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  Transcripts copyright to Front Page Ltd but may be used PROVIDED attribution is made to TVOne and Agenda. AGENDA Presented by Lisa Owen THE PRICE OF MONEY Making housing affordable
LISA The New Zealand dollar rose about 76 cents US again this week giving rise to speculation that the Reserve Bank may intervene in the currency market for a third time. New Zealand's official cash rate is the highest in the industrialised world with homeowners facing floating interest rates of more than 10%. Labour MP Shane Jones is Chairman of the Finance and Expenditure Committee which is currently looking at monetary policy and its ability to manage inflation. He also sits on the Commerce Committee which is conducting an inquiry into housing affordability. Shane Jones joins me now. New Zealand First says it's going to try and get an amendment to the Reserve Bank Act and try and push something through, would Labour support that, is that the way to go? SHANE JONES – Chairman, Finance and Expenditure Committee You’ve got to bear in mind that for the last 20 odd years the framework within which monetary policy works has enjoyed bipartisan support from the main parties. I've got no doubt whatsoever that all sorts of suggestions are going to come to the committee and a senior member from New Zealand First Doug Woolerton is on the Finance Committee, but that lies for the future as to whether or not there'd be any support from us, without seeing an amendment it's unwise to comment on how useful the amendment might be. LISA Alright well let's look at some detail then because Winston Peters is saying that inflation shouldn’t be the only target for the Reserve Bank, do you agree with that? SHANE Yeah well when I've heard Winston and others basically they're concerned that whilst consumption is very high in New Zealand the highest the interest rate grows the greater the dollar grows and I think he's been looking around for some international comparative instruments. Now you know monetary policy has enjoyed quite a bit of stability and one thing we must never forget in doing this inquiry is that it's very important to maintain the credibility of the framework, so if there is going to be a change it'll have to enjoy widespread support in the House, but I've no doubt in my mind that not only Winston but a host of exporters will come forward and say that a few more arrows need to be put into the Governor's quiver. LISA Do you agree with that personally? SHANE Well I think it's timely to look at it, I mean it's an arcane area, I mean Treasury looked at it, the Reserve Bank Governor looked at it himself and it's so arcane one sort of remembers the stories about Merlin and the closely guarded secrets of his potions, it really is a very complex area, but day to day Kiwis they're not happy about high interest rates and they're certainly frightened about the high dollar and what we try to do and the reviewers give everyone an opportunity, I mean we're a bit suspicious of the tired old faces coming in and trotting out predictable ideological lines but we've had a great response and I've no doubt in my mind that we're going to get quite a few radical ideas as to how perhaps the Governor's job might be improved, or the instruments he has access to. LISA So within your caucus is there a general agreement within your view there that this is an arcane piece of legislation. SHANE Well let's get down to brass tacks here. The role that the Governor the Reserve Bank has is a very complex economic role, at the end of the day the only instrument he has access to is interest rates, he's not happy himself about the level of consumption in New Zealand, so it remains to be seen whether or not we were to change it how that would impact on you and I and others' purchasing but there's full support in our caucus for this inquiry, we've been encouraged by Dr Cullen to get on with it, the Prime Minister thinks that it's a damn good idea that more parliamentarians become familiar with monetary policy so that our own debates are more constructive, I mean the banks, the exporters, the importers, the academics, the trade unions they're all lining up to come and give us their ten cents worth, and so they should I mean a select committee belongs as much to the people as it does to the politicians. LISA You mentioned there about some exporters who are obviously feeling the squeeze from the high New Zealand dollar but how worried should we be about the high New Zealand dollar when say the dairy exporters are going great guns? SHANE Yeah I think there's a correlation between inflation and the earnings of the dairy industry, that’s just a personal view if have and I'm sure if you were to historically track it you'd find that was the case. Exporters in the fish and the meat and the tree business, they are concerned, but the reality is ours is a very buoyant and resilient economy and sure there is some speculation but there are some serious bets that New Zealand's economy is not about to go down the gurgler, there's no evidence of that, but you know be fair to the exporters they're not happy. LISA So what do you think could be done to lower inflation and get the dollar under control? SHANE Well inflation is too much money chasing too few