2005 began with the international response to the catastrophe caused by the tsunami in the Indian Ocean.
Worldwide, hearts were touched by the appalling death toll, the plight of the survivors, and the sight of the devastated communities.
This was a natural disaster affecting human beings and their communities on a scale without precedent in our lifetimes.
It is the scale and extent of what happened which evoked the massive international response. I am proud that individual New Zealanders wanted to play a part in that response and fully backed the work of our many agencies which got involved in the relief effort.
Our people on the frontline, in Thailand and Indonesia especially, from the police, defence force personnel, the Ministry of Foreign Affairs and Trade, and NGOs, have made incredible efforts to help. And so, back home, have agencies across the board. My thanks go to them all.
New Zealand's official response to the tsunami relief and reconstruction effort amounts to this country's largest ever relief effort.
The scale of what happened justifies that, as does our country's desire to be a good neighbour.
It's easy to be a good neighbour when times are good. But it's in times of crisis when neighbours are put to the test.
New Zealand has never been found wanting when disaster has struck in the Pacific.
Now as disaster affected our regional partners in South East Asia and our Commonwealth partners in the Indian Ocean region, we have been proud to play our part, and we have the means to do so.
New Zealand at the beginning of 2005 is a confident nation, and it's moving ahead.
The gloom and doom merchants can get little traction as job and economic growth roll on.
What a disappointment for those who pin their hopes for political salvation on economic failure!
They know they can't improve on New Zealand's current performance, so they try to talk the country down.
But that's a hard task when the economic indicators are positive.
And it's a hard task when this government's policies are working and their policies based on the 1990s never did and never could.
Growth for the year to September came in at 4.6 per cent, equal to that of the United States and second only to Korea in the OECD.
Our GDP growth per capita has been running ahead of the OECD average over the past five years.
It's performance like that which is giving New Zealand momentum and confidence. The results are being felt in homes across the country.
In the past five years, more than a quarter of a million jobs have been added to this economy. Along with that extraordinary growth, unemployment has plummeted - down 44 per cent from the September quarter in 1999 to the September quarter last year.
The crime rate is down too, to its lowest level for 21 years.
This government has been prepared to take a tough line on crime and sentencing. The cost of that has been increasing prison numbers, despite the drop in crime rates.
Legislation will be introduced this year to keep the pressure on crime through a civil forfeiture regime to target the profits of organised crime.
Now we must increase our focus on measures that will, over the longer term, reduce crime and imprisonment rates by tackling the causes of crime. Early intervention, drug and alcohol treatment, and crime prevention initiatives, like the recently announced Vehicle Crime Reduction Strategy, will all help reduce the number of New Zealanders who become victims of crime.
Benefit numbers have tumbled too. In the past five years the numbers of working age adults supported by benefits has dropped by over 100,000 – a drop of 23 per cent.
That is spectacular, - but we aspire to do even better.
Industry is crying out for labour – and we have responded. There are now nearly 7000 Modern Apprentices, and more than 126,000 people involved in industry training. But we must keep doing more to equip New Zealanders with the skills they need to do the work available.
As the economy's done so much better, so the government's been able to invest back into the things that matter to New Zealanders.
Health spending is up by forty per cent over the past five years.
We're seeing the results in more affordable primary care, more hospital treatments, higher quality and better co-ordinated mental health care, and more initiatives in public health.
Education spending is up 39 per cent over the past five years, with especially big increases in early childhood education – the foundation for later learning. Teacher numbers have soared, and tertiary participation rates are high.
The big new investment coming out of last year's Budget and projecting forward is in the Working For Families Package, at an annual cost of $1.1 billion when fully implemented.
From 1 April this year, 300,000 low and modest income families with dependent children will get significant boosts to their incomes, - and that comes on top of increases in support for childcare and accommodation costs which began last October.
These changes will have a dramatic effect on child poverty, reducing it by thirty per cent. At this new level, the rate of child poverty will be well below that of the European Union, and will be on a par with that in the Netherlands. This is an outstanding result.
For this government, investing back into health, education and people from the surpluses we've built are our top social priorities.
That's why we are rolling out lower cost access to primary health care and pharmaceuticals over the next three years.
