Emissions Targets To Be Released By End Of Year

Labour plans to release carbon emissions targets including a carbon neutral date by the end of the year.

David Parker, minister responsible for climate change issues, said the government is currently working on setting those targets.

"We will be specifying dates in respect of our targets by the end of the year, I am determined that these targets will be realistic albeit at a stretch."

However Greens co-leader Russel Norman said he had doubts about whether Labour's timeline for its carbon trading scheme could be achieved.

"There is a question of feasibility and speed. it's not clear to us yet that the emissions trading scheme that the Minister is proposing is actually going to be in place next year." The minister suggested that targets would include a cap as well as a carbon trading scheme.

"Trading in itself does not reduce emissions, trading with a cap and allied with regulatory measures is probably the best mix."

TRANSCRIPT FOLLOWS;

AGENDA, TV One, Presented by Lisa Owen

CLIMATE CHANGECrossing the Political Divide

LISA This week G8 leaders signed a deal on climate change in which they agreed to seriously consider at least halving global emissions by 2050. this has been described as a significant development given US President George W Bush's previous reluctance to even discuss targets. In New Zealand the government wants the country to become carbon neutral but it hasn't set any targets for achieving this. on the other hand both the Greens and the Labour Party have set targets for reducing greenhouse gas emissions. We're joined now by Russel Norman, Co Leader of the Greens, Nick Smith National Spokesman on Climate Change and from Dunedin we have David Parker, Minister of Climate Change Issues, welcome to you all this morning.

Can I go to you first Mr Norman, how significant is this G8 agreement that we've heard about this week?

RUSSEL NORMAN - Co Leader, Green Party Well it is significant in that they've agreed to seriously consider it but at the end of the day we actually need binding targets. The good thing about the Kyoto Climate Protection Treaty is that it has a binding target within it, on average OECD countries have to be 5% under 1990 levels over the period of 2008, 2012, so George Bush is still an obstacle to binding targets and I think we're really not likely to see much more international progress until George Bush and John Howard kind of move a bit out of the scene, which could happen with the elections in the US and Australia.

LISA David Parker will New Zealand be following these G8 goals?

DAVID PARKER - Minister of Climate Change Issues We will set targets by the end of the year but we're building those targets based upon what can be achieved at a stretch, and our proposals in respect of that are out through the draft energy strategy and related documents.

LISA Labour has already said that it would like this country to be carbon neutral, when does it want that to happen?

DAVID Well obviously you can't get to carbon neutrality overnight and indeed it will take a number of decades to get there but it is an aspiration that is worthy, it's interesting to see that Costa Rica another very green country has recently said that they'll be going carbon neural as has Norway, so the Prime Minister's started a trend here.

LISA But Norway has stated a date, 2050.

DAVID They have and we'll be stating dates in respect of our targets by the end of the year, but it would be premature to do it now because it would be effectively putting a pin on a map and I'm determined that these targets that we come up with are realistic albeit a stretch. You can rest assured that the Labour government has carried the torch with the Greens on this issue for six years now, is very serious about them and will do our bit.

NICK SMITH - National MP Emissions have gone up in every single year. Labour came to government, they said they would reduced emissions by 20% by 2005, they actually went up by 12%, we are right now bringing in the biggest new thermal power station is being commissioned as we speak at Huntly with the new EP3 generator, we've got record levels of deforestation, we're nowhere near even stabilising emissions and it is just a joke for the Prime Minister to be talking about carbon neutrality when emissions are growing at three times the rate of Australia and four times the rate of the United States, it's just not credible.

LISA Well you mention Australia there, the Australian Prime Minister John Howard, wants to look at the APEC meeting to come up with some kind of climate change goals, and it would include countries like China, is this what New Zealand should be making a priority.

NICK Yes it should be, John Key in an important speech a month and a half ago set this national target of reducing emissions by 50% by 2050, that's based on 1990 levels which is the base year for this stuff, which is actually quite a lot more ambitious it's about 65% because emissions have gone up so much during the course of this government, but it's absolutely critical if we're going to make global progress on the issue of climate change to get the Chinas, the Indias, the Brazils into the mix. We've got a new Huntly size power station being built in China roughly every fortnight and so a key priority for National and that's where I think the G8 developments are encouraging is to make sure those other countries are part of it. We wanted New Zealand to be part of the Asia Pacific pack when it was put together which includes those countries. We think it was unwise of the government to sort of to bag it and to stand aside from that.

