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  Note: All transcripts are copyright to Front Page Ltd but may be used PROVIDED attribution is made to TVONE and AgendaAGENDA
JOHN KEY – Prime Minister GUYON Has he don’t that? JOHN Not as I'm aware at this point. GUYON But you would expect him to let go of all those government positions? JOHN I would have thought so, I mean he isn't appointed because of his commercial ability or his commercial nous, he's there because he was a friend of Helen Clark, he was the Labour Party President, and I would have thought it would be time for him to move on, but you know he needs to make that decision or I guess there's actions a government can take, but that’s for other ministers to determine not for me. GUYON There's a hint there that you might push him if he doesn’t jump? JOHN Well the government is not without options and you know ministers can consider, that’s not something as Prime Minister that I would consider but there are other ministers that have responsibility, obviously Simon Powers you know as SOE Minister can consider that. GUYON Can you give us a commitment here this morning that unlike other governments you won't be appointing your mates, your former MPs and your party hacks to government boards and to foreign embassies around the world. JOHN Well it would be my preference to make sure that those that represent New Zealand either overseas or on boards are there for their ability and we've argued that case in Opposition, and I think you can expect to see us follow through on that. Now there'll always be people that you know because of your association with them and you rate their ability and their performance, so you can never say never when it comes to some of those appointments that there won't be someone that the media will be able to argue has an association with the National Party, but look we've got a big chunk of the economy being run through government owned entities, it's important that they deliver, that their performance is at the right level and you know we should be engaging the right type of person on those boards. GUYON Any role for Don Brash? JOHN Haven't had any discussions with him about that you know look he's a capable individual but you know it's not something I've sat down and discussed in the last few weeks. GUYON Okay you’ve talked about capping the public service, have you actually had your State Services Minister or any other minister send a directive out to the Public Service, to the Chief Executives of those government departments and basically say look there's a hiring freeze on? JOHN Well firstly I've made that clear in terms of talking to the Chief Executives that you know we're in different times, 2009 will be a pretty difficult year for New Zealand economically, I don’t think there will be a lot of appetite from the New Zealand public to see the core bureaucracy growing ahead of the market. GUYON No but has that message got through and has it got through formally, have you said look no more hiring of staff? JOHN Well our policy is well understood, you know we've made it quite clear our policy is to cap the number in the core bureaucracy, now we can have a debate over what the starting point is, it's not a perfect science. We argued the case it went from 26,000 individuals to 36,000 under the last nine years of Labour, that’s broadly driven off the quarterly employment survey, so whatever that starting point is if you like it won't be above that limit. GUYON At the end of the first term JOHN Quite correct. GUYON But there won't be any formal practice to actually keep within those bounds, you're just going to roughly keep an eye on it? JOHN Oh the Expenditure Review Committee is going to work with each minister and each government department so I think it's fair to say it's a little bit more specific than simply saying look we'll keep a bit of an eye on it, we'll be expected you know as a minister, and as the Minister of Tourism for instance, I'm acutely aware now of how many people I have in the core bureaucracy and we'll be making sure we deal with that. GUYON I was going to ask you that will you lead by example at all, will the ministers say look we're gonna cap or even reduce the number of staff that we've had in our offices. JOHN Well the whole argument's really been around not about the competency of people, it's just about what is affordable and what are our priorities as a new government, now there'll be some things which just simply don’t fit in with the priorities of a new government, and which were nice to have when the economy was putting a lot of cash, just not affordable in times like this, so you know I think you can expect us to see reductions in certain areas. Natural attrition will play a fair role, we shouldn’t underestimate that’s quite high in the public service. GUYON Okay we've talked about quantity there, what about quality. You’ve had a few challenges early on in your tenure over extricating New Zealanders from Thailand and the preparedness of the New Zealand Defence Force, how have you found generally the quality of advice you're getting from