Budget 2009 and agricultural research announcement
Good morning. Thank you, Peter Townsend, for your introduction. Thank you also to the members of the Canterbury Employers' Chamber of Commerce for the opportunity to speak today.
I trust you managed to get some time off over the Queen's Birthday break so you're refreshed and ready to discuss an important aspect of Budget 2009.
Today I want to give you a flavour of the Budget and its relevance to you as employers and members of the business community in Canterbury.
I'm also here to make an announcement about significant plans for agricultural research, but more on that later.
Budget 2009 was delivered last week in global economic conditions unprecedented in generations.
We were determined to address the unsustainable situation, whereby core Crown expenditure had increased by 49 percent in the past five years. At the same time the economy had grown by only 25 percent, as had tax revenue over the same period.
Budget 2009 in context
Some tough decisions had to be made. These resulted in deferring the second and third stage tax cuts.
We did not cut superannuation as Labour has claimed; instead we have suspended automatic contributions to the Super Fund.
To pay into the Super Fund when we face budget deficits would have been ridiculous. It would have meant increased borrowing now to pre-fund Super for draw down in 2030 and beyond.
Besides maintaining all entitlements, we managed new initiatives in Budget 2009 including: increased Research Science and Technology funding, now up to $743 million per year; broadband, $290 million in this financial year; and state highways, an extra $1 billion over three years.
The Budget ensured that forecasts of skyrocketing debt, due to the big spending policies of the previous Government and the recession's pressure on revenue and growth, will not eventuate.
The National-led Government is ambitious for New Zealand. Despite the serious economic challenges I continue to be ambitious and positive for our future.
Primary Growth Partnership
On this ambitious note my particular focus over recent months has been developing a significant investment programme in primary sector growth and innovation. On Budget Day we announced some very good news for the primary sector by way of the Primary Growth Partnership.
The primary sector is our economic foundation and it will drive us out of recession. We have world scale.
New Zealand is the world's largest dairy and sheep meat exporter and a major player in the world trade of horticultural products.
These industries generate 64 percent of our merchandise export earnings. They are the only major industries in which we have sufficient scale, market share and supply chains to be truly competitive in international trade.
In saying that, we are no longer the world's lowest cost producers. If we rest on our laurels our competitors will soon outflank us.
That is why the Government unveiled the Primary Growth Partnership on Thursday.
It shows how committed National is to the primary sector.
For 20 years we, as a nation, haven't invested enough in primary sector research and development.
Many of the recent productivity increases we have achieved on-farm are as a result of research done almost 30 years ago.
The former Agriculture Minister, Jim Anderton should be acknowledged for his vision for pastoral and food sector research and development with his promotion of the Fast Forward Fund.
We assessed Fast Forward and decided we could do better. Fast Forward was funded through a nebulous capital fund that was to be drawn down over a period of 15 years. The Primary Growth Partnership is funded through an ongoing, annual government appropriation that will be matched by industry.
Based on the many statements of support from primary industry organisations over the past few days I am confident this will be easily achieved.
PGP is a bigger commitment than Fast Forward. It incorporates a transparent and accountable funding structure that is focused on results.
So how it will work?
Budget 2009 provides $190 million of Government funding over four years for PGP. It will start at $30 million this year; go to $40 million next year; $50 million the year after that; rising to $70 million per year ongoing from 2012/13. Funding will be increased as industry shows capacity and the need to spend even more.
With a matching commitment by industry, up to $140 million will be invested annually.
It is an enduring commitment from central Government.
As I said, funding will start this year at $30 million. We have started with a smaller amount because we believe projects will need time to be developed and assessed.
There will be five sections of funding with each proportioned a dedicated amount. This year it will be $2 million. The sections are divided up into:
1. pastoral (including wool) and arable production;
2. horticulture;
3. seafood (including aquaculture);
4. forestry and wood products; and
5. food processing (including nutriceuticals).
In addition to the five sections, $5 million will be proportioned for Greenhouse Gas research and development. I'll talk more on that shortly.