DAVE Well we didn't bag it actually Nick, and I would also say that this recent road to Damascus experience that your leader has had having said that climate change was a hoax a while ago.

NICK He never said climate change was a hoax David, that's just a Labour lie.

DAVE He did in the House.

NICK No he didn't.

DAVE Now National aligns themselves with Australia and the United States in these matters, and Australia and the United States are outliers, they are not the world and thank goodness they're not because they haven't got a record to be proud of in terms of bringing the world together, because it is a global issue, it requires a global solution and of course Australia, United States and Kazakhstan supported by the National Party were the only ones that didn't ratify the Kyoto protocol after they'd signed it.

RUSSEL Can I just say I mean I think that, I mean Nick's right about the emissions increasing, we're 24.7% over our 1990 levels and increasing and no this government has not reduced our emissions, they've increased dramatically under this government. On the other hand the AP6, you know the alternative to Kyoto that was set up, there's no question that that would not reduce emissions be AP6 what they said is they wanted to reduce the amount of emissions per unit of GDP if you like, but the overall emissions weren't gonna be reducing. We need binding international targets to actually reduce our emissions and that's what Kyoto offers, so we need Australia and the United States and China India Brazil to all having binding targets under Kyoto, I mean I think that's where we need to go.

LISA The National Party has set a target of 50% reduction by 2050, is that enough, developed countries are supposed to be doing more is the theory, is that enough Mr Norman?

RUSSEL` Well if we're looking at keeping it under two degrees warming which everyone's saying is the kind of threshold, and it probably isn't, we probably need 60 to 80 or even 90% reductions by the middle of the century which is a huge ask, but if we're serious about avoiding catastrophic climate change then that's where we need to go.

LISA Alright, Mr Parker Labour wants legislation on a trading scheme by early next year. Agriculture is responsible for about 50% of our greenhouse gas emissions, are they going to be exempt in any way from the scheme that you hope to set up, are they gonna get any special treatment?

DAVID Well emissions trading's important because it sends the right economic signals to those who have got the ability to reduce emissions, and in New Zealand's case it's absolutely critical that that cover all sectors and all gases because unlike a lot of countries 50% of our emissions come from the agricultural sector, and indeed it's been that sector where emissions have been growing most strongly particularly in the dairy sector, so we've said that we think emissions trading should be considered for all sectors and all gases and that does include the agricultural sector. However, we've also said that we recognise that some sectors can reduce emissions quicker than others and therefore for example we'll be expecting to reduce emissions in the energy sector at a fast rate than may be possible in the agricultural sector.

LISA So they will be getting some form of special treatment, some form of exemption, not at much will be expected from them though?

DAVID Well that's not an exemption though, that's a reflection of the reality that some should do more than others because it's easier and cheaper to do so, and to have any other outcome would you know with respect not be logical.

LISA Russel Normal is that acceptable?

RUSSEL Okay well if we're moving on to an emissions trading scheme, it's gotta be across the board if it's gonna work, and there's two key things I mean in particular the cap, I mean we need to know what the cap is going to be because you know trading by itself doesn't reduce emissions, it's where you set the cap and you know the taxpayer is going to be liable for any of the increase in emissions the cost of buying the credits over 1990 level, so if the dairy industry is not gonna cover the increase in emissions over 1990 levels then the taxpayer will have to pay for it, so if dairy's going to be exempted, and I think it was quite unclear from David's answer whether they are or they aren't.

DAVID No it wasn't, I said they're in.

LISA They're in but you're not going to expect them to do as much as some of the other industries.

DAVID I said that the principle that we're applying across all sectors is those that can do most will be expected to do most, and it is clear that there aren't as many technological choices for the dairy sector as there are for example in power generation.

RUSSEL Well where's the cap, what level are you setting the cap at?

DAVID Well I'm not going to tell you that today, but you're absolutely right that the cap it critical and I do accept the point that you make that trading in itself does not reduce emissions, trading with a cap can, allied with regulatory measures it's probably the best mix.