our top civil servants? JOHN Well it's general pretty good, voluminous in nature would be one way of describing it at times, it's the difference from coming from Opposition where you’ve got a very small research unit, to you know the large numbers of people just in my own you know DPMC, Department of Prime Minister and Cabinet, there's big numbers right across that sector. GUYON You were unhappy though weren’t you with the advice and with the actual movement of the Public Service in those spheres? JOHN I think it's important to understand what happens here, the officials can only give you advice, they don’t make the call for you. So I actually happen to think when it comes to Thailand we did actually more than most other countries, in fact no other country sent a military plane, now that in part reflected the fact that because both of the 757s were out of service. GUYON Were you given enough heads up about that though? JOHN Not really, I mean I got that information on the Monday night, I'd pretty much made the decision on the Tuesday morning. GUYON So no one thought to tell the Prime Minister that he didn’t actually have any options in that regard? JOHN What happened was on the Monday – on the Sunday actually, sort of back up a little bit, so last Sunday we were aware that there was a commercial flight coming out of Utapau the military airbase to Sydney and that New Zealanders would be able to get on that plane and the indications were that about 30 to 50 would be able to get on that flight. It wasn’t actually sort of limited by our nationality if you like, it was somewhat first come first served and it was useful if you had a Thai Airlines ticket. When I got in on the Monday morning or rang up on the Monday morning the indications were only 20 had got out and I just wasn’t satisfied that was enough, and it was on that basis I said give me every option, and it was at that point I realised you know 757s weren’t available. GUYON Alright let's talk about the major challenge that you're facing and that is the economy. The books will be opened again before Christmas how bad is it gonna look? JOHN Well I think it'll look substantially worse than what you’ve seen and the numbers that were put on public display four weeks before the election, so the prefue, those numbers have deteriorated considerably. Now the reason for that is the prefue never included the six weeks prior to when they were actually released and that was a very tumultuous international time and that volatility has continued. Now it's important to understand that they are forecasts so I think we shouldn’t overreact nor should we underestimate the challenge that we have. GUYON Before we go into that can I be a bit more specific, in what respect are they gonna look a lot worse in terms of debt, rising unemployment, both? JOHN All of them, the debt levels, the predicted debt levels are higher, they go on for, not necessarily longer, because actually the prefue argued that there would be a decade of deficits and certainly what you see in the December update defue will argue a decade of deficits, they're just larger deficits with higher levels of unemployment. GUYON What sort of levels of unemployment are we talking about I mean Treasury had it in the early 5% so are we talking 6 or even 7? JOHN There's a range actually, and it's very difficult for them at this point to absolutely quantify this, I mean it's difficult to forecast anyway and we've seen that in the last nine years where Treasury's numbers have tended to undershoot the actual tax revenue. We're in a position now we're in the most volatile times so asking the Treasury or the Reserve Bank or independent commentators to come up with a sensible set of numbers is tough but I think it's fair to assume that it will be worse than some people expect and as I said to you you know the danger is that we over react, that all of a sudden you know we go out there and start slashing and burning things for the shear sake of it, this is about building a medium term economy. Now we have a plan, we intend to enact that plan and I think it will work and work very well. GUYON One of the points in that plan is putting 40% of the New Zealand Super Fund into New Zealand business, when will that happen? JOHN Well I'd prefer to see that as soon as practically possible. GUYON When would that likely be can you give us a date, a month? JOHN Well we'd obviously, it's for the guardians ultimately to determine where those investments are undertaken, I mean we've got an indication or we can tell them the quantum we want to see invested, and my argument always was you give them a little bit of time to get to 40%, but they’ll have to think through carefully if they are going to send money offshore and you know why that is. Now that’s gonna be difficult I would have thought given the fund have recorded I think a three and a half billion dollar loss this week. GUYON And who qualifies, I mean is Telecom a New Zealand company for these purposes or because it's got foreign ownership is it not a New Zealand company? JOHN I would have thought it qualifies, it's a little bit like