  |
|||
 
|
  AGENDA, June 11 NOTE: The Don Brash interview appears below SIMON On Thursday Reserve Bank Governor, Alan Bollard held the official cash rate at 6.75% but warned that any stronger than expected inflation would require a further policy tightening. In layman's terms that means he's still poised to raise interest rates, but if he was hoping to shock the banks into backing off their interest rate wars he was mistaken. Within hours of his briefing Kiwibank had dropped its rate, Sam Knowles is the bank's Chief Executive and he joins us now. Were you surprised by the Governor declining to change the official cash rate? SAM Good morning Simon, no the outcome was pretty much as expected and because of that outcome we were able to pass on some of the reduction occurring in the market on to our customers. SIMON So you anticipated this entirely? SAM Well I think the market had pretty much anticipated the outcome in terms of non change and then different people obviously read different things into what the Governor's saying. SIMON How important then is it from the trading bank's perspective to what the Governor says now, it just seems that you read your own reports. SAM Well I guess - it's always a balance of what he's saying, doing your own assessment of the market and what the market's saying particularly offshore, and that balance was driving down longer rates and our funding costs at the longer end and that allowed us then to take the position we have. SIMON How then do see interest rates tracking over the next few years, what's likely to happen to mortgage rates? SAM That’s a very challenging question over the next few years. SIMON Well you've obviously decided what's gonna happen in the next several months. SAM We've certainly decided that at this time we could come out with you know the best rate in the market and we can still make money on that, there's so many different variables, political variables, external variables, it's very difficult as everyone knows to predict rates over any period really but I guess in making the call we are saying the bias is that they won't go up. SIMON They won't go up did you say? SAM Well that’s our position today that we're not seeing pressure to push them up, but clearly other people have different views. SIMON But the Reserve Bank Governor was still hawkish with his statements you know it seems to signal that we're on the precipice of another rate rise sometime still to come this year, at least one. That doesn’t seem to match what you’re anticipating. SAM Well that’s not quite the key driver of our decision, our decision is driven by how we can raise money at the two year rate in the wholesale markets. SIMON So longer term assessment of the economy is it slowing at the rate? SAM Clearly the economy's slowing and the question is how much is it slowing and that’s the thing that’s the uncertainty. We're comfortable where we are, other banks may have different views, the Governor clearly is concerned that it might not slow quite fast enough in order to keep rates down. SIMON It does suggest a degree of impotence or irrelevance on the part of the Reserve Bank if all the factors influencing your decisions are offshore. SAM No I think don’t think any way it's irrelevance but he's got a very challenging role at the moment because most of the factors that he's having to deal with have occurred in the past and clearly we're looking very much as to what might be occurring in the future. SIMON In yesterday's National Business Review there's a growing – I quote directly there's a growing danger of New Zealanders getting the worst of both worlds, low growth and persistently higher inflation, how real is that danger? SAM I guess I'm not an economist so I can't sort of give you the economic view but now I think that is a real danger and that’s probably why the Governor's having such a challenging job at the moment. SIMON Clarify for us because it's been debated a lot, which is more inflationary tax cuts or greater spending? SAM I'm not an economist that’s a challenging one, in the end it depends what government spends its money on as to what the impact is. SIMON Michael Cullen's talking with his Australian counterpart about the possibility of a trans Tasman banking regulator, what are the implications for New Zealand from that? SAM Clearly it depends on not so much who the regulator is but what the actual regime is that drives the implications for Kiwibank and other banks. We're certainly very comfortable with the current regime, Australia has a more hands on regime around banking so that would impose costs if we were to go in that direction that would pose costs on New Zealand banks. SIMON Are you expecting us to lose a degree of control to Australia? SAM Well if it was controlled by Australia certainly we'd lose a degree of control to Australia but I think all indications I've received is that they're looking more at trying to bring them closer together rather than giving us sovereignty. SIMON Let me bring the panel in at this point. Nevil Gibson from NBR I'm sure you've got some questions. Nevil Gibson, Editor, National Business Review SAM We don’t source funds significantly from offshore but we certainly use you know the local market and some offshore players to secure the money in terms of swaps and options. NEVIL So do you see holding rates up as really unsustainable on the part of the bank, most banking economists say the Reserve Bank's really out of step with the market. SAM Yes I think I agree with you there but it's more about philosophy, we've got a very strong philosophy, we're trying to pass on any reduction in our costs straight through to our customers, other banks obviously are looking at unders and overs and they may not react in quite the speed we react to changes in the market. NEVIL And I notice that you’re also building up your banking for business service so what's behind that, do you see you’re able to undercut the other banks there too? SAM Yes we see that spreading in the small end of business is not well serviced by the current banks so we're opening business banking centres around the country and again we do believe we can compete on price and service in that area. NEVIL So are you likely to initiative any further drops in the rate? SAM That really depends on the market, certainly the 7.35% rate we've got out today I don’t see that going down in the short term so it does depend on what happens in the wider market. Andrew Holden, Deputy Editor, The Press SAM We're expected to provide as an SOE the comparable level of profits to the market so we're moving towards that in the longer term, as you said we've just moved into profit now and what I can confirm is that at the 7.35% rate we can still make good profits. ANDREW But that puts you in a better position I would imagine than those banks who are stock market driven, you don’t have to match the sort of profit levels that they have to deliver is that fair. SAM I guess that’s generally fair that we're looking at an average return on capital, they may have needs to provide you know very high returns on capital to their stockholders. SIMON Chief Executive of Kiwibank Sam Knowles, thank you very much for joining Agenda today.
