Speech that ‘offended’ the Cabinet

Press, 15 June 1982, Page 18

Speech that ‘offended’ the Cabinet

The Minister of Works and Development. Mr D. F. Quigley. resigned from the Cabinet yesterday. The Prime Minster. Mr Muldoon, said that an address hy Mr Quigley to the Young Nationals last week had "offended, embarrassed and angered" members of the Cabinet.

The full text of Mr Quigley's address, is printed in this article. When a Wellington newspaper, the "Dominion." printed the text of the address last week. Mr Quigley offered the following letter of explanation about his speech: I note that you are proposing to publish the full text of the speech I gave last Monday, June 7 and felt that it would be helpful if I provided some additional comments to put the speech in its proper perspective.

As you will be aware it was prepared for and delivered to a group of young people with a common interest in National Party matters. They were holding a conference to discuss a wide number of topical subjects including the Clyde Dam issue and the Government’s growth strategy. I was also aware that a remit was to be moved on the subject of special legislation for the Clyde Dam.

The speech was deliberately designed to stimulate discussion, because, in my view it is most important that a group such as this has the opportunity to debate the issues of the day in an informed manner and appreciate the role the Government plays in the deci-sion-making process. The debate on think big has to date concentrated on a limited number of large scale projects rather than the part each of these plays in an over-all development strategy. Yours faithfully, D. F. Quigley. In his speech on June 7, Mr Quigley said: What has happened to the National Party since it was swept back into office in 1975 with an overwhelming majority 9 We had had the first big oil shock by then, and over the next three years had to make some moves which had brought the economy under better control again; for many observers, those moves were enough to tip the time scale back and recreate the "she’ll be right” attitude that existed in past years.

The temptation was to sit back and relax, to leave things as they were in the hope they would eventually come right as

had invariably been the case in the past. However it was the first oil shock that should have given us the incentive to examine New Zealand as. it was. and to decide where its future lay. The need for change stared us in the face, but in retrospect we did not heed the early warning. It was only when the second oii shock sent us reeling and put us under pressure again, that we looked for some immediate solutions. That was early in 1979. and by then New Zealand had more than reached the crossroads. A lot of decisions have been made bv the Government since then in'implementing changes for the future. But has the individual New Zealander been involved enough in the deci-sion-making process so that he not only understands it. but also supports it? If the answer is no. why not 9. And what if anything, can be done about it?

As far as Mr Bill Christie, president of the Manufactuters Federation is concerned, his answer would be "no” because he said in a speech delivered to the Oamaru Rotary Club, and reported in the May 26 issue of the “Manufacturer" under the title "Targets needed for growth strategy" the following, and I quote: "If the private sector knew that the Government was committed to the attainment of specific goals, corporate planning would become more certain and confidence would be restored." Mr Christie also said in the same speech that New Zealand's record in integrated medium-term economic planning was patchy "because real commitment at"the top has not been forthcoming." He blamed the three-year electoral cycle saying, in terms of economic management, it was a disaster. He saw another example of the same sort of criticism earlier this year, and some of you may remember March, 1982, when the D.F.C.'s general manager, Mr John Hunn. received a broadside from the Minister of Energy when he (Mr Hunn) said to the Hutt Valley Chamber of Commerce: “Government has not provided sufficient information for an informed debate on the viability of each (energy) project, and this is cause for concern as it is in my view an unnecessary contribution to the tensions within the community." People are now even starting to talk like that in my own electorate, and that is getting

too close to home for my liking. In the June 4. Christchurch "Press" there was a full page reproduction of a speech by one of my own constituents (and supporters) to the annual conference of North Canterbury Federated Farmers. Mr John Bayley, a farmer-econo-mist with an enviable list of qualifications, was formerely employed in the Bank of New Zealand’s head office, and was speaking on that “comfortable disease, inflation."

His whole speech is worth reading and re-reading. ■ but I only want to quote two extracts from it.

First the following

"In the aftermath of the election I am very fearful that inflation has faded from the official priorities, and I am fearful that the Government regards its election win (by default) as a mandate to continue with the same policies as thev had through 1980 and 1981."

And later: "I will be looking at the forthcoming Budget for the projected level of Government expenditure. I won’t be looking at all the platitudes in the front, for they have long since lost their credence, but turning to table two in the back depicting the financing of Government expenditure. The annual percentage change in expenditure will illustrate to me the commitment of this Government to doing something about inflation." Unfortunately, the sort of comments Messsrs Christie. Hunn and Bayley are making are becoming more and more commonplace as our community leaders express their views on the issues that are of concern to them.

These are now no longer isolated opinions, but I believe a reflection of the thinking of a lot of New Zealanders. And I say this despite the fact that we have only recently fought and won an election on what many would say was a credible and clearly understood series of policies” centred around a growth strategy. In an article in the “Listener" earlier this year, it was noted that only 7 per cent of those who voted for National at the last election did so because of our growth strategy. Clearly think big is neither understood nor supported at this stage by the majority of New Zealanders.

