Pre-Budget speech to Business New Zealand

Kia ora koutou katoa
It’s great to be here today, at our now-regular event in anything-but-regular times.
I last spoke to some of you in mid-March.
That was an opportunity to reflect on an extraordinary 12 months, but also to reflect on how the future was shaping up.
In what has truly become a sign of our rapidly-changing times, even eight weeks later much has changed, and we can add even more thinking and learning to how we shape the next 12 months.
Today I want to touch on that thinking, but I’ll also speak to some of the wider challenges facing New Zealand in 2021, especially as we head into the Budget.
Last week on Mother’s Day I found myself in Dunedin.
I was speaking at an event, and as we wrapped for a cup of tea, a young woman approached me to share a cheese roll recipe. Of the many things people have chosen to share with me, this was a highlight.  
I thanked her, and took the opportunity to ask about her story.
She was from Invercargill. She had worked in tourism, but when COVID arrived she lost her job. It was not long though before she found new work – doing food preparation as part of our food in schools programme, which provides free school lunches in areas of high deprivation.
Hers is among the almost 1,000 jobs that have been created by the scheme, which we scaled up last year in response to COVID.
As I was listening to her tell me how much she loved her job, especially given she works out of her school’s kitchen and therefore has what she described as an “instant and honest” feedback loop from the kids, I couldn’t help but reflect on why we had extended that programme in the first place.
We all know that when an economic crisis hits, it is not felt or experienced evenly.
We know there are vulnerabilities, people in precarious work, people who were already living in the margins of society for whom life was already hard, and for whom it simply becomes that much harder.
And we know that because even before COVID, New Zealand had persistent issues we knew we needed to address.
Today, before I came to this event, we released the Child and Youth Wellbeing Annual report, and Child Poverty Related Indicators Report.
We committed ourselves to these two pieces of annual reporting when we introduced our child poverty and wellbeing legislation in our first term.
While we have made excellent progress, with consistent declines across all nine of our child poverty measures over the last two years, we have a long way to go.
I personally see the issue of child poverty as a moral issue, but I’ve also heard from many who view it as an economic one, with the loss of potential among our future workforce.
Either way, it’s a challenge that requires an urgent response – both in spite of and because of the pandemic
And respond we have.
In the first package we pulled together in the midst of COVID 19, it included of course funding for the wage subsidy, but also changes to benefits, the winter energy payment and the in-work tax credit.  
And this is another example of where COVID is both a challenge and an opportunity.
I remember sharing a Zoom call early on in the pandemic with Joseph Stiglitz.
He talked extensively about the idea of “double duty”, or what we in New Zealand would probably call ‘two birds with one stone’ – the sense that we can and should ensure that in difficult moments where we need to stimulate the economy, maintain employment and create new and sustainable jobs, we do so with an eye to the existing challenges we face.
I want us to look back at this period, and see that not only did we make it through, but we seized the moment to put New Zealand on a surer footing, better prepared to face the future.
Let me give you some examples.
We have long been challenged by productivity issues, something persistently raised by both the IMF and OECD. 
We also have a skills gap, coupled with massive under-investment over many decades in infrastructure, including housing.
All of that lends itself to two things – taking the time now to invest in those extensive building programmes, but also investing in our people.
Just last week we reached a milestone we can be particularly pleased with – the highest number of building consents issued in New Zealand’s history.
Now we need to make sure we have the workforce to boot.
COVID again provided a two birds opportunity. Taking into account what we saw in the wake of the GFC, we moved quickly last year to establish the Targeted Training and Apprentices fund.
It makes a range of qualifications in targeted areas and all apprenticeships free until 31 December 2022.
These targeted areas include primary industries, construction, manufacturing, technology, road transport and IT.
I can tell you that, without a doubt, it has worked.
A few weeks ago I visited MIT. As I was walking through the new learning environment for those in trades training I was introduced to a women studying electrical engineering.
I asked how she came to be in her now chosen trade. She told me it had been a long held passion, but life had originally taken her on a different path.
After leaving school she had spent several years as a travel agent, and was then made redundant due to COVID.
She said it was the fact she could study for free that finally gave her the impetus to take up the career she’d long aspired to.  She is not alone.
More than 100,000 learners have signed up for free vocational training and apprenticeships under the scheme, including more than 58,000 apprentices.