-------------------------------------------------------------------------------- SIMON Last week's UMR Insight poll had National ahead of Labour by one percent. On the strength of that poll National could form a coalition government with New Zealand First, it's the first time National's led Labour since leader Don Brash's Orewa speech on race relations in January last year. Tax is another major policy platform - while the party's yet to release its tax policy National is advocating tax cuts, these would funded in part by reducing the number of public servants. Don Brash is with me now from Howick in Auckland. SIMON Dr Brash welcome to the programme, how committed are you to tax cuts? DR BRASH Oh very committed indeed Simon we think New Zealanders are substantially overtaxed at this point, have been overtaxed indeed for the last several years and it's one of the reasons we're losing 600 Kiwis across the Tasman every single week, we think there's ample scope for tax reductions and quite frankly with the government running at a surplus of about seven billion dollars a year there's no reason to defer those. SIMON Okay Dr Brash I've heard the rhetoric and I've heard the platitudes for some time now, when are we going to hear some detail? DR BRASH Ask Helen Clark when she's gonna hold the election. The reality is we will announce our tax policy well ahead of the election. We said we'd do it within a few weeks of the budget when that budget was announced and at that time we thought the election would take place at the end of July, we don’t want to announce it at a time which gives the primary advantage to Helen Clark, but we will announce it well ahead of the election I can assure you, and it'll be much better than 67 cents a week in three years time which Labour is offering. SIMON Is it prepared? DR BRASH Of course it is. SIMON It's ready but you’re just holding it back waiting for the strategic advantage? DR BRASH That’s correct. SIMON What about giving the public the opportunity to digest some of it? DR BRASH They will have ample opportunity Simon, it's very important they do, it's no point in announcing a policy which doesn’t have an opportunity for the public to react to, they’ll have plenty of opportunity I can promise you. SIMON You’re playing a game of double bluff here aren’t you? Are we gonna have tax cuts by Christmas as was originally promised. Let's clear this up. DR BRASH No no no no, that was never promised, what was promised was a budget before Christmas. The Sunday Star Times reported that as tax cuts by Christmas. Realistically IRD can't change the tax schedules by Christmas, we said we'd have a budget before Christmas and that of course became – because the headline was misleading that became a backtrack, it was not a backtrack at all, we said a budget before Christmas and tax cuts just as soon as we can get the IRD to change the schedules. SIMON Okay April the 1st next year? DR BRASH That’s a realistic target. SIMON So we could legitimately expect that tax cuts would be on the board by April the 1st next year? DR BRASH Yes you can. SIMON What sort of tax cuts? I know you’re not gonna give me figures but are we talking corporate tax cuts, are we talking across the board, are we talking low to middle income or are we talking high earners. Who's gonna get them? DR BRASH We've said that hard working New Zealanders have been overtaxed by this Labour government and we propose to relieve that tax burden, we've also said the company tax rate now 33% should be on a par with that in Australia at 30%, we're committed to that. SIMON On the 13th of July 2003 you said you would reduce company tax and the top two personal rates to 30%, in a press release on the 17th of March last year you said National's top priorities for tax reductions and tax relief for low to middle income families. What is it? Who's getting it? DR BRASH We're committed to have tax relief for all hard working New Zealanders that’s what I've said that’s the latest statement I've made and that’s what we'll stick with. SIMON So by all the hard working New Zealanders you mean across the board? DR BRASH I mean across the board. SIMON Including the lowest tax bracket? DR BRASH Let's wait and see the details Simon I don’t want to go further than that. SIMON Well you said all hard working New Zealanders, do you include all hard working New Zealanders within the lowest income bracket? DR BRASH That’s correct. SIMON Okay. What are you gonna do to pay for these cuts then? How are you gonna pay for these cuts? DR BRASH Look this Labour government has been spraying money around like it's gone out of style, huge increases in bureaucracy, huge increases in very low value tertiary courses like Hip Hop Tours, homeopathy for pets, you name it. We are convinced there's ample scope to reduce that wasteful expenditure to give tax relief to New Zealanders. SIMON Well be a bit more specific who's going to go, where are the cuts going to be allocated? DR BRASH We will clearly announce what we plan to do to finance the tax relief well ahead of the election. SIMON John Key told the Herald on Sunday National government will reduce spending from 32% of GDP to 27% within three years. DR BRASH No no he did not, he did not. That was a gross misreporting of an article by Brian Fallow 18 months ago based on a speech I'd made even earlier which talked about a gradual reduction in the ratio of government spending to GDP over a ten year period. It was total misreporting. SIMON Nevertheless that reduction means cuts, cuts in expenditure where are they coming? DR