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PM's Post-Cabinet Press Conference: Monday, 2 March 2015

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PM: OK. Good afternoon. As reported last week, the Remuneration Authority made an increase to MPs' pay of about .5 percent. As youve been aware, Ive been expressing my concern at the level of increase for some time, and so Cabinet today has decided to legislate under urgency to, one, change the criteria in the Remuneration Authority Act 1977 to take away the authoritys discretion on MPs' pay increases; two, the sole new criteria will be the average public sector pay increase for the previous year as the total compensation; and, thirdly, the legislation will be backdated under urgency to 1 July 2014.

Based on the most recent data from Statistics New Zealand, the average public sector pay increase is in the order of 1 to 2 percent. Increases for MPs will therefore be in the range of 1 to 2 percent instead of the 3.567 percent increase announced by the Remuneration Authority. Ministers anticipate more detailed advice from officials on the measure to be used, which will be set out in legislation, likely to be introduced in the next sitting session. I anticipate this will be a long-term change. The balance here is to ensure pay increases in the public sector are reflected in MPs' pay in the fairest way possible.

The decision was not taken lightly, given that it changes several decades of practice with the Remuneration Authority. However, its clear that changing the criteria is the only way the Remuneration Authority will start handing down more modest pay increases for MPs.

Recently the chair, John Errington, referred specifically to the criteria set out in the legislation as the reason behind the increases. So changing the law is the most effective way of ensuring that this will happen for this year and into the future.

MPs do not get treatedwere obviously conscious and want to ensure that MPs do not get treated more generously than public servants. This only relates to MPs. Judges' remuneration will be reviewed on the same basis that is currently.

As you know, I hosted the Australian Prime Minister, Tony Abbott, in Auckland late last week for our annual leaders' talks. Australia is our largest trading partner and largest economic partner, so its important that we continue to work closely together on issues that affect both countries. Prime Minister Abbott and I discussed a wide range of political, economic, social, and security issues, I was pleased that we were able to announce arrangements between our two countries for the recovery of student loans and for more information sharing around employment vetting. We also agreed to accelerate work on arrangements to exchange information in relation to transTasman deportees.

This year is a significant one for both our countries, for the cohosting of the Cricket World Cup and the centenary of the Gallipoli campaign and the formation of the Anzacs. One hundred years on from the Gallipoli landings, my meeting with Prime Minister Abbott underlined that the relationship between New Zealand and Australia is as strong as ever,

Finally, Id like to acknowledge what was a fantastic sporting weekend for pretty much everyone in New Zealand, unless you were a Crusaders supporter. I was at Eden Park on Saturday for the Black Caps' thrilling win over Australia, and, once again, would like to congratulate Brendon McCullum and the team. The Black Caps are in outstanding form and I wish them all the very best for the rest of the tournament. New Zealand is 100 percent behind them.

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I was also in Christchurch yesterday to see Lydia Ko win the New Zealand Open. She is a superb athlete with golfing skills I could only dream of, and I wish her all the very best as she undertakes her next tournament in Singapore this week.

In terms of my own activities this week, Im heading to Christchurch tomorrow for a number of visits and to get updates on the progress there. Ill be in Waikato on Wednesday and Auckland on Thursday, Nelson on Friday. Ill be travelling to Northland as part of the National by-election campaignon Thursday I think it is.


Media: Prime Minister, why did it take 5 years for the Government to act on this?

: Well, initially, actually, the pay increases were more modest. They actually did listen to us, and they reflected the concerns we had around the global financial crisis. Secondly, my concerns areand this has been a reoccurring theme in probably the last 12 months of discussions now with the Remuneration Authoritythat the current Act suggests to them that they should be looking at relativity, at least, with other parts of employment. But that includes the private sector. And you can see that they strongly feel as though they should be moving Cabinet Ministers, and me as Prime Minister, up to a level which would be more reflective of what we were doing in the private sector. And I think that that is fundamentally wrong.

PM: Secondly, I think that sort of broad-based level weve got to for MPs and Ministers is about right. So recognising that what we put in place now is going to be a very long-term move, because I think its unlikely Governments are going to want to change this, we need to make sure that we are fair. I think we should be paid as pay increases no more, in my view, than the average of what nurses and doctors and teachers and other State employees are paid. So, in fairness, you know, I think you can always argue the merits on these things, but I reckon were going to land in the right place, in my view.

Media: Do you think 1 to 2 percent is an acceptable pay rise for people?

