Q+A

The interview has been transcribed below.  Q+A is repeated on TVNZ 7 at 9.10pm on Sunday nights and 10.10am and 2.10pm on Mondays.  The full length video interviews and panel discussions from this morning’s Q+A can also be seen on tvnz.co.nz at, http://tvnz.co.nz/q-and-a-news

DON NICOLSON & RUSSEL NORMAN interviewed by PAUL HOLMES

PAUL Water, everyone seems to agree is going to make us rich somehow.  Norway aside we’ve got more water than any other country and we have a clean green image to maintain abroad, but some people are worried that our poor water management, or what’s perceived to be poor water management, I putting that at risk.  In the past week factory farmers have abandoned plans to house nearly 18,000 cows in cubicles in the South Island’s McKenzie country, they’ve been sideswiped,  Critics argue that the combined effluent would be similar in quantity to a city the size of Christchurch contaminating McKenzie country water supply, and then a new report found that thanks to dirty dairying our streams are more polluted than ever, and in the north, Kaitaia and now Kaikohe are under strict water rationing, so what’s going on with the water.

So why are we suddenly talking water we’ve got the dairy farm the effects of dairy farming of course, we’ve got lack of supply up north, we’ve got economic potential, why are we talking water all of a sudden?

DON NICOLSON – President Federated Farmers
I think we’ve been slow out of the block, we’ve been talking water for years in the farming sector, we’re waiting for the wider community to actually make itself more resilient as we’re trying to make ourselves more resilient, so you know in Northland two metres of rain falls every year and they haven’t stored it, and they’re no in a crisis situation, rivers low, I mean let’s make our communities more resilient as well as agriculture.

PAUL So let’s get more savvy about water.

RUSSEL NORMAN – Greens Co-Leader
And if you look at surveys of New Zealanders when you ask them what’s the most important environmental issue, they now say fresh water, and the reason they say that is we’ve got major issues around water, the Environment Waikato, its latest report said that 70% of all the sampling sites in the Waikato the water was unsafe for swimming, 75% of all sampling sites it was actually unsafe to give to stock for drinking, so there is a significant water quality problem.

PAUL Right so how would you describe our management of water Russel?

RUSSEL I call it malign neglect, it’s been neglected for so long, we haven’t given it the attention it deserves, it’s tremendously important.  New Zealanders really value the right to swim in a creek, they value the right to catch a fish, also the impact of dirty rivers on the marine environment, like you know why is the schnapper fish really in trouble in the Far North, because of all the sediment coming down the streams, so people are feeling the impacts of poor water management.

PAUL How are you going to stop sediment coming down the streams?

RUSSEL It’s about proper management, so that’s about fencing waterways, so to keep stock out of them, it’s about riparian planting, it’s about keeping stocking rates at a level that the soil can actually handle in terms of the effluent coming off the animals, and it’s about using fertiliser, both nitrogen and phosphorus in a sustainable way and at not too great a levels because otherwise it runs through the system.

DON So Russel’s got his facts all about farming, why doesn’t he focus on some urban stuff for a change, I mean urban waterways are very degraded in this country, but he picks on agriculture all the time.

PAUL Well I wonder why that might be, it might be something to do with the report that came out last week, that dairy farmers are making the streams filthy, 15% of farmers fail to comply with regional and council environmental rules, why do 15% …?

RUSSEL It’s actually 40%, 15% is the serious non compliance, 40% non compliance.

DON Sure that’s true and some of the non compliance was little certificates on the dairy shed wall, I mean Fonterra’s cowering into a corner because it’s been beaten by these sort of people to want to jump all the hurdles.

PAUL No it’s doing another big initiative into China and doesn’t want to know the mess.

DON Yeah they don’t need another mess, another problem to their brand, I accept that, but the problem is rural water schemes and sewerage schemes have never been updated for years.  A lot of the water quality issues Russel’s talking about are basically around sewerage schemes that have not been upgraded over time.

RUSSEL It sounds right I mean you know, if you look at – I was just up at Kaitaia on Thursday and they’ve got a major problem up there which is partly due to the drought, no question, but it’s also because they haven’t invested in infrastructure over a long period.  I was talking to – there was a small community water scheme.  Ed and Rada Masters and there’s 50 of them on this community water scheme, their water is brown because the dairy farmer in the catchment above them refuses to fence the stream which they all rely on for the water, they’ve offered to put in the labour for free, the Regional Council offered to pay for the fencing around it, but the dairy farmer from his yacht because he’s currently travelling the world on his yacht, refuses to go in and fence that stream so that community has clean water, and those are the kind of situations where we get both a water supply problem and dairy problem combined.