Already all under eighteens and over 65s enrolled with PHOs are benefiting.
This year the 18 – 24 year olds come into the scheme; next year the 45s to 64s; and in 2007 the 25s to 44s.
In health, we believe a stitch in time saves nine. That's why we want people to be able to afford to go to the doctor early on – and be able to afford their medicines.
The same philosophy is driving the roll out of the meningococcal meningitis vaccine across New Zealand.
We can stop this deadly disease in its tracks.
We are doubling the number of hip and knee joint operations over four years – bringing much needed relief especially to our older citizens.
And now we are working on a similar project for cataract operations.
Also a top priority is to resolve the long term funding pressures in the elder care and disability services sectors.
In education, investments are rolling out across the sector.
We have big programmes in early childhood education and in further education and training, to overcome the neglect of the 1990s and improve quality. In the school sector, our main focus will continue to be on standards and achievement, especially in literacy and numeracy. We'll continue to invest in improving teaching, and there will be new initiatives to support parents getting more involved with their children's learning.
At the tertiary level we are continuing to work to make education more affordable. This year eligibility for allowances has been expanded so that around 50 per cent of students will get an allowance.
Making it possible for every individual to fulfil their potential through education is our dream, and it's the dream every family has for their children.
Making that possible enables our nation to fulfil its dreams – of prosperity, high living standards, and a great quality of life.
Everything this government does in education reinforces the vision we have for taking New Zealand ahead – and becoming more innovative, more skilled, more productive, more prosperous, and lifting overall well being.
It is important at the beginning of this election year to restate our vision for the future, and to set out our direction and new areas of policy development for the years ahead.
In government, we've set out to build a prosperous economy, a healthier and well educated society, and a sustainable and better quality of life for all New Zealanders.
Working together, we and New Zealanders have achieved a great deal in the past 5 years. New Zealand is a very different place now from the way it was in the 1990s. But our country has to keep moving ahead, to become an even more compelling place to live in, work in, bring children up in, invest in, and above all take pride in.
Our country does move ahead when there's the opportunity for every individual to make the most of themselves and for every hard working family to enjoy the fruits of their labour with higher living standards and a secure asset base.
No matter what part of New Zealand society people come from, each is entitled to the opportunity to reach the New Zealand dream. That's what this government dedicates itself to.
Together we can build a society in which every New Zealander has a stake. And by unlocking all the talents, we can build a progressive modern economy capable of continually renewing and reinventing itself.
Building a strong New Zealand requires leadership, commitment, and good policies.
There's no place for complacency or the status quo or going back to the failed policies of the past.
There's no place for the kind of government which sets New Zealanders against each other.
New Zealand needs governments which draw on the strengths of all to move the whole country ahead.
That's the model of government we have followed and will continue to follow to reach the vision we have for New Zealand.
Building and sustaining prosperity is a never ending task.
As fast as we make progress, new benchmarks are set.
In our lifetimes we've seen countries devastated by war in Asia and Europe rebuild to overtake our living standards.
We've seen the dramatic difference European Union membership has made to poorer regions and nations. That's why across Central and Eastern Europe to the Ukraine, and from the Balkans to Turkey, countries aspire to join.
Our country has forward momentum now, and we'll keep it by committing to upskilling, innovating, and being more productive for the long term.
In government we have to be continually re-evaluating our policies to sustain our growth and development – and we do.
We have to be prepared to measure our progress against key indicators and against the performance of other developed countries – and we are.
This week the Economic Indicators Report 2005 will be released.
The good news is that on a number of key indicators our performance is already good, and on a number it's improving. No indicator shows deterioration. But the report also tells us where our performance needs to improve, most critically in labour productivity and in our levels of innovation.
Not surprisingly these issues were also highlighted in the Workplace Productivity Working Group Report released in November by the Minister of Labour.
Three years ago in my Prime Minister's Statement, I set out the Growth and Innovation Framework which would guide the government's economic development programme.
Over the past three years, the Framework has been taken on board across government. We've focused on lifting our skill and innovation levels, investing in science and research, and developing regional and sector strategies and offshore markets and contacts. This year's Budget will have many more new initiatives linked to the Framework.