This in itself has to be a major cause for concern when you consider that we are at the same time attracting less and less popular support at the polls — 48.58 per cent in 1975,

but onlv 38.78 per cent in 1981.

Our main problem as a governing party is. I believe, one of identity.'We haven't as yet decided whether we should continue to attempt to dominate the economv. or adopt a more passive role. Most of our younger members are in favour of the latter, but there is the problem of transition.

This arises not so much in the context of conflicting ideologies — and there are sharp differences here — but because of the dominance of the energy and energy intensive projects in the growth strategy. The more passive approach was advocated by a task force of the New Zealand Planning Council which published a brochure in July. 1980. entitled "Investment issues." The conclusion in the brochure was that the Government should not attempt to lavdown a detailed blueprint for the level and pattern of investments over the next decade. It suggests that the Government's main role should be to provide the right climate for private and public investment decisions. give better signals, and reduce the negative influence of regulations, licensing and control. It also made certain recommendations. Unfortunately, the solutions are not quite as simple as that, because the extent of the Government's decisions of the past four or five years will influr ence New Zealand's development for many, many years to come.

The Government has been intimately involved in most of these decisions in a variety of ways.

For example, it negotiated the power price where electricity supply was involved.

It has also had to decide amongst competing proponents which to accept, and the degree of overseas equity participation required from the selected participant.

These decisions and the various other matters which required resolution in connection with these projects, have required the Government to be much more closely involved than merely creating the right climate.

There are substantial risks associated with the energy projects if not carefully handled

Like Britain, with its North Sea oil fields, we will miss out on many of the benefits of energy resource development if we do not pursue sensible

macro-economic policies (1980 Budget).

The risks, in my view are two mam areas:

0 First, that existing businesses. whether they be farms or factories, could finish up being short of the investment capital which they will need, not only to maintain their present output, but to earn the extra export income which will be required, at least in the short term, to service the phenomenal borrowing we will be engaged in to fund the major energy projects. ® Second, that the New Zealand public will reject the process of structure change that is now taking place, and will need to take place at an accelerated pace, if the large scale development which I have outlined is to proceed to fruition.

Whether we succeed or fail is still something for the future. However, the measure of our success or failure will not be the number of spectacular large energy intensive projects which may. or may not have been established as a result of Government decision-making, but the contribution those projects make to the total economv.

Put another way: If we merely add to our existing structure, huge projects funded from overseas which provide little additional employment, and earn or save only limited overseas funds, then when it is all over, we will again run into foreign exchange constraints albeit at a higher level of gross national product, and be no better off.

In my view, new development has to proceed in tandem with an expansion of the efficient parts of our existing economv.

If it doesn't, it will be even harder in future to achieve international competitiveness.

In my view, we have focused too narrowly in the past on earning overseas funds, and the quantity rather than the quality of our development.

We now run the risk of repeating the mistake with the second smelter if we give into the consortium's power price demands.

The principle that applies to the smelter also applies to any other development project that the taxpayer is involved in.

The Government has to see that it sets a correct price which provides an adequate return to the nation on its investment. If the commodity the Government is selling is

generating capacity, sales to users who can in turn achieve competitive results on their investment are worthwhile. Any sales of electricity at below the marginal costs of production represent an inefficient use of the resource, but the effects vary as between New Zealand arid overseas interests.

If the Government charges uneconomic prices to domestic users, the benefit of those lower prices is at least captured by the New Zealand consumers.

However, if we sell the power to a foreign investor on this basis, we confer benefit to foreign shareholders or consumers at New Zealand's expense.

Exactly the same argument applies 'to our natural resources such as forests, natural gas. minerals, etc. Where domestic policy settings of this kind are inappropriate. the best approach is to correct them at source.

If excessive profits are being made, for example, in parts of our highly regulated transport industry, it makes more sense to amend the form of regulations than to prevent foreign firms from investment in transport services.

Appropriate moves have alreadv been taken in the meat processing industry and restructuring is already under way there. However there have been more of what John Baylev termed "the platitudes" in the front of successive Budgets than there have been actual decisions. In the preamble to the 1980 document, there was a clear description of our economic circumstances and a forthright comment to the effect that "we needed to face up squarely and courageously to a difficult period."

Indeed the same preamble also staled that during this difficult -period "it will be our will and our ability to use our resources and opportunites wisely, and the readiness to accept change which will determine whether we prosper or stagnate."

It also emphasised the importance of efficiency — “today's dirty word is inefficiency, not profit" — and the need to use the total resources that are available to best advantage. Unfortunately, the theory and the practice are still poles apart, and will remain so till governments accept that their role is not to dictate but to listen, explain, and guide:.