one of the arguments around sort of buy New Zealand made, no one's arguing that Ice Breaker's not an iconic New Zealand company just simply because it manufactures some products in China. We're a small open trading economy and we need to take that perspective when we view our assets and our opportunities, so I'm not gonna be hung up on a definition that it's also co-listed in Australia or that it has a larger Australian share register than New Zealand, it's a New Zealand company. GUYON I guess the other broad theme when you look at an agenda of any government is social policy. Labour had banned smoking in bars, it presided over a decriminalisation of prostitution and I guess brought in civil unions. Are there any priority, any areas that National wants change on a social level in New Zealand? JOHN I don’t think that’s gonna be a major focus of the government, I mean the reality is we are going to be in for a very challenging three years, I would argue with you probably the hardest decision that the cabinet made over the last nine years was how to spend the money. We're just not gonna have that luxury, we need to deliver economic growth, we need to delivery higher productivity and we need to do it on the backdrop of a weakening international and domestic economy, now that’s a challenge and for us to get distracted I just don’t think that’s gonna make sense. I saw some research I think came out in the paper saying he thought it was a good idea that the government should be banning smoking in cars. I've gotta tell you, that’s not gonna be happening, because it will take years, it will distract the parliament and in the end you know we're a party of sort of reasonable choice, I'm not opposed to banning smoking in bars, because other New Zealanders are there and people work there, but if you want to smoke in your own car don’t be looking for a National government to pass a law to tell you can't do it in the next three years. GUYON So there'll be none of that, we won't see any of those social constraints, any real social policy changes, even back to a more conservative stance from National? JOHN We're not planning to go back no, because it distracts – there's a limited amount of parliamentary time and you can see from the anti smacking legislation how much time that that consumes, now I've always said, I said before the election, say again now, that if the anti smacking legislation proves not to work then I would do whatever I could as Prime Minister to change it, but I'm pretty comfortable it's working at this point. GUYON How many terms do you want I mean Helen Clark hung on and on and on, she wanted one term, she wanted two, she wanted three, she wanted four, it's about history to her too. I mean are you someone who wants to be Prime Minister for a long long time? JOHN I want to be there for as long as I can make a difference. I think there's probably arguably you know politicians might not want to admit it but there's a shelf life of any government. GUYON What is that? JOHN Don’t know, I think in New Zealand nine years is pushing it, but maybe you could get 12 if you were exceptional, if the conditions were there, but MMP makes that more difficult. You saw that in Australia. I think partly it's a reflection of the modern media approach, we get saturation now of our politicians on TV screens on shows like this and the newspapers, through the internet. It's very different from back in the old days where you saw so much less and maybe the public just tires of you after a period of time. GUYON Now I'd like to open the discussion to our panel - John Roughan. JOHN ROUGHAN – New Zealand Herald JOHN KEY Yeah I mean partly it's a mixture of – you realise the significance of the role and the constitutional significance of the role, these are the need to make obviously clearly – you know you’ve gotta make good decisions and then there's the shear exhilaration that you're sort of there and you can do things, and the big difference is you can make decisions and actually you have to make good decisions, and it's getting in front of the curve if you like, it's actually seeing where things are going and having that plan sorted out early on. JOHN R Coming back to the Bangkok rescue socalled, it seemed to me there didn’t need to be a rescue there and it seemed to me that you were stampeded a little bit by the press and the size of the story in those days, and Labour saying you should be on the phone to Australia and getting help. Come Sunday night you were telling Guyon about finding out that only 20 could get out on that plane, that wasn’t enough. Why did you think that wasn’t enough, why did you think this was an emergency that we had to send a military aircraft for? JOHN KEY Well we were starting to get some advice that the thing could get a little bit worse. Now there's always – you’ve gotta think about the risks involved for the New Zealanders that are there, and New Zealand enjoys a unique relationship with Australia and the United States and the United Kingdom and Canada, so we always have options to moving people out working with our partners, and I think Phil