PAUL So it does seem like there is a cavalier attitude though amongst the dairy…

DON I don’t think so, I actually don’t think so Paul, it’s been overstated by people like Russel, look we took Russel to the Opuha dam in south Canterbury, a great success story, run by farmers, owned by farmers, has recreation, electricity generation, water sports, fishing, hunting, and guaranteed minimum flows in the Opihi River, plus it adds about 470 jobs in that reason and Russel can’t even come out and say a good thing about it.

RUSSEL I’ve said a number of good things about it, however what we have to go back to is the science, and the science is absolutely clear ant that we have degrading water quality right across New Zealand, and they’re also very clear that it is the intensification of agriculture that’s driving it, and every scientific report says that.

DON No that’s not clear to the layman reading this stuff, but you get the sensational headline Russel, that’s what people believe.

PAUL In the matter of the non compliance which may have been a failure to put a sticker on a cowshed or something, but nevertheless, 85% are complying we have to take from that number, so 15% perhaps badly not complying and 40% totally not complying to some degree or another, you’re saying.  At the moment the business is voluntary, you want to see regulation now, yeah?

RUSSEL Yeah that’s right, exactly right, so we’ve got this voluntary accord, I’d say what we actually need is good environmental minimums, good regulation, and that way the good farmers don’t get penalised by the bad farmers, cos currently if you’re a good dairy farmer doing all the right things and lots of them are, then your reputation’s being besmirched by the bad ones, whereas if  you have environmental minimums which we can actually impose because they’re regulations, then it means it protects the rivers and lakes for everyone and protects the good farmer’s reputation.

PAUL Would you have a problem with that?

DON I have no problem with setting standards, actually maximum standards would be good, because these guys just want them higher and higher all the time, so let’s get a maximum standard.

RUSSEL We like clean water.

DON Yeah we like clean water and so do our animals, and but here’s the rub Paul, last year 23.2 billion dollars worth of farm gate revenue over all sectors, including pork and poultry, out of that 23.2 only 6.2 cents in every dollar stayed with the farmer, yet we get 100% of the environmental grief from proposal like Russel, you actually get a big sick of it, 6.2 cents in every dollar stays with the farmer.

RUSSEL So in terms of economic strategy which is obviously a critical issue, the question you have to ask about the economic strategy for dairy is can we continue to increase production every year and compete on the basis of price, or do we try to compete on the basis of a brand of integrity, like Peter Townsend, CEO of the Chamber of Commerce in Canterbury’s been saying, in which case we have good animal welfare, we have good food safety, good environmental performance, and then that’s the basis on which we compete New Zealand products in the world, and that’s how we make money without trashing our environment, and that’s my strategy for economic development.

PAUL It is a matter of balance isn’t it, I think Canterbury’s got 70% of the country’s water and 240,000 extra cows have gone into Canterbury in the last six years, are we going to get to the point where we can’t do any more farming.

DON We’ve gotta do water storage, the thing is New Zealand’s not running out of water, the water’s running out of New Zealand and we’ve just gotta do this water storage to make us more resilient, the threat of climate variation that Russel’s so hot about, if you want to make yourself more resilient let’s store some water, let’s make sure the water quality is good, cos water’s gotta have properties, I don’t want sterile water.

PAUL No you’d have to build major dams though wouldn’t you?

DON No, but there’s lots of community schemes available, yeah there’s a lot of investment required, but it’s not as much as you’d think, and so just making Canterbury resilient doesn’t make New Zealand resilient.

RUSSEL But it’s the question – I think it’s an interesting question, like water storage, so you know I would certainly support smaller on scale farm storage, but do we want big dams across major rivers like the Hurunui scheme which would dam one of the last of the wild rivers on the East Coast in Canterbury.

PAUL You don’t actually have to dam the river do you?

RUSSEL Well you don’t exactly you can have on farm small scale storage, the Hurunui scheme dams the south bank with a 70 metre high dam, which I think is totally unacceptable, we can have small scale on farm storage.

DON Look when the river flows are high you can divert water flows into holding dams no problem at all.