goods okay and there are obviously instruments available if you wanted to depress consumption, there's a lot of concern about the housing sector but I myself just see the growth in housing prices as reflecting the strength of the economy. There's probably a case for us to look at whether or not the tax system has unfairly advantaged those who are investing in property as a form of superannuation and Dr Cullen has encouraged us to look at that and indeed the Greenies who are on our committee they're highly enthusiastic about it. LISA So you're talking about flicking tax breaks for people with rental properties? SHANE Yeah at the moment if you own a rental property you do enjoy an opportunity to capture the losses and have that counted against your income, that’s something we'll definitely look at but once again unless an option of that nature enjoyed widespread support, which is probably why it's come to the Select Committee. There's 13 people on this committee, as Rodney Hide pointed out curiously enough that it deserves to be treated seriously and try and find some consensus because when we bought in in the mid to late 80s into this new framework the monetary policy framework it has enjoyed widespread parliamentary support and I think any suggestion that it be changed has to be done with a great deal of judiciousness and buy in, or what will happen is we'll end up eroding the credibility internationally of both our country and the Reserve Bank and given we have this enormous appetite for overseas capital you do that at your own peril in my view. LISA Let's talk about tax for a minute, tax cuts, what is the view of your colleagues, when you're sitting around at the end of the day having a beer or a cup of coffee what is the genuine feeling about whether tax cuts should be happening? SHANE Well when you come on national television and you talk about the contents of what your caucus discussions comprise you court the grim reaper, so that aside. LISA Who's the grim reaper Mr Jones? SHANE I'll leave that to your wonderful imagination. No the reality is that tax is a live issue, you’ve heard what Trevor Mallard's had to say, Dr Cullen has said that he's working on it in the context of the budget. LISA So Trevor Mallard's comments where he says I have no doubt that this will be addressed in the next budget referring to tax cuts, is he right, are his views shared by you all? SHANE Well no doubt it'll be a vital mix in what's probably a very candid set of discussions. The public's attitude is fairly evident but you know we've been running surpluses, but at the same time we haven’t been allowing certainly in our view the size of the state to grow exorbitantly, people have wanted an improvement in education and housing, they want a new burst in housing and in public health, so I'd say that it's in the mix in terms of the development of our budget yeah. LISA Labour is talking about a renewal in time for the next election and we had Mike Williams on he said there's likely to be ten retirements before you go into the next election and reshuffle of portfolios. Where would you expect to find yourself after that? SHANE Such candour from Mike, I don’t recall seeing or hearing that. LISA I can assure you it was said her on this programme. SHANE Oh no I certainly won't doubt the voracity of what you're saying here. LISA So after the big reshuffle where do you think you'll be? SHANE Well I came into politics as I've said publicly with at least a nine year timeframe in mind, you’ve gotta serve your apprenticeship which is what I'm doing and really the areas of interest I've always had are my own people, Maori, and matters of a sort of economic development nature and really want to be regarded as a dependable and talented member of a team because unless you're a part of a team in politics you're gonna end up like Alamein Kopu and I didn’t believe my somewhat lofty heights of Maoridom to emulate Alamein Kopu, so no be a part of the team and see how far that takes me. LISA So how far do you anticipate it will take you because some people have said that one day Shane Jones will be Prime Minister. SHANE Well unfortunately for me they said that about John Tamahere so I'll resist responding thank you very much. LISA Alright well will you stand in a seat next election? SHANE Oh yeah no no I have ever intention of standing again although it's regarded as cowpat country, my own homeland of Northland, I've always been keen to stand in a general seat and demonstrate to both our Maori people and all New Zealanders that a person of say mixed ancestry such as myself can appeal to all sorts of New Zealanders. I'm intensely proud of my taha Maori and cherish the language, grew up with the language, brought my kids up that way, but I firmly believe that our future as a small four and a half million population lies with the rest of the world it doesn’t lie looking at our own navel and it certainly doesn’t lie in a victimhood mentality and I stand against that in every way possible. LISA We'll turn now to our panel for their questions, going first to Jenni McManus. JENNI McNANUS – Senior Journalist, Sunday Star Times Shane I'm thinking back to the Wine Box Inquiry which actually had its genesis in a select committee, it was originally going to be there and then