Goff was totally wrong when he argued I should be ringing Kevin Rudd. If we were in a position where that was credibly going to be an option, military evacuation of New Zealanders of course I would have been on the phone to Kevin Rudd much earlier, but our embassies were talking three or four times a day, our foreign ministers had been talking, no one was credibly arguing, and the Australians weren’t credibly arguing military evacuation, Qantas that happens to fly into Phuket put on a couple of extra charters and the Australians said if you want to take a bus up there you know the 14 hour trip we'll pay for it. The only reason we sent the plain was because at the point we realised the 757 was out of commission, or both of them at the same time, the point at which we realised it wasn’t going to be as easy to get people on commercial planes, we had to take a precautionary step, Now I actually think that was the right thing to preposition it in Asia but if the 757s had been working and we'd been able to access Thailand much more easily much more quickly I wouldn’t have sent a plane. JOHN R So looking back on the whole experience you think you did the right thing and you'd do the same thing again, you'd send a military plane in a crisis of that lower level? JOHN KEY I would if the only options available to me were C120 Hercs that take you know 14 hours potential notice to be dispatched and 48 hours to get to Kuala Lumpur, but you know the question has to be asked why on earth are both 757s out of commission at the same time, that’s something I understand Phil Goff as Defence Minister signed off on, I don’t think that’s terribly acceptable actually to the new government. JOHN R That'd be a surprise to you? JOHN KEY It was a surprise. GUYON Andrew Holden the economy's been large on your mind this week? ANDREW HOLDEN – Christchurch Press JOHN KEY Well you’ve got a couple of people agreeing with him as well, I mean NZI this week coming out saying we think that you know we're in a very very shallow recession and then we're moving out and it's important to understand what they're actually saying though, they're effectively saying New Zealand comes out of a recession and on their growth track it's very low levels of growth for a considerable period of time. So if you go back to 98 you know 99 period when we came out of a recession, sure we were in recession for a while but we had growth rates of 5½ - 6%, I think the bank is predicting something like 1.5 or something percent for 2010 and then about 2 or 3% beyond that. Treasury see the situation a little bit differently, as a slightly deeper recession and with a slightly higher bounce back but not much. I don’t know I mean our view has gotta be look the long term trend growth rate for New Zealand and productivity needs to rise and rise significantly if we're going to deliver the standards of living and incomes we want. GUYON But the Reserve Bank thinks that the worst is over, do you agree with that? JOHN KEY I think it's a little early to predict that, I mean to be perfectly honest from a liquidity banking point of view my own personal view is we've stabilised that position internationally, we don’t have a financial crisis, we have a crisis of confidence, whether people are prepared to invest, whether the private sector believes that they can see a future enough for them to invest in. Now all the indications are that that financial crisis will flow into the real economy and you'll see a slow down and I think you’ve already seen ANZ now announcing another 200 job losses, so it is real. JOHN R And it's largely international isn't it? Our own economy's not too bad. JOHN KEY No, and actually it's important to understand some really good things happening as a result of the changes, for instance monetary policy base rates are 5% now, their currency 52½ cents against the US dollar, taking fishing companies as a good example, losing money for all of 2007 and the bulk of 2008, they're now making money. So you’ve got a few differences, somewhere commodity prices are paring back like Fonterra certainly having you know reduced results but it's not all doom and gloom out there. I think New Zealand's actually and fundamentally in quite a strong position and the Crown's accounts give us the room to have some flexibility to lean against that in this recession. GUYON Where do you see – you’ve got some experience in this, where do you see the dollar going? JOHN KEY Well my personal view is it'll go lower, I've always thought the little printed 4 in front of it at some point against the US dollar and probably a 7 you know when it comes to the Australian cross rate but if you really look at history, history always tells you any time the New Zealand dollars has you know a 40cent handle on it against the US dollar or a 70 odd cent aft the Australian or on the other way above 90 cents against the Australian or above about 75 cents against the US dollar they're either overdone or underdone, and I think there'd be a lot of exporters, notwithstanding international demand are starting to weaken who will really look in the exchange rate of let's