Thank you again for the privilege of giving this annual speech to your Rotary Club.

This evening, I wish to cover three main bases.

First, the big picture for New Zealand and where we see the challenges and opportunities for the new decade.

Secondly, I want to give a take on my own environment, climate change and ACC portfolios in this context and outline my priorities for the year ahead including some new announcements.

And thirdly, I want to give a take on Nelson in 2010, and some of the initiatives I want to see progressed locally.

The middle year of a Governments term is the business year. 2009 was about delivering on our election commitments and 100 day programme. It was about managing the fall-out from the worst global economic downturn since the 1930’s. It was about finding our feet as a new Government and getting some of the hard work done to enable us to make some of the bigger long term decisions.

This is not to understate what we achieved in our first year. We have done what we said we would do on crime, on health, on education and in electoral law. Sometimes it is the smallest things that make the biggest difference. My favourite Christmas moment was when a complete stranger ran up to me at Mitre 10 Mega and gave me a spontaneous hug. I was a little taken aback, as I am not used to such reactions from women. She then explained that her daughter had breast cancer, and that our delivering on our Herceptin promise had saved them re-mortgaging their home.

A lot of Cabinet’s work last year went into buffering our economy from the sharpest edges of the global recession.

While we love to hate the Aussie banks, we are so much better placed not having had major failures in our core banking sector, as has occurred in Europe and North America.

We’ve deliberately boosted investment in infrastructure and housing to help keep the building and construction sector afloat. In Nelson that’s meant extra funding for the new Nelson Abbeyfield in Tahunanui, for Habitat for Humanity, and for upgrading the Orchard Street flats as well as funding for hundreds of homes to be insulated and the installation of clean heating and solar water systems.

We’ve given tax relief to businesses and householders to try and keep jobs and people afloat. We’ve made the option of a nine-day fortnight to save jobs and put in place extra support for families hit by redundancy. We provided thousands of extra places for youth with the Job Ops and Community Max programmes to recognise they are particularly hard hit by the recession.

Long-time political commentator Colin James opened the year by noting that the last decade was one of illusory wealth.

New Zealand went on something of a spending binge on the back of inflated house prices. He is right to describe the challenge for the decade ahead being one of realism and hard work.

The last five years have seen no growth in our exports. The growth sectors of recent years have been Government and housing. That is not sustainable and that is why major changes are going to be required to rebalance the economy.

Three elements give me confidence of New Zealand’s and Nelson’s future if we get the incentives right.

The first is Government debt. New Zealand is far better placed than historical economic powerhouses like Japan, the US and the UK. This debt is growing as we speak in all developed countries as Government’s have borrowed to cushion the recession, but we and Australia are better placed to pull out and make the recovery than those where Government’s are further in debt. This also gives us some room to make some of the long overdue infrastructure investments in areas like broadband, transport and water that will be critical to delivering stronger growth this decade.

The second reason for optimism for New Zealand is because we are well positioned in the world, both geographically and in our areas of strength.

This telling chart shows the growth picture of the last decade. The powerhouses have been the China’s, the India’s and the ASEAN economies. These now huge economies offer New Zealand tremendous trade opportunities enhanced by our geographical location, sealed or in-train trade agreements and our complementary exports of healthy primary produce.

The really tough issue for the Government is getting the incentives right for New Zealand to take up these opportunities, and that is at the core of the debate on tax.

A tax system that penalizes work and that incentivizes investment in property over exports, is not a tax system that is going to get the New Zealand economy on a strong growth path.

It is just not right that the $200 billion invested in property actually resulted in the Government forking out $500 million in tax losses.

Nor is it right that only half of New Zealand’s most wealthy individuals pay the top tax rate when hundreds of thousands of very middle income earners now do.

And we also have to understand that in a highly competitive world, tax rates on companies and individuals have a very real impact on whether we get investment and whether we keep and attract the talent we need to grow.

The Government is some way off from making the tough calls in this highly contentious area. Inevitably tax debates draw out self-interest in droves.

The driver must be a focus on the sort of tax reform that will deliver a better balanced economy, one that rewards hard work and will deliver stronger sustainable growth.

Tax is only part of the Government’s broader programme of economic reform, alongside education and skills, technology and innovation, reducing the regulatory burden and better use of our natural resources.

The wise use of New Zealand’s plentiful natural resources is at the core of the Government’s broader strategy and one I want to particularly focus on this evening.

My colleague, Gerry Brownlee, is reviewing New Zealand’s mining resources and stepping up Government efforts to generate wealth from these. A key reason Australia’s incomes exceed our own is their huge mineral industries. New Zealand is not resource poor but we have been more reluctant to use these. There will be important work this year on getting the right approach to tapping into New Zealand’s mineral wealth while maintaining high standards of environmental protection.