it was decided that it wasn’t the appropriate place to have it because the committee wouldn’t have enough powers of compulsion legally and would be able to summon witnesses and documents as it wanted to. Do you think that a select committee is the appropriate forum to hold inquiry into monetary policy given that you may probably have reluctant witnesses? SHANE Well isn't that a blast from the past, we're talking this morning about Americas Cup and Wine Box. You know an interesting thing happened in the House the other day, my senior colleague Lianne Dalziel made reference to attempts or influences that were designed she thought to thwart the efforts of the Securities Commission. I think that if there is any further action in that regard and Dr Cullen said it merited further consideration, a select committee inquiry is one option but we're away off from that, I've no doubt that my colleague Winston Peters will have more to say about it. JENNI Well he was very instrumental back in 1992 in getting the thing out of select committee and into a commission of inquiry but my next point would be wouldn’t you think it would have to be done fairly quickly because the BNZ's Tony Alexander was saying this week that he thinks that Bollard will happily plunge the economy into recession if he doesn’t get the slow down in growth that he's looking for. Given that, don’t you think it's urgent that you get your monetary policy inquiry underway? SHANE We've got a two week recess and the monetary policy inquiry's gonna kick off in full gusto after that. You know the BNZ have had – there's been a bit of static between the BNZ experts and the Reserve Bank for a while, that’s not necessarily a bad thing, just a different view as to how Bollard's done his job I suppose, but look there's a lot of enthusiasm, we're already receiving submissions and I myself have been meeting with different parties and saying you’ve got to treat this seriously because what we're looking for is to create some consensus on the committee because if you're gonna go ahead and do something radical like alter our monetary framework Jenni it has to enjoy bipartisan support, it has to have wider buy in than just the chairman and his colleagues on the committee. JENNI But that’s my point, don’t you think you need to ensure that you’ve got adequate legal power to summon people as you need them and to call up documents and require documents to be produced? I mean can't we get it out of the select committee process and into something else? SHANE There's two things happening, there's monetary policy review which is about to kick off and then there's the suggestion that there's unresolved issues which flow back to the debacle and the drama round the Wine Box Inquiry, we're not going to have a consideration of monetary policy blighted by all the problems an unresolved issues of a Wine Box. JENNI But no this isn't the unresolved issues from the Wine Box Inquiry this is the structure of the inquiry into monetary policy and the only reference to the Wine Box was back then there was a problem as to whether you could summon witnesses and require them to produce documents and what I'm saying is don’t you think you're going to have that same problem this time round and the selection committee forum isn't the correct one for an inquiry like this? SHANE Well in terms of monetary policy inquiry I'm sure that the select committee will have every opportunity if needs to get to the heart of the matter. LISA Jenni raises the Wine Box there let's talk about your rather blunt comments this week in relation to Sir Michael Fay, do you really think he should lose his knighthood and is this something that you're going to pursue? SHANE Well my focus is really on the future and the reality is that the laws governing our capital markets, our securities laws have been given a very positive fillip by the Minister, by Lianne Dalziel, people lost thousands of dollars, the reputation in my view of the capital markets plunged and really when you're a politician speaking in public you tend to be a bit more guarded than what you might say in the House. I made my views known but my focus really is that we've got to tidy up the law so that the things that afflicted people and the loss of their savings won't happen again as a consequence of weakness in laws. LISA Well you made reference to the corporate cancer and these allegations that seem to be swirling around in the background, are we going to hear more detail in the House if you won't say it out here will you disclose more in the House? SHANE Yeah but I think that what Lianne Dalziel had to say that the Securities Commission in their inquiry was thwarted and Dr Cullen's response that it merits further inquiry is a very very serious matter so no doubt we'll hear more about that. LISA Thwarted by whom, are we gonna hear that? SHANE Well that’s really I presume why Dr Cullen thought that it merited further inquiry so we understand who if anyone was actually thwarting the efforts of the Securities Commission. I mean people are expected… LISA Do you know who they're referring to? SHANE No no and unfortunately I don’t but people are expected to pour dough into Kiwi Saver which we're great supporters of, and unless you’ve got laws and rules governing the manner in