2. Overall Performance Summary

Operating environment

New Zealand's wealth and social capital is largely created by people through their work. The Department of Labour is involved in all aspects of the development of work, and the delivery of greater value to the economy and society through that work.

Our small population base and limited skill base means that immigration contributes significantly to the composition of our national labour force. The Department of Labour plays a crucial role in this process through the work of its service arm Immigration New Zealand. Immigration adds significantly to the economy of New Zealand by meeting skill and labour shortages in critical sectors of the economy. The Department's immigration services also underpin the success of our international tourism and education sectors.

The scope and depth of the Department's operations - ranging across skills, immigration, employment relations and workplace practices - give it a comprehensive view of New Zealand's workplaces and the workforces that sustain them.

The effects of the global economic downturn on the labour market have been significant. During the past year, economic activity has fallen and this has resulted in higher levels of unemployment. This operating environment poses many challenges, and positive labour market outcomes are critical to support New Zealand's economic recovery.

The Department has responded to these challenges by:

• managing the volume and mix of migrants to New Zealand
• adjusting its regulatory and policy settings for employment
• supporting improved workplace practices and productivity
• better matching skills to industry needs
• providing more responsive workplace health and safety regulation
• supporting industry to prepare for future economic growth
• improving settlement services for refugees and migrants.

In order to support New Zealand's economic recovery, our 2008/09 work programme has been balanced to provide what was required to protect jobs for New Zealanders, limit recessionary impacts on the labour market, and build the skills and workplace conditions that will increase productivity. The Department also continued to deliver ongoing immigration services to tourists, international students and other migrants that enhance New Zealand's economy.

Current state

The New Zealand economy entered recession at the beginning of 2008 due to factors such as high interest rates, falling house prices, drought and high food and petrol prices. New Zealand's recession was prolonged due to international events in late 2008 and extended into 2009.

As a result of the economic downturn, the labour market has eased over the past year. The number of people in work fell by 0.4% in the June 2009 quarter and the unemployment rate rose from 5.0% to 6.0%. This was the sixth consecutive rise since it reached a 22-year low of 3.5% in late 2007. As at the end of June 2009 there were 138,000 people unemployed, up from 90,000 a year ago.

The unemployment rate is relatively low on both an historical and international basis and is below the current OECD average of 8.3%. New Zealand has not experienced the large rises in unemployment seen in other countries such as the United States, Spain and Ireland.

During the year ended June 2009, there was a net permanent and long-term migration (PLT) of 12,500 people, up from 4,700 in the June 2008 year. The main contributors were the United Kingdom, India, the Philippines, China, Fiji and South Africa. Research has shown that the current PLT inflow of overseas-born people is estimated to contribute $1.9 billion to the New Zealand economy per year.

International student approvals increased with a 6.5% increase from the previous year, the first time, since reaching a peak in 2003/04. The number of decisions on visitor applications was similar to the previous year, but the number of decisions made in the Asia/Middle East region fell by 5%.

Contribution to government priorities

With the new challenges facing the New Zealand labour market, the Government's priorities are delivering prosperity, security and opportunities to all New Zealanders. The focus has been on keeping the economy running as strongly as possible in the short-term, while making necessary changes to stimulate long-term economic growth.

The Department is playing a vital role in this process through its work to:

• ensure workers have the skills to be employable in current and future jobs
• encourage economic growth through facilitating the entry of skilled migrants, visitors and international students
• support industry initiatives to improve skills and raise productivity
• provide responsive labour market regulation that contributes to higher-performing workplaces
• reduce compliance costs for business while ensuring the legislation meets contemporary business needs and maintains fairness for employees.

To support the Government's immediate priority of keeping New Zealanders in work during the period, the Department provided:

• labour market information to inform decisions on labour market policies and programmes aimed at stimulating employment
• skills plans for industries and sectors that provide opportunities for growth in employment and improved productivity
• informed analyses of the causes of employment problems.

International competition for skilled migrants continued despite the global economic downturn and skill shortages persisted in some areas. The Department provided targeted immigration solutions such as the Essential Skills policy for temporary workers.

In order for immigration policies to take better account of changes in the economy the Department worked to:

• better match migrant skills with employer needs
• retain skilled workers and attract skilled expatriates back to New Zealand
• provide world-class immigration services.

The Department continued to monitor the performance of the ACC and provided purchase advice on the scheme. The Department also worked to prevent workplace injuries and occupational illnesses through its responsibilities around workplace health and safety.

The Department

Since 2004/05, the Department has been working to integrate itself as 'one department' with consistent policies, systems and processes. In 2007 the Foundation Capabilities Programme was initiated to develop organisational capability in areas such as management and leadership, financial management, planning and performance, risk management and infrastructure. In 2008/09, the Department continued to develop its internal capability through its ICT Infrastructure Programme to create a modern ICT environment.

A Learning and Development Strategy was developed to ensure that the Department has a highly capable workforce to enable it to operate effectively. A core curriculum training programme was developed so staff members have the core skills required by the Department and understand what the Department does.

The Department also undertook a project to enhance the reliability of Immigration New Zealand's Application Management System (AMS). This will improve the reliability and stability of the systems that comprise AMS while the Department works on the Immigration New Zealand Change Programme.

During 2008/09 work began on implementing the findings of reviews by the Office of the Auditor General and the State Services Commissioner, and an internal review of the Department's Pacific Division. The Immigration New Zealand Change Programme was initiated to ensure we are able to provide a world-class immigration service, while addressing the recommendations of recent reviews. As the result of ongoing changes, the Department's Pacific Division has shown a turnaround in performance with significant improvements on key indicators.

