New Zealand the Way I See It

The New Zealand I grew up in was a very different country from the New Zealand of the late 1970s. While material conditions are much easier than they were a generation ago, the issues have become much sharper. Since I believe in speaking my mind frankly on matters of common concern, I welcome the opportunity Salient has given me to summarise the kinds of realities University graduates will have to live with.

A Different World

The biggest change has come in the external environment. A generation ago New Zealand was virtually an offshore farm for Britain in a world dominated mainly by a group of western states and their overseas dependencies. Now most of the dependencies are independent states, a new nationalism is in the ascendant in many, while in others communist regimes or military governments have seized power.

At the same time world trade and economic activity is increasingly being dominated by trade blocs and special economic groupings, particularly those centred on the EEC, the US, Japan, the Soviet Union and the OPEC states.

New Zealand stands isolated outside these large groupings with an economy still based mainly on the export of a limited range of farm products which are essential to none. Our export problems are thus two-fold. First, to secure trade access for our traditional pastoral products in both traditional and new markets. Secondly, to develop new export industries based on our other resources and the skills and imagination of New Zealand's people.

"...administrative firmness has to be brought in to deal with difficult situations. "

Some people consider that I place too much stress on economic issues. They are entitled to their opinion. However, there are certain realities which are very pressing.

First, we are still running a huge overseas exchange current account deficit of around 500 million dollars a year on an exchange transactions basis. This is only half of what it was when my government took office, but it is still too large. The rest of the world does not owe us a living.

Secondly, there is the domestic situation. According to the Government Statistician's projections, the New Zealand labour force will grow by over 100,000 in the next five years. Providing jobs for all these people - including the graduates of Victoria University - is going to be a major task of government.

We cannot do it simply by make-work activity in the public sector since even this generates an additional demand for foreign exchange, even if it is in smaller degree. The only realistic solution is to develop new industries which earn or save foreign exchange and provide the basis for genuine expansion in the rest of the economy.

Trade Access

My Government's determination to press forward with the trade access objectives has on several occasions led to public friction with our overseas trading partners. I make no apologies for this. New Zealand is the world's most efficient producer of pastoral products. Our freedom to export to natural markets benefits the ordinary people in these areas and at the same time is vital to our own living standards and ability to provide jobs. I will continue to press New Zealand's economic interests with vigour wherever this is needed.

New Industries

The second economic issue is the need to press forward with the development of new industries, particularly those geared to earn or efficiently conserve foreign exchange. Many of these industries will be resource based. This group includes, in particular, forestry, fishing, the further processing of primary produces, tourism, and the energy sector.

Another grouping consists of established manufacturing and service activities which have hit the limits of the domestic market. These industries will need to get out and sell in a competitive world market, as the leaders in the manufacturing field already have done. Clearly, the others will need to become more efficient and cost conscious. Equally clearly, both they and the primary industries will need certain things from the New Zealand environment if they are to meet the challenge.

These things include an easing of inflationary pressures, a minimising of unnecessary industrial disputes, and efficiency in the servicing and transport sectors of the economy. Anyone who pretends that New Zealanders can pull their way out of their troubles without all of us working more efficiently is peddling a pipe dream.

Innovations

There is a third category of industry where development offers potential for the New Zealand future. This consists of new activities based on innovative thinking and the development of new products and services — things we cannot necessarily even visualise today. I would hope that the the pool of university graduates will provide many of the innovations New Zealand is going to need — adding technical and intellectual sophistication to the traditional Kiwi ingenuity.

We are trying to create a climate in which more such innovation occurs. It involves many things — technical advisory services, access to development capital, more freedom in the market, and lower taxes. But most of all it needs the talents of able people harnessed in the right directions.

The Social Environment

Economically New Zealand is a more varied and challenging place than it was a generation ago. Socially though the situation is less happy. A whole range of areas, from the stability of family life to the safety of certain city streets at night, is much less certain than it once was.

I suppose one could say that New Zealand is simply following trends elsewhere in the western world, and is still comparatively better than most.

However, the special and unique New Zealand we once had seems to be eroding. This has created a situation where much more often than we would like, administrative firmness has to be brought in to deal with difficult situations. I would emphasise that a heavy, necessary emphasis on law and order is not exactly New Zealand the way I want to see it. However, when firm measures in any area are required my Government will face up to its obligations.

Public Spending

I would now like to focus on another issue in which I think I have some special expertise. This is the role of public spending in the economy. In New Zealand, as elsewhere, a large rise in the share of public spending in the economy has created what the Planning Council described as public sector "overload". While one can argue about the precise meaning of words or statistics, two things are clear.

First, the rising tax burden to finance public spending is hurting the public. It is squeezing the economic position of the average taxpayer and acting as a disincentive to effort and innovation.

Secondly, the real value of much of the rise in public spending is very dubious. During the period of the previous government the share of government spending in the economy shifted up over 10 per cent of GNP; but the man or woman in the street would be hard put to identify any significant benefits they obtained from this upsurge.

One of the messages any Minister of Finance will need to keep repeating to the New Zealand public is that there is no such thing as free government services. It all has to be paid for somehow. A more rigorous control of public spending — and a better public understanding of the need for this —is pretty fundamental to grappling with our problems.

Well, I have listed some of our problems and issues and some of the solutions we will need. I could list many more if you gave me the space. And I trust that the students of Victoria University who have been educated at vast expense to the taxpayer, are able to play their own part at helping to grapple with these issues.

R. D. Muldoon