Q and A - Shane Taurima interviews John Key 22 Jul 2012
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Sunday 22 July, 2012
Shane Taurima interviews John Key
Anyone can claim a water ownership right in the courts, but believes it would be unlikely to succeed and would be "complex and convoluted".
Economic difficulties do not mean it's not a good time to take SOE sales to market.
Remains firm to superannuation remaining at 65 due to the "bond of trust" built up between PM and the electorate.
"Not uncomfortable" with the current cost of superannuation relative to GDP.
Youth unemployment is relatively low at 13.5% "compared to many countries like Spain".
High house prices are offset by low interest rates and increased capacity to borrow and capacity to repay debt due to higher qualifications in young people.
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Q + A
SHANE TAURIMA INTERVIEWS JOHN KEY
SHANE The annual National Party conference is being held right across the road at Sky City. Such occasions are an opportunity for the party to reflect on the past year and in this case, the past four years in government. After a difficult start to its second term, what is the mood like within the National Party, and what new ideas does the Government have to address the same issue they’ve faced from day one: a sluggish economy? Prime Minister John Key joins me now. Prime Minister, good morning.
JOHN KEY –
SHANE Let’s start with the water issue. You’ve told the Maori Party you won’t legislate against water rights. Can you give us an example for the people at home? What is a Maori water right?
JOHN Well, we’ve already
negotiated and legislated for some of those, so I think the
way they’ll look at this issue is when it comes to
ownership, the Crown’s very firm position and view and
long-standing view is that no one owns water. The Crown’s
also recognised for a very long time, for the better part of
over 20 years, that Maori have rights and interests when it
comes to water, and those rights and interests are
negotiated iwi by iwi, river by river. So if you take the
Waikato River as a bit of an example, my government has
negotiated a co-management agreement with Waikato Tainui.
They are involved in decisions around the river. They’re
certainly involved in the programme to improve the water
quality. So rights and interests are recognised by this
government as they were with the previous governments. We
deal with them generally through the Treaty’s settlement
process, but ownership, in our view, is owned by no
SHANE Are we talking about exclusive Maori rights, or are we talking about rights for everyone?
Well, in the instance where we negotiate them with
an iwi, they are Maori rights and interests, and they’re
long standing and historical, and they are to do with the
connection and the connection of the local iwi with that
particular water source. In terms of other rights, of
course there are other New Zealanders that also have rights.
They have proprietary rights that they use when they have a
water take, for instance. There’s all sorts of interested
parties when it comes to waterways. But I don’t think
people should be fearful of negotiation of rights and
interests when it comes to Maori and water. As I say,
it’s been going on for the better part of 20 years. If
you take some of the areas where we’re working at the
moment, Whanganui River being a good example – there are
others – working on Kaituna River at the moment, so, you
know, Taniwha Springs – they’re all about improving the
quality of the water and making sure that there’s a
sustainable plan for development on the river.
SHANE So when you say that nobody owns the water now, could somebody own the water in the future? So, for example, in the event of a court finding that one person or a group actually does have some form of ownership right over a particular waterway, would you allow that to happen, or are you absolutely ruling that out?
JOHN Well, in my
view, no one owns water, and it’s not just my view.
That’s a well-established common-law position.
SHANE But it could happen, though, couldn’t it, because there is no current law preventing that from happening.
Well, in theory, someone could try and test their
rights in the court about ownership of water, but that would
be a very complex and convoluted case—
SHANE But it could happen, though, Prime Minister?
Well, anyone can claim an ownership right, but
whether they would be legally successful is a very different
matter. In my view, they wouldn’t be successful, and case
law points to the proposition that I’m putting up. It’s
not new to my government, it’s been the view of successive
governments, and, you know, to argue that someone owns
water, in my view, is nonsense. You know, water’s been
round a very long time. People have rights and interests,
and there’s all sorts of rights and interests that are
negotiated, and the Land and Water Forum is a great example
of a great many parties coming together to debate the future
of water for its economic growth, its health, its
relationship with iwi. All of those different things are
debated in the Land and Water Forum, but this debate has
been polarised by one or two people saying it’s about the
ownership of water, and as we currently—
SHANE Including the Maori Council, who say, actually— and I’m sorry to interrupt you, but I’d like to move it on to the state asset issue. But the Maori Council says that they could take their case to the High Court, which could delay the sale of Mighty River Power. How prepared are you for that? And does it come at any cost?
Well, it’s the Government’s expectation that
someone will probably take us to court and try and test
their rights. We can’t guarantee that they will, but
we’ll wait and see. It may in part depend on what happens
as a result of the findings of the Waitangi Tribunal, but
there have been murmurings from certain parties that they
might take us to court irrelevant of what the Waitangi
Tribunal says. But again the Government has demonstrated,
we believe, over the last four years that the right way to
resolve these issues is through negotiation, and we’ve
been doing that with iwi, with hapu about their rights and
interests. It’s been done in a calm and considered and
appropriate way and for the long-term interests, in my view,
of all New Zealanders. And I think that’s the right way
to do it, rather than going through the court process. And,
anyway, I don’t think the courts would really be in a
position to say anyone owned water, but certainly the
common-law view is no-one owns water.