Over the course of the year, the Department further refined its strategic framework to build an improved understanding of how to measure progress in achieving its strategic goals. By identifying immediate outcomes that contribute towards these goals, the Department is better placed to measure the value added by its activities.

Full details of the Department's achievements during the year are included in the Statement of Objectives and Service Performance and in the Financial Statements in this report.

Themes and critical dimensions of the Department's work

Within the challenging labour market environment of 2008/09, the Department focused on the following critical dimensions:

...our focus on skills

An appropriately skilled labour force will be particularly important for New Zealand to improve labour productivity and increase our future economic growth. The Department worked to ensure that New Zealanders have the skills they need and that workers remain in employment during the downturn and are equipped with the skills they will need in the higher performing economy of the future.

The Department's multi-year Upskilling Partnership Programme that focused on changing workplace practices around literacy, language and numeracy skills was completed in June 2009. Evaluation work is showing how essential skills training can realise improvements in workplace productivity.

In combination with New Zealand businesses, the Department worked to attract the talent and skills New Zealand needs. Continued refinement of immigration residence policies ensured that temporary and permanent migrants enhance the local workforce and that New Zealanders with suitable skills have preference in the labour market.

Between 2004/05 and 2008/09, 145,686 people were approved for residence under the business/skilled stream. This not only grows the skill level of New Zealand's workforce but directly contributes to New Zealand's economy.

The Department worked on the New Zealand Skills Strategy in partnership with Business New Zealand, the New Zealand Council of Trade Unions and the Industry Training Federation. The Strategy seeks to build capability of firms to support managers and workers to better develop and utilise their skills.

...our focus on improving our immigration services

Immigration plays an important role encouraging economic growth. International education and tourism are significant industries in New Zealand. Immigration fills skill shortages with temporary workers where no New Zealanders are available and brings in skilled migrants providing the skills, experience and knowledge that New Zealand businesses need.

The Immigration New Zealand Change Programme was initiated to ensure that New Zealand has a world-class immigration system. The Department continued to make temporary entry and residence decisions enabling students, visitors, temporary workers and permanent migrants to contribute to the New Zealand economy.

The movement of people across the New Zealand border was facilitated while maintaining security by keeping the border 'offshore'. The Department became a full member of the Five Country Conference building on its relationships with other like-minded countries and continued to collaborate with other New Zealand border sector agencies through the Border Sector Governance Group.

The Department facilitated services to help migrants settle into our communities, integrate well and contribute to the New Zealand economy and society.

...our focus on workforce resilience and flexibility

With a weakened labour market, there were more redundancies and decreased job opportunities, and more people facing longer-term unemployment. Apart from its social and fiscal costs, long-term unemployment may erode some of the skill benefits acquired from educational achievement and greater work participation and thereby have far-reaching future consequences. In this environment, the Department undertook essential work to understand and build workforce resilience and flexibility so that New Zealand is prepared for future growth.

The Department helped to build resilience and flexibility in the labour market through:

• providing information on restructuring, redundancy and problem-resolution services for those affected
• exploring the impacts of the recession on labour market and collating information about the challenges and opportunities facing at-risk workforces and sectors.

...our focus on productivity

Labour market productivity continued to be one of New Zealand's biggest challenges. New Zealand's productivity growth has averaged 1.4% each year over the past 20 years, below the OECD average of 2.0% per year.

In 2008/09, the Department focused on understanding and improving workplace productivity through the Workplace Productivity Agenda (WPA) which aims to increase the value of what we produce by working in more effective and efficient ways and by doing so lifting New Zealand's living standards and wealth.

The Department completed four private sector workplace productivity demonstration projects, and funded four multi-year workplace productivity projects. A State Services Productivity Resource Kit was distributed which is designed to achieve productivity improvements in state sector workplaces.

...our focus on effective labour market regulation

Responsive labour market regulation contributes to higher-performing workplaces. During the year the Department developed and supported a number of key changes to labour market regulation including the introduction of the 90 Day Trial Period.

In addition, legislative changes occurred that focused on strengthening fundamental rights at work. The Employment Relations (Breaks, Infant Feeding and Other Matters) Amendment Act 2008 became law and the Department worked on the review of the Holidays Act 2003.

The Department continued to ensure that its service delivery resources are directed to the areas of highest risk. Investigations were undertaken where we assessed these will have the greatest impact in improving workplace health and safety practices.

Effective labour market regulation involves driving workplace practice improvements by raising awareness and expectations in the workplace. Examples include the online Hazard Handler Tool and the seasonal fatalities campaign.

...our focus on international relationships

New Zealand has a strong global presence, and we ensure we meet our international obligations, including resettling refugees mandated by the United Nations High Commissioner for Refugees (UNHCR). We have strong relationships with the International Labour Organisation (ILO) and the labour and employment aspects of Asia-Pacific Economic Cooperation (APEC), the United Nations and the Organisation for Economic Cooperation and Development (OECD).

The Free Trade Agreement with China came into force and includes a new Working Holiday Scheme and policies that makes it easier for Chinese business people to travel to New Zealand. The Department also began work on the implementation of the Memorandum of Understanding on Labour Cooperation between New Zealand and China, which sits alongside the Free Trade Agreement.

At the 98^th session of the International Labour Conference, the Department contributed to the development of the Global Jobs Pact through its participation in the drafting committee.

We have also sought to build capability through our relationships and partnering with countries within the Pacific region. In response to a request, the Department provided technical assistance to Tuvalu.

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