of Settlement today is an example of the approach that tangata whenua and the Crown will both need to bring to the table to make settlements happen.

It is an example of what can be achieved with leadership, with flexibility and pragmatism, and with a willingness to put aside old differences and look to future possibilities.

Most importantly, it is an example of what can be achieved with good faith and a determination from both sides to reach a settlement.

It started with a genuine and innovative request to negotiate an early regional settlement that was outside the scope of the settlement legislation.

That request was met with a desire from the Crown to work together to find an early settlement so that iwi, the Crown and the aquaculture industry can move on with finality and with security.

Setting aside previous issues has allowed Te Tau Ihu and Ngai Tahu to reach a settlement for the whole Te Wai Pounamu - this is the first time this has been achieved and I give my congratulations and thanks for making this happen.

The Agreement in Principle to come to an early settlement was signed during a ceremony in the Beehive on the 12th of October 2008.

Today we sign the Deed of Settlement to formalise that agreement and make a pact between Crown and iwi to settle these grievances and move forward.

All the steps to make the agreement happen are taking place and the Government will, in the near future, introduce legislation to Parliament to make the changes to the law that are needed to complete the settlement.

I would like to acknowledge the hard work and commitment that has brought us to today’s historic signing.

I acknowledge the work of previous Ministers and their desire to work with iwi to achieve an early settlement.

I also acknowledge and thank the current Ministers here today who have worked to pick up this work and carry it through to completion.

I acknowledge the work of government agencies, led by the Ministry of Fisheries, to agree the details and work out the finer points of the settlement.

I would like to thank Te Ohu Kai Moana who worked through allocation agreements and provided support to iwi throughout the negotiation process.

Most importantly, I acknowledge and thank the iwi leaders and negotiators for their hard work, their good faith and their pragmatic, innovative thinking and approach to this issue.

The change of Government has brought a continuity of the Crown’s commitment to negotiating the settlement of Treaty grievances.

It has also brought a desire to be more proactive, more flexible and more pragmatic in those negotiations. It means a desire to achieve more settlements faster so the benefits of those settlements can flow through to iwi, hapu and whänau and so all of Aotearoa can move forward together.

What has been achieved in getting to this point today is an excellent example of the attitude and approach that will be needed from all of us.

No reira tënä koutou, tena koutou, tënä koutou katoa.