As a government we've set out to give leadership to the transformation of the economy, and to work in partnership with a wide range of stakeholders to achieve that.
The future of our dreams will provide better wages and salaries. They will be driven off a sophisticated economy producing goods and services the world won't want to do without, and will pay to get.
The more skilled, the more innovative, the more enterprising, and the more market and brand focused we are, the more progress we will make towards that future.
Today I want to emphasise key areas of activity and policy development which are critical to lifting New Zealand's performance and living standards, and realising our vision for the future.
Lifting Labour Productivity
This is essential for maintaining growth in our living standards over the long term.
Labour productivity has grown in recent years, but it remains well below the OECD median growth rate.
Most of the gap between our GDP per capita and that of the United States is attributed to our lower rate of labour productivity.
The investments both government and industry are making in skills, innovation, science, research, and technology will boost productivity. But at the level of industry and the workplace there is also much that can be done to build leadership and management capability, create safer and more productive workplace cultures, organise work more effectively, and network and collaborate to build best practice.
The emphasis we've placed on building good employment relationships will also pay dividends in lifting labour productivity.
It's pleasing to see last week's statistics reporting the lowest loss in wages and salaries from work place stoppages since the relevant data series began in 1988.
A new reference group drawn from industry nominations is being established to follow through on the workplace productivity report. It is being asked to identify concrete actions to drive productivity improvements in the workplace, with a report expected by mid-year.
Building a more highly skilled workforce remains a top government priority, to be achieved both by investing in New Zealanders and through the skilled migration programme.
We also want better value for money than we've been getting in some areas of further education and training spending. Low quality providers and courses should not expect to survive. The money they have consumed can be far better spent elsewhere.
Net migration is heavily influenced by the flows of New Zealand citizens. Many of the hundreds of thousands currently offshore have skills this country needs. The Minister of Immigration is looking at how to encourage more migration back by expatriates. He will be looking for input and ideas from employers, so many of whom are reporting skills shortages.
This year's Budget will also support business innovation by, for example, increasing the rate of depreciation on short-lived assets.
Lifting Participation Rates in the Workforce
While overall New Zealand's labour force participation rates are high, coming in seventh in the OECD in 2003, our women's rate lags – and in particular sits below the OECD average for women aged 25 – 34.
Treasury estimates that our GDP per capita would rise by 5.1 per cent if we lifted our participation rates overall to the average of the top five OECD nations.
That's a worthwhile objective and at this time of labour shortage, it's a good time to be pursuing it.
In last year's Statement I highlighted the need to increase women's participation in the workforce, and a number of steps have been taken to do that.
The Working for Families Package means that a single parent family, for example, along with other family types, will always be better off at work, full or part time, than being dependent on a benefit. Reforms to the whole structure of the benefit system will make case management of clients back into work its central focus. This will deliver New Zealand a value-for-money social security system, designed to meet the needs of the 21st century.
The legislation for four weeks annual holiday and the improvements to the paid parental leave scheme will also help working parents.
So will the big boost for early childhood education and care in last year's Budget. It increased the funding for childcare and after school care subsidies; for more places in early childhood education; and, from July 2007, for twenty hours free education a week in community-based services.
In the first three months of the new subsidy levels for childcare and out of school care, there was almost a fourfold increase (382 per cent), over the same period the year before, in the number of subsidy claims granted. That means thousands more families have got help with their childcare costs. That helps more women return to work.
But still more needs to be done. In the United Kingdom, one of our key source countries for skilled migrants, proposals are being considered for a year's paid parental leave. And plans have been announced for "dawn to dusk" out of school care (8.00 am to 6.00 pm) based at schools, for five to eleven year olds, with the aim of extending to fourteen year olds in time. These kinds of policies will be increasingly important in influencing the decisions of people considering whether to come to New Zealand, and the decisions of expatriate Kiwis on whether to come home or not.
So we are looking again at our set of policies – across parental leave, child and out of school care, flexible working hours, and work-life balance – to see how to boost both participation in the workforce and good outcomes for children. In that mix of policies we are looking at options for boosting the provision of home-based childcare, as part of the overall solution to getting enough places.