SHANE Now, you’re about to announce more detail around the actual sale process of Mighty River Power, and we understand you’re talking about $1000 parcels for the mum and dad investors and also a loyalty scheme.
The details I’m going to announce will have to
wait for my speech, but, I mean, essentially we’re moving
to that next step now where I think New Zealanders are
becoming increasingly interested in their opportunities to
potentially buy these shares. We want to make sure that as
many mums and dads out there as possible at least consider
whether they’d like to do that or not. New Zealand has
typically had an investment profile and New Zealanders have
had an investment profile that has been dominated by housing
and other investments, for instance, not a lot of New
Zealanders owned shares, so this might present an
opportunity for them to do so. And what we’ll be talking
about at least at one level is how we can make that process
as easy as possible. In the end, final decisions are up to
them and their financial advisors if they choose to take
advice, but we certainly want to have New Zealanders at the
front of the queue. That’s what we’ve been arguing the
whole way through while retaining that 51% majority
SHANE I’m just wondering, given the uncertain economic times that we’re facing, whether it’s still a good time to sell.
you know, you can always— you’ve always got to make sure
you get, I think, a fair price for the asset that you’re
particularly trying to take to the market. In this case,
it’s less than half of that asset, but nevertheless, you
know, it’s a substantial portion. So, yes, economic
conditions around the world haven’t been that flash over
the last four years, and this government’s had to contend
with those very difficult issues and I think for the most
part have done a pretty good job of navigating New Zealand
through that and building competitiveness in our economy.
But, yeah, I wouldn’t want to say just because we’ve got
a global financial crisis that’s still washing through
Europe and some challenges that you can’t take something
to market. Well, Fairfax did that exactly over this period
in the last few, sort of, six months or so with Trade Me,
doing exactly the same model – keeping 51%, selling 49%.
The stock market has actually, globally, for the most part
has been quite robust in the last four years,
SHANE But what about yourself, though, Prime Minister? Would you be advising a company to sell in these times, in these tough times?
Again, it would depend on the individual company,
but all I can say, and it’s not for me to offer financial
advice, is if you look at the performance of the stock
market over the last four years internationally and
domestically, despite the fact that these have been tough
economic times, actually the stock market’s globally
performed pretty well.
SHANE Given our low economic growth rates, the ageing population and the pay-as-you-go structure of our health care and pension system, Bernard Hickey says we face government debt— a government debt blowout over the next 30 to 40 years. Do you accept that? Is he right?
Not really, no. It would depend on the actions of
any particular government. So again if you look at the
National Government, we’ve been very focused on that issue
of debt. So when we came in at the back end of 2008, we
faced a recession that saw a contraction in the economy for
about the nine months before we came in and a bit beyond
that of 3.3% in a big reduction in our tax revenue. The
Treasury advice to the Government was that by 2026, debt in
New Zealand would be 60% of GDP. The government— the
advice now from Treasury to the Government as a result of
all the changes that we’ve made in the trimming back of
the very expensive programmes that Labour left us is that
debt will be 0%. Now, of course, obviously, it depends on
the actions that we take and our capacity to grow the
economy, but the way through all of the issues New Zealand
faces is to build that competitiveness. We’ve actually
got enormous opportunity. We shouldn’t sit around feeling
sorry for ourselves. We should sit around identifying those
opportunities They’re definitely Asia, they’re the
power of the internet through the services-based sector,
they’re actually a vibrant Australia which benefits from
the mining sector, so New Zealand’s got a lot going for
it. And to sit around and, sort of, extrapolate some
analysis without taking into account all sorts of decisions
governments will make over the next 30 years is bit
SHANE But Treasury has also estimated, Prime Minister, that with current policies and economic growth rates, our national debt would rise over 200% of GDP, something similar to what we’re seeing happening in Greece now. And I suppose the question is are you happy for your kids, for your grandkids to be faced with so much debt?
JOHN No, and that’s why
the Government’s taken the actions we have. As I’ve
said, when we came in, the advice was debt at 60% of GDP by
2026. Now the advice is 0%, and that’s four years of a
National government. Give us longer, and we’ll continue
to lift economic performance. I mean, people say things are
sluggish, but, actually, in the first quarter of this year,
New Zealand grew at 1.1%. It was the third highest in the
developed world. Only Australia grew a touch faster at
1.2%. And if you look at Australia, they have a mild
recession, I think, actually taking place on the east coast
of Australia – Sydney, Melbourne, Brisbane. In fact,
they’ve got 14% growth rate in the mining sector, and
that’s a wonderful thing for Australia and not a bad
thing, actually, for New Zealand that we get to feed into
that. But, actually, we’re building strong
competitiveness in our economy, and our focus has got to be
on how we lift the growth rate of New Zealand, how we lift
opportunities, jobs and stability for our
SHANE Prime Minister, the cost of superannuation will contribute a lot to that big debt. And can I just confirm that your position is still the same – that there’ll be no change to the super age while you’re prime minister?