Well, of course we would always like to see more, but that is what we have been saying to the public sector for some timethat we expect them to show restraint. Thats the Government living within its means. We have been making that case incredibly plainly and clearly to the Remuneration Authority. Whats clear this time is that that pay increase that they have suggested didn't reflect that. It was .5 percent, broadly, as opposed to something that looks more like 1.5 percent. Now within their capacity to change cash for non-cash items, they should be free to continue to do that. That actually, despite the fact that gets reported that way, doesn't actually increase an MPs salary. Its just a change in the mixture of compensation thats paid. But, in my view, a much more realistic pay round would have been between 1 and 2probably nearer 1.5, but certainly between 1 and 2. That's what the public sector was last year, and thats much more reflective than 3.5.

Media: So you are, effectively, going to nullify this latest pay rise and award yourselves what1 to 2 percent

Well, effectively, yes, but what were going to do is were going towere getting official advice on what the exact best long-term measure is, but essentially it reflects the average of the public sector pay round for the year earlier, and then under urgency we are going to pass that through all stages so that the current pay round, which was gazettedin effect, it does not go through.

Media: John, this is quite a practical question, but has that back-pay from the latest pay round actually gone into bank accounts?

PM: Not yet. It could potentially go in next week. And if it did, the overpayment will have to be repaid.

Media: So any MPs that get that money banked would take it out and give it back to the

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Well, effectively youd deduct it from source next time. And lots of people get overpaid, and then they have it taken off them the following week.

Media: Doesn't this just reflect the growing inequality in the wider economy between those at the very top and the rest?

No. What it reflects is that the public sector pay round thats been going through, you know, the big groupings in the public sectornurses, doctors, teachershas been sitting in a slightly lower band than what is recommended by the Remuneration Authority. Secondly, that the Remuneration Authority, at the core of it in their beliefs, believe that MPs should be disproportionately earning more over time.

Media: Putting Bernards question another way, I mean what youre trying to show is, presumably, leadership, when youre asking public servants to only take 1 to 2 percent, SO you don't believe you should take any more.

Media: Shouldn't then chief executives in the private sector who are asking similar things of their employees show the same leadership?

Well, that, in the end, is up to them. I mean, I cant control them; I don't even try to control them. They have to consider through all of the different factors. Sometimes their pay is very volatile because of bonus payments and the like. Sometimes they take massive pay cuts, actually, because of the fact that they don't get a bonus payment. And in the end, the private sector under a Nationalled Government has been rising at a slightly faster rate than the public sector. But my point is simply: as politicians, you know, and as the Government we send very strong signals about what we can afford for the public sector. just don't think its right that we should be saying to the public sector: We think living within our means is 1 to 2 percent, but, by the way, an independent bodydespite all the things that we tell them very directly and very plainlyis going to give us more than that." I have been making that point to them for some time. In the end, they have said This is the reason why were doing that., so were changing the law.

Media: Doesnt 1 to 2 percent imply youre actually getting real wage deflation in the public sector, because the Reserve Bank is supposed to target around 2. Youre saying were going to lock in deflation for the public sector.

PM: No, were not locking in 1 to 2. What were locking in is the average public sector wage increase. So at the moment inflation is running at .8 percent, so even at between 1 and 2, theres been a real wage increase. You know, Ive got toobviously Ive got to make decisions that, and reflect the fact that this stuff is unlikely to change, ever, because there isn't going to be a Government thats going to stand up in front of New Zealand any time soon, in my view, and reverse these decisions, because they would be legislating to give themselves higher pay increases. So Ive got to make sure that 50 years from now we don't have some sort of system in place where MPs are proportionally just getting further and further behind, but actually I don't think we will be. If it was solely the CP1, then youd say there would never be a real wage increase for an MP. And I don't think thats what New Zealanders expect, but I don't think that New Zealanders expect them to have their wages go up at a faster rate than the average of the public sector.

Media: You mentioned the pay rounds of, is itI cant rememberis it teachers?

PM: Well, quite a few of them are coming up soon.

Media: Yeah, I mean is this actually just a bit of a shot across the bow to them that they cant expect anything more than 1 or 2 percent

Well, in the end well go through those negotiations, but the Minister of Finance has been very clear. You knowin the end we have a billion dollars to live with, in terms of our new budget spending. Weve asked people to show restraint in the past and

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fundamentally were asking them to show restraint in the future. Inflations running at under 1 percentthat would still be a real wage increase.

Media: Have you picked up a sense, though, that the unions were perhaps going to pick up on the increase that had come through the Remuneration Authority to push for higher increases for public servants and others?

