Source: New Zealand Government
Tēna koutou katoa. Greetings everyone.
Thank you Matt for the introduction and can I acknowledge the presence of former Australian Prime Minister Scott Morrison. It’s a pleasure to have you back in the country.
It’s also a pleasure to be here to speak at this event for the third year in a row.
The world is changing. Fast. Orthodoxies are being challenged. De-globalisation, tariffs, counter tariffs, artificial intelligence, conflict, cynicism about national institutions, extreme climatic events, increasing competition for food, energy, minerals and other resources.
Leaders around the world are being compelled to act more boldly than they have for several decades.
Where once countries could take for granted their position in the world, it is now unquestionable that we need to place ourselves in the driver’s seat for our national interests.
These issues are not just the concern of diplomats, leaders and elites.
People the world over are increasingly feeling the effects of declining living standards, soaring prices, unaffordable housing and incomes that are not keeping up.
Is it any wonder that there is a growing sense that the benefits of progress are not being evenly shared or that citizens are questioning the institutions and conventions they were raised to rely on?
It’s hard not to look back on the past few decades and see complacency.
Where once there was an assumption about the inevitability of economic growth – a given to be traded off against a host of other values – that stance now seems blissfully naïve.
From the United Kingdom, to the European Union, to China, to the United States, there is a growing realisation that growth must be fought for and that, even once achieved, can easily slide away.
We in New Zealand are not immune to these trends. In fact, we are at a moment of inflection.
After three years of struggle, many Kiwis feel poorer, less financially secure and less hopeful about their futures. The cost of living is a daily concern.
New Zealanders have been through the wringer. Where once there was triumphalism about our response to, and recovery, from the COVID-19 pandemic, there is now a realisation that we are still paying the economic price for the disruption it wreaked.
The aftershocks of extended lock-downs included a generational spike in inflation and the cost of living, extraordinary interest rate hikes, ongoing disruption to migration flows, massive increases in Government debt and a structural deficit in the government books.
These blows landed on an economy that had being showing cracks for decades.
New Zealand already faced longstanding issues of low productivity growth, low capital intensity in our firms, low levels of competition in many sectors, challenges in attracting and retaining skills and talent, low uptake of innovation, declining housing affordability and a growing tail of New Zealanders leaving school without basic skills. Today, as Kiwis suffer the real-life effects of economic problems, it’s become even more urgent that we address these complex challenges.
For the economists in this room these observations about our economic problems can be understood as data points.
For many Kiwis, it is more personal, more visceral and far harder to stomach. The cost of living is too high and they need to see a path out.
Despite falling inflation and interest rates and rising business and consumer confidence, many New Zealanders tell me they still can’t get on top of their bills – even though they’re working harder than ever, that they are worried about whether they’ve saved enough for their retirement, and are concerned about their kids’ prospects should they stay in New Zealand.
My message to those New Zealanders is this: it’s tough right now, but our country has far better years ahead of it.
It’s easy to lose sight of the reasons to be optimistic, but let’s be confident about how great New Zealand’s potential is.
In a world facing multiple challenges, we have some extraordinary advantages. We’re a safe, secure country with established trading relationships and a reputation as a good place to do business. We are blessed with abundant natural resources – everything from ocean to freshwater, fertile land to minerals and temperate weather.
In a world worried about food security, we have the world’s best farmers, feeding more than 40 million people with levels of efficiency and sustainability that are the envy of the world. We have a long history of stable democracy, strong institutions and rule of law. We’ve produced world-leading scientific breakthroughs from splitting the atom to the Hamilton Jet Boat. Our entrepreneurs and innovators have converted their ideas into world-beating successes – from Oscar-winning digital effects to rockets in space.
New Zealand has what it takes to succeed, but for too long we’ve put up stop signs and road cones when we should have been putting our pedal to the metal.
Our Government’s mission is to make the most of New Zealand’s potential so we can grow the economy and ease the cost of living for New Zealanders.
Our plan is simple: remove the barriers that have held back growth and create the conditions that will allow businesses to create better paying jobs, more financial security for our families, and more income to pay for world-class education and health services.
Today I am releasing a document that shows how our Government is putting that plan into action. “Going for Growth” is a snapshot of the Government’s activity in five key areas, all designed to ease the cost of living and grow our economy.
The document identifies more than 80 separate initiatives that have been completed or are underway. Don’t worry, I’m not about to list them all.
But I do encourage you to give it a read. Going for Growth will be updated on a regular basis and we are actively seeking your feedback on its content and any actions you think should be added or prioritized.
The document focusses on five areas which are essential to improving the performance of the New Zealand economy.
Developing talent by lifting education and skills: Too many of our kids have been leaving school without the basics they need to succeed in an increasingly demanding world. This is a moral failure. It’s also a fiscal and economic timebomb. Our Government is improving our education system to deliver a better deal for Kiwi kids.
