Agenda Transcript – Guyon Espiner IV's John Key

Agenda Transcript – Guyon Espiner IV's John Key

©Front Page Ltd 2007 but may be used provided attribution is made to TV One and Agenda

Polling High - What's next for National?

RAWDON Polls, policy and leadership, what's next for the National Party? John Key joins One News Political Editor Guyon Espiner live from the National Conference in Auckland now.

GUYON Well John Key let's start with the economy, I mean we're in the largest economic expansion that we've had in 60 years, Labour's halved unemployment from when National left office, why would people want to take a risk and switch to you?

JOHN KEY – Leader, National

Well I think a few things Guyon, I mean firstly the growth that’s been taking place in New Zealand has been universal round the world, so you’ve seen that in Auckland, the UK, the US, there's nothing very special about what's happened in New Zealand. I think secondly the New Zealanders have got slightly wealthier with real growth but the truth is that most of their growth has come from debt that they’ve consumed themselves. So what we're seeing under these very high interest rates that Michael Cullen has created is the situation where they're now really feeling the squeeze and we're seeing that in the housing market, we're seeing it in their ability to pay their credit card bills.

GUYON And they are two of the key things aren’t they that you’ve just identified, interest rates and the housing market. What would you do to try and get us out of this high interest rate high dollar bind that we we seem to have worked ourselves into?

JOHN Well there's no question that what's driving those interest rates is inflation and that’s because we don’t have capacity in our economy that’s around skills, that’s around infrastructure, whether it be roading, public transport, energy, water, you name it. So we've really got to – if we want the economy to go faster and raise that speed limit we absolutely have to grow the capacity and that’s the real challenge I think.

GUYON What about those two specifics Mr Key, the dollar and inflation, you’ve previously targeted government spending on that saying that’s the main driver, is that still your position?

JOHN Oh there's no question that’s been a big driver, look Michael Cullen wrote to his cabinet colleagues at budget time when he was putting down his budget in March, he said look if you spend more money than is allocated interest rates will be higher, exchange rate will stay higher and the reality is that he went on to spend an additional billion dollars.

GUYON So the government has spent too much in your opinion, the government is spending too much money?

JOHN Well there's no question that they’ve spent too much, I mean we would argue very strongly some should have gone back in tax cuts, but also it's the quality of spending, it's the lack of competition in our economy, so I don’t think there's any doubt Michael Cullen's gotta take some responsibility here.

GUYON Okay well that’s the inevitable question though isn't it, where do the cuts come from, I mean let's have it, where is the money coming from, where are those cuts going to come from?

JOHN Well let's get a few macro facts on the table. Over the next five years the New Zealand government will spend approximately 330 billion dollars, so there's plenty of capacity in there I think to spend money more efficiently and to frankly spend a little less and that will allow us to fund a tax cut programme.

GUYON Okay spend a little less on what?

JOHN Well to go back to our 2005 campaign we rolled out a plan that was a highly effective tax cut programme around about $45 a week for the average New Zealander.

GUYON Spend less on what government programmes.

JOHN Well we'll increase government spending but at a lower rate.

GUYON That’s the same as a cut though isn't it Mr Key, because if the population is growing and your spending is not growing with it then that’s a cut.

JOHN Well I wouldn’t necessarily say that’s the case, I mean what you’ve gotta do is give value for money and if you go back and have a look at the health system under Labour, they’ve certainly spent a lot more no one's arguing that, but it's gone into building the bureaucracy, it's gone into building inefficiency, and we've now got a situation where productivity is virtually at a standstill in the private sector in New Zealand and frankly it's negative in the public sector.

GUYON Okay so would you spend less on Health than Labour is spending?

JOHN Well we're not anticipating making cuts in Health and Education, we don’t need to, we are arguing about growing government spending overall at a slightly lower rate, and Bill will ultimately as Finance Minister determine those parameters, but as you saw in 2005 we provided a lot more detail around what the surplus would look like, about where we would trim areas of waste that we thought in government expenditure well and truly before the campaign and well and truly for New Zealanders to see where they were coming from.