Women's participation is also likely to be affected by pay rates in female dominated sectors. Last year the nurses' pay claim was settled, on the basis of moving to remedy years of under pay in that sector. The government is continuing to work on a staged programme to address pay equity issues in the public sector.
New Savings Initiatives
The government is developing new savings initiatives, both to help New Zealanders build up their assets and security, and to reduce our national reliance on the savings of others.
Since 2001 our saving rate has exceeded that of Australia, the United Kingdom, and the United States, but it remains below the OECD median.
Asset ownership is important for enabling people to participate fully in society. Assets provide families with greater security, control, and independence. The more evenly assets are spread in a community, the more social cohesion there is at a national level, the more all New Zealanders can benefit from economic growth.
Savings are also needed to finance better living standards in retirement. With the New Zealand Superannuation Fund established by this government, all New Zealanders have the certainty that a basic pension will be available to them when they retire. But New Zealand Superannuation alone cannot provide the standard of living to which most retirees aspire.
For that, New Zealanders must add to New Zealand Superannuation with their own savings, but, for many, developing the habit of putting money aside now for the future is not easy. There are many pressing demands on limited incomes. Yet the international and domestic evidence suggests that our failure to save adequately is not just because people don't have a lot of money. Many people lack confidence in making decisions about how to save. That means they put off the difficult decisions and fall back on non-saving habits.
Establishing a saving habit will be the single biggest factor in lifting the saving rate. That's why this government will take active steps to help people establish that habit.
We believe New Zealanders will save more if they have confidence in the saving vehicle chosen, and when they are aware of the differences it will make to their life chances.
Our first step last year saw us establish a new superannuation scheme for public servants, providing for employer and employee contributions. Forty six per cent of those eligible to join that scheme have done so already. As awareness improves, I am confident those numbers will increase.
But it is not only our own employees who deserve some assistance to establish retirement savings. The comprehensive report from the workplace savings group last year offers a viable way ahead for retirement savings. Proposals have also been put to government for encouraging tertiary education savings.
This year we will be announcing further initiatives to encourage more families to participate in workplace savings schemes. That will help build a more broadly based ownership society in which more New Zealanders can enjoy the security of their own home, afford higher education for their children, and have a good standard of living in retirement.
Traditionally New Zealanders' principal assets have been their homes.
Yet the thorough dismantling of state support for first home ownership by the last National Government took away tools developed over the previous half century to help families acquire homes.
Our government is concerned at falling rates of home ownership. The mortgage insurance pilot introduced in September 2003, was this government's first step back into this area of policy. How to encourage savings which could lead to home ownership is under consideration now.
But home ownership is not the only investment families may want to make. Establishing savings to reduce the need to borrow for tertiary education or training is also likely to be an objective for many families.
This government believes new initiatives are needed in these areas. We are developing policy to encourage a co-ordinated lifetime approach to savings.
We know that the building blocks for a confident and secure nation are confident and secure families. An ownership society, in which every family has a stake and sees a future, makes our country strong.
The Hui Taumata and Maori Development
This decade and this century will see Maori emerge even more strongly as very significant stakeholders, asset holders, and contributors to economic development.
The Maori commercial asset base is already estimated at $9 billion, with Maori owning 37 per cent of the fishing quota and ten per cent of land in the forest estate, as well as contributing seven per cent of agricultural out put.
Last year's aquaculture settlement, on the same basis as the 1992 fisheries settlement, provides iwi with entitlement to the equivalent of twenty per cent of all space allocated to aquaculture since 1992, and twenty per cent of any future new space.
This will add significantly to the already large asset base. Future treaty settlement monies wisely invested have the potential to do the same.
That is one of the reasons why it is important to get historical claims settled. Both Maori and Pakeha want us to complete treaty settlements so we can move forward together.
Our aim is to complete the historical settlements in the next ten to fifteen years. Achieving that will need a closing off date for the lodging of claims to be set.
The focus then can be forward looking.
The hui taumata being convened in Wellington next month is just that. It is focused on developing people, assets, and enterprise. The hui sees Maori picking up the challenge of development, and planning how to accelerate it.