NICK Well see one of the areas where National does agree is that the agricultural sector is gonna be the toughest customer in constraining emissions but we do agree that if you're going to have a trading system and we've supported that consistently, is that we need to include them. Where we do have a concern is that the government has produced a draft energy strategy, energy we've got more options than most countries with wind, with geothermal, with hydro to produce renewable energies. Over the last decade we've seen a declining amount of renewable energy in our electricity mix. Now in the draft energy strategy they are projecting a 20% still above 1990 levels by 2030, and so in my view there's a complete disconnect between the rhetoric of carbon neutrality and an energy strategy that has emissions 20% plus on 1990 levels at 2030. That would make us one of the snails.

DAVID I've got to intervene Nick, you've misquoted the Australian and United States statistics and now you're saying the New Zealand's emissions .

NICK Well they're the UN figures David, they're the UN figures.

DAVID No I disagree with you, you're using gross figures rather than net figures. Look the strategy shows New Zealand's emissions going down for the first time since industrialisation began in New Zealand, if the world does as well as New Zealand is proposing to do through these strategy documents we will beat this problem.

LISA Look I just want to ask Russel Norman about the agricultural dairy industry, if Fonterra wants to grow at 4% a year compounding do we need to cap the growth of dairy is that what Greens would like to see.

RUSSEL I think they're talking about 4% growth per annum which is a doubling in roughly 17 years, the question is what are the environmental limits for dairy. There's two kinds of environmental limits, one is water, that is water abstraction, so the aquifers in Canterbury are in deep trouble, the other is water pollution into all the rivers and streams, 95 and 100 rivers and streams are unsafe for swimming now, and then on the other side is the greenhouse emissions which are increasing dramatically. So we do think that there needs to be some limits on the amount of dairying in New Zealand. Now it might be that there can be land use changes, some places that are currently not being used for dairy perhaps could be and vice versa but we need to look at some kind of limit on dairying. We know it's an important industry and you know I've got friends that are dairy farmers and you know that's also good because it's New Zealand owned, I mean unlike most of our other you know important industries it is New Zealand owned, but there are limits, there are environmental limits.

LISA Could you work with that, could the National Party work with, he's talking a cap on dairying?

NICK Well no I think it's taking it a bit far. There's no question that Russel is correct around the issues of water quality. In areas like Canterbury we have seen the government's approach to the whole water quality issue, the OECD report that came out two months ago gave New Zealand a real dishing for the poor management of water quality, and so in that respect Russel is right. Now the key question though is are we going to achieve the best outcome what National would call a blue green outcome, both good economic growth and good environmental outcomes by arbitrarily setting a cap on the dairy herd, no we will not. What we do need to do is a better job of actually controlling the effects of dairying. Now all credit to Fonterra recently a fortnight ago they announced that they will simply not be taking the milk from dairy farmers that do not meet the environmental standards. We've got big issues around planting stream margins, so those dairy effluents, the nutrients aren't getting into our water courses. So a really big job to do, one of the things we set in our Blue Green Vision document was a billion dollar sustainability investment fund, water quality is the number one priority in that area because we simply cannot have the ongoing expansion of dairying if it is going to come at a huge loss of water quality that New Zealanders see as part of the Kiwi way.

LISA Let's bring our panel into the conversation going first to Brian Fallow.

BRIAN FALLOW - Economics Editor, NZ Herald Question for Dr Norman, I mean the day that the Greens released their climate change policy we also had some trade figures which were bad and would have been a lot worse if there hadn't been something like a 30% growth in dairy receipts over that year. You say you want to limit growth in that sector, but why I mean isn't it a matter of getting dairying to pay perhaps for offsets like forestry, it's the net increase in greenhouse gases that mattes?

RUSSEL So what we want to do is look at the dairy sector overall, we know they've been a bit part of the growth and under our policy, and our policy is that they buy Kyoto carbon credits above 1990 levels and transfer them to the taxpayer or to the government so that they cover basically the taxpayers' liability, so that's the first step. The second step is around looking at the impact on waterways so they're both about environmental limits but they're separate if you like, and so the second step is to make sure that regional councils have integrated catch management plans and within those catch management plans you can have rules around limits on how much dairying you can have. Those two things together we want them to actually internalise the cost of their greenhouse emissions in the price of the milk, we think for us that's part of how we're gonna make our market system work within the physical limits of the planet is to internalise those costs and making them buy those carbon credits is part of that and then the other side of it is the impact on the waterways. So they're the kind of two components of it.