GUYON Okay you mentioned your tax cut package, obviously that was a big big issue at the 2005 election and I'd imagine it will be next time, if you had pumped what 3.9 billion dollars I think your tax package was, that would have been disastrous for inflation surely?

JOHN Well I don’t agree with that on a number of fronts, firstly you’ve gotta remember that the fiscal impulse from Michael Cullen, the amount he was stimulating the economy has been pretty strong, so that’s the first point. Secondly we'll be rolling our tax cuts plan over a period of time and it's not a big bang approach we've never argued that, and thirdly there's no direct correlation between actually a tax cut and inflation.

GUYON How can you argue that government spending is inflationary but it's not inflationary to pump money into the economy by giving tax cuts?

JOHN Because where Michael Cullen spends a dollar it physically goes into the economy, when you have a tax cut that’s not necessarily the case, some of it's saved, some people actually just don’t borrow as much as they otherwise are doing because they have the cash, so you know and secondly you have the supply side effects where you actually stop people leaving so you have greater supply of labour. I'm not at all convinced that a tax cut programme has such a disastrous effect on inflation.

GUYON This whole argument the last couple of months about the high dollar and high inflation has really rammed it home to Kiwis that we are largely in the hands of the international money markets and the ebbs and flows of currency, does your previous job as a currency trader make you vulnerable politically on this issue?

JOHN Oh not at all, look the fact that I might have a good understanding of financial markets, the fact that Bill English and I are both experienced in economic matters as opposed to Helen Clark and Michael Cullen, I think has been very well received by New Zealanders because we've got a few things going on over the next few years, we've got great opportunities…

GUYON But that’s what you used to do though isn't it in a former career, that’s what you used to do, you used to trade on other people's currencies and make your money that way and that’s some of the damaging effect that we're seeing on people's mortgage rates etc. Won't they be looking at you and thinking is this the sort of guy I want to be Prime Minister?

JOHN No not at all. Firstly you’ve got to understand that I built and ran very large global businesses and they were in the financial markets across the board. Secondly you know the financial markets play a crucial role in our economy they provide liquidity. What's driving up that exchange rate is a weakness in the US dollar and high interest rates and we know where those high interest rates are coming from, they're coming from pressure put on by Labour government, so the fact that I might understand the economy I think New Zealanders will welcome because they’ll want somebody at the helm of the country who actually can deliver prosperity and understand what's gonna drive the international marketplace to which we are inextricably linked.

GUYON Let's look at one of the moves that the government tried to reduce this inflationary pressure, Kiwi Saver, now we know you'd keep mark one, what are you gonna do with the compulsory employer's contributions?

JOHN Well that’s the area that we're going through at the moment.

GUYON You’ve had quite a while, they’ve had a couple of months, as you say you and Bill English are both well versed in finance, what is your feeling at the moment are you going to keep it, I don’t need all the detail, but are you going to keep – are the workers in this country going to know that their bosses are still going to front up with a contribution?

JOHN Well firstly we have had two months but you’ve gotta remember that Michael Cullen's sprung this on all New Zealanders, we're out there consulting with businesses, I've been pretty surprised with the low take up rate of Kiwi Saver and it has confirmed what I actually said in my budget speech, which is for the vast bulk of New Zealanders they're not going to be part of the scheme, so yes we're quite keen to design a scheme which is actually better than the existing one and my own personal belief is that that’s possible Guyon.

GUYON You're quite often referencing Bill English and I know the two of your are working closely together in the finance and leadership roles, are you worried that he might overshadow you in any sense, in that finance role, I just looked at your website and I looked for speeches on finance, there's not one speech up there on your National Party website from Bill English, I'm just wondering whether you're concerned that he's overshadowing you?

JOHN Oh not at all we have a great relationship together, I see him as a huge asset, he'll be Minister of Finance in New Zealand, and he'll be calling the shots financially, but the fact that we can have a good conversation together and talk about the issues that matter I think is a real advantage because that’s certainly something Helen Clark and Michael Cullen can't do.