RUSSEL And then the other side is the downstream and which I think you’ve also gotta look at.  If the water storage is then used to intensify and dairy like tens of thousands of hectares you have downstream effects in terms of water quality in rivers and also in ground water.

PAUL Just a couple of quickies, should we start charging farmers for water?  The car maker pays to buy the steel for his cars, the baker pays for his flour to bake the bread.

DON Look if we do that then the person washing their car in Remuera had better pay, the fish better start having a value around them, and the kayaker better have a value and then we’ll all be happy and then we’ll get some really true values around the resource efficiency, because that’s what we’re gonna be talking about.

PAUL Russel can you see a time when water becomes a huge export earner for us, because country’s build desalinisation plants don’t they?

RUSSEL Effectively it is already a big export earner for us because of the dairy sector we have basically water through the dairy sector.

PAUL And I spose because of the tourism sector as well.

RUSSEL Exactly, so tourism, the other huge export earner that we have that is threatened if we get our environmental management wrong.

DON Look no water, no life Russel, come on.

RUSSEL Yeah so?  I’m a Green Don I’m a Green.

PAUL Thank you Don Nicolson and thank you Russel Norman

The interview has been transcribed below.  Q+A is repeated on TVNZ 7 at 9.10pm on Sunday nights and 10.10am and 2.10pm on Mondays.  The full length video interviews and panel discussions from this morning’s Q+A can also be seen on tvnz.co.nz at, http://tvnz.co.nz/q-and-a-news

TIM GROSER interviewed by GUYON ESPINER

GUYON Thank you Minister for joining us this morning, we appreciate your time.  As Paul says we’re signing this Free Trade Agreement with Hong Kong, it’s been negotiated since 2001, essentially Hong Kong has zero applied tariffs and we can effectively export our goods tax free there anyway, is this going to be worth anything at all to the New Zealand economy?

TIM GROSER – Trade Minister
Before we drill down into the specific of this or the TPB Agreement, let’s just see where we are as a country.  We’ve been bottom trawling in the OECD in the lowest quartile now for some years, we’ve gotta lift that.  As the Prime Minister says we’re not going to get richer by selling to ourselves, so trade is fundamental to this.  The problem for New Zealand until really about 15, 20 years ago, was access to markets, and New Zealand really did suffer in any relative sense. What’s happening now is transformational in terms of the opportunities New Zealand has.  So the Hong Kong deal is more strategic than specific, you’re quite right, there are some services improvements that will help certain services exporters but fundamentally what it does is it builds on the China deal. It’s not just China, which gives us access to a quarter of the world’s people, as consumers. We’re starting to phase in now this agreement with this unpronounceable name AANZFTA [ASEAN-Australia-New Zealand Free Trade Area], which is merging the CER with the whole of South East Asia, there’s India going on as you said, there’s Korea…

GUYON And we’ll come to those agreements. Hong Kong, any dollar value at all?

TIM Oh sure, but look it’s more about making more coherent the China deal, and our exports to China in the last 12 months, have gone up by almost the size of our total exports to Korea. At the moment there’s a sort of porous border, so it’s putting cream on the top of the China deal is how I see it.

GUYON Some manufacturers were concerned that increased competition with Hong Kong would lead to job losses, will there be job losses in the manufacturing sector as a result of this deal with Hong Kong?

TIM No there will not be job losses, for two reasons, first of all because we’ve been very careful to stage the tariff reductions in this area so they’re consistent with the China deal, so in that respect in terms of import competition, it doesn’t change the situation at all.

GUYON India is predicted to be the world’s second largest economy by 2050.  On January 31, you announced that negotiations would begin.  What are we predicting that deal could be worth to New Zealand?

TIM I wouldn’t want to put a number on it. What I know is that in the last two years our exports have doubled, India’s gone from being a very small market to about our 13th largest export market, your figures are exactly right, we expect India on the current projections to be about the size of China today in 15 years time, we have only scratched the surface with this country, I think it’s vital that we do this deal.

GUYON You did a joint study in March 2009, and under one scenario in that assuming a 100% tariff reduction, it talked about gains of 2.5 billion US dollars to New Zealand, a whopping 2.4% of our GDP, is that possible?

TIM It’s possible, personally I don’t have much taste for these sort of figures, although they seem part of the deal that you have to do these estimate, I think it’s more important for us to focus on the big picture, New Zealand needs trading opportunities, this is the second giant developing country in the world, let’s do a deal.