BRIAN Well I think Minister you last month I think said something along the lines that if the dairy sector had to meet the cost of the increase in its emissions since 2005 it would only shave about four cents per kilo of milk fat off the payout, that doesn't sound like the sort of number that's going to affect their behaviour or turn off many dairy conversions. Do I have those numbers right, is that what you're saying?

DAVID Yes you do have them about right, it actually illustrates the point that internalising these costs which is very important is not going to break people, these costs are a lot more scary in the abstract than they are in reality because they're not as high as people I think expect when they don't know what they are.

BRIAN But in that case what's the environmental payoff for that measure?

DAVID Well it's the point that you made earlier and that is that if there is a requirement to remit Kyoto compliant units for increases in emissions those emission reductions are happening somewhere in the world, most of them in New Zealand and that's the task that the world has to reduce overall emissions, net emissions.

MARIE McNICHOLLS - www.newsroom.co.nz (http://www.newsroom.co.nz) I've got a question for all of you actually, because notwithstanding the display of finger pointing we saw before the break it seems to me there's been a fundamental sort of closing of the gaps between you all in recent weeks over the issue of us sharing the cost across the entire economy, across all emissions, I mean what realistic prospect is there for you all to just sort of come to a cross party deal somewhere in this and stop bickering?

NICK Well National wrote originally to David Parker back December a year ago and suggested such a process, and I had further correspondence with David, he wrote to me inviting me to a meeting in January and I said well look happy to do that, need to get some conditions around it, haven't heard since. I actually think you're right though and that is that look there's broad agreement that we need to get our emissions constrained, I think the Green Party has come quite a long way in that I've noticed they've become more open to market instruments in this area in recent times.

RUSSEL We have been long open to those.

NICK Well if we look at the manifesto three years ago around the issue it was far more regulatory focused than market instrument focused so I think emissions trading there's now a broad consensus that's the right way forward, there is agreement that it should be a comprehensive system, we're now getting down to the nitty gritty of what degree of grandparenting, which has gotta be a really big question, there's gotta be a question of what Russel said earlier, what's the level of the cap, and I think we all want the cap at a level that we're going to get progress but if you put it too low you're gonna kill off the economy and so I think that's where the next stage of the discussion is, it's about the cap and it's about the allocation.

MARIE It's going to be hardest for you though isn't it Russel for the Greens to make compromises on this, because this is so dear to your heart.

RUSSEL Well we're willing to make compromises if they produce outcomes, I mean very happy to work with people if it actually produces outcomes that has to be you know the deciding - at the end of the day does it reduce greenhouse emissions has to be the deciding factor. So the question of the cap, the question of how you allocate the permits at the start is really important because that, you know whether you basically give away these permits which will be worth a lot of money like they did in Europe which I think was a big mistake, and I would also say that there's a question of feasibility and speed if you like. It's urgent that we have a price as quickly as possible, it's not clear to us yet that the emissions trading scheme that the Minister's proposing is actually gonna be in place next year, I mean maybe, maybe not, it's a complicated thing to set up, which is why we've put up our policy of saying as a first step beginning next year when the Kyoto market starts emitters actually have to buy carbon credits, carbon credits straight away which we can do right away, so I'm a bit worried about the lags.

DAVID If I could say something here, I think it is good that parties are coming towards some agreement on some of these central issues. I think in the end when voters judge authenticity they'll be looking for what long term records have been, and I think there is a good relationship of trust and confidence between the Greens particularly between Jeanette Fitzsimons and myself with whom I work closely and I think we're increasingly seeing other political parties in parliament come together now. I meet with all of those parties who are willing to meet with me and discuss these issues through and I can see us reaching a good position that meets the objective of reducing greenhouse gas emissions.

MARIE But Minister why don't you take some more leadership in terms of ambition, I mean you're not even prepared to talk about ballpark figures for caps, why don't you commit now to binding commitments and targets in the way that National has?

DAVID Ah well it's easy to pluck a figure from the air and that's a wee bit trite of them to say that.

NICK We've done a lot of work on that, we did a lot of work on that David, and it's a realistic target that's had pretty broad industry buy in.

DAVID Well could I just say my bit here. I think it's - you're in a different position if you're in government than you are in opposition, you actually have to build something based on analysis that is credible and we're doing that through the energy strategy and these other documents which are very complex areas, there's no one solution gets you towards your target whatever it be by 2050, and so you actually have to build a credible path through there otherwise you're picking a figure from the air and you're not going to achieve the environmental objective of reducing emissions.