The remaining $15 million in year one will form a contestable fund open to any sector to bid for. If the dedicated $2 million for any of the sectors is not used, it will transfer to the contestable fund.
In my mind the $2 million works like a teaser - every sector has a fair chance. Those industries that propose bigger and more ambitious projects can apply for more from the contestable fund.
Government does not see PGP as 'business as usual'. It is an ambitious project and has an ambitious scope.
The priorities and strategic direction of PGP will be led by those industries that choose to be involved.
PGP will be managed by an Industry Advisory Panel. I can announce today that the panel will be chaired by the highly regarded Bill Falconer.
Bill is one of New Zealand's most experienced and respected commercial directors. He has an unrivalled knowledge of the primary sector and was the chair of Fast Forward.
A real feature of PGP is how it has been closely developed with industry. It is unashamedly industry-led and simple in its structure. PGP will focus on results, and bureaucracy will be minimised.
Announce Centre for Agricultural Greenhouse Gas Research
I mentioned earlier that I am going to make a major announcement on greenhouse gas research and development.
New Zealand has to meet its commitments under the Kyoto Protocol.
The Government has always been clear that agriculture will be part of New Zealand's emission reduction efforts, but there must be effective and affordable technology that allows the sector to do so without reducing productivity.
Research and development is absolutely essential to finding solutions.
With this in mind, the Government will establish a Centre for Agricultural Greenhouse Gas Research by early next year.
Our next step is to determine where it will be based - a New Zealand university or Crown Research Institute will be the physical location.
A key focus of the Centre will be collaboration - although it will have a ‘bricks and mortar' presence at one institution, it will be focused on using expertise wherever it may be in New Zealand.
The Centre will be charged with developing technologies that reduce emissions and improve on-farm efficiency and productivity.
We intend to be world leaders in the field of agriculture greenhouse gas research and development, because we have to be.
The Centre will have three areas of focus:
1. methane from farm animals and waste systems;
2. nitrous oxide from farm animals and nitrogen fertiliser; and
3. soil carbon from agriculture and horticulture.
As I mentioned already, five million dollars from PGP has been specifically allocated to this project. This will be allocated annually. The Centre will also be able to bid with industry partners for PGP's additional contestable funding.
This ongoing funding certainty by Government will provide the incentives for scientists and industry to commit to the long-term projects required to solve the methane-abatement challenge.
This initial Government funding commitment is just the beginning. It is our intention that the Centre for Agricultural Greenhouse Gas Research will also be linked internationally.
A Ministerial steering group that includes: myself, the Minister of Climate Change (Nick Smith), Associate Minister of Climate Change (Tim Groser) and the Minister of Research, Science & Technology (Wayne Mapp) is developing a high-level set of principles to guide New Zealand's work in this area as well as potential funding commitments.
This concept of an international centre has already been raised by Minister Groser and New Zealand officials overseas and received considerable high-level interest and support.
International Agriculture Greenhouse Gas research efforts
This international centre for research on agriculture greenhouse gas emissions will provide a platform for broader engagement with the international community.
International efforts present perhaps the most exciting opportunities.
Our emissions profile, made up predominately from ruminant animal emissions, leaves us in a unique situation when compared to other developed nations. It makes sense that New Zealand leads the global effort to develop agricultural emission mitigation technologies.
We must be at the forefront of this work.
There is a global significance to this collective effort.
I believe it's the most important contribution New Zealand can make internationally to the challenge of climate change.
That is why the Government is prioritising this work, and why we will be backing it with significant funding.
Conclusion
As I have said, the Primary Sector Partnership is unashamedly ambitious in its scope.
I am confident that the dynamic nature of our primary sector will ensure that breakthroughs are substantial and will underpin our future economic growth.
The next few years promise to be exciting times for primary sector research.
Nowhere will this excitement be greater than in the work being carried out in the climate change field.
Budget 2009 will be a turning point for New Zealand. Ten years of economic growth and expansive appetites for debt and Government spending have ended.
Budget 2009 outlines the challenges to rebalance the economy from debt and consumption to investment and exports. Primary production will lead that rebalance.