GUYON He said in a North and South interview that while he grinds away on policy you float from cloud to cloud, what do you think he meant by that, is that a compliment?

JOHN It was a compliment actually, he was asked by the Herald in an interview we did and he said quite clearly look I've got a pretty optimistic sunny personality and that’s exactly what he meant and that’s true, I am a very positive person and even as Opposition Leader I don’t think I've adopted the approach that a lot of opposition leaders do and just absolutely bag the government, I've actually focused on what I think is gonna be the best bits of New Zealand and how we can improve them.

GUYON Are you convinced that Bill English still doesn’t want to be the leader of the National Party?

JOHN Oh absolutely, if Bill had wanted to be the leader quite frankly he wouldn’t put his name up to be Deputy Leader, because go and have a look at the history and if a leader fails the deputy leader is collateral damage, so there's no question that Bill doesn’t want to be the leader, Bill wants National to be in government and we're gonna work very closely together to make sure with the caucus that we earn the right from New Zealanders to do just that.

GUYON Have you ever had a conversation with Bill English and discussed a scenario where he may take over as leader one day?

JOHN No I haven’t.

GUYON Did you have a discussion like that with Don Brash, did you and Don Brash get together and he actually said while he was leader that you would take over one day even if he won the prime ministership?

JOHN Well yes he did have a conversation of sorts with me like that. After the election he indicated to me it was extremely unlikely that he would stay and fight election 2008 and that he favoured me to be the person to take over for the party. Now the reality is that’s not his choice, that’s the caucus's choice.

GUYON So there was a deal in effect Mr Key whereby Don Brash said even if he won he would hand over control to you?

JOHN Oh sorry no I misunderstood the question, no not if he won, no, if he won he would have stayed and been Prime Minister, I'm talking about post the result when we didn’t win, he indicated that was unlikely, he didn’t say categorically he would move on but he said it was fairly unlikely he would stay.

GUYON And what about yourself, is this a one shot for you, I mean if you don’t become Prime Minister will you quite parliament?

JOHN Well firstly I don’t have a plan B.

GUYON You must have a plan B, you’ve spent your career making some pretty good calls in terms of the financial money markets you must have thought about that?

JOHN No I don’t have a plan B and the reason I don’t have it is, my entire energy is focused on winning this election and being an integral part of that team. We're there to win, you know we're not there to sit around and contemplate all sorts of other things that might happen and frankly we'll take every day as it comes, but we're out there earning the right to be the next government of New Zealand and there's a lot of work to do and we're a long way to go before an election.

RAWDON We'll bring in the panel here because there are a lot of questions to ask. We've got John Key on the dawn of the conference. Vernon, economy's gonna be the key?

VERNON SMALL – National Affairs Editor, Dominion Post

Yeah I think so, John you were telling Guyon that you were looking at the spending going forward. The government's been routinely putting about 750 million aside for health, are you going to put the same sort of amount aside?

JOHN Well in the end Bill will have to work through those numbers, I mean it's just too early to commit to that Vernon but you'll remember in 2005 we put out what I thought was a very detailed plan, we showed the level of the anticipated surplus, the level of new government expenditure and what that meant and where we would make savings from existing baseline expenditure, so we will do exactly the same in 2008 and I might add that’s a whole lot more than what Labour did in 1999.

VERNON I mean I only asked because in the House as you know perfectly well because you’ve been doing it, you’ve been thrashing Michael Cullen and Bill English as well has been having a go about the government being both miserly with tax cuts and running big surpluses and at the same time spending like mad and driving our mortgages up, are they misers or spendthrifts?

JOHN Well they're both.

VERNON How do you explain that?

JOHN Well it is quite possible to explain that Vernon. Firstly if you have a massive new amount of tax coming at you it's quite possible to increase government expenditure enormously as Michael Cullen has and also possible to run large surpluses which is exactly what's gone on. I mean our view is the same approach in New Zealand should have been the one that was adopted in Australia and that was they’ve used the last five or six years to build competitiveness in their economy to lower their tax rates. I mean we lose 760 Kiwis a week to Australia, why do they go – because their after tax wages are much greater and that’s because productivity's higher and because tax rates are lower, and we know that and so if we want to deliver that in New Zealand that’s the programme we have to adopt.

