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John Key Interviewed by CORIN DANN on Q + A

Q + A

Episode 17

JOHN KEY

Interviewed by CORIN DANN


SUSAN Now to Wellington to the National Party Conference, Corin spoke to the Prime Minister John Key.


CORIN Well Prime Minister thank you very much for joining us on Q+A. It's interesting looking at your slogan behind us saying 'Working for New Zealand'. Is your government working for all New Zealanders? There is a big working poor, a group of working poor in this country that are still doing it pretty tough despite the fact we're a so-called rock star economy.


JOHN KEY – Prime Minister

Yeah without doubt there are a group of New Zealanders that are doing it tough. What we do know though is if you look at children who are defined to be living below the poverty line as it's defined in New Zealand and the developed world, a lot of those families are on welfare, they're not in work. Now not exclusively, there certainly are some working poor. So one of the big things the government's trying to do obviously is transition people into work and I think that is working with 1500 people a week coming off welfare to work.


CORIN But is work enough for them because if you look at the average wage, around 55 thousand dollars, by your own figures they're only looking at small wage gains over the next three years. Now is that going to be enough to cover the cost of living?


JOHN Well firstly there's quite a big differential obviously between welfare and working. So being in work absolutely is a positive uplift for their household income, but secondly you know the government has supported and will continue to support the redistributive programmes that we run, like Working for Families, accommodation supplements and the like.


CORIN But they're not going to increase more than the rate of inflation are they? They're just going to go up as they are.


JOHN No, but the government would expect wage growth to be running faster than inflation that’s been the case over the last three years, where broadly it's been about double the rate of inflation.


CORIN Sure, but that’s not a huge amount though is it? It's 1 to 1½% real wage increases. So for someone on $50,000 that is a small amount of money to look forward to over the next three years when they’ve got rising power prices, higher than the rate of inflation, and all sorts of other costs. You know they're not going to get ahead are they?


JOHN Yeah, so I think I'd say firstly, (a) we're very focused on their costs, and I think if you take electricity prices as an example, yes they’ve gone up under a National government by about 20%, but again much much slower rate of increase than under the previous Labour government at 72%. Secondly, people don’t always stay in the same job, I mean of course people transition into you know more highly paid jobs, or different forms of employment. So at the end of the day I think what the government can realistically do is build a solid foundation that will see investment from the private sector and jobs created.


CORIN So for those people, that working poor, that group that are doing it tough around the average wage, what are they going to have to look forward to over the next three years though? It's going to take such a long time for their wages to come up?


JOHN Well firstly I think they can genuinely look forward to a stronger economy. So you're seeing that confidence coming back with people saying yes I can get a job, and you see it in what the economists say are the participation rates – how much of the workforce is actually out there looking for a job…


CORIN But that’s a double edged sword isn't it, because the extra work is coming in to the workforce, plus the immigration numbers being strong. That means that employers can find the labour they need in the low skilled areas and don’t have to push up wages.


JOHN Yeah, though overall we're still seeing more employment being created, and we still are seeing wage increases there. Don’t forget the government's been working hard on the number of different factors to ease the burden on people. So for instance, the first time we got a chance with a budget surplus being posted for this year or in anticipation of that, we rolled out that programme for free doctors' visits for under 13s.


CORIN So are we going to see more of that if National is re-elected, more of that – helping that group perhaps the lower middle class that are simply pretty much going nowhere?


JOHN Well I'd like to think that we can support them. I wouldn’t make the case that they're going nowhere. I think if you contrast New Zealand to the rest of the world, there’ll be plenty of people even in a country like Australia who are genuinely fearful that they’ll either keep their job, or be quite worried that they won’t get a job. And in pretty much every developed country in the world there's going to be a range of people at a range of different incomes.


CORIN But I mean the argument about inequality that’s raging, the best National seems to be able to offer is well it hasn’t got any worse under us. That’s not a very good goal is it?


JOHN Yeah but again if you look at other countries in the world we can see some evidence where income inequality's been getting worse. My main point over the last 20 years really is that I don’t think on that measure it's got worse. But what I do think is the much more pertinent question to ask is income sufficiency. Do people have enough to live on? Well I certainly know if they don’t have a job it's very very frugal.


CORIN But do they have enough to live on?


JOHN I'm not saying they're racing ahead, but what I would say is if they're moving into work they're in a lot better shape than they were.


CORIN How would you cope on $55,000 a year with all your rent and all those sorts of costs rising? It's pretty tough.


JOHN It is, but let's think about it in these terms. If you earned $40,000, so below the average wage, which was running in the mid 50s, if you earned $40,000 you have three children and you live in Auckland, let's say for want of an argument, how much does your next door neighbour have to earn to get exactly the same level of after redistributive income, how much do they have to earn if they have no children. The answer is $73,000. So as a country we're quite generous, with a family with three and earning $40,000, their after tax income is the same as the one earning $73,000.


CORIN Sure, but you’ve talked about tax cuts, and you’ve talked about that it's that group that would benefit wouldn’t it? So how would that look? What sort of tax bracket would you aim at?


JOHN Well I think the first thing I'd sort of cautionally say is we haven't designed a tax package yet. We have said there is a bit of free room there which we could possibly use to give back to New Zealanders …


CORIN And it's your promise that it's that group that would benefit?


JOHN Oh I think logically it would be low to middle income New Zealanders, but the only thing I would say is I've been at the forefront with Bill English of designing tax packages both in Opposition and in government. They're hugely expensive.


CORIN But it's not going to be much at the end…


JOHN It's not very much no.


CORIN I've talked to business ahead of this interview about what they want. They want a corporate tax cut. Is that on the agenda?