Thank you.
Good morning. Thank you, Peter Townsend, for your introduction. Thank you also to the members of the Canterbury Employers' Chamber of Commerce for the opportunity to speak today.
I trust you managed to get some time off over the Queen's Birthday break so you're refreshed and ready to discuss an important aspect of Budget 2009.
Today I want to give you a flavour of the Budget and its relevance to you as employers and members of the business community in Canterbury.
I'm also here to make an announcement about significant plans for agricultural research, but more on that later.
Budget 2009 was delivered last week in global economic conditions unprecedented in generations.
We were determined to address the unsustainable situation, whereby core Crown expenditure had increased by 49 percent in the past five years. At the same time the economy had grown by only 25 percent, as had tax revenue over the same period.
Budget 2009 in context
Some tough decisions had to be made. These resulted in deferring the second and third stage tax cuts.
We did not cut superannuation as Labour has claimed; instead we have suspended automatic contributions to the Super Fund.
To pay into the Super Fund when we face budget deficits would have been ridiculous. It would have meant increased borrowing now to pre-fund Super for draw down in 2030 and beyond.
Besides maintaining all entitlements, we managed new initiatives in Budget 2009 including: increased Research Science and Technology funding, now up to $743 million per year; broadband, $290 million in this financial year; and state highways, an extra $1 billion over three years.
The Budget ensured that forecasts of skyrocketing debt, due to the big spending policies of the previous Government and the recession's pressure on revenue and growth, will not eventuate.
The National-led Government is ambitious for New Zealand. Despite the serious economic challenges I continue to be ambitious and positive for our future.
Primary Growth Partnership
On this ambitious note my particular focus over recent months has been developing a significant investment programme in primary sector growth and innovation. On Budget Day we announced some very good news for the primary sector by way of the Primary Growth Partnership.
The primary sector is our economic foundation and it will drive us out of recession. We have world scale.
New Zealand is the world's largest dairy and sheep meat exporter and a major player in the world trade of horticultural products.
These industries generate 64 percent of our merchandise export earnings. They are the only major industries in which we have sufficient scale, market share and supply chains to be truly competitive in international trade.
In saying that, we are no longer the world's lowest cost producers. If we rest on our laurels our competitors will soon outflank us.
That is why the Government unveiled the Primary Growth Partnership on Thursday.
It shows how committed National is to the primary sector.
For 20 years we, as a nation, haven't invested enough in primary sector research and development.
Many of the recent productivity increases we have achieved on-farm are as a result of research done almost 30 years ago.
The former Agriculture Minister, Jim Anderton should be acknowledged for his vision for pastoral and food sector research and development with his promotion of the Fast Forward Fund.
We assessed Fast Forward and decided we could do better. Fast Forward was funded through a nebulous capital fund that was to be drawn down over a period of 15 years. The Primary Growth Partnership is funded through an ongoing, annual government appropriation that will be matched by industry.
Based on the many statements of support from primary industry organisations over the past few days I am confident this will be easily achieved.
PGP is a bigger commitment than Fast Forward. It incorporates a transparent and accountable funding structure that is focused on results.
So how it will work?
Budget 2009 provides $190 million of Government funding over four years for PGP. It will start at $30 million this year; go to $40 million next year; $50 million the year after that; rising to $70 million per year ongoing from 2012/13. Funding will be increased as industry shows capacity and the need to spend even more.
With a matching commitment by industry, up to $140 million will be invested annually.
It is an enduring commitment from central Government.
As I said, funding will start this year at $30 million. We have started with a smaller amount because we believe projects will need time to be developed and assessed.
There will be five sections of funding with each proportioned a dedicated amount. This year it will be $2 million. The sections are divided up into:
1. pastoral (including wool) and arable production;
2. horticulture;
3. seafood (including aquaculture);
4. forestry and wood products; and
5. food processing (including nutriceuticals).
In addition to the five sections, $5 million will be proportioned for Greenhouse Gas research and development. I'll talk more on that shortly.
