Monday 23rd May, 2011

TRANSCRIPT: Prime Minister, John Key interviewed on TV ONE’s Breakfast at 7:20am this morning.

The full length video interview can also be seen on tvnz.co.nz at, http://tvnz.co.nz/Breakfast

JOHN KEY interviewed by PETRA BAGUST

Petra : The Prime Minister has spent the weekend explaining the financial direction outlined in the Budget, while Labour threw down the gauntlet with new policy that truly puts them on a different path. And of course the country got right behind the Christchurch Telethon pitching in a whopping two and a half million dollars. John Key was there, here and everywhere, and now he's here again, good morning. A busy weekend for you.

John: Well I was down at Bluff actually, the Oyster Festival which was great fun, then Christchurch for the weekend, then rise up for the Telethon here in Auckland last night.

Petra: So what have you been hearing from people about the Budget so far?

John: Well look actually in Bluff where there was you know about 5000 people at the Oyster Festival, it was well received. I mean I think people were realistic that of course you know we always want to give away more money, but there's certain times when that’s not appropriate and at the moment the right thing to do is get on top of the debt position New Zealand has. They were impressed by the fact that we're gonna cut the deficit in half next year, half again then it's gone. And I think they do recognise that wider message that you need lower deficits, you need to be back in surplus if our interest rate's going to stay low.

Petra: And even Labour is agreeing with you on that, they're saying they wouldn’t reverse everything, but there is some scepticism of those Treasury forecasts.

John: Yeah I'm surprised actually that the Herald's running that line, it's not a very effective line and not actually accurate. If you have a look at it, the Treasury are in about the middle of the pack of the forecasters, so all of the banks, you know the ANZ, Westpac, those kinda guys they all have their own economists, they’ve been largely more optimistic than the Treasury. NZIER, independent forecaster, again about where the Treasury is. IMF I think is slightly above the Treasury, so they're quite in the middle of the pack.

Petra: Is it because those Treasury forecasts haven’t been so accurate over the last couple of years?

John: Yes okay it's always difficult to do forecaster, and then in any conditions, but it was more difficult over the last few years, and that’s because when you have a massive thing like the global financial crisis it's very uncharted territory. No one was quite sure the impact it would have, and it did have sort of second round implications. So last year we expected the world to be stronger. Actually with the meltdown in Portugal and Greece and Spain it wasn't. So that threw the numbers out a bit. But there's more predictability here no, I think we're on firmer footing.

Petra: Based on no further earthquakes or natural disasters, or bailouts. The world seems to be quite a volatile place at the moment.

John: Yeah, and look there's always risks in any forecast so high inflation in China could lead to a bout of inflation round the world, higher oil prices could lead to a reduction in consumption, but overall on balance I think they look about right.

Petra: Okay Labour have come out with some clear policy ideas here. I can see you're wearing a cow tie, important for farmers this morning.

John: I am, I am..

Petra: Lots of little cows on your tie. Labour's saying they should be paying their fair share and that they're not doing that at the moment. Is that not a logical commonsense sort of approach.

John: Yes, so let's take it one step back, I mean they're basically saying they're going to have an R&D tax credit that costs 800 million. The only minor technical issue, it's Labour of old. So if you go back and have a look at the last time they had this policy, the policy on those numbers just using the same things actually cost 1.55 billion. So just like all of the other policies we inherited, they said it cost one thing, actually it cost twice as much. Second thing is, get the same farmers coming to the ETS, so in 2013 we'd be the only country in the world doing that, and then what happens when those additional costs go on farmers. I mean are they gonna pay more? Not necessarily, they’ll just pass it on, so you, the people watching this show, will pay more for milk, more for meat, more for butter, more for cheese…

Petra: But they are coming up with an idea of fiscally neutral …

John: But it's not fiscally neutral, they say it cost 800 million. On their own calculations they used going to the last budget when they had a 15% R&D tax credit, if you adjust for 12½ it actually cost 1.55 billion. So where's the other 800 million?

Petra: Good question and one that we can look at further. Minimum wage raise to $15, reversing some of those taxcuts, obviously things in the obvious direction to National?

John: Okay so let's go and have a look at the minimum wage. We took it up from 12 bucks to 13 bucks in the 2½ years we've been in office so far. No you're not easy conditions, there's always a trade off. The Department of Labour say if you go to $15 it'll probably cost about 6000 jobs. So you sit there and I think if you genuinely went to a young person, so primarily young but not exclusively and said okay here's the options, you get $13 as you do at the moment, or whatever it will be by this time next year $13.50 or something, you can have that or you can have time on the unemployment queue, what do you want? Most people I think would genuinely say I want the job. Now there's a trade off here, because if it was just as simple as legislating for higher wages, well what's magical about $15, why don’t we make it 20 or 25 dollars. So there's always a trade off here, and in the end you get higher wages not because a politician says they’ll be higher, it's because businesses can afford to make them higher and they can afford to make them higher when the conditions allow them to.

Petra: And higher wages are something the National government would like to see?

John: Correct, but in the right way, I mean because as we say you just don’t want to put people in the dole queue.

Petra: What about this concept that was mooted overseas of a billion dollar prize for future energy technologies. This concept of making New Zealand a place that comes up with incredible ideas as a creative economy?

John: Yes well we've been trying to do that. If you go and have a look at where we've been going in technology, in R&D, I'm the first Prime Minister to have a Prime Minister's Science Advisor, Sir Peter Gluckman, so he's had quite a lot of influence in the government over the last three years. We've done things like these technology vouchers which means that a company puts in some money, we give them money and they go off to CRI or university or whatever. Again if you go and have a look at technology in that area, in clean technology, a lot's happening in that space, whether it's tidal technology or whether it's wind, you know solar, geothermal, actually New Zealand's been doing quite a lot in that area.

Petra: And finally South Africa and Australia calling on the IMF to select a candidate based on merit not nationality, what's New Zealand's position on that?

John: Yeah we're the same, we support someone on merit, I mean it seems Christine Le Garde might be front runner, who's the French Economic Minister. I actually met her when I went over to my trip to Paris a couple of weeks ago. She's super impressive I've gotta say.

Petra: Prime Minister John Key thanks for joining us this morning.

ENDS

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