GUYON But the producers and the exporters, they will be pretty interested in those sorts of numbers, if you look at some of the tariffs that India has on goods that we export there, sheep meat 36%, apples 51%, Kiwifruit more than 30%.

TIM That’s right.

GUYON Are those sorts of products expected to gain tariff free access to India under the negotiations you’re doing?

TIM Absolutely, but if you look at our exports as I said they’ve doubled in the last two years, but what is interesting when you look at India is that it’s not our traditional strengths in exporting that explain that. It’s a whole range of other products.  So I think there is major scope for our more traditional agriculture exports, that will require negotiation.  I keep on saying this will be difficult, this will take years to complete, 14 rounds I think is what the China deal took, so we’ve gotta be patient but we’re moving in the right direction.

GUYON That study I mentioned talked about under that scenario of 100% tariff reduction, a 12.6 billion dollar US gain for India, how is that possible that New Zealand could provide a gain of that magnitude?

TIM No, the figure must be wrong, it couldn’t possible explain it.

GUYON The figure is in your report Minister.

TIM 12.6 billion?

GUYON 12.6 billion dollars on page 43 of your report from March 2009.

TIM Alright I’ll have to go back and look at it, I don’t believe that’s possible.

GUYON Well you’re going into these negotiations, shouldn’t you have a handle on those things.

TIM I certainly do have a handle, I’m sure the figure is wrong.

GUYON So what’s the point in doing these studies if the numbers are so wildly wrong?

TIM Look I think the point is this, these econometricians they do these studies, they look at the figure, I don’t know whether the 12.6 billion is over a period of years or not.  The main thing is that it makes sense to India to move strategically into the Asia Pacific, we’re in the forefront of the architecture of many of these FTAs and I think that’s really the main benefit for India.  From our point of view it’s more direct, they’ve got major trade barriers that we can negotiate downwards.

GUYON Do they want access to New Zealand’s labour market?

TIM I imagine they’ll want something comparable to what China’s got which is a few, very small number of jobs in highly specialised areas, but that’s for the negotiation that’s ahead of us.

GUYON So we could see some Indian workers coming to New Zealand in specialist trades and practices is that what you’re saying?

TIM Oh I’m sure and it would be in New Zealand’s interests to facilitate that in things like education for example. The Indian market is exploding for New Zealand, it’s the fastest growing sector of our education industry, our education industry’s New Zealand’s second largest services export and it would be in our own interest to facilitate that. But forget the idea of massive migration from India as a consequence of this FTA, that’s not what happened in the China deal, it won’t happen in this deal either.

GUYON In the whole document in the joint study, 120-odd pages there’s one line about labour and environmental standards, and it says that India does not include labour or environmental standards in its free trade negotiations, is that acceptable to you, will we do a deal which doesn’t include that?

TIM We’ll certainly want to try and look at the scope for that, but this is the stuff of a negotiation.

GUYON Would we do a deal without that?

TIM I’ll make that decision later on.

GUYON It’s turned to trade with the United States and talks have begun on this so-called TPP which groups New Zealand, the United States and six other countries in a massive free trade area, potentially.  How confident are you that this is actually ever going to be realised.

TIM I think this will be quite difficult, but the objective is to try and do this in the next two years.  The Obama administration has put this near the top of their trade agenda, so that’s very encouraging, but this is gonna be a major and complicated negotiation.  I spoke to our chief negotiator on the phone on Friday, he still hadn’t left Melbourne, you know there were over 200 people in that room for this first negotiation, we expect over 300 in LA, so it looks like a major international negotiation.

GUYON You said something very interesting about this recently, you said that it would be wider than the traditional negotiation and probably look more like CER.  What do you mean by that?

TIM Because the way trade policy is going is that we have to look at non tariff barriers, it’s not just enough to look at the tariff barriers, we’re still very interested in that, particularly New Zealand given that in the case of the United States there are still very significant trade barriers to dairy products for example, but it’s almost certain that we will want to look at some of the behind the frontier measures.  We will be looking at trade and labour in terms of its relationship to that, we’ll be looking at trade and environment, so I think it’s likely to be deeper than a conventional trade negotiation.

GUYON But are we talking about potentially an Asia Pacific EU, I mean is that the sort of end goal that we’re looking at?