LISA Minister I'd like to just quickly ask you about forestry. We're in a situation at the moment where forests are being cut down faster than they're being planted, what are you going to do to stop that?

DAVID Well the first thing is there's a degree of exaggeration round that, total forest area even in production forestry is now higher than it was in 1999, it isn't growing as fast as it did in the early 1990s but that's because of the changing economics of forestry compared with dairying. We're also seeing increased permanent environmental forestry as a consequence of devolution of carbon credits to that sector which all parties voted in favour at the end of the last year, and an emissions trading scheme will control deforestation and it will be interesting to see whether there is support for the in parliament, because deforestation on a broad level in New Zealand is no better here than it is in Brazil or Indonesia.

NICK Well I think the Minister's done a huge amount of spin. The truth is this. from 1953 to 2003 we increased the forest estate, planted forest by about 40,000 hectares per year. For the first time ever and when data has been collected for now three years in a row we've been losing over 10,000 hectares per year of trees. In the last two years we've lost seven million trees.

LISA So what are you gonna do to stop it?

NICK Well the first thing you need to do is look you need to understand the financial incentives, and that is foresters will plant trees if they get the carbon credits, we're just going into the planting season now, June, July, August is the traditional forest planting season, we have said give the carbon credits, simply make a statement Minister, give a commitment that those foresters that plant this year will get those carbon credits.

DAVID Well that's of course where emissions trading is heading and one of the proposals in the documents that have been out there with the industry since before Christmas is exactly that.

NICK Not for this season.

DAVID No that's not true the documents propose devolution of carbon creditsd for 2007.

NICK Will they get credits for this season?

DAVID I've given you that answer you just heard it.

NICK No no but the industry itself, I was talking to nurserymen as early as yesterday and they are saying nobody is planting trees, nobody is planting trees this year because there isn't the credits.

RUSSEL Can I just say, I mean I think what we all agree on and what we need is that there needs to be a financial incentive around planting trees and devolution of some of those credits or a proportion of those credits to the foresters, and if we can all find a way through that I think that will help enormously.

BRIAN But that's only half of the problem with forestry, the other half is to discourage deforestation which globally is a bigger source of emissions than 600 million motor vehicles are. One of the things surely Minister that your emissions trading scheme has to include is a regime to handle deforestation, what can you tell us about the level of grandfathering and the level of financial payment you will put before deforesters.

DAVID Well absolutely it does and indeed this government for a long time has said that there needs to be a crack on deforestation emissions which is something that National has opposed. You're quite right without a cap on deforestation emissions deforestation emissions would grow.

NICK Can I just clarify, the government came out and set an arbitrary 10% deforestation cap, they provided no information as to who would get in and so what happened as a whole lot of foresters said well if I get in and cut my trees down early I won't have to pay and so that's what they're doing, and so National's opposition to the cap was a bad tool including carbon from the forest sector and an emissions trading system is absolutely the right way for incentivising planting and cancelling.

DAVID it will not work if you don't have a cap on deforestation.

MARIE Well I'm baffled by the foresters' complaints because you'd think that they were planting trees for tax credits, I mean they're sposed to be planting trees for the profits from wood, and really the tax credits should be just a by the by really.

DAVID That's exactly right Marie and that actually points to what is the underlying cause of the decline and rates of planning in New Zealand and it's the relative profitability of forestry compared with dairying..

LISA Minister on a different topic, if we're going to struggle to meet our Kyoto targets should we still be exporting the likes of coal to China and Japan, is that appropriate behaviour?

DAVID Well there's two things there, firstly at the moment our deficit is projected to be 41.2 million tonnes, I think by the time we've finished our policy we will prune that deficit back because we are bending the line and getting emissions heading in the right direction. The issue as to whether we should export coal or import oil is absolutely yes. I mean we export dairy produce that has inherent carbon emissions in it, what's important is that the countries that you export coal to like Japan take responsibility for their emissions just like we take responsibility for our emissions when we import oil.

