John Key's statement: full text

The Government starts 2010 with a very full programme of reform in front of it.

Our eyes will be firmly on the economy this year as we continue to implement our economic plan.

Only by lifting our country's economic performance can we deliver New Zealanders the jobs, increased incomes and better living standards they aspire to and deserve.

Last year saw the worst global economic and financial crisis since the Great Depression. Almost all the world's developed countries went into recession and a number are now facing fiscal crises.

The good news is that New Zealand has weathered the worst of the global crisis, and New Zealanders can be pleased at how well this country has come through it.

The economy has performed better than almost anyone expected a year ago and is now starting to grow again.

That has been due to a combination of factors including the resilience of New Zealand businesses, the relatively strong performance of trading partners like China and Australia, the swift monetary policy response of the Reserve Bank, and the sound economic management of the Government.

While unemployment is higher than any of us would wish it to be, it is encouraging that the loss of existing employment almost completely halted in the last quarter. But every person out of work is one too many. That is why the Government's focus remains on the economy and on jobs.

Last year we introduced a number of measures to help stem job losses, in particular by maintaining a sizeable fiscal stimulus, cutting tax and bringing forward public infrastructure spending.

However, in the longer term, sustainable jobs will only be created when people have the confidence to invest in productive businesses, which can then expand and take on new employees.

It is encouraging to see that businesses are reporting a marked increase in confidence, and are positive about hiring new staff over the coming year.

New Zealand actually has the opportunity to come out of the recent downturn in a better position than many other countries and be well placed to attract investment, build productive firms and create jobs.

We have a lot of things going for us as a country. We are rich in natural resources, we are one of the best food producers in the world, we have a beautiful landscape, and we are home to some of the smartest and hardest-working people in the world.

However, we have not been making the most of our strengths.

This is demonstrated by the fact that the New Zealand economy was already in recession well before the global crisis struck. Our export sector was in poor shape, having stagnated for several years. New Zealand has long spent more than it earns, resulting in a high level of debt to the rest of the world. The Government is running budget deficits caused by a slump in revenue and previous big increases in spending.

In recent times, New Zealand incomes have fallen further and further behind the countries we like to compare ourselves with, including Australia.

The Government is committed to turning things around and in particular to closing the gap with Australia.

We are keeping a tight lid on new spending over the foreseeable future, which will enable us to get the budget back into surplus and keep public debt under control. Tight control of spending will also help to keep pressure off interest rates, which means lower mortgage costs for New Zealanders.