TIM That’s probably going too far, but after all the EU’s a customs union. We’re talking about a free trade area, so the basic distinction between a customs union and an FTA is, an FTA looks at trade barriers and then looks at some harmonisation of policies in association with that, customs unions go deeper, so we’re not going to go as far as the EU.

GUYON Just before I leave trade I want to talk about our own tariff liberalisation process. We still have considerable tariffs on clothing and footwear, 14% on clothing, about 10% on footwear, are you looking at actually removing that?

TIM No, we made a decision to suspend the further unilateral liberalisation, in part because of the very success of these negotiations.

GUYON Is that a permanent situation that we won’t do that unless it’s in the part of any other deal with another country?

TIM I don’t know whether we would commit to all time, but we have no plans for further unilateral liberalisation.  I think the main point is this – de facto New Zealanders moving to complete free trade, by the time you’ve got complete free trade for Australia, which we have, complete free trade for all least developed countries, which we have, complete free trade for all the South Pacific countries, which we have, we’re phasing in complete free trade for China and the whole of South East Asia, frankly in all practical senses you’ve got to free trade.

GUYON Just before we leave it, you are Associate Foreign Minister also, and we should touch on Fiji because the Foreign Minister is possible going to hold talks with Commodore Bainimarama in the coming days.  Now he said in parliament recently that there could be changes to the sanction regime at some point in the future if progress is made on other issues.  Under what grounds would we consider, what does Fiji need to do, for New Zealand to lift the travel sanctions on that country.

TIM Well I leave the talking on this to Mr McCully basically, but that statement has got a lot of conditionality to it. Clearly we want in the long term to be in the right space with Fiji, we don’t want this impasse to go on, but fundamentally it’s a question of them committing to full restoration of democratic process and that’s what the object of our government is.

GUYON Would it require that before sanctions were lifted?

TIM I’m not going to speculate on the precise process. That’s the general statement of intent.

GUYON Alright we’ll leave it there, thank you very much for joining us this morning Minister, we appreciate your time.

In recent weeks research company, UMR polled 1,000 people in Australia and another 1,000 in NZ on the topic of NZ becoming the 7th state of Australia, the results are recorded below.

Background to the poll, interview with UMR MD and Q+A discussion with Phil Goff, Sir Don McKinnon and Australian Liberal National MP, Peter Slipper have been transcribed below.

Q+A is repeated on TVNZ 7 at 9.10pm on Sunday nights and 10.10am and 2.10pm on Mondays.  The full length video interviews and panel discussions from this morning’s Q+A can also be seen on tvnz.co.nz at, http://tvnz.co.nz/q-and-a-news

ONE COUNTRY POLL RESULTS

Would you support or oppose New Zealand joining Australia and becoming the 7th Australian state?

AUS NZ
Strongly oppose 26% 45%
Oppose 26% 26%
Support 28% 17%
Stronly support 9% 7%
Unsure 11% 5%
Total Oppose 52% 71%
Total Support 37% 24%

If New Zealand became part of Australia do you think New Zealand’s economy would be…

AUS NZ
Better off 20% 37%
Worse off 32% 27%
Makes no difference 34% 25%
Unsure 14% 11%
Net Better Off -12% 10%

Do you think that NZ becoming the 7th state of Australia is an idea worth debating?

Yes 41%
No 58%
Unsure 1%

If New Zealand did join Australia, would the following be better, worse or about the same in New Zealand?

Better Worse About the same Unsure
Ease of Travel to Australia 65% 3% 29% 4%
Defence 64% 8% 20% 9%
The NZ economy 43% 23% 23% 11%
Your personal standard of living 30% 12% 48% 9%
Job Security 28% 20% 41% 10%
Health System 27% 23% 40% 11%
Lifestyle 25% 18% 53% 5%
Education 22% 16% 53% 9%
Law and Order 20% 25% 47% 8%
Immigration 19% 36% 35% 10%
Values 9% 41% 43% 7%
Race Relations 7% 60% 26% 6%
Culture 7% 51% 37% 5%
Environment 6% 39% 49% 6%

Points of interest:

–          UMR’s John Utting: Older New Zealanders, men and people in New South Wales most pro-union; New Zealanders more concerned about national identity than wealth

–          Sir Don McKinnon: NZ-Australia union “probably inevitable” but an issue for “the next generation”

–          Phil Goff: New Zealand will never submerge its identity into Australia’s

–          Peter Slipper: If European countries who have fought recent wars against each other can have a common currency, why not our countries?

