Too much focus on doom and gloom, says PM

John Key said NZ was in a stronger position than many countries. File photo / Kenny Rodger

Prime Minister John Key talked up New Zealand's position amidst the global recession at a Council of Trade Unions (CTU) productivity conference in Wellington today.

Speaking alongside representatives from unions, business and the public sector, Mr Key said lifting productivity growth rates was one of the country's biggest challenges.

He said it was not good enough for New Zealand to be in the bottom third of the OECD for per-capita incomes, but was cautious about tackling the issue by lifting minimum wage rates.

"In reality, lifting the minimum wage will only take workers so far," he said. "In the end, it's productivity that drives wages."

Mr Key applauded the workplace productivity education project which has been run by the CTU, but said a mixture of initiatives were also needed.

Reforming the Resource Management Act and stripping red tape that could hobble ingenuity and good ideas, investing in a fast broadband network and improving vital transport links were all government initiatives with productivity improvement in mind.

Mr Key said lifting education levels among young people was also important.

Literacy and numeracy levels among workers were disappointing and schools needed to put pressure on themselves to improve education levels.

Initiatives such as introducing literacy and numeracy standards into primary and intermediate schools and expanding the provision of trades-based training in high schools, were part of the plan.

Talking about the global recession, Mr Key said there was too much focus on the doom and gloom when New Zealand was in a stronger position than many other countries.

The country's relatively conservative banking system had not taken as big a hit as banking systems in many other countries.

"And, by and large, we've not seen the kind of rinky-dink housing and finance deals that led to bad debt problems in the rest of the world."

Credit had dried up for individuals and firms overseas, but had continued to grow here.

Cuts in the official cash rate here had also flowed quickly through to fixed and floating interest rates, meaning New Zealanders didn't have to spend as much to service their debts.

"In fact, economists predict that if New Zealand interest rates held at current levels, the cost to households of paying off their mortgages will drop by about $4 billion.

"If interest rates continue to fall that figure gets even bigger."

Mr Key also compared New Zealand's export base with technology-based export countries like Japan.

A strong food-based export sector here continued to experience demand, whereas luxuries such as cars and electronics were the first to take a hit during recessions.

"Japan, for example, has experienced a 70 per cent drop in car exports in the past year."

There was a sense overseas that bigger homes, their financial institutions and economic growth had been built on a house of cards.

"And, as the house of cards has fallen, the trust in each other has eroded. I don't feel that here. Instead, what I sense is an unshaken belief in our strengths as a country."

To give an example of how much other countries were hurting, Mr Key referred to the United States, where only 10 new BMW 7-series vehicles were sold last month.

After getting applause for offering the statistic, he suggested he had former prime minister Helen Clark to thank for the large fleet of 7-series BMW's inherited by the National Government after the election.

- NZPA