Building a more productive and competitive economy

Mr Speaker,

As I said earlier, good fiscal management is important because it helps us pursue the other three priorities of this Government.

So I want to turn to the first of these - building a more productive and competitive economy.

The Budget continues to support the wide range of actions the Government is taking to raise productivity and therefore create more jobs and raise incomes.

I want to mention just a few of them.

Budget 2012 contains $385 million of new investment over four years in research, science, and innovation.

We need to support businesses and farms to innovate and stay ahead of the competition. And we need to ensure New Zealanders have the right skills to compete in an increasingly global labour market.

Over the next four years, Budget 2012 investments include:

• $166 million to redevelop an Advanced Technology Institute, which will help New Zealand's high-tech firms grow, increase exports, and ramp up productivity.

• $60 million to support a series of National Science Challenges, which will seek innovative solutions to specific questions of national significance.

• $100 million additional funding for the Performance-Based Research Fund to support world-class research in New Zealand's universities.

• $59 million to boost funding for science and engineering courses. Funding rates for engineering degrees will be increased by 8.8 per cent and for science degrees by 2 per cent.

• In its first three years, the Primary Growth Partnership has stimulated more than $430 million in research and development investment from government and industry. A further $270 million of investment by the Government and industry is awaiting approval of business plans or negotiating contracts.

Mr Speaker,

Budget 2012 continues the Government's programme of investment in productive infrastructure and other major capital projects.

In particular, the Budget establishes the Future Investment Fund. This fund will receive all proceeds from the Government's sale of up to 49 per cent of shares in four SOEs and Air New Zealand.

These proceeds are expected to be between $5 billion and $7 billion.

The Future Investment Fund will reinvest these proceeds in other public assets, such as modern schools and hospitals, over the next few Budgets. The Government will do this without having to borrow to pay for those new assets.

We have earmarked $1 billion of the fund for modernising and transforming schools as part of the Government's 21st Century Schools programme.

This demonstrates that the partial sale of shares in the five companies does not result in any net loss of publicly owned assets, but simply changes the mix of those assets.

The Government would rather build new schools and better hospitals without having to borrow more from overseas lenders, and still retain a majority shareholding in these companies.

The share offers will provide New Zealanders with an opportunity to invest their savings in large New Zealand companies and will help to improve the transparency and accountability of the companies.

As part of the Budget, the Future Investment Fund is allocating its first $559 million. This includes:

• The first $34 million of funding for 21st Century Schools.

• $250 million towards KiwiRail's Turnaround Plan.

• $88 million for health sector initiatives, in particular hospital redevelopments.

• $76 million for the capital costs of the new Advanced Technology Institute.

We expect to make a significantly larger contribution from the fund in Budget 2013, once the share offers are under way.

In addition, the Government is investing around $12 billion in improving state highways over the next 10 years.

We are also investing more than $500 million a year in improving and maintaining local roads, and completing the $2.1 billion upgrade of the metro rail systems in Auckland and Wellington.

Through Transpower, the Government is investing $4.6 billion in upgrading the national electricity grid over the next 10 years.

New Zealand's size and geographic isolation from the rest of the world mean communications technology matters.

That is why this Government is investing up to $1.35 billion in the roll-out of Ultra-Fast Broadband and an extra $300 million in the Rural Broadband Initiative, currently under way.

Mr Speaker,

As part of the Government's programme to deepen capital markets, the Budget last year made several changes to KiwiSaver.

We announced an increase in the minimum contribution from individuals and employers from 2 per cent to 3 per cent, to take effect from 1 April 2013.

About 15,000 New Zealanders a month are joining the scheme, and since March last year, total KiwiSaver funds have grown from $9 billion to more than $12 billion.

Budget 2012 further strengthens KiwiSaver.

New disclosure rules, to take effect from April 2013, will allow people in KiwiSaver to evaluate and compare the performance of different funds. Fund managers will be required to report their performance and returns, fees and costs, assets and portfolio holdings, and liquidity and liabilities.

In addition, the Government is today issuing the terms of reference for a review of KiwiSaver default-provider arrangements to ensure they are working in the best interests of investors.

The Government is also deferring its auto-enrolment exercise for KiwiSaver. Proceeding with auto-enrolment in 2014/15 as originally intended is now not possible without putting the updated forecast surplus at risk. Therefore, public consultation on auto-enrolment has been deferred until after 2012.

In building a more competitive economy, the Government will develop initiatives across its business growth agenda.

This will help businesses with the research, capital, ideas, skills, natural resources, and infrastructure that they need to grow, employ, and trade successfully with the rest of the world.

This is how the Government will support job growth.