–          Peter Slipper: Why not a confederation, with New Zealand as an equal partner and ties short of full union?

–          Peter Slipper: Australians would accept an ANZAC dollar

–          Phil Goff: A common currency wouldn’t be an ANZAC dollar, “it’ll be the Australian dollar, that’s the reality”. That will put New Zealanders out of business

–          Phil Goff: Treaty of Waitangi not a make or break issue, even though Maori Party voters most strongly opposed to union

–          Sir Don McKinnon: New Zealand and Australia will be driven together by a desire for freer movement, easier taxes and the like

BACKGROUND TO POLL by PAUL HOLMES

In 1901 the six Australian colonies formed a federation, a new country effectively, glorious federation they call it, New Zealand came close to joining them, we had after all briefly been part of New South Wales before the Treaty of Waitangi.  At the Australasian Constitutional Conference in 1890 however New Zealand backed away from the idea, referring to the width of the Tasman Sea particularly, Premier Sir John Hall said there were 1200 reasons not to join the Federation, but in parting said:

‘I almost envy my Australian brethren the opportunity of joining them in the great work before them, I cannot help regretting that for the present, circumstances render it impossible for New Zealand to do so.  It is said that history repeats itself’ said Sir John Hall ‘and we shall, I feel confident, have another instance of it.’

Is it time therefore as Sir John Hall said to have another instance of it, the two governments are continuing towards a single economic market and something like 400,000 New Zealanders already live in Australia.  To this day the Australian constitution lists New Zealand as one of the states that may be admitted to the Federation.  So what do ordinary Kiwis and ordinary Australians think about becoming one?

Market research firm UMR has in recent weeks been conducting the first trans-Tasman poll on such a union, asking whether New Zealand should become Australia’s seventh state.  A thousand people in each country were asked the question and we can reveal the results this morning.  UMR’s Managing Director is John Utting, he’s a veteran pollster known on both sides of the ditch and he spoke to Australian correspondent, Steve Marshall in our Sydney offices.

POLL CONTEXT

JOHN UTTING interviewed by STEVE MARSHALL

JOHN UTTING – UMR Managing Director

In both countries people weren’t keen on the proposition and in fact most people were against it, in New Zealand only a quarter of New Zealanders, roughly about 24% favour the country becoming part of the Commonwealth of Australia, 71% opposed.  In Australia the numbers are actually sort of closer, people are in fact more in favour of the idea with 37% of Australians supporting the idea, and 52% opposing. There are some very interesting kind of demographics, the key ones for the New Zealanders, basic oldies 60 plus who while still opposed are much more strongly supportive of the idea, in Australia surprisingly in the state of New South Wales, support is particularly strong and both countries the common element of support is much stronger amongst men than females.

STEVE MARSHALL So what is the main reason for people opposing the merger?

JOHN  It’s really interesting, in both countries the drivers for this are actually a bit different.  In New Zealand it really goes to the core of what New Zealanders have a very strong sense of national identity, and part of its national identity in the sense, things like the environment, race relations, you know cultural issues, you know basically New Zealanders see the country as quite a unique culture and there’s a real fear that this would be lost or compromised.  In the Australian point of view it’s kind of more sanguine in the sense that Australians just don’t think they’d get a lot out of it.

STEVE And for those in favour, why would they care?

JOHN  Well look, in New Zealand a strong driver is overwhelmingly the economic benefits that would flow from it.  This is the really key thing that sort of moves the debate along, and my view is the economic circumstances will really determine whether this comes to pass or not.  In Australia the economic imperative isn’t so great, in Australia it’s more of what I’d call the ANZAC tradition, the shared sort of cultural national values between the two countries.

REACTION TO POLL

PAUL HOLMES interviews PHIL GOFF, Sir DON McKINNON & PETER SLIPPER

PAUL  That’s the polling, you’ve just seen John Utting of UMR.

Joining us to debate the issues are the Opposition Leader and former Foreign Affairs Minister of course Phil Goff, and former Commonwealth Secretary General and Chair of the Trans-Tasman Business Circle, Sir Don McKinnon, also former Foreign Minister.  And also with us, very early this morning in Maroochydore in Queensland is the Australian Liberal National MP Peter Slipper, and Peter is a former junior minister in the Howard government, a frequent visitor to New Zealand, and past chairman of the Australian House of Representatives Constitutional Affairs Committee, and this committee several years ago recommended such were the synergies really between our two countries that union really would be desirable.  Peter Slipper I hope you can hear me and good morning.