Competitive business settings: Excessive and badly-designed regulations have slowed New Zealand down, added costs and prevented too many good ideas from become reality. Several of our major sectors lack competition and consumers are paying the price. Our Government is removing red tape, reducing compliance costs and promoting competition to deliver a better deal for Kiwi consumers.
Promoting global trade and investment: New Zealand is a small country, geographically distant from many of the world’s large economies. We need to keep pursuing trade relationships and international connections not only to get good prices for our exports, but also to keep up with emerging technologies and to access the world’s talent and capital. Our Government is growing our trade relationships and rolling out the welcome mat for international investment so we can deliver better paying jobs for Kiwis.
Innovation, technology and science: New Zealand’s science system is not geared up for the future economy. Our businesses have often been slow to invest in the technology needed to make them more productive. We’re modernizing our science and innovation system so we can deliver a better deal for Kiwi businesses who want to use science and tech to grow.
Infrastructure for growth: New Zealand’s Resource Management system has been weaponised against development, adding cost, slowing things down and stopping too many projects. Despite abundant land, housing remains unaffordable for too many. Major infrastructure projects are too slow, too expensive and too few. Our Government is removing roadblocks to delivery of housing and infrastructure and fast-tracking major developments so we can deliver better living standards for New Zealanders.
Some of you will be familiar with the work we already have underway in each of these areas. Today I want to share some thoughts about a few areas where I think more reform is needed.
Number One. Driving greater competition in sectors that are vital to our national interests, including banking, grocery and electricity.
The economic impetus for this is clear. Strong competition protects consumer interests, it puts downward pressure on costs, it incentivises innovation and investment, it supports efficient allocation of resources and it drives productivity.
When I look around the business landscape today I see too many sectors where market power has been entrenched to the detriment of everyday people.
New Zealand has seen significant mergers and consolidation across major industries. Big fish have been swallowing the little fish and regulatory barriers have stopped new fish from entering the pond.
While many super-sized businesses have flourished, in too many cases the Kiwis they sell to have experienced higher prices, fewer choices and a worse deal all round.
In my view, law-makers and regulators have been far too complacent about diminishing levels of competition in vital areas. Large-scale mergers have been repeatedly allowed in major industries, with so-called efficiency prioritised over the interests of consumers.
Well-intended regulations have become a moat, stopping challengers from disrupting the status quo.
The result? A raw deal for Kiwi consumers.
The dominance of big fish has also made it difficult for many small businesses to grow into larger businesses.
We see it in the banking industry which the Commerce Commission has described as a highly profitable, two-tier oligopoly. The Government is taking action to address this.
And we see it in the supermarket sector in which three large entities, two of whom don’t compete in the same island, effectively control 82 per cent of the market.
The result, as the Commerce Commission reported in 2022, is that competition between grocery retailers is muted, profits are high, product ranges are limited and shoppers pay higher prices than people in many other countries.
In this environment it is almost impossible for a new entrant to establish a foothold in the New Zealand market.
Even if they are able to battle their way through the thicket of resource management and overseas investment regulation, they are confronted in many cases by an absence of suitable land for new supermarket developments. It has been land-banked by the established players.
Some of our best food producers also tell me they are struggling because of the duopolistic practices of the major players.
If Kiwi food producers can’t afford to keep their products on New Zealand supermarket shelves, how are they ever going to grow to the point where they can export overseas?
The supermarket lobby will find 1000 different ways to say this is not the case, but it is.
The OECD has this to say about the New Zealand supermarket sector:
“Two major players dominate the market through their portfolio of different brands. As a result, they can extract higher prices from consumers (oligopoly power) but also exert ‘oligopsony power’ on their suppliers, passing on costs and uncertainty to them, with the threat of removing products from shelves if suppliers disagree”
Studies have shown that New Zealand supermarkets were the most expensive for kitchen staples compared with the UK, Ireland and Australia.
If you doubt the findings of the OECD, research papers, or the Commerce Commission, just ask the everyday Mums and Dads at the checkout:
Kiwi shoppers feel ripped-off.
I think of PK, the Kiwi man who went viral on Tik Tok, sharing how he cried when he discovered how much cheaper the food was when he moved to Australia. I think of the parents in the supermarket aisle, putting back the chocolate biscuits as the weekly shop blows their budget – again. And I think of all those people who endure gut-wrenching anxiety as they watch their items being scanned and the numbers tallying up on the till.
The weekly supermarket shop makes up a significant proportion of most people’s weekly budget and contributes massively to their cost of living.
They deserve to know they are getting a fair deal.
Right now, I don’t think they are. I’m ready to pull out all the stops to get them a fairer deal.
The supermarkets will fight back I’m sure. It’s a fight worth having.
So what can the Government do?
Let me reassure you, we are not going to open our own grocery chain. There will be no KiwiShop.