Once qualified, these workers will support New Zealand’s COVID recovery efforts and help drive our economy for years to come.
That is double duty.
But of course our challenges don’t end there. We are also undertaking a once-in-a-lifetime transition to a sustainable, carbon neutral economy.
Here you can see the work we are doing to set the pathway for not just the next 10 years, but the next 30.
The Climate Commission is due to report at the end of this month on its recommendations on how we reach our goals, and you can be sure that we’ll continue using our recovery to expedite those plans.
More on this in the Budget, and over the remainder of the year.
But our plan to address long-standing challenges also relies on us continuing to successfully manage the immediate and pressing issue that is COVID 19.
Things are very different to where they were a year ago.
And in fact very different even to when I last spoke to you a couple of months ago.
In March India was recording less than 40,000 daily cases – less than 8 weeks later they would record over 400,000.
Meanwhile the UK is now allowing hugs between loved ones again, and starting to trial large outdoor music events.
We’ve been lucky in New Zealand, but there is no doubt COVID has come at a cost.
Many employers and their employees have felt that acutely.
That is why we owe it to them to make the most of the strong position we find ourselves in.
Today, I want to build on the plan I set out in March, and share with you both what we know, and what we are less certain about, as we move into the next phase of our recovery.
Firstly, let me say from the outset, that while the hard work of many has meant our goods and services have remained mobile in the last 12 months, our goal now is to move towards reconnecting our people to the world.
As a government, we see it as incumbent on us to do this in a way that maintains the position we have – an environment where we are free from COVID – because we don’t yet have the individual armoury to protect ourselves from the disease.
That means that for the time being, our borders remain our barricade against COVID-19.
This has been our approach over much of the past year; what we call Phase One or the Keep it Out phase of our COVID response plan.
But there are ways we can retain our elimination strategy whilst starting to rebuild contact with the world.
You will have seen us gradually begin to do this with the opening of the trans-Tasman bubble. Since the bubble opened, more than 70,000 people have landed in New Zealand from Australia. Over 57,000 have travelled the other way.
The next step will be quarantine free travel with the Cook Islands, beginning this Monday.
I’m going to call these arrangements “phase two” of the COVID response plan, or the start of reconnecting our people to the world.
In this phase, where vaccine roll out in New Zealand is incomplete, the number of countries we can safely open up to is limited.
That’s because they need to hold the same status as us, or pose the same low risk of bringing COVID into the country.
Niue is the natural next addition. Beyond that we are relatively open-minded, and I do anticipate there will be other countries we can explore opportunities with.  
But as you can see from the trans-Tasman bubble, expanding the team of 5 million to a team of 30 million is not without risk and complication, and the bar we’ve set for whom we can safety operate such an arrangement with is high.
But phase two, where we are currently sitting, and which represents a partial re-opening, is in many ways a holding pattern, while we work on ensuring we lift the numbers of New Zealanders that have the individual armour of the vaccine. 
Here, high levels of uptake are critical.
To date, the vaccine roll out is on track.
In the last week alone, we vaccinated just shy of 80,000 people; a third of all doses that have been delivered have been delivered in the last fortnight, and the programme continues to ramp up, as intended.
Later this month all DHBs will be in a position to vaccinate over 65s and by the end of June, we’ve aiming to have administered over 1 million doses.
Throughout the roll out of the vaccine programme, our approach has been to match our vaccination rate with available supply.
We wanted to avoid a position where we build capability, infrastructure and systems only to have to turn it off because we run out of vaccines.
We are also using this period to test systems such as the COVID-19 Immunisation Register, logistics and inventory management, and the national booking systems that are being piloted in several DHBs across the country.
I should note, that even with planning in place, there is some risk that we’ll have a period between shipments when we run low, or out of vaccine temporarily.
If this does happen, it would be prior to the larger deliveries we are expecting in July, but does speak to the difficulty in scaling up smoothly and managing eligibility, demand and supply.
Come July, our vaccine rollout fundamentally changes.
That is when we take delivery of larger stocks, and can properly ramp up the programme, reaching every New Zealander over the age of 16.
DHBs are currently finalising their roll out plans for the general population, and in the weeks following the Budget, we’ll be able to set out in detail the resourcing and logistics of the final phase of the programme.