This matters to all of us. Maori children comprised 25 per cent of all children in 2001, and are projected to comprise 28 per cent by 2021. Ensuring that they can stand tall and make a big contribution to New Zealand's development and well being is critical to our future.
That's why the government is backing the hui.
Infrastructure Development
Many years of underinvestment in the national infrastructure showed up when the significant economic and population growth of recent years put pressure on it.
This government's been working with local government and other stakeholders to find solutions and put new policies and funding in place. For Auckland land transport, another $1.6 billion was committed over ten years, on top of the 50 per cent increase from 1998/1999 to 2003/04.
Last week, we announced a quarter of a billion dollar increase in government funding for land transport development in Wellington.
That funding will not only allow for faster roading development. It will also significantly boost public transport which must be a significant part of a sustainable solution to transport issues.
Increased investment is also required in the energy sector. The state, which owns the transmission system and a large share of generating capacity, will be expected to stump up a major share of it.
The new Electricity Commission is charged with ensuring security of supply.
It is important that as much of the new supply as possible can be derived from renewable sources. Changes to the RMA reinforce that objective by giving renewable energy a greater weight in decision making.
Fast internet access is also a critical component of modern infrastructure. The government's commitment to Project Probe is bringing broadband to schools throughout New Zealand, and has hastened the roll out to regional communities.
Complementary to that is the completion this year of the Digital Strategy for New Zealand. There will be significant Budget initiatives to support this Strategy this year.
We are committed to developing first class infrastructure for our first world nation. Governments have to lead in this area. We are – and we will.
Dynamic Trade Agenda
Building our export capacity and opening up markets is critical for an open economy like New Zealand's.
With respect to Australia where our trading relationship is well established, our efforts will be directed towards progressing the single economic market. Our two governments have a big work agenda towards that end.
Our top trade policy agenda is the WTO round, and significant resources are being applied to it.
But we can't stand by and see others negotiate preference through FTAS which disadvantage our exporters.
From 1 July this year the new FTA with Thailand kicks in, improving our access to that growing market.
Negotiations for an FTA with China are under way, and we are well advanced on the trilateral FTA with Singapore and Chile. The China agreement alone is estimated to be worth $400 million a year to New Zealand over the first twenty years.
ASEAN has agreed to negotiate with New Zealand and Australia, and a study of the possibilities with Malaysia is being done.
Far away Egypt, where we are to open a new embassy next year, has approached us about an FTA, and we've agreed to respond positively to their proposal.
We remain ready to enter negotiations with the United States. The mutual benefits of an FTA between us are clear.
All these agreements open up new opportunities for New Zealand businesses. We accept the responsibility for ensuring that knowledge about them is widely dispersed, and for working with business to maximise the gains for New Zealand.
New funding to enable us to get the most from the new agreements will be announced in the Budget.
Beyond trade, we have forged an independent foreign policy record we can be proud of. We continue to place disarmament, human rights, and engagement in peacekeeping at the forefront of foreign policy. New Zealanders overall have taken pride in seeing their country's foreign policy express their values and our country's pride in its independence of mind. Nuclear-free status won't be gone by lunchtime with a Labour-led government.
Seriously Asia
The Seriously Asia Conference of late 2003 brought new focus and energy to this country's engagement with Asia. Asia's fast rate of economic development provides huge opportunity for New Zealand, but only if we are proactive, and only if we realise the importance of building well rounded and deeper relationships overall.
The government is providing leadership for New Zealand Incorporated in making this country relevant to and engaged in Asia's future.
That's why:
- this year New Zealand will be at the World Expo in Aichi, Japan,
- we pursued a summit relationship with ASEAN, leading to the first summit at leaders' level for 27 years last year,
- I led a government and business mission to India – the first visit at prime ministerial level for nineteen years. The Ministers of Foreign Affairs and Education will follow up with visits this year,
- we are pursuing FTA initiatives with key Asian nations.
Further investments in building our Asian relationships will feature in this year's Budget because of the importance of Asia to our future.
Building National Identity and Pride
In this government we are proud New Zealanders. We believe this country has every reason to be confident about its future and proud of its achievements.