argue 50 cents, interest may well be lower by the middle part of 2009 saying this as a pure operating environment it's a pretty good one. ANDREW Can I look ahead to this coming week opening of parliament, your major speech in terms of giving confidence to the country, this is arguably your Barack Obama moment isn't it, this is your key speech? JOHN KEY Yeah putting it into a little bit of context, I don’t want to put too much pressure on the Governor General but it's read out by the Governor General on Tuesday, so the commission opening we were sworn in on Monday, the official of parliament Tuesday, he reads the speech for the throne on behalf of the government and that really spells out our agenda, you know our government will tackle these issues over the next three years and largely it's quite predictable really, it sort of says look you know the economy and law and order and health and education these are the things that we believe passionately in. I get a chance to respond I think to Phil Goff after he speaks and obviously we have a couple of backbenchers that lead off. You know it's always a tradition that the government puts up two backbenchers with their maiden speech of some significance and we're putting up Sam Lotu-liga, he gonna have a big future I think and Melissa Lee the first Korean Member of Parliament. GUYON And then we go into urgency where you ram through those pretty JOHN KEY Hard I think is the expression Guyon. GUYON Without all stages and without select committee scrutiny it is ramming through legislation, I just wonder whether that’s necessary to do that just to make a bit of a mark at the end of 2008, why don’t we give this proper consideration through the select committee process. JOHN KEY Because we campaigned on a 100 day agenda, and I think the New Zealand public expect to see us act now, act professionally and act the right way but nevertheless to act. If we sit around to go through all stages of select committee it's broadly speaking a nine month process. Now if you look at something like the on the spot protection orders that we've argued about, that’s going to go through the full select committee process because there's a lot of different aspects of that, but Cabinet tomorrow will be signing off on a quite a lot of legislation that will be in that urgency motion, in relation to KiwiSaver the tax cuts, bail laws all of those things, Herceptin and you're going to see us act and act pretty quickly. JOHN R You were talking about this not being the time for slash and burn, are you going to proceed with the way you campaigned to look at the efficiency of the public sector and to make you know, put the cap on and make things much tighter or is it tempting now to just let it ride for a while until the recession is through> JOHN KEY Actually we can't afford to let it ride because if you look at the new budget spending component we have it's 1.75 billion dollars, that is historically very low, Michael Cullen was operating at over double that for the last five years. We don’t have any room to move, health and education consumes a lot of that, so the simple message to my ministers is, look if you want to have a different agenda, a higher growth agenda, and you intend to put New Zealand on that path we can't fund that by largesse from the new budget spending component you have to find that in your own departments. So actually we absolutely need to get on top of that and there will be programmes we'll be culling and things that will be changing, but the question is where that money is recycled if you like, some of it's through tax cuts but other's actually through better programmes. GUYON Just before we leave this can I ask you where you'd like to be this time next year, I mean what would have been a satisfactory first year in the job for you/ JOHN KEY Well firstly delivered on the 100 day programme, and that’s important. You earn the trust of people when you become the government by virtue of the fact they vote for you but you have to keep the trust of the New Zealand public. Secondly those support arrangements with the confidence and supply partners that we have, the Maori Party ACT and United Future are very important to me, I've invested personal capital in them, I've run or met with all of the leaders since I've been back in the country and I intend to keep that dialogue in that, and it's not just a matter of what's on the piece of paper as I always argued, it's about building a real relationship, so that'll be important, but obviously thirdly I mean people have to see that we're on a track for higher growth, that we've dealt with those issues we argued about, you know things like education standards, you know reining in some of the bureaucracy, taking away some of the red tape and compliance costs, having a vision for New Zealand, those things are really important. Can we fix everything in 12 months – no, but New Zealanders have to feel as though this is a government that knows why its there, it's focused on why it's there and it's committed. GUYON Right thank you very much.
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