These efforts will involve GPs and pharmacies, workplaces, marae, churches and some large community vaccination centres, at more than 800 sites around the country.
It will be challenging, but also exciting.
The business community’s response to the challenge of COVID 19 has been critical; the vaccine rollout is no different.
The private sector is already playing an important role in our vaccine roll out plan – from logistics planning, to shipping of the vaccine, to workplace vaccination models, to simply encouraging and enabling your people to get vaccinated. Thank you.
But need for us to work together will only grow in coming months, as we aim to ensure every New Zealander who can be vaccinated is vaccinated by the end of the year.
So what does our vaccination plan mean for us in terms of reconnecting our people?
Let me share with you what we know, what we don’t, and what will help us make decisions.
The first question we are asking, is: do we need to have completed our vaccine rollout in order to open up our borders beyond the bubble arrangements we already have?
Will people who’ve been vaccinated in other countries be able to come in even if we haven’t finished our vaccine roll out?
The answer is – possibly. But there are two things we need to consider.
Firstly, we will be relying heavily on emerging evidence about how effective vaccines are in preventing not just symptoms of the disease, but transmission between vaccinated individuals.
Early data is promising. A recent study in the UK found that the likelihood of household transmission was halved where an infected person had been vaccinated, on top of the vaccine being 90 percent effective at stopping infection in the first place.
But as we have seen, no vaccine is fail-safe. We have had our own recent example of a fully vaccinated border worker contracting COVID 19.
The second consideration alongside vaccine efficacy is the question of COVID variants.
At this stage Pfizer is holding up well, but our reopening plan will need the flexibility to continue highlighting and responding rapidly to countries where variants emerge that might pose a risk to the immunity we’ve built up in New Zealand, or are working to build up.
That’s why, as work continues internationally on vaccine passports, New Zealand will remain actively involved in those discussions, while also considering other tools for managing and monitoring risk at the border. 
As planning continues for different possible ways to phase our reopening, we are leaning on the expertise and guidance of three groups – the Business Leaders’ Forum led by Rob Fyfe, the Continual Improvement Advisory Group led by Sir Brian Roche and the Public Health Advisory Group led by Sir David Skegg.
These groups have been invaluable and I cannot thank their chairs and members enough.
While I cannot give you definitive answers on where some of this work will land, I can tell you that we will keep an open mind, listen to the science, and prepare ourselves for the range of different opportunities that may arise.
In the meantime, there is much we can already do to maximise the opportunities we have before us.
As well as international travellers coming in to New Zealand quarantine-free and New Zealanders returning home, strategic decisions continue to be made around other border exceptions to help accelerate the recovery.
Since June last year, we’ve been able to let in over 8,000 critical workers.
On Monday we announced that over the next 10 months, thousands of skilled and critical workers will be allocated spaces in MIQ to help provide a boost to key sectors.
These include a further 2,400 RSE workers by March next year, to help prepare for harvest, pick Autumn and Summer fruit, harvest grapes, and prune through winter.
The new allocations also include 300 specialised construction workers between June and October to help progress key infrastructure projects such as the Auckland City Rail Link, Transmission Gully and Te Pae Christchurch Convention Centre.
We’ll also be putting MIQ spaces aside for 400 international students, underscoring the Government’s commitment to the international education sector, which is important in the country’s long-term recovery.
We will continue looking at our border settings to make sure we’re meeting businesses’ needs.
In terms of immigration going forward, last week we announced that the Productivity Commission will hold an inquiry into New Zealand’s immigration settings.
The inquiry will focus on immigration policy as a means of improving productivity in a way that better supports the overall well-being of New Zealanders.
The inquiry will enable us to optimise our immigration settings by taking a system-wide view, including the impact of immigration on the labour market, housing and associated infrastructure, and the natural environment.
This will sit aside existing work being led by the Immigration Minister around reforms to temporary work visas and a review of the Skilled Migrant Category visa.
In fact this Monday Minister Faafoi will be outlining the case for change in New Zealand’s immigration policy in a speech in Wellington.
But let me be clear. The Government is looking to shift the balance away from low-skilled work, towards attracting high-skilled migrants and addressing genuine skills shortages in order to improve productivity.