which those savings are used as they plough into the economy people aren’t gonna be confident unless they feel that the laws governing their savings never ever get ensnarled in what happened in the 90s. JENNI But as interest rates keep going up there won't be any money for people to put into Kiwi Saver at any rate so that policy's going to fail completely. SHANE Well probably a lot of people watching this programme who are enjoying unfortunately the high interest rates because it's giving them a good return on their savings but the interest rate question is being driven because we've got high consumption, why have we got high consumption… JENNI And low productivity growth, that’s the big problem, low productivity growth. SHANE Yeah well productivity remains a challenge for us. JENNI Well inflation, Brendan O'Donovan at Westpac was saying this week that inflation would be half of what it is at the moment if productivity growth in the 2000s had remained what it was in the 90s, are you people going to look at that and consider it? SHANE Yeah no productivity is the third element of what the monetary policy inquiry's going to consider, that unfortunately is likely to take us into a set of rabbit warrens and one of the challenges for the Select Committee is going to be confining its attention, but productivity has been identified by National despite their silly decision not to support the actual monetary policy inquiry, they’ve highlighted that as the main thing to look at. JOHN ROUGHAN – Columnist, NZ Herald Is the general agreement in the parties on the Select Committee that the core problem in the bind that we're in with monetary policy is the housing market, is there that much agreement? SHANE Where there's no agreement is what is the remedy, from the minority parties they feel that housing has become a haven that people are able to use to reduce their tax liabilities where they're on a high income. JENNI But they're also setting up their superannuation fund, shouldn’t the government be applauding that and the minor parties. These people will not become a burden on the state when they flog off their houses in ten years time. SHANE I mean the committee hasn’t formed a view that housing is a bad thing, and I certainly don’t think investing in housing is a bad thing, the problem though Jenni becomes if we'd favoured one particular category of assets over others then you're likely to get a distortion and that what we're going to look at. JENNI So you're talking a capital gains tax aren’t you? SHANE No we're certainly not talking about a capital gains tax. JENNI Well if you're talking about favouring one group of assets over others you’ve got to be thinking about it. SHANE Well we had the tax guru Robin Oliver from the IRD say that there is no particular capital gains tax advantage to housing, where there is an advantage is that you can ratchet up debt against housing and you can claim all those costs. JENNI Well you claim at such a marginal rate yeah that is the beauty of it, or the poison. SHANE Yeah well that’s probably what we're going to look at, I mean it's controversial but I've no doubt that National, they're going to remain quite interested in that. LISA Thank you very much for joining us this morning Labour MP Shane Jones. THE COST OF SPONSORSHIP Is the price too high? LISA With the 2011 Rugby World Cup only four years away efforts have been stepped up to make sure we retain the event by keeping cup sponsors happy. This means getting rid of offending billboards and stopping streakers. David Walden is President of CAANZ the Communication Agencies Association of New Zealand and Chief Executive officer of TBWA/Whybin advertising agency, he's also no stranger to rugby with TBWA/Whybin having just won the advertising world's equivalent of an Oscar for its bonded by blood poster campaign. The ink used to produce the posters was infused with samples of the All Blacks' blood. David Walden joins me now. You know this new law that the government is proposing would ban others from putting up billboards within 5ks of the stadium is that going too far do you think? DAVID WALDEN – Chief Executive, TBWA/Whybin Yeah I think look everyone agrees that you need to have some protection for sponsors, you don’t get the major sporting events to New Zealand unless you can provide protection for sponsors, so no one's going to argue that there shouldn’t be. What I think everyone's concerned about though is that we're using a kind of sledgehammer to open a walnut here. The proposed legislation is pretty draconian, I mean five kilometres from Eden Park will be effectively a no go zone for anything other than the official sponsors. Now if you’ve got a local pub and you're not serving Heineken then you're gonna have a problem, and I think that they're also talking about transport zones which kinda means every billboard from what the bottom of town to Eden Park is suddenly going to be outlawed, I think it's going to be really hard to administer but also what's happening is they're putting the power in the hands of the event organiser and I think that’s another issue, I mean there's plenty of people out there controlling billboards now, we've just had a bit debate about them, I think if you put all of the power in terms of all of these restrictions in