Well, you saw that with the teacher unions late last week coming out and saying they shouldn't expect to be paid less than what MPs were, and actually they had a fair point. Even though the systems are different, even though it was beyond our control, they had a fair point and I happen to agree with them. I don't think that they should be getting less than what basically MPs are getting, and as Ive said last weekand I meantI think MPs are getting too much, so well change the system.

Media: You said yesterday that you are willingyouve offered to sit down with Muslim leaders and talk to them about issueshave you actually issued that invitation?

Well, my understanding is yes. I mean, theres constant discussion between my office and other Muslim leaders. Im going out to one of the mosques pretty soon, but Im more than happy to talk to them about the actions that the Governments taking. But they are constantly in discussion with various parts of, you know, essentially, my administration and my office.

Media. But inaudible] two different groups issued an invitation asking you to sit down with them and talk to you about the foreign fighters legislation. Theyd also like to talk with you about sending troops to Iraq, and they havent heard back from your office.

Well, Im more than happy to talk to themat some point we will. Our decision to send the partner, building partner capacity group to Iraq has been well signified and, I think, articulated by us. Its the decision that weve made, but Im more than happy to talk to them about it.

Media: But don't you think you should have sat down with them before you made those decisions, given theyve been asking for those meetings?

Well look, in a perfect world maybe if we can go through that, but at the end of the day we understand their concerns. As I say, they feed things in, but were more than happy to talk to them about it, but weve made our call on what were doing.

Media: How would you describe the scale of our contribution to Iraq?


Media: Do you think were doing too much, perhaps, given the size of our country?

Theres no indication of that. I mean theres 62 countries that are making some sort of effort. If you look at Australia, they have 600 people there at the moment; theyll probably have more over time. Proportionally, you know, those proportions feel about right.

Media: If you just look at the troops and remove the personnel doing the air strikes, New Zealands actually doing a lot more than most. is that right?

I dont, no, I don't think that is right, and theres a range of different contributions that countries are making, and some activities are arguably riskier than others. Actually, being completely behind the wire and in the most secure environment that you can provideyou might have a few more people but actually arguably, you know, that those are less risky environments than, say, accompanying people out in the field, as some countries

Media: 143 troopsthats actually, were contributing more troops to Iraq per capita than any of our other close allies.

PM: Well, again, you just want to be a bit cautious about, sort of how you quote some of those numbers, because as we know thats the maximum number and it allows for the facts that, you know, there are changeovers and different things happening. I think on

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balance, you know, if you look at what were trying to do, which is be part of a training group, if you like, at Taji, then, you know, we had to get those proportions about right with our partner and, in my view, they are.

Media: Australias just issued essentially a nogo zone notice for its citizens to go in Mosul. Have we done anything like that, or will we do anything like it?

| don't think weve done that. I mean, the advice from MFAT is its a very highrisk environment and people shouldn't travel to Iraq, but I don't think theres a formal you cannot go there.

Media: Do we ever, you knowwould that be something youd consider?

Id need to get advice on MFAT for that. I don't think Ive ever seen a situation where wed physicallywe do certainly send strong advice that people should not go unless its absolutely urgent, and wed strongly encourage people not to go to Iraq and Syria on the basis that its a risky and dangerous environment. I mean were sending people to a quarantine part of that with a huge amount of protection around them. But as a general rule, we think its a dangerous environment to go in. But youll always get people thatll exercise their right as, you know, humanitarian aid workers, or others that will choose to go there.

Media: By describing it as modest, are you saying that were doing the bare minimum?

PM: No, but I think, you know, at the end of the day, its not the bare minimum, but if you look on the continuum of things that we could do, clearly, you know, theres a lot more things that you could do. You could have a lot more people and you could put them in a lot more dangerous environment. I mean, were there for a 2-year period of time, were there solely behind the wire, were there with a modest number of trainers, and with a significant force protection around them.

And, as said consistently last week, if not that and we are to make a contribution, because we feel as a country we should, then what? Because I cant name something. Its all very well Andrew Little saying he supports air strikes. Well, he knows, like I know, we don't have an air capability. His previous Prime Minister got rid of it. Its all very well saying going out there build roads, and schools, and hospitals, but he knows, like I do, its infinitely more dangerous because youre at risk of being, basically, kidnapped in that sort of environment, or killed in a very exposed environment. So, you know, we asked for a range of advice on all the options available to us and, in my view, the least risky and most modest, really, was sending the particular group were talking about for a short period of time.