BRASH No no no no, it didn’t mean that at all, it said that if we grow government spending slightly slower than we grow the economy to which we're absolutely committed then the ratio of government spending to GDP would of course decline, that’s what it said, I said it, he said it, and we mean that. SIMON So you can guarantee that no core public sector employees will be cut? DR BRASH No I did not say that. SIMON No I'm not asking you if you said that, I'm asking you if you’re saying that now? DR BRASH No, well I am saying that over the last six years core public services have grown from 30,000 to 38,000 roughly a 25% increase over that period. Now frankly we think there are far too many bureaucrats and not enough nurses, teachers and Police Officers. SIMON Well if you think there aren’t enough nurses teacher and Police Officers you’re saying there's gonna be more? DR BRASH We can say we can reallocate government spending to get better effect for New Zealanders, we need better health care, we need better law and order, we need better schools. SIMON More front line Police Officers? DR BRASH More front line Police Officers. SIMON This is more cost, where's the cost going to come out? DR BRASH I've made it very clear in a speech in July last year that New Zealanders do not feel safe and their families do not feel safe in their homes, do not feel safe in their communities, we need better policing and better allocation of the Police resources we have. SIMON So it's just allocation you don’t have to have any – where's it going to be funded again, is it just from a grown tax pie is that what you’re saying? DR BRASH Increased spending on law and order is one of the issues which we think deserve attention and we've said that repeatedly, we've said we want to abolish parole for repeat and violent offenders, that costs money, but the amount of money being spent is relatively small, relative to the huge amount of money which this government has been wasting. SIMON Let's move on to the nuclear issue. ACT's Ken Shirley has promoted a bill to overturn the ban on nuclear powered vessels yet you've indicated you oppose it, why? DR BRASH Look this issue is far too important to be dealt with by private member's bill. We've made our own policy very clear indeed and that is that this issue ought to be decided by referendum. We're committed to doing that before there's any change at all. SIMON Ken Shirley told us yesterday that he is going to amend that bill to included a referendum will you support it then? DR BRASH Look as I said earlier the question is does foreign policy get decided by private member's bills, our answer to that is categorically no. SIMON Well you just said you'd support a referendum, he said he's gonna change it, will you then support the bill? DR BRASH Well we'll look at the bill, but as I said earlier we don’t believe foreign policy should be decided by private member's bills. Look we're committed to the really important issues which concern New Zealanders, poor quality education, welfare dependency, too much crime on our streets, Treaty of Waitangi issues, racial bias in the system, the fact that we've got 600 New Zealanders I mentioned a moment ago going off shore every year to Australia, those are the important issues facing New Zealand. SIMON As opposed to our relationship with the US as well that’s important I'm assuming in terms of trade? DR BRASH Of course it's important. SIMON Nuclear legislation then is a very important issue as well because that factors straight into it, on Agenda last year on the 8th of May when asked whether you'd overturn the no nucs legislation you said not without some kind of explicit public mandate which is a referendum or a National victory, after we've made it quite clear what our policy will be in the next election. DR BRASH That’s correct. SIMON And you stand by that? DR BRASH Absolutely right. No no I've said that we would not change the nuclear ships legislation without a referendum or as you say going into an election committed to making a change. We're not committed to making a change, on the contrary we're committed to making no change without a referendum. SIMON So you'll support Ken Shirley's bill then cos it calls for the referendum? DR BRASH We will not make foreign policy decisions by private members' bills. SIMON A senior MP we spoke to said neither you nor the majority of your caucus believe in nuclear free policy, is that true? DR BRASH I'm not sure to whom you were talking, I believe fundamentally that we should not have any nuclear weapons in New Zealand and I've also said we will not change the ban on nuclear propulsion without a referendum and I stand by that. SIMON And that’s what he's offering. DR BRASH Who's he? SIMON Ken Shirley in his bill, he wants to support the nuclear propulsion. DR BRASH Simon I just said to you foreign policy decisions are far too important to be dealt with by private members' bills. Let's focus on the important issues facing the country at this election and frankly this is not one of them. SIMON You also said you'd consider it if it included a referendum, he said he'd change it, I don’t see what the problem is. DR BRASH Well I've just explained to you I don’t want to make foreign policy decisions of this magnitude on the basis of a private member's bill. SIMON Even after a referendum? You've also said one standard of citizenship for all, one of the great political phrases of recent times, are you still committed to removing race based funding? DR BRASH Yes I am. SIMON And abolishing the Maori seats? DR