JOHN Not today, but I wouldn’t rule it out at some time in the future.


CORIN In the next three years if you're re-elected?


JOHN Well again we haven't designed our tax package, but what I do know is that corporates want to be competitive, and when they are competitive they're investing, when they're investing they're creating jobs. Now I think at 28% which is our current corporate tax rate not bad as a level, and business aren't really hammering me for that. What I will say business is saying is we do want more flexibility in employment law. We certainly do want reform of the Resource Management Act, so we're focused in other areas.


CORIN Would you go further on employment law, the employment law that’s stalled, would you actually push that further if you're re-elected?


JOHN Don’t think so, but I'd like to get what's stalled actually through the parliament…


CORIN The other issue they raised with me was the aging population. They said okay John Key's not gonna budge on going to 67, because he's made a promise you know that’s it. So what are you going to do, because there is a problem looming there?


JOHN Yeah, I mean I think it's worth putting a bit of you know perspective around that, which is to say that we have about 600,000 New Zealanders aged over 65, and we can all see that it's going to a million over time. But it's not going to hit us in day one. Secondly we have one of the cheapest retirement plans…


CORIN But you're kicking it down the can to the next guy aren't you?


JOHN Well not really. What I'm saying to you is that I think there are a range of times where people might want to retire, but legitimately in some occupations that actually will be 65. For one in four workers they're staying in the workforce anyway aged above 65. So it's not like they're getting kicked out of the workforce.


CORIN The environment is an issue that’s starting to come back post global financial crisis. A big issue with Obama and John Kerry and those things. Your government is obviously very keen to see dairying grow, intensification of dairy farming, more water storage, more dams. The Ruataniwha Dam decision is a shot across the bow though isn't it, that says actually we can't intensify farming much more than this because the run-off of nitrogen is going to be a major problem. What are you going to do about that.


JOHN Yeah, so Ruataniwha is an interesting decision, and it's Board of Inquiry that’s made that decision, so I don’t want to cut across you know what I think is a draft determination at the moment. But what I would say is there's quite a bit of debate about the science that’s actually been applied by the Board of Inquiry. Vis a vis, because don’t forget it's the Hawkes Bay Regional Council that’s actually the applicant for the decision.


CORIN So are you going to fight the science on this?


JOHN No, what I'm saying is that the Board of Inquiry is applying science which is at least disputed I think in the application made by the Hawkes Bay Regional Council, but what I'd say in terms of the broader issue…


CORIN The science doesn’t fit your model does it? Because you need to grow the dairying?


JOHN Well I think there's be a lot of people who might contest whether that’s right or wrong in that particular instance. What I am saying though is that you're right. We do see increase in dairy as a big opportunity for New Zealand. We also know absolutely that we need to be mindful of balance and in face improve our environmental outcomes. And water's at the forefront of that. But it's not like the government's been silent on that issue for the last three or four years.


CORIN But would you overrule if the Board of Inquiry – if it all goes through and there are limits on nitrogen that had ramifications across the whole country, would you overstep that?


JOHN Well that’s not our aim of doing that. What I would say though is we need to find a way, and make sure through science, that’s accepted and through our practices that we can have the best of both worlds, increasing dairying output at a time where we’re improving our water quality. As I said the government hasn’t been silent on that issue because we know to New Zealanders that’s very important. We're doing everything from working with Fonterra who have fenced 22,000 kilometres of waterways, having the Land and Water Forum actually working very closely with all a variety of groups. You are seeing an improvement in water quality in various areas. We've spent about a quarter of a billion dollars cleaning up waterways.


CORIN If I could move on to just briefly on the issue of coalitions and partners and those sorts of things. I want to talk about Colin Craig but the reality is you're going to need to work with Winston Peters after this election if you're going to win aren't you?


JOHN Potentially, I can't rule that out. I mean I have done what I think has been affirmed actually by the TVOne poll, which is three quarters of New Zealanders, irrelevant of who they're voting for, think it actually makes sense for a political leader to say here are the parties that we could work with. Because you know you do want to know what the combinations are roughly like.


CORIN Sure, but the issue with Winston Peters is how will you work with him? You’ve ruled him out twice. He's spent the last three years attacking you on everything he possibly can, I mean attacking your credibility. How do you then put him into potentially the position of a Minister?


JOHN I suppose anyone that’s been a student of New Zealand politics would say situation normal for Winston Peters. I mean he attacked Jim Bolger, he attacked Helen Clark. I remember being in the Opposition back in 2002, and Winston Peters being in full flight.


CORIN So you believe him it's all a game?


JOHN Well I don’t want to speak for Winston Peters. I think there's a legitimate question actually to be answered about whether Winston Peters would want to abstain or work with a National government. I genuinely cannot answer that question. I know that historically he's tended to say he'll have at least discussions with the biggest party, but that doesn’t mean that he actually has that discussion.


CORIN Would you put him in a Cabinet?


JOHN Well it's already impossible to have those discussions today, because we don’t know what the outcome of that ….


CORIN I mean he was very good in Foreign Affairs, most people thought he did a good job in that role.


JOHN I think the real point here is, I do believe that the least overwhelming bulk of New Zealanders who are going to vote for a particular party want National returned, that’s certainly what the polls show, and I think on the basis that they accept under MMP I've got to find a way of navigating through what is unlikely to be a situation where we could govern alone, then I have to do what any other political leader does. I mean David Cunliffe won’t be anything different, he'll be sitting there saying what are the combinations I can put together to form a government.


JOHN It's what we're required to do, short of saying to the electorate we're not mature enough to try to find a way through and you have to go back and have another election, which I think New Zealanders don’t want.


CORIN Prime Minister John Key, thank you very much.


ends

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