Media: Prime Minister, are you aware of the allegations that New Zealand may be harbouring war criminals suspected ofinaudible]

Well, I only saw some vague media reports, and I think theyve been rejected in so much they can.

Media: The Refugee Council have rejected them.

Yeah, the Refugee Council rejected

Media: But were you aware of, sort of, more

No, Im not aware of any information that would support that its true.

Media: Is it the kind of thing that you think should be looked into

I think theyd be concerned about it, but obviously, but I don't theres a lot of

validity to it. Im sure someone will look into it, but—

Media: Will the Government have to bail out Solid Energy again?

Ah, look, Solid Energy is in a very delicate position, has been for quite some time. You probably noted the changes in board makeup. Theyve been in ongoing Consultation

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with the banks. Theres really not much more I can say at the moment other than theyre working their way through that situation.

Media: Are there any circumstances in which the Government would inject any money into the company?

PM: I wouldn't want to speculate on that at this time.

Media: So will Solid Energy have to cut its staff again, shut down operation?

Again, llook, theyre in very delicate negotiations with the banks.

Media: What sort of time frame are you looking at for some sort of resolution?

Its an ongoing issue, so I cant be absolutely precise, but its sooner as opposed to later in terms of resolving the next steps.

Media: Is Solid Energy trading at the moment on its implicit Government guarantee?

PM: No, I don't think Im overstepping the line in saying that it still has equity and it still has cash in the bank.

Media: Do you have any idea why Pip Dunphy quit?


Media: Can you tell us?

Ah, no. I think youd be better to take that up with the board.

Media: Is it related to concerns about the scope of the indemnity that the Governments offering?

I just wouldn't want to speculate on that.

Media: When the United States sent its first tranche of troops into Iraq, Barack Obama broke down those numbers. He said how many troops were going to be doing force protection. Will you tell us how many of our troops are going to be designated force protection?

: How many? I think its unlikely, only on the basis that I think our partner doesn't necessarily want to do that, and theres all sorts of other reasons. Im not overly sensitive to it. I mean youI don't think it takes a rocket scientist to go away and work out that if there are 16 dedicated trainers, and potentially 106 people and you need logistics people, and you need that, and theres a whole bunch of other people who do, you know, some training as well, that, you know, its kind of in a range of acceptable number. But what I would say is this: is that we take the safety and security of our people very seriously. It is a paramount issue of importance. So, clearly, you know, were gonna make sure that we have our very best people keeping everyone there as safe as we possibly can. So Im quite comfortable that weve got the right balance there.

Media: Its about one to one though, isn't it, taking all those things that youve just mentioned into account?

Ah, be more than one for one.

Media: Is 16 trainers enough to have any practical effect beyond being a sort of token force?

PM: Yes, because theyre dedicated trainers, and they train individual groups, obviously, so theres lots of soldiers that come out as a result of that. There are plenty of people who also form the part of the 106 who have some training as part of what they do, and in the end, its the capacity, actually, for that base I think to actually, you know, realistically over a 6 or 8 week programme, whatever they runto work their way through, you know, upskilling those soldiers.

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PM: I think as I said on QA yesterday— mean, its easy for people to say the contribution or the numbers are small, but at the end of the day thats always the argument for New Zealand in everything we do, from climate change to whatever. So, basically, it will make a difference, and part of what were trying to do is train the trainers so that when we go after 2 years' time theyve got a, you know, a renewable and ongoing capability to train their own people.

Media: Prime Minister, just looking at the Internet Party and the Internet Mana Partys expenses, it works out that Kim Dotcom spent about 102 for every vote they got. What do you make of that in terms of bang for political buck?

Not good value for money.

Media: Then, in terms of Pam Corkery, the press secretary, she

PM: Well, she certainly had bang for her buck, didn't she? She had bang, I think, or whatever it was she was doing on that Sunday afternoon.

Media: Yes, she got paid 15,000. Was that worth it?

: I wouldn't pay her 15 grand for it, but it was great entertainment, so at one level it was probably worth it.

Media: Treasury today has released its advice to Ministers, talking about the level of immigration and its impact on housing, and essentially theyre saying that their forecasts in December are probably too conservative now and that net migration could go even higher than the 52,000, with a knock-on effect, obviously, in the longer term on housing. Have you got any concerns about that?