BRASH Yes we are. SIMON You call them an anachronism. DR BRASH Absolutely they were put in place in 1867 for five years, almost a 140 years later we've still go them, I do believe every citizen should have the same legal and constitutional rights. SIMON Well what would go and how would you get rid of it, would you just abolish it legislatively? DR BRASH Why not? SIMON Okay what about tinorangatiratanga, what's National's policy regarding Maori claims to self determination? DR BRASH I think I want every New Zealander regardless of race to be treated the same and I think that applies to Maori New Zealanders, Asian New Zealanders, European New Zealanders etc. I want every citizen to have equal rights. SIMON Does that mean you reject tinorangatiratanga? DR BRASH That phrase means different things to different people Simon I'm reluctant to be dogmatic on what I reject or not, explain what you mean by it and I'll tell you whether I agree with it. SIMON Well I'll tell you what Tau Henare said, he said last week on Agenda that the National Party support him and I quote 'absolutely with regard to self determination for Maori'. Do you? DR BRASH Well if you mean by that that Maori should be able to run their own schools for example, why not – I'm happy for anyone to run their own schools I want much greater flexibility for parents to have the kind of school they want to send their children to. If Maori want to run their own schools that’s absolutely fine as with any other group, but it's not a right for Maori it's a right for parents. SIMON The Maori Party would you be prepared to enter into coalition with them? DR BRASH I find it very hard indeed to believe that the Maori Party and the National Party could ever be in coalition, why, because we have quite fundamentally different views about the future of New Zealand. I want New Zealand to move forward as one people not as two different peoples. SIMON Do you rule out the Maori Party entirely? DR BRASH Well on the basis of their currently announced policies I cannot see how any coalition would be feasible. SIMON Statistics New Zealand issued a press release on April 22nd saying the Asian population in New Zealand will increase by 145% over the next 16 years compared to 5% for Europeans, how comfortable are you with that? DR BRASH I think that projection was based on certain assumptions which have already been proved to be wrong, they assume that there'd be a very high continuing rate of Asian immigration and of course that Asian immigration's fallen off very rapidly indeed over the last 18 months. SIMON Who will you be targeting for immigration, how will you change immigration rules. DR BRASH I want immigrants coming into New Zealand who are of benefit to New Zealand, they should be skilled immigrants, people who can integrate into New Zealand society, and if we have that kind of immigrant I'm all for them. SIMON According to Winston Peters of course Asian immigrants will outnumber Maori by 2021 won't that further damage Maori aspirations? DR BRASH Look, Maori aspirations are best helped by society where everybody is treated equally regardless of race, and I want that for my children and I'm assuming you want that for your children. SIMON Current polling though would suggest you'd almost certainly have to coalesce with New Zealand First and Winston Peters, what would it take for that to happen, what's the bottom line? DR BRASH There's a long way to go to the election I'm not counting any chickens I'm not crossing any bridges, we will talk to parties which share our concern about welfare dependency about law and order and about the Treaty after the election. SIMON It seems those parties won't offer you the right numbers that New Zealand First would, would you and John Key be prepared to forego the purse strings again if that was a condition? DR BRASH I'm not crossing that bridge Simon, we will talk to other centre right parties who share our values, share our concerns, share our objectives after the election. SIMON Mr Peters has promised to increase superannuation as a bottom line, could you accept that if necessary? DR BRASH Look Mr Peters is making some promises which quite frankly he knows or should know cannot be met, I know that, Helen Clark knows that, Winston Peters should know that. SIMON Who would you prefer to be in coalition with? DR BRASH Oh I'm not going to answer that question Simon, I'm happy to talk with any of the other centre right parties and currently I see three centre right parties with whom we could have discussions. SIMON Who are they? DR BRASH United Future, New Zealand First and ACT. SIMON In that order? DR BRASH No no, no no, let's put it in alphabetical order, ACT, New Zealand First, United Future. SIMON You've been quoted of course last year as saying that you'll quite if National loses the election, do you stand by that? DR BRASH No no I didn’t say that, what I did say was that political party leaders who lose elections don’t expect to stick around for long, they normally get dumped pretty quickly. I'm not gonna cross any bridges on that regard either. SIMON Okay then if you win how long will you stay on, you'll be 68 at the next election? DR BRASH Look Winston Churchill I think was 66 when he became Prime Minister for the first time, I think I'm right in saying that, Ronald Reagan was 70 when he became President for the first time and he went on to have two presidencies, I don’t regard myself as an old man at all. SIMON Don Brash, Leader of the National Party thank you very much for joining us today. DR BRASH Thank you Simon.