RUSSEL Obviously the issue is that coal is the worst, we all know that in terms of generating electricity burning coal is the worst way you can do it in terms of greenhouse and so the long term future of the coal industry if we're serious about climate change doesn't look very good you'd have to say. Now there's attempts of GO sequestration as it's called you know to try to store it underground, but that's still very much experimental. Can I just raise one other issue which I think is quite important is the oil that the Minister was talking about, the other great problem we're gonna have in the near future is that oil prices are going to continue to go up and up, now there's a tremendous synergy whereby we can reduce our consumption of oil and decrease our greenhouse emissions at the same time and key to that is increasing fuel efficiency standards and investing in public transport. Now we were really pleased that they finally got around to you know providing the money for the electrification of the Auckland rail network but my goodness it took a lot of work on behalf of the Greens and the Auckland Regional Council and others to try to get them to do that, it's still really difficult to get the government to see through the need to reduce our oil dependency which links to climate change policy and I'd really love them to be doing a lot more on that.

DAVID There has been a 900% increase in public transport funding, we agree with you.

RUSSEL Yeah and there's been a massive increase in motorway building David.

DAVID Not 900%.

LISA Alright gentlemen we're gonna have to leave the conversation there.

GUEST COMMENTATORS Reserve Bank's Latest Move to Dampen the Housing Market

LISA Last Thursday the Reserve Bank Governor raised the official cash rate to 8%. Bollard continues to cite the strong housing market as one of the reasons for yet another increase, but he's also concerned that the possible impact of record dairy prices when asked if he was counting on dairy farmers to reduce debt rather than spend the money Bollard had this to say:

Alan Bollard: ".expect a number of different responses, we did see land prices pushing up very strongly a year ago, we're starting to hear stories about dairy farmers were cash constrained and we knew there was a certain amount of debt building up in the sector we would think that this would now be an ideal situation for some of them to reduce that but we know that will depend on their individual circumstances, I have no doubt there will still be some dairy farm consolidation going on, but yes we will be talking to rural distributorships for vehicles and the like to find out just what is going on.

What's the message to dairy exporters is it just sort of two bed fellows?

Well we've only got one exchange rate and one official cash rate we can't run two different ones for different parts of the economy, this is a problem that Australia has had for a the last couple of years with its very strong mineral sector driving up the Australian dollar, we've got a taste of the same thing. As I say on average it's good news but it does mean quite tight situations for exporters who aren't able to take advantage of those very goodwill prices for their products."

LISA Brian we heard a journalist there asking about other exporters, I mean the dairy industry might be booming but how much damage is this going to do to other exporters?

BRIAN Well it's already doing damage, I mean he raised the rate to an eyewatering 8% at the time when the dollar is already at post float highs, there's a risk here of what economists call the Dutch Disease, you've got one narrow part of the economy that does really well, the exchange rate reflects that and everyone else is hammered it crowds them out. Manufacturing exporters their confidence is the weakest it's been you know for 20 years or so, beef and sheep farmers certainly are struggling, but Dr Bollard's right, there's only one instrument he's got to use here which is the interest rate, he's probably gone too easy in the past and now he's struggling to make up that lost ground and all he can do is keep bashing away until he turns off appetite to borrow money at any price for house.

LISA So what other tools does he need then?

BRIAN I don't think it's a matter of giving him more tools, he has to simply wait for it to work and that lag is getting longer and longer. In the past he's given us the benefit of the doubt, and it's turned out to be a mistake, what's different this time is that he's hiked and hiked and then hiked again and shows every sign of keeping on doing that, it's a new implacable look for him but it's the only one that's appropriate at this stage.

LISA I have seen some projections thinking that the housing market wouldn't cool from this until 2009 some of those figures.

BRIAN Well that's where we have it flattening off.

LISA So should he have done it sooner.

BRIAN Well hindsight's a wonderful thing and the fact is that the man says he doesn't like raising interest rates and I think he's displayed that in the past but it comes - there's some wisdom in the stitch in time saves nine approach which we're all learning the heard way here. I mean he has had a lot of difficulties to contend with, but in normal circumstances something like the dairy payout would be just unambiguously good news and he'd have enough headroom, he'd have enough room to manoeuvre to absorb that extra spending power, the reason he's fretting about it now is that he's already so close or heading so close to the top of his target any little extra spending will be too much and he simply doesn't know how much the farmers will save and how much they'll spend he can't afford to take that risk.

LISA Marie you were interested in this from the point of view that John Key jumped on this the next day strongly.

