Monday 31st October, 2011

TRANSCRIPT: Prime Minister, John Key interviewed on TV ONE’s Breakfast at 7:20am this morning the 31st October.

The full length video interview can also be seen on tvnz.co.nz at, http://tvnz.co.nz/Breakfast

JOHN KEY interviewed by CORIN DANN

Corin: Well the election campaign is heating up, the two main parties well and truly staking their territory. Labour's promising a pension reform and funding for a CBD rail loop in Auckland. National want to shake up employment law and channel money from partial state asset sales into Health and Education. National Party Leader, John Key, joins us now, good morning Prime Minister. This policy you announced yesterday of this new fund, this ring fencing of the money, you know critics will say this is smoke in mirrors, this is about accounting and that really this is about appeasing the fact that 52% according to latest polls are strongly against asset sales.

John: Yes look let's understand what we're trying to do here. We're trying to replicate the Air New Zealand model for the power companies we essentially have in Solid Energy. So the Crown owns 51%, the money that’s released from those sales of those minority stakes goes into the future investment fund and is used for purchase of other assets, Mum and Dad get the chance to buy those shares, and we think those companies perform better, and so there's no smoke in mirrors about this, we're being very transparent with what we're doing and what we've always said is look we're going to end up with more assets as a result of this process. See yesterday we announced a billion dollars going into 21st century schools. That'll mean that your child will be going to a school that has a modern learning environment, ultra-fast Broadband, capability of getting world class learning, doesn’t matter whether in a rural school or a main school in downtown Auckland.

Corin: Labour will argue though that you could have used the dividends from these assets to pay for that billion dollars. Over the course of five years that would be about right.

John: Yeah they don’t seem to understand those numbers. If you look at the normalised dividend over the last sort of six years for the companies we're talking about, it's been running on average at about sort of 320 million. So there was one year which they want to quote which is a year where it was much higher, and the reason for that was Meridian sold an investment they had in Australia, ironically the asset sale called Southern Hydro, and that pumped up the numbers. So Treasury's expectations are that over the next five years the average dividend flow will be 380 million. Now we're retaining at least 51%, so you're talking about us foregoing about 160 million in dividends, that’s true. But under Labour they're gonna borrow 17 billion dollars more, and they're gonna have to pay that interest back, and the fact that interest in dividend flow is about awash. So we would rather not go and rack up 17 billion dollars more of debt in the next four years and they would.

Corin: But I would have thought aren’t schools exactly the type of thing you do borrow for? They are capital items. I mean I think we've had this debate in previous election campaigns. These are the types of things you do borrow for. They obviously depreciate, all those sorts of things, but they're legitimate borrowing aren’t they?

John: Well I tell you what they are legitimate for and that’s investment, and the reason for that is the one thing that can change somebody's life is education, and I know from my own background that’s been the case, and I think it's true for basically all New Zealanders. Unless you get a decent education you are not going to be fully equipped to participate in modern New Zealand. So it is true that we're being very conservative and we don’t want to rack up debts over the next three or four years. But if you look at what's happening around the world, we've got a global debt crisis. Labour's answer to that is add more debt, National's is to get the books back into surplus earlier.

Corin: Okay, let's look the pension age. I know you’ve made it pretty clear that you as Prime Minister will not raise the pension age, but do you accept that it is inevitable at some point in the next 20 years, that a government is going to have to put it up, when you look at the numbers of baby boomers coming through for retirement?

John: Well I don’t if you have the plan that we're proposing, and I'm not being cute about that, I mean quite deadly serious, when we are spending less money than Labour. We're certainly putting less costs on business, and that means our books get back into surplus in three years, and our debt levels by 2020 for instance, will be 20% of GDP. At the very highest they're 29%, and that includes paying for all of the Christchurch rebuild. So what's happening with Labour is they're not being big and brave and bold as Phil would have you believe. They're spending a lot of money and they’ve gotta work out a way to pay for it, and so they're sort of - the nasty bit of that is they're saying you’ve gotta work two years longer, and I'm saying look I just don’t think that’s the right model. We've run it through Treasury's models, they're fully in all of our models right out to 2025, and in fact the Treasury produced a piece of paper for us not long ago that said look at all the cost increases you’ve got over the next 15 years. The age of super was actually only quite a small part of that. Health inflation, education inflation, all these things are much more expensive.

Corin: Sure, but the former head of the Treasury John Whitehead certainly thinks that it is inevitable, Business New Zealand, the Medical Association, the Retirement Commission – Just about every expert thinks that at some point in the next 20 years we need to. But you're saying you don’t think we need to over the next 20 to 30 years?

John: Well we certainly don’t need to with our plan, there's no question about that. Those numbers are affordable, but you’ve also got to make sure you live within your means if you do that. So if you want to spend more money, I mean what's happened with Labour is they’ve said we're gonna take this tax off $5000 and we're gonna take tax off GST. They're gonna work out how to pay for that along with a whole lot of other promises. So their model's pretty simple, they're saying we're gonna spend a lot more money, we'll chuck a lot more costs at business, you’ve gotta work two years longer. We're saying we spend less. And I mean that’s true, the former head of the Treasury, John Whitehead, did say that we should raise the age of retirement, He also said take Working for Families away, he also said put interest back on student loans.

Corin: Well do you think those policies are sustainable over the next – to begin with the next term. I mean will you have to look at student loans, that interest policy?

John: Oh I think we've done a fair bit in that space in terms of the margins. I mean yes I think we can keep 0% interest on loans, but we have tightened up considerably and we are chasing those foreigners or New Zealanders that go overseas and aren’t repaying their loans. I mean the truth is the government faces a lot of long term costs and there's always different ways of managing those costs, but what we've tended to do is spend less and reprioritise …:

Corin: Okay, Prime Minister we have to leave it there unfortunately but I know people will get a chance to hear more from you tonight on the debate. Thank you very much for your time

ENDS

© Scoop Media