PM: Well, theres no question that immigration has some impact on housing. Its not a perfect science, because some of it is being driven solely by the fact that people arent leaving. Many of them may already be accommodated and some of the people that come in have different set-ups, different conditions. They may rent for a while, for instance. But ultimately, if your populations rising, by definition, you need more places to accommodate them. So, generally, the Reserve Bank takes the view that net migration is positive for the economy but has some spillover implications. All I can say is if you think about where the bulk of those migrants go is Auckland, and in Auckland the pipeline of building activity is very significant. So I think, from the top of my head, 84 of the 100 special housing areas are in Auckland, for instance.

Media: Are you concerned then that building consents seemed to stall at the end of the last year, beginning of this year, according to various

PM: Well, I take all that with a bit of a grain of salt. I mean, I had discussions with the mayor when I went to see him on Thursday or Friday of last week. Hes extremely confident that those numbers are charging ahead.

Media: It does suggest, though, doesn't itthe numbers that Treasurys forecasting— that you need to even step up above the level that was previously established for house building or consents.

PM: Well, as you would expect, my office takes a look at all the special housing areas that have been zoned, all of the resource applications that are granted, all of the, you know, bulk sort of building construction numbersso we have a sense of what that pipeline looks like over the next 5 to 7 years, and its tracking at a very, very substantial increase. I mean, you can find, believe it or not, quite a lot of people in Auckland on the construction side that are a bit concerned therell be too many houses in a few years. Its not a one-way street. I mean, if you take Christchurch, for instance. There was quite a lot of concern that there wasn't enough supply in Christchurch. If you go down to Kaiapoi and Rangioracertainly the outskirts of Christchurch nowyoull find that theres quite a lot of supply on the market. So catch-up does happen. And in the end the Government can control migration. If we don't think those migrants are actually adding to the solution, then we canwe have, outside of

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Australia and at certain times Pacific islands, great capacity to alter those numbers if we think theyre going too quickly.

Media: And you don't intend to do that?

PM: Well, at the moment, the advice we get is that the people are required on the skills category, theyre in different parts of New Zealand. Some of them are working holidays. Its a lot of different factors in there, but, generally, they have been bringing skills into the country.

Media So its a no.

PM: Well, we always measure it and we always monitor it. And, look, when the global financial crisis came and there were problems with the labour markets obviously weakening, we really did clamp down on the number of people that can come in. But at the moment these people are actually significantly adding to the economy.

Media: At what point, though, do you actually look at the demand side? Because house price inflation in Auckland is running in double digitsin some cases 25 percent on a year agO.

PM: Yep, so therell be a lot of different factors, and again, you know, things go up and they go down, and people sometimesand the market sometimes, as we know, get ahead of themselves. There are plenty of times when were talking about oil at 100 a barrel and dairy prices at 8.30, and, actually, to be honest it aint too much different than peoples expectations of housing markets. Were used to them going in one direction, but there are plenty of countries where they dont. So in the end, what Id sort of say to you is yes, its an Auckland supply issuethere are other parts of the country but largely an Auckland supply issue. Theres a huge amount of supply taking place in Auckland. Were going to keep working on that at a significant rate.

Media: Just on Solid Energy again, has the company asked for Government assistance, for financial assistance?

Look, its been a very long and complicated process, and Im not going to kind of go into the machinations of whats been happening. Youve seen what weve done over time, which is we have injected more capital into the company. They have a reasonable amount of privatesector debt, and weve made it quite clear to the company and to the bankers involved that that debt is their responsibility.

Media: So who owns the company? Who makes the decisions on this company now? Is it the Government or the banks?

No, the board and the management make the decisions about the company.

Media: But the future of this company is determined presumably now by the bank?

PM: Its not quite as straightforward as that. What youve got is a situation where the banks have an exposure to the company, and the question is: how do they best believe that they can get some of that money back. And like any situation where a company is in a delicate trading position, then the bankers always think through their options, and theres no question that the bankers are thinking through their options at the moment.

Media: So is it the case that if the banks arent prepared to take the hit, that Solid Energy will go into receivership?

| wouldn't want to make those comments today.

Media: Can you rule out putting more cash in?


Media: Can you rule out putting more taxpayer cash in?

PM: Its not the Governments preferred option to do that.

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Media: Would you expect a resolution before the Budget?

Media: Bradley Ambroses defamation action against you is going to trial next year. Do you think you can win?

I just wish hed get on with it. I mean, were wanting to go to courtthe sooner the better. Were very confident about our position, and its him thats slowing the process down. So if he wants to go next week, lets go next week. Thanks very much.

conclusion of press conference

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