the event organiser then I think it does become a bit of an issue, so look we agree kind of that you need to have some protection, we just think it's going too far. LISA Well what does this all say about sport now and whether the focus has moved from winning and losing to more about market share and your target audience and things like that? DAVID Well I mean sport's huge, I mean sport is a very effective way of building a brand, sport is a very very powerful pastime for – it's the thing that helps you connect a brand with consumers, so we're never going to get away from the fact that people are gonna use sport as a means to connect with their eventual customers. LISA But does this show that the pendulum has swung more in the direction of the marketing and the money making in the sport? DAVID Perhaps but I think sport's benefited from that, I mean if you look at the fact that if you didn’t have people like Adidas putting so much money in we wouldn’t have the All Blacks in the situation that they're in where they are as well equipped as the best teams in the world. If you didn’t have people like Adidas getting behind sport in New Zealand you know it'd be really hard for us, I mean we punch above our weight and we can always kind of come up trumps but look at what's happening in Valencia right now, if it wasn’t for Emirates I think Team New Zealand wouldn’t be as competitive as they are, so you’ve gotta let those people benefit from the association but I think you’ve gotta also be a realist about what it means to the general public. LISA Well is it the consumer that dips out at the end then because you’ve only got one beer at the venue, you can only eat this food, you can't wear that tee shirt when you come in. DAVID Well you wouldn’t want to be locked up for wearing a play station tee shirt if they're not an official sponsor, but I don’t think the general public misses out I think they just have to understand and I think most of them do that when you go to a major event where it does have a major sponsor you're not going to be able to drink another beer, you're gonna have to drink the beer that has provided the money to put the event on and I think that’s just the way it is today. LISA Let's bring in our panel going to John. JOHN I've just been to Valencia and I don’t recall that there's a 5k radius of ad free zone there or anything. Are we having stronger rules forced on us because of our size or what? DAVID Well I think it's a bit of a reaction to what happened when we lost the hosting rights to the last World Cup but we cocked up the business about providing clean stadia and I think the reality is now we're very keen to get it right and I think we're almost sort of over zealous, so I don’t know what the situation is in Valencia but it'd be pretty hard for us to kind of turn the Hauraki Gulf into a sponsor free zone if he suddenly get the thing back, I mean you have to be realistic. I think when your at Eden park you’ve gotta play by the rules, I think if you are within a 100 metres of Eden Park you’ve gotta be prepared to say yeah I'll take my sign down, I don’t think it's realistic to say five kilometres away from Eden Park that someone's gonna have a problem with the sign above my bar. JENNI But don’t you think it's impossible to stop ambush or guerrilla marketing unless you actually tread on somebody's trademark or copyright, I mean you look at the Soccer World Cup, remember the soccer balls on the noses of the Lufthansa planes even though Emirates was the official sponsor, so they couldn’t do anything about that, the only thing you can really control it seems to me is people coming into the stadium like the Dutch with their orange lederhosen weren’t allowed in, the Dutch fans, so isn't it all a bit stupid? DAVID Well I think it's just gonna mean that people are gonna get more creative in the way in which they approach to bend the rules. JENNI Yes they are, you can't control the airspace. DAVID Well no, in theory if you look at this does it mean that because Qantas isn't a sponsor that they can't fly over the top of Eden Park. JENNI Qantas managed in the Sydney Olympics didn’t they, very very well. DAVID Yeah they did. I think you're always going to find that there will be brands that will try hard to do a bit if ambush marketing but you know they’ve gotta have some protection for the sponsors, it's just gonna be I think a little more of a challenge. LISA Thank you very much for joining us this morning David Walden. FINAL THOUGHTS GUEST COMMENTATORS LISA Turning now to our panel for their final thoughts on today's show. John the advertising clamp down there, you’ve got some thoughts on streakers that you just want to share. JOHN Well I just – much as I don’t like unnecessary regulation in things I can't help but favour a crackdown on streaking cost it just gets a bit boring you know, and I don’t want the rest of the world to see that we're still streaking in this country you know, it's a bit passé I think. JENNI Well what would you put in its place, I mean you’ve gotta do something to liven up a dull cricket match, what would you put instead? JOHN Well Mexican Waves are also passé so we'll have to look for something new. LISA And almost banned as well in some cases. Now earlier in the show we were talking to Shane