That’s my position. And the first thing I’d say is I
think that the bond of trust that’s built up between a
prime minister or politicians in the electorate is very
important. And I’ve campaigned on significant issues, and
if I go about and change those, then I break my word. And
the very same journalists that might argue I should break my
word, mark my words will be bagging me for breaking a pledge
I made to the electorates. That’s the first thing. The
second thing is even without that promise, I’m not
uncomfortable with what we’re doing. So our current level
of cost of New Zealand superannuation is 4.5% of GDP. Many
of the people that Fran or Bernard Hickey or others actually
refer to, many of those countries are already well above the
peak of the cost of New Zealand super, even at the height of
the baby-boomers in New Zealand today. So take Germany –
their superannuation costs are 10.1% of GDP today. We’re
4.5%. At the very most, we’ll rise to about between 7%
and 8%. Secondly, if you want to have a serious debate
about the cost of super and if your only objective was to
keep it at broadly the levels of cost today – about 5% –
then raising the age won’t do much for you, because
raising the age from 65 to 67 between 2020 and 2033 reduces
that cost by 0.7% of GDP. In other words, from, say, 7.7%
SHANE Prime Minister, we—
so we have to follow what the—
SHANE Sorry to interrupt you—
JOHN all these other things.
SHANE So you’re not going to change your position while you’re prime minister? Can we talk about the young people? Because there’s a big debate happening at the moment about their frustration at the huge debt that they face, but also the huge cost that they face to build a future here. We’re talking about higher student debt. We’re talking about higher unemployment rates. We’re talking about, well, if they’re one of the lucky few to be able to afford to buy a house, it being extremely hard for them to be able to buy a house. You know, they’re taking on debt two to three times higher than what their parents paid. We’ve got a serious problem there, don’t we?
Okay, so firstly I’d sort of reject the
statements that you’ve made.
SHANE We don’t have a problem?
You’re saying unemployment— Well, no. I mean,
there are always challenges, and that’s the government’s
job to address those challenges and deliver confidence to
the New Zealand electorate that we’re on the right track,
with a plan, and we have that plan. But you’re saying,
for instance, unemployment’s at a very high level. Well,
in fact, it’s 6.7% and falling, and
SHANE But youth unemployment, though. That’s very high, though, isn’t it, Prime Minister?
JOHN I— Well, youth
employment’s still relatively low in New Zealand at about
13.5%, depending on how you measure it, compared to many
countries like Spain, where it’s 50%. So, yes, it’s a
bit higher, but it’s naturally always a bit higher in most
SHANE But what about housing affordability? It’s so tough, though, these days to be able to afford a house. What is the Government doing? We had, you know, Murray Sherwin from the Productivity Commission and Bernard Hickey on the programme last week saying we’ve got a housing crisis, especially here in Auckland, and the Government doesn’t seem to be doing anything about it.
Okay, so we don’t have a housing crisis in
Auckland or in New Zealand, but there are clearly
challenges. So you say it’s difficult for young people to
buy a house. Well, I think if you go back to pretty much
any person who’s bought a house in New Zealand, whatever
their vintage, they’ll pretty much tell you that was a big
struggle. They’ll mostly tell you they had to save hard
to get a deposit and they had to borrow money. In
SHANE But when we compare the prices, though, Prime Minister, the average price – house price – back in in the ‘70s, ‘80s, as an example, was three times the average wage. It’s now eight.
JOHN Okay, but if you go again and have a look at interest rates in New Zealand, they’re on about a 40- or 50-year low at the moment. The capacity to borrow money against a house is much higher today than it was back then, so the loan-to-value ratio is often at 80, 90, 95, even 100%–
SHANE But we’re talking about massive debt, though, Prime Minister.
JOHN Well, again,
people’s capacity to pay that debt is arguably much higher
because, again, if you go back and have a look, I’m 50
years of age, look at my generation. When I went to
university, it was a very small group of people – less
than 1%, I think – that went to university. Today the
numbers that go to universities and their earning capacity
is very very high, as it is in terms of tertiary
qualification. So no one’s arguing there aren’t lots of
things we can address, and personally I happen to agree with
a lot of what Murray Sherwin and the Productivity Commission
have said around potential land issues, around speeding up
the building process, around development contributions.
There’s a lot of things we need to address—
SHANE When can we expect the Government response to that report? Sometime this year will we see—?
Well, I hope so. I mean, look, we want to in a
considered way go through that report, and there will be
things we can do. But mark my words, when we do it, the
very same political opponents, like Russel Norman and the
Greens, who this week was raising that matter of housing
affordability in question time, will be the very same person
on your nightly news telling New Zealanders, ‘Don’t
reform the RMA. That’s bad. We don’t want to do
that.’ It’ll be the same with Labour. They’ll
complain about it, but they won’t do much about it. In
government, we have reformed the RMA, we’ve reformed
building practices, we’ve been reducing the bureaucracy in
the local-government sector, we’ve been streamlining the
activities. So in my view, we are making great strides
towards ensuring better affordability for New Zealanders,
compared to the bubble we saw in the mid-2000s that saw the
then Labour Government go and commission yet another report
SHANE Prime Minister, unfortunately we have to leave it there. We are out of time. We thank you very much for your time this morning and all the best for the rest of your conference.
very much, indeed. All the best.
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