MARIE Well he did jump on it eventually, but it took 24 hours and yeah he was very strong he took on the government accused him of playing chicken with the housing market forcing you know predicted that rates would go higher, but it was a good - from a political viewpoint it was good strong reaction and he had a good go at the government over its government spending and accusing the Governor of not being prepared to take on the government spending component of the problem, but the day before when the Governor, the man himself was before the other National MPs on the finance and expenditure select committee to you know to please explain what you've just done, they didn't hold him to account at all, I mean it was quite a weak performance, they were poking and prodding and asking for explanations about tables and I couldn't help but think that they weren't ready, they should have been prepared for announcement either way up or down or no change.

LISA They just dropped the ball.

MARIE Well I think there's a bit of complacency creeping in here that their polls are so good that maybe they don't think they have to do much work and it shouldn't have taken 24 hours for John Key to come out with what was an admittedly very good political strong reaction but it was a bit late.

BRIAN What stuck in my mind from that select committee hearing was the excuses Bollard was making when he was being pressed not by National but by Doug Woolerton about what will this do to exporters your very question, nothing good was his answer but he immediately says don't blame me it's not the Reserve Bank doing this it's the fact that the households.

LISA You can't stop spending. Alright we're going to have to leave it there.

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FINAL THOUGHTS

LISA Brian, do you see those party being able to reach some kind of cross party agreement are they moving closer together and close enough together?

BRIAN Whether it's close enough remains to be seen because there are these, as I say these really big decisions about the cap and grandfathering and so on but the big picture despite all the bickering tedious as it is, is the convergence that's going on not only between the parties here but globally, the fact that you've got absolute recalcitrance like Bush and Howard, it's no longer politically tenable for them to stand there with their arms folded saying it's all nonsense and it'll be the ruin of us, I think both in New Zealand and in the wider world there has been a C change, a tipping point here, so the logic of that will drive them to a deal both I hope globally but certainly locally I would think.

LISA Sticking points though, agriculture?

BRIAN Well one of the ironies of this dairy boom for example that Bollard is worrying about is that a lot of it is down to climate change it's the drought in Australia, it's the fact that the US which is the largest exporter of milk powder is not increasing its production because corn is going to produce bio fuels instead, so I doubt we'll hear the dairy industry here when they finally do get the hard word about paying for the increase in their emissions saying oh well that's fair enough we've been doing very nicely thank you because of the supply side effects.

MARIE I think another sticking point is going to be the fairness of the allocation system because it's been a problem for the fishing quota even though people hold our system up, our fishing system up as one of the best in the world it's still wrought with problems and so I know the Greens are quite sensitive about how these things are gonna be allocated fairly and whether the polluters end up getting access to credits when they shouldn't.

BRIAN There's a real possibility here of hug windfall profits for example for Meridian or any of the generators that don't have to pay a carbon price for the fuel, because it's rain or water, the risk is that these will make these very very tempting SOEs to sell off if you were a National government with a disposition to do that.

LISA Which brings us to you Marie, SOEs are on your mind aren't they?

MARIE Yes, we seem to be going full circle here because this takes us back to the ..case because the other issue that's triggered was the SOE model and to some extent it might be a bit of a red herring really but it still triggered it, and you know we have the government fudging on whether they're gonna use tougher guidelines or bring in regulations when in fact the model does give them tools to have acted already and they haven't and that is they could have sacked the chairman or chairwoman of Mighty River Power and they didn't, and that's where the accountability falls and they didn't do it in fact they seem to be making very soothing noises about that, and then on the other side we've got National criticising the model for saying that it doesn't provided accountability and we had Gerry Brownlee talking about you know the institutional shareholding does provide better accountability and then suddenly the shutters came down on whether that meant are you going to privatise these things and then Murray McCully has a curious piece on his website about you know perhaps devising a new architecture for these things that individually better reflect their public interest which I read as code for partial privatisation.

LISA But the lid's come down.

MARIE Well the lid's come down because they're in the middle of devising their policy on this and McCully's piece curiously is no longer on his website and Brownlee is really not answering questions on it, so the issues from that, you know National's under scrutiny on this too because it raises the issue what are you going to do with the SOEs are you going to tinker with them to the point that it's privatisation by stealth, and equally the other way Labour you know has rather copped out a bit on what it could have done, it's kind of missed it's opportunity to some extent.

LISA Alright, thank you very much for joining us this morning.

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