Jones and we touched on the Securities Commission to sit in in the compensation payout. JENNI Well I think it's very interesting that 20 million is a good figure and a very good settlement for the Commission, but I can't help think that if we were in another jurisdiction and it had proper prosecutorial powers and we hurried up our regulations to criminalise insider trading, the scenario could have been quite different cos I can't imagine the USSCC coming in and saying to a couple of people look you know we're going to do a deal with you and you pay us 20 million and you can walk away. The SCC would say no mate it's a crime you're looking at 40 years if you're found guilty you will stand trial, and I know we're reaching that situation in New Zealand where we're going to criminalise insider trading but I don’t think they can get there quickly enough. It's a good settlement but you know. JOHN And it's becoming so important now in the context of monetary policy and the dollar and all of that because if we're going to really tackle monetary policy mind and heart and do something about housing tax and discourage the over investment in the property market we have to improve the sharemarket and the alternative investments people have and the most urgent thing to do there is to restore faith in our security laws. JENNI Confidence is the big thing. JOHN And let people know that insider trading will be cracked down on and stopped as far as you can. LISA Do you still think people feel the burn from that and are still nervous about the stock exchange… JENNI Oh absolutely and I think just what we've seen from the Reserve Bank over the past couple of weeks there is the feeling out there that the government and those in control can do anything and will act capriciously, therefore your money is never safe, you can understand why this would be. But no until we have proper disclosure, proper insider trading law people aren’t going to have confidence the market is being properly policed. Fortunately that’s coming in regulations we're told at the end of the year, the regulations are pretty well drafted but I really think they need to be passed fairly quickly. LISA The financial expenditure select committee inquiry there into monetary policy you obviously are raising concerns that they don’t have the powers that they need. JENNI Well I don’t think they know what sort of powers they need until they get started but I think they will very quickly realise that they need more cos that’s what inevitably happens when people have got vested interests and money of course is the big thing that makes the world go round. JOHN I can't quite see where they will need real prosecutorial powers to investigate monetary policy. JENNI No but the requirement to get people to front up for a start and to produce documents will be very very important. JOHN What sort of people though? JENNI There will probably be reluctant witnesses, I can see people who may well – well you don’t know until you start, it's an inquiry so you're presumably not going in with preconceived ideas, but I can see this being an absolute fizzer, it doesn’t look as if there's any urgency to get it moving even though there are fears that the Governor of the Reserve Bank will happily plunge the country into recession if he doesn’t get what he wants by way of interest rates and the dollar down. So I'd say there's a bit of urgency here but I don’t feel it when I talk to Shane Jones. JOHN No, and you think that there should be because intervention has so obviously failed. Two attempts to undermine the dollar and the international markets have been utterly unimpressed naturally enough, if there's a third at some point everybody's gonna start to think well that hasn’t worked, we really do have to think of something different. JENNI Well the strategy clearly doesn’t work it just gives speculators overseas a decent entry point to get into our dollar and we've sold twice why would you do it a third time. LISA So what's your solutions then? JOHN Well mine if the housing market and I don’t underestimate the pain that would cause because so many people now have investments for their retirement in second or third houses and tenants are getting a great advantage from that because they don’t need to charge rent to cover the costs, so rents are quite low in this country and if we start to reduce the tax writeoffs for you know the investment costs then rents will go up, will have to go up to try and cover that, and so it'll be – it's a big traditional problem … LISA But you think we should go down it? JOHN I don’t see any other way. JENNI Well I must say for the past 30 years I've argued against a capital gains tax but I'm just starting to think that it does need a short sharp shock, the housing market, it may be the least painful way of doing it, even though it's going to be retrospective. LISA No enthusiasm from Shane Jones for that though. JENNI Well politically of course it's suicide. JOHN David Lange said it was the policy you adopt if you want to lose the next election and the three after that, and every politician in parliament lives by this belief, I'm not sure that it's that big a thing. LISA Alright thank you very much for joining us this morning. |
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