SIMON Joining us again are our guest commentators, Andrew Holden and Nevil Gibson to react to what Dr Don Brash just had to say. Andrew. ANDREW I think looking at the election campaign and the three months you suppose that we've got left, forget the Leaders' Debate and the Worm, forget any of the major policy set pieces even arguably forget the announcement of the election, you'd have to say the most important moment's going to be when Brash's tax policy is released and the detail of that, it's going to dominate the entire election and it strikes me that National potentially has a big problem is that will have commentary and detail broken over one two weeks you would think, if they do it when the election campaign is called it wipes everything out of the spectrum, they won't have time to talk about education, they won't have time to get into any detail about health, they're really betting to my mind everything on this tax policy and I they should get it out of the way sooner rather than later. SIMON Do you agree with that Nevil? NEVIL Well I think the tax policy has to be seen in the greater growth agenda in fact a wholly alternative one that says that we can do health and education without talking about government services, but rather we're gonna go in a different direction. But he was so defensive in that interview you had him rattled and I presume that that will continue and the media will have a particular view and they’ll pick on the issues they want to talk about but he should be setting his own agenda instead of alternative ones, it's not as though the Labour government haven't got a clear set agenda on where they're going, National stands for exactly the opposite in virtually every one of those areas. SIMON Stands for broad philosophy at the moment, when are we going to get some detail, there are so many areas we're still not… NEVIL Well I don’t know if the detail's so important as selling the idea that people want a change and I think we're starting to see that that could get some traction and certainly you can't discuss the finer details of tax without really talking about the offset in the economy and business growth and the cuts in government spending and that sort of thing but if those are the issues he has to debate well he has to come up with some answers, they can't leave it on the top shelf. SIMON Cos National's greatest advantage so far is simply the damp squib of the lost expectation in the budget. ANDREW I think so, I think they’ve been handled a phenomenal opportunity to come out with precisely that alternative vision that alternative way of governing and using the dollars, which is really why if they don’t capitalise on it they're going to struggle enormously I think. SIMON What about the nuclear policy? This business Ken Shirley's bill, Ken Shirley told us yesterday that he is amending the bill to allow for a public referendum to consider the rejection of Section 11 of the No Nucs Act the one that bans nuclear propelled vessels. First of all Don Brash says yes we'll do it if there's a referendum and then says no he won't support a private member's bill, is that mutually exclusive. NEVIL Well again I think it's driven by public opinion or what he perceives rather than taking a leadership role in this, I mean the word nuclear doesn’t frighten many people these days, certainly not nuclear bombs that sort of thing because there's virtually no nuclear armed ships around at this time, and even on the Greens' side there's now talk that nuclear power could be the good alternative to carbon emissions and that sort of thing, so the idea is to actually get the debate going, there is a growing groundswell of opinion in scientific circles and so on that nuclear's not the big bugbear it was. SIMON Coalition partners, it seems that Maori are ruled out, and it looks like New Zealand First are less than favourably received of course. NEVIL Well I think that’s again a bit of a furfy you know because I mean half those parties won't be there and you've got Winston he can play every card on that one and you know that’s again letting the media set the agenda rather than saying no we're not talking about that, that’s the way Winston has to have handled it. ANDREW I think you can be sure Labour will play out the element that Winston Peters will be the coalition partner if you vote National they’ll push that very hard knowing that there'll be plenty of people who'll be terrified by that prospect that’s one of the centre right's great issues here is with ACT imploding and United Future not necessarily being a great strength of a party then all Brash has is Winston. SIMON If the polling stays the same it's gonna make Winston very very powerful someone's gonna have to concede something. Oh it's getting so exciting these days. Transcripts should be checked against a copy of the programme to ensure Copyright to Front Page Ltd but may be used PROVIDED attribution is made to TVOne and Agenda |
||