Instead I’d like to see another competitor enter the supermarket scene to disrupt the major players, drive down prices and increase options for Kiwi shoppers.
Over the past 12 months, international supermarket chains and local investors have expressed interest in entering the New Zealand grocery market.
I want to help them succeed.
We owe it to Kiwi shoppers to help remove the barriers that could get in the way of a new entrant.
That could include removing unnecessary regulatory hurdles in the Overseas Investment Act, Resource Management Act and the entire regulatory maze; helping them to access suitable land and properties for development; helping them to attract capital; cracking down on predatory pricing and ensuring they have fair access to products.
If a new grocery chain opened up here it would deliver massive gains for Kiwi shoppers. So I’m up for actions needed to help make it happen.
At the same time, the Government must continue our efforts to hold the existing supermarket chains accountable to their customers and suppliers.
That means enhancing consumer protections and correcting power imbalances between suppliers and supermarkets. It means strengthening the Grocery Supply Code, enforcing action against non-compliance and illegal conduct, introducing a Wholesale Code to enhance access for smaller retailers, introducing disclosure standards for consumer complaints and responding to further recommendations the Commerce Commission makes.
Commerce Minister Andrew Bayly has already been pushing hard in this space. This year we’re dialling up the pressure.
The major supermarket chains should listen up: our Government is on the side of Kiwi shoppers and we will act to defend their interests.
Number two: The Government’s approach to procurement.
The Government is a huge player in the New Zealand economy. Every year it procures billions of dollars worth of goods and services.
Those doing the procuring understandably play close attention to prices. That is as it should be. We want value for money.
But getting value is not just about cost. Getting value is also about assessing the contribution particular contracts can make to New Zealand as a whole.
The Government wants the Government agencies doing the procuring to assess the value as well as the cost of contracts.
Small and medium-sized businesses say that too often they can’t effectively bid for Government contracts because of the complexity of official procurement processes.
I am reviewing the Government procurement rules that cause this and will soon be recommending changes to Cabinet. I want to ensure value to New Zealand is properly considered when government agencies are picking suppliers, ensuring a more level playing field, improving the ability of smaller businesses to bid and giving more small and medium sized Kiwi businesses the opportunity to grow and become global players.
Third, tax settings.
New Zealand must ensure our tax settings are competitive with other countries who seek to lure our talent, ideas and jobs.
We need to ensure the New Zealand tax system does not discourage businesspeople from investing in their businesses and does not deter foreign investment.
I am considering a range of proposals to make our tax settings more competitive over time.
Fourth, affordable energy.
Alongside the supermarket bill, electricity prices are a major pain point for Kiwi households. Spiking prices and uncertain supply are also a major barrier to industry and the jobs it supports.
As we look out to the world, it’s clear that those choosing to invest in manufacturing, data centers and technological parks will increasingly ask themselves: does the country that we want to invest in have secure, affordable and renewable energy?
New Zealand is pretty well-positioned for that. We already have abundant levels of renewable energy.
The question is, are we well positioned to bring on new generation at the pace needed to keep both security of supply and affordability?
That’s a question the Government is very much engaged in.
The Energy Competition Task Force has published proposals to give consumers more control over energy costs. In addition, independent reviewers will report to Ministers in the middle of the year on the performance of the energy market.
My view is that the world’s surging demand for renewable energy has changed the game. It’s time to think much more boldly about the actions the Government may need to take to incentivise new generation, security of supply and affordable electricity.
Fifth, savings.
Finally, I want to see KiwiSaver working as well as possible for New Zealanders. Commerce Minister Andrew Bayly already has work underway to enable Kiwisaver providers to make greater investments in private assets, to generate good returns for savers and ensure more Kiwi savings can be deployed for investment here at home.
I want to see KiwiSaver balances grow, both to make Kiwis better off in retirement and to grow our collective national savings. I am taking advice on options for achieving that with a view to taking recommendations to Cabinet.
Let me finish by providing you with some perspective.
Our domestic context is challenging. Internationally we are arguably operating in a more complex, faster changing world than at any time in history.
But, when I look around the world, there is nowhere I would rather build a business or raise a family than here in New Zealand.
But the world doesn’t owe us a living. We have to compete hard to deliver for our national interests and the interests of New Zealanders.
Our Government’s plan to grow the economy is about making the most of New Zealand’s many advantages, removing barriers that are holding Kiwis back and competing for our share of the world’s wealth.
This is not an abstract mission. It goes to the heart of what matters to New Zealanders.
To create better paying jobs and make Kiwis more financially secure, we must grow our economy.
To deliver better health services and schools, we must grow our economy.
To make New Zealand more resilient to global challenges, we must grow our economy.
This Government backs New Zealanders to succeed. I know you do too. I wish you a successful conference and look forward to hearing your ideas. Let’s go for growth.