Building a more productive and competitive economy

To deliver more jobs and rising incomes, the economy needs to be more internationally competitive and productive. The New Zealand economy lost competitiveness in the mid-2000s when growth was built on debt, consumption and large increases in government spending.

It is important that we do everything we can to help give businesses the confidence to invest, grow and create more jobs. There is no single silver-bullet that can achieve this - instead, we must literally do hundreds of things well.

This Government has already taken a wide range of measures to build a more productive and competitive economy, with growth based on more solid foundations of exports, savings and productive investment.

Budget 2013 will support and continue this wide-ranging programme of microeconomic reforms. The programme is set out in the Government's Business Growth Agenda, which details initiatives in the following areas:

• Export markets
• Innovation
• Skilled and safe workplaces
• Infrastructure
• Natural resources
• Capital markets

Initiatives under the Business Growth Agenda constitute a comprehensive ongoing agenda of microeconomic reform, which will assist businesses to become more internationally competitive.

The Business Growth Agenda is focused on ensuring businesses have access to the six key ingredients they need to grow, create jobs and be successful. Working closely with the business community, we will continue to update progress.

Over the past four years, the Government has, among other things, reformed the tax system by lowering personal income tax rates and the company tax rate, while at the same time increasing consumption tax and the effective tax rate on property investment.

The Government has introduced voluntary 90-day trials and a new starting-out wage, to boost employment chances for groups who find it hard to get work. It is building on the comprehensive reform of the welfare system announced in Budget 2012 by extending work expectations and providing significant extra funding and support to assist more beneficiaries into work.

It has set time limits for the consenting of large and medium-sized projects under the Resource Management Act 1991. And it has introduced a competitive new system for processing oil and gas exploration permits.

It is progressing a multi-billion dollar infrastructure programme to ensure New Zealanders have the roads, rail and ultra-fast broadband they need in a modern economy. This is also supporting many thousands of jobs.

And by getting Accident Compensation Corporation (ACC) in better financial shape, the Government was able to reduce ACC levies earlier this year, saving households and businesses about $630 million a year.

As announced last week, the Government has decided against making further immediate reductions in aggregate ACC levy rates, which were recommended by the ACC Board.

The Government is committed to rebuilding ACC's long-term sustainability and that means making sustainable change over time, so we can reduce levies over a longer-term framework.

Ministers have also taken into account that a reduction in ACC levies at this time would have a direct impact on the Crown's operating balance. The Government has mapped a path to fiscal surplus and that is important for both New Zealand's credibility with financial markets and for business confidence, in what continues to be an uncertain global environment.

In terms of New Zealand's overall prospects, the Government recognises that the global economic environment continues to create headwinds for New Zealand businesses, such as a high exchange rate and subdued demand in some export markets.

This reinforces the need to progress the Government's clear economic programme, to tilt the economy towards savings, productive investment and exports, and away from unsustainable borrowing, consumption and over-investment in housing that marked much of the past decade.