PAUL  Let’s get quite clear on these figures, because they’re complicated figures, 41% of New Zealanders are prepared to open the debate about New Zealand becoming the seventh state of Australia.  41% of New Zealanders say well let’s have a debate, does that number surprise you?

PHIL GOFF    The 41% simply says, oh look yeah let’s have a discussion about it what are the pros, what are the cons, but the important figure is the figure that’s three to one against New Zealand losing its national identity being swallowed up as seventh state of Australia, and I’m not surprised at that, most of us as Kiwis are proud of our national identity, we can’t imagine a world without going along cheering for the Kiwis or the All Blacks, or you know our national soccer team, why would we give those things up to be swallowed up to be part, just another state in Australia.

PAUL  Are you surprised by that Don?

DON McKINNON   Not really. Look, it’s a debate that’s gonna go on, and it’s been going on, but look no political leader in New Zealand is going to win an election advocating this issue.  I believe it’s inevitable but it’s probably the next generation and it’s going to be driven by people who actually want it because of the trans-Tasman activity will be that much more intense.

PAUL  Let me look at these other more definite figures though, we have 52% of Australian’s are opposed to a union, but 37% of Australians favour a federation.  71% of New Zealanders are opposed, but a quarter support union, they say it quite straight, let’s go, a quarter of New Zealanders, that’s the figure that amazes me.

DON   Well you see we’ve got nearly half a million New Zealanders living in Australia anyway, so there’s a tremendous number of family connections.  A lot of people going backwards and forwards and look where our incomes are separating.  I think there’s a lot of people thinking well if we’re gonna get that poor in relation to Australia maybe we should be catching those coat tails, that’s something that’ll be continually debated.

PAUL  Let me go to Peter Slipper now the Liberal National MP.  37% in this research, 37% of Australians want union, now what do you make of that figure?

PETER SLIPPER  Well I think Australians basically are relaxed about the issue.  I represent more New Zealanders I suspect than any member of parliament in the world other than someone in the New Zealand parliament, because there are 20,000 New Zealanders here on the Sunshine Coast.  I think it’s unfortunate that when the survey poll was taken such an emotive question was put, I mean there are many other issues of closer association, things like a single currency, maybe there could be a trans-Tasman federation whereby the six states of Australia and New Zealand together become a confederation with equal rights on either side of the ditch.  I just think that in 2010 people are starting to look at what we can achieve together, and our shared values, and it’s not about our becoming the west island or it’s not about our forcing the All Blacks to don Wallaby colours, I think it’s about how can we improve the quality of living for people on both sides of the Tasman.

PHIL    Yeah let me agree with Peter on that.  Look I disagree with Don’s thing that it’s inevitable, I don’t think New Zealand will ever submerge its identity into Australia, but obviously we want to get the best of both worlds and to a large extent we’re doing that, as Mike Moore said before, since 1983 we’ve had Closer Economic Relations with Australia, our trade has grown faster with Australia than any other part of the world, we have a single economic market that we’re working on under respective governments over the last five six seven years, I think we can get the best of both worlds, we can get the advantages economically of being part of Australia ….

PAUL  How can you possibly say we’re getting the best of both worlds, Australia’s booming along doing fabulously, we are falling further and further behind…

PHIL    And we’re very glad that Australia’s doing well because it’s our largest market.

DON   Well they are, I mean they are 20% of our export trade, 20% of our imports, they have a huge influence on our economy, and it is important that we eliminate all the barriers we can to better economic activity.

PAUL  Let me talk about what those further eliminations may be, but I wonder if there’s also a suggestion in the research that John Utting’s done that New Zealanders are inclined to cut off their nose to spite their face.  What do we make of this? Kiwis make it clear in our research, they thought union with New Zealand and Australia would provide the following, a better New Zealand economy, better Defence, better job security, better education, better lifestyle, better personal standard of living and of course make travel easier – despite all of that, a vast majority in our research believing a union would achieve all of that, no they still don’t want to have anything to do with a union, here’s what John Utting said about that.

John Utting:  ‘New Zealand is a bi-racial society, Pacific orientation, Australia’s cultural orientation is different, they’re pushing it apart, economics is pushing it together, it’s really the interplay of a balance of those two forces which I think will ultimately determine what happens.’