The remaining $15 million in year one will form a contestable fund open to any sector to bid for. If the dedicated $2 million for any of the sectors is not used, it will transfer to the contestable fund.
In my mind the $2 million works like a teaser - every sector has a fair chance. Those industries that propose bigger and more ambitious projects can apply for more from the contestable fund.
Government does not see PGP as 'business as usual'. It is an ambitious project and has an ambitious scope.
The priorities and strategic direction of PGP will be led by those industries that choose to be involved.
PGP will be managed by an Industry Advisory Panel. I can announce today that the panel will be chaired by the highly regarded Bill Falconer.
Bill is one of New Zealand's most experienced and respected commercial directors. He has an unrivalled knowledge of the primary sector and was the chair of Fast Forward.
A real feature of PGP is how it has been closely developed with industry. It is unashamedly industry-led and simple in its structure. PGP will focus on results, and bureaucracy will be minimised.
Announce Centre for Agricultural Greenhouse Gas Research
I mentioned earlier that I am going to make a major announcement on greenhouse gas research and development.
New Zealand has to meet its commitments under the Kyoto Protocol.
The Government has always been clear that agriculture will be part of New Zealand's emission reduction efforts, but there must be effective and affordable technology that allows the sector to do so without reducing productivity.
Research and development is absolutely essential to finding solutions.
With this in mind, the Government will establish a Centre for Agricultural Greenhouse Gas Research by early next year.
Our next step is to determine where it will be based - a New Zealand university or Crown Research Institute will be the physical location.
A key focus of the Centre will be collaboration - although it will have a ‘bricks and mortar' presence at one institution, it will be focused on using expertise wherever it may be in New Zealand.
The Centre will be charged with developing technologies that reduce emissions and improve on-farm efficiency and productivity.
We intend to be world leaders in the field of agriculture greenhouse gas research and development, because we have to be.
The Centre will have three areas of focus:
1. methane from farm animals and waste systems;
2. nitrous oxide from farm animals and nitrogen fertiliser; and
3. soil carbon from agriculture and horticulture.
As I mentioned already, five million dollars from PGP has been specifically allocated to this project. This will be allocated annually. The Centre will also be able to bid with industry partners for PGP's additional contestable funding.
This ongoing funding certainty by Government will provide the incentives for scientists and industry to commit to the long-term projects required to solve the methane-abatement challenge.
This initial Government funding commitment is just the beginning. It is our intention that the Centre for Agricultural Greenhouse Gas Research will also be linked internationally.
A Ministerial steering group that includes: myself, the Minister of Climate Change (Nick Smith), Associate Minister of Climate Change (Tim Groser) and the Minister of Research, Science & Technology (Wayne Mapp) is developing a high-level set of principles to guide New Zealand's work in this area as well as potential funding commitments.
This concept of an international centre has already been raised by Minister Groser and New Zealand officials overseas and received considerable high-level interest and support.
International Agriculture Greenhouse Gas research efforts
This international centre for research on agriculture greenhouse gas emissions will provide a platform for broader engagement with the international community.
International efforts present perhaps the most exciting opportunities.
Our emissions profile, made up predominately from ruminant animal emissions, leaves us in a unique situation when compared to other developed nations. It makes sense that New Zealand leads the global effort to develop agricultural emission mitigation technologies.
We must be at the forefront of this work.
There is a global significance to this collective effort.
I believe it's the most important contribution New Zealand can make internationally to the challenge of climate change.
That is why the Government is prioritising this work, and why we will be backing it with significant funding.
Conclusion
As I have said, the Primary Sector Partnership is unashamedly ambitious in its scope.
I am confident that the dynamic nature of our primary sector will ensure that breakthroughs are substantial and will underpin our future economic growth.
The next few years promise to be exciting times for primary sector research.
Nowhere will this excitement be greater than in the work being carried out in the climate change field.
Budget 2009 will be a turning point for New Zealand. Ten years of economic growth and expansive appetites for debt and Government spending have ended.
Budget 2009 outlines the challenges to rebalance the economy from debt and consumption to investment and exports. Primary production will lead that rebalance.
Thank you.