A resource of particular importance to Nelson is that of aquaculture. In 2000 Labour imposed a moratorium on this growing industry and then in 2005 imposed a flawed legislative framework that has been completely unsuccessful in enabling any aquaculture development. Last year we started the work to reform the RMA’s aquaculture provisions by establishing an advisory group and advancing the first phase of legislative reform. In 2010, new laws need to be passed to unlock the considerable potential for growth in this industry.

The smart growth of this industry not only requires a more accommodating framework for accessing sea space but strong support for the research base that supports it. That is why I am so supportive of the Cawthron and Wakatu Incorporation initiative for a major development at the Glen. I am confident this year of securing multi-million dollar government support for this initiative.

New Zealand’s most strategically important natural resource is our freshwater. This bar chart shows just how well endowed we are, and at nearly 80,000 m3 per person, we are to water what Saudis are to oil. Better still, if wisely managed it is infinitely renewable.

The problem is that water has been so plentiful that we have not had to be too sophisticated historically in how we have allocated or managed the resource.

First up is the handling of contentious applications for dairying in the Mackenzie basin.

Second up are issues over Environment Canterbury’s performance

And third are a wider set of issues about the legislation governing water quality and allocation arising from the Land & Water Forum.

Today I made some important decisions about the resource consent applications involving huge new dairy operations in the Mackenzie Basin.

Three related companies, Williamson Holdings, Southdown Holdings and Five Rivers, are proposing intensive dairy operations involving the housing of nearly 18,000 cows on 8,000 hectares of land near Omarama in the Waitaki District.

The growth of dairying is not new with it being one of the most successful export industries over the past decade, but there are aspects of this operation that have given rise to significant public concern and nearly 5,000 submissions.

The most concerning to myself as Environment Minister is the implications for water quality. 18,000 cows produce an equivalent amount of effluent as 250,000 people, or a city two thirds the size of Christchurch. The problem of this effluent load is compounded by the shallow and fragile soil structure of this formerly tussocky basin and the iconic status of Mackenzie’s majestic mountains and clear lakes.

Intensive farming over a long period has created major water quality issues in Lake Taupo, the Rotorua Lakes and the Waikato River that Government today is having to spend hundreds of millions of dollars attempting to address. Prevention is always preferable to any cure. I need to be satisfied that such major intensification of farming in the Mackenzie is going to be sustainable.

That is why I today announced that I will be calling-in these discharge consents and that they will be heard by a Board of Inquiry chaired by an Environment Court Judge. I want the most robust process possible for dealing with these nationally significant consents. New Zealand needs to be satisfied that large scale intensive dairying in this pristine and iconic area is either environmentally sustainable or prevented from proceeding.

This debate in the Mackenzie is just a part of a broader issue New Zealand needs to address about use of our water resources.

Environment Canterbury has been in trouble for some years but 2009 was their annus horribilis. In June, the biennial summary of resource consenting performance showed them bottom of 84 authorities. In June, the divided Council rolled and replaced its Chair. The Audit Office raised concerns in December about poor decision making over conflicts of interest.

As part of a more pro-active approach to these critical resource management issues, I choose last year to instigate a formal inquiry into Environment Canterbury, using Resource Management powers not previously used. I am expecting to receive that report in February. This will inform significant decisions for myself and Government on how to improve the governance of Canterbury’s critical water resource.

The challenges over water management go well beyond Canterbury. That is why in 2009 the Government has triggered a major process with the Land and Water Forum on how New Zealand needs to improve its freshwater management.

Here we have pulled together iwi, farmers, environmentalists, fishers, power generators, irrigators and other stakeholders to try and build a common vision forward on how to better manage our water resources. Their report is due in July from which Government will have critical decisions to make. Water reform, while not as significant as tax reform, needs to be part of the mix to lift New Zealand’s game this decade.

Water is not the only area of resource management reform in which we will be working this year. Last year I spoke of the need to streamline and simplify the RMA. Last February I introduced to Parliament the most significant package of changes to the Act since its inception in 1991, which became law on 1 October. These reforms were about greater central government direction, and saw the creation of the Environmental Protection Authority. Tonight I wish to announce two important parts of the Government’s second phase of reforms.

The first is infrastructure. New Zealand has not done a good job of planning and implementing the necessary infrastructure under the RMA. This is reflected in the too regular power outages and shortages, the problems of traffic congestion, issues in telecommunications and water infrastructure. Tonight I am announcing a new Technical Advisory Group to review this aspect of the RMA with a reporting timetable back to Government by March.

The second is our approach to urban design and housing development. There is a real and genuine concern that the RMA has not delivered optimal planning for our major urban centres. A major analysis by MOTU Economic Research looked at how metropolitan urban limits had resulted in limiting section supply and driving up prices unnecessarily. The economic consequence of this is quite serious, making home affordability worse and contributing to distortions in investments towards housing with all the flow-on implications that have harmed the economy over the past decade. Today I am announcing a technical advisory group to re-look at these issues and where the RMA needs re-jigging to ensure our rules enable well designed urban environments. This work is likely to result in further amendments to the Act later this year.