VERNON So how do you get from this situation to a situation where you’ve got smaller surpluses, you’ve got tax cuts and you haven’t pushed up inflation?

JOHN Well I don’t think we will push up inflation, I mean what's driving inflation is that our productivity is on an all time low in the private sector since they started measuring it and in the public sector it's negative, and so look how do we build non inflationary growth, the answer is build capacities, and so you know …

VERNON Well I was asking how do you get from here to there?

JOHN Well it takes time Vernon, there's no silver bullet here, that’s really the whole point, I mean Michael Cullen's had eight years to really transform the New Zealand economy and make a step change and frankly hasn’t done that, and I think when people look back on it they won't remember Michael Cullen as being the great Minister of Finance that oversaw a period of time where there was growth in the New Zealand economy that came largely from not what he did but what he inherited, they’ll remember Michael Cullen as a man who missed the opportunity.

RAWDON Tracey there's a great deal more to sift through than just the economy, I wonder if you want to put something to John Key?

TRACEY Well I guess there's the growing criticism John that people aren’t sure quite why it is you want to be in government, they know you want to cut taxes but slowly and incrementally, but there's sort of a bit of an emptiness around everything else.

JOHN Well I disagree with that actually Tracey, I mean firstly there are an enormous amount of differences between Labour and National. I mean National fundamentally believe in individual choice and freedom, so they basically believe in that principle. We believe in making sure that New Zealanders can run their own lives and not be told by the government what to do. We unquestionably will take a harder line on areas like law and order. So there are a lot of differences, I mean when you run a larger tax cut programme, smaller government, you ultimately leave people with more choices in my view, so we have a very different style of operation.

TRACEY I'm not sure that people are aware quite what more choices means, I mean does it mean user pays or privatisation or you know?

JOHN Well let's take ACC, we will introduce competition, we don’t think the state should be a sole provider. Let's look at Health, we think that there is the capacity to use the private sector in Health, not to replace the public health system but at the moment we don’t actually do that, we don’t have a private sector infrastructure asset class in New Zealand like they do in Australia.

RAWDON John quickly before you get back to the conference, I referred in my introduction to Maurice Williamson's comments, what's his future in the party?

JOHN Oh look his future's very bright in the party and I think that was a very unfortunate comment, I've made that quite clear. I don’t think there was any malice intended from Maurice, he's a person known for having pretty colourful language sometimes, but quite frankly yeah I think that comment was offensive, I've made that clear and on behalf of the party I regret that comment to the Jewish community, but at the end of the day we're gonna move on from there.

RAWDON And you're happy taking people, senior ministers through who might make comments like that?

JOHN Yeah and I think Maurice has made it clear that he finds that statement in hindsight a little regrettable, he's said that on television, that’s the end of the matter.

RAWDON Fair enough. Thank you very much John Key from the National Party Conference. Guyon what have we learnt?

GUYON Well I think we've learned really that the pressure is now finally coming on to John Key just to when you get into specifics, you heard him on the economy there, you know what is it, is it the government spending too much which is driving up inflation and where would he make those cuts, so gradually that’s going to sort of like a water torture thing be eked out of him and I think that that pressure and that targeting is really starting to increase on him now.

RAWDON Cos he won't get a lot of targeting over the weekend, however come next week the pressure's gonna raise quite significantly isn't it?

GUYON Yeah well these conferences are very much also for the supporters, for the delegates to make them feel good, and to make them go out and do the foot soldier work for the party, so a lot of that will be the ra-ra sort of stuff, you're not going to see a lot of that detail, and you know he's basically wanting to keep his powder dry fearing that his opponents will steal his policies, but it's an uncomfortable position to be in, not to be able to give specific answers because it doesn’t look good, the public's asking, the journalists are asking if a politician's to dissemble like that it's not a comfortable place to be in.

RAWDON We want answers don’t we.

ENDS

© Scoop Media