The final component of re-connection with the world that I wish to touch on today is trade, export and generating sustainable global investment to support our future growth.
Our COVID response is part of what makes New Zealand an attractive proposition – we are seen as COVID-free, safe and stable, astute crisis managers and enjoying a strong recovery.
This is compelling to business and investors who’ve been badly impacted by COVID overseas, but also a great brand proposition for our exporters.
We need to keep sending the message that New Zealand continues to be a great place to do business.
On this front, I have two announcements to make today.
The first is that in early July, I will lead a trade and promotional delegation to Australia – New Zealand’s first since the emergence of COVID.
I will be looking to further strengthen business ties with our trans-Tasman partners.
Also next month, Trade Minister Damien O’Connor will travel to London and Brussels to progress negotiations for New Zealand’s free trade agreements with the UK and EU.
Securing high-quality, comprehensive and inclusive FTAs with the EU and UK expands our market opportunities, playing a big part in our COVID-19 trade recovery strategy and building on what have been longstanding traditional relationships.
As with all returning New Zealanders, Minister O’Connor will undertake 14 days of MIQ upon return, and will be vaccinated ahead of departure.
These trips may not have been overly notable pre-COVID, but they are hugely significant in light of the domestic realities we’ve been experiencing, and the global ones that still persist.
I can also assure you that when our key trading partners over and above Australia look to re-open their borders and we have greater movement between countries, I will look to lead delegations into Europe, the United States, China and the wider Asia-Pacific.
But equally, I want to make as much progress as we can right now.
Already this year I have spoken at the US Chamber of Commerce, showcasing New Zealand’s credentials as a stable country to invest in and do business with.
With a change of administration there, and a deepening relationship with President Joe Biden across a range of issues, I intend to actively pursue an enhanced trade relationship with the US over the coming term.
We will also continue to rollout the $216 million funding boost for NZTE to help kiwi firms retain and grow their global connections.
We will be look to incorporate recent advice from the Productivity Commission on how that additional funding can be further targeted to support our exporters.  
To conclude, let me leave you with a few parting thoughts on the Budget.
In Budget 2020 and through our COVID response last year, we laid the foundations for New Zealand’s economic success by supporting businesses and jobs.
As a result we’ve seen our economy performing much better than expected over the past 12 months.
Our March quarterly benefit statistics showed a record number of people have come off the benefit, with nearly 33,000 entering paid work.
Unemployment dropped to 4.7 percent in the first three months of the year, well down on the 6.5 percent forecast, and low when compared to the average jobless rate across the OECD, which sits at 6.7 percent, and with Australia, where it’s 5.9.
As I’ve just said, exports remain resilient and firms also appear willing to invest more off the back of an improving environment, with imports of capital goods strengthening. 
Our success has been recognised, not just in how we’ve handled the virus, but also in terms of our economic resilience. 
In February Standard and Poors gave New Zealand the first ratings upgrade of any economy since the pandemic and the first for New Zealand since 2003.
And in the last few weeks Moody’s reported on our economy, maintaining our triple A rating and noting our “robust fiscal position” when compared with our peers.
Budget 2021 will be a continuation of our work to support the recovery, but will see our response become more targeted.
We will continue to focus on our key priorities – keeping New Zealanders safe from COVID, accelerating the recovery and rebuild, and laying the foundations for the future by addressing long term challenges such as housing, climate change and child wellbeing.
Two birds.
We must continually ask ourselves, have we addressed the pressing challenge in front of us, but have we also taken hold of the opportunity to fix long standing issues and leave all New Zealanders better off?
We need to be aspirational, and have a plan, but we also need to be disciplined and prioritise.
Not all our commitments will be met in this budget. The past three years have demonstrated the benefits of careful management and targeted investment.
Our strong position means we have an opportunity over time to bring down debt and put the Government books on a path to surplus, but our balanced approach will also see tens of billions of dollars opened up for investment into infrastructure over the coming decade so we don’t leave the next generation with debt of another kind.
We look forward to sharing the full budget with you next week.
In the meantime, you will have picked up from my comments today that I feel optimistic about the remainder of 2021 and beyond
I feel confident in our plan and approach and heartened by economic indicators.
I remain proud of where we’ve got to.
And now together, we need to keep going. So let’s get on with it. 

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