One of my tough roles last year was trying to get on top of the serious financial problems in ACC.

In the year to June 2008 prior to my appointment, ACC made a loss of $2.4 billion. In the year to June 2009 that straddled Maryan Street and my period as Minister a further loss of $4.8 billion was made. That’s a loss of over $1000 for every New Zealander. Nearly 50% of the Government’s $10 billion deficit last year came from ACC.

It is true that the global recession has hammered ACC’s investment portfolio, but the underlying issue is that ACC claims costs over the past five years have risen by 60%, or growing at five times the rate of inflation. The part that makes me grumpy with the previous Government is that even after the June 2008 loss of $2.4 billion, they introduced in October just prior to the election, twelve additional unfunded extensions to the scheme that have just compounded the problem.

The decisions in Nelson in 2008 to buy Fashion Island on which they have lost $6 million and to lease flash new premises over three times the cost is symptomatic of the broader problems that have got ACC in so much trouble.

In March last year I made significant changes to the Board, we’ve changed the funding in areas like physios, we’ve pulled back on the new entitlements and we’ve had to put levies up for workers, businesses and car and motorcycle owners. It’s been painful, but it has been totally necessary.

This work last year will hopefully prevent ACC making another loss this year, but the bigger problem remains. Its liability will still exceed its assets by about $12 billion. The task this year with the stocktake, will be about the longer term plan to secure a sustainable future of our unique 24/7 no-fault accident scheme.

It is not my intention to canvas my climate change portfolio and the disappointment of Copenhagen late last year, albeit another challenge this year will be the smooth implementing of National’s modified emissions trading scheme.

I want to conclude this speech with a Nelson focus.

I noted that an important part of the Government’s economic strategy is investment in infrastructure. It is my job to ensure Nelson gets its fair share.

We made good progress in 2009 as a region with the $30 million investment getting underway with the Ruby Bay Bypass on State Highway 60, and the completion of the Saxton Field Stadium of which I was proud to play a role as Deputy Chair of the Society.

It will also be good to see the Nelson Courthouse and the Theatre Royal project, both of which I have been strongly supporting come to fruition this year.

An important issue late last year was securing Finance and Education Minister support for the $9.1 million funding for NMIT’s new Arts and Media building. The arts are a critical part of Nelson’s character and it is right that our polytechnic specialises in this area of tertiary study.

Last year, I also worked closely with the Nelson City Council in securing Land Transport funding for engineering design to address Nelson’s arterial transport problem. This long standing issue needs to be fronted up to as Nelson’s most critical infrastructure issue. We’ve had too many false starts with the Environment Court set-back in 2001 and the flawed proposal in 2009 to add lanes to Rock’s Road. We need a practical, affordable solution to getting our growing population in and out of city area.

Two local dimensions to natural resource issues I mentioned earlier is the aquaculture research and developed centre at the Glen and the proposed water storage facility up the Wairoa River being promoted by the Tasman Council. My support for these initiatives reflects the broader theme of this speech about ensuring proper investment in these critical export industries that are so vital to Nelson’s long term wealth.

I also want to highlight how important it is for Nelson to pick up on the opportunities from New Zealand’s hosting of the Rugby World Cup 2011.

Last year I helped secure $1.2 million in Government funding for the upgrade of Trafalgar Park. The Government is determined that this is a New Zealand-wide and not just an Auckland event.

Last week I met with the Italian Ambassador, and there is huge interest in maximising the fun and flair from hosting the Italian team. This year we decided to do the hard-yards to ensure we are well prepared.

Another task this year is getting Nelson in on the action of the National Cycleway. Full points to the local group for driving options between here, Abel Tasman, Marlborough and Murchison.

Tourism is a critical industry for our region and part of our brand is the outdoors, adventure experience symbolised by the globally renown kayaking experience of the Abel Tasman coastline. We can compliment that by a cycleway experience and my task will be to get a share for the region of the $50 million nationwide fund.

I’m also looking forward to a decision this year, after ten years of procrastination on allowing mountain biking in the winter months on the Heaphy track.

The last project I want to mention tonight on my list is the proposed new special needs satellite classroom at Henley School in Richmond.

Our special needs facilities have not kept pace with the growing population on the Waimea Plain and it makes no sense to taxi these children in and out of town every day. I am also a strong believer in the satellite classroom model where special needs children get the best of both a mainstream school and specialist teaching support.

I hope that has given you a bit of a flavour of the Government’s and my own programme for 2010.

It is a year for recovery and for looking to the future. We are about building the sort of future for our region and country that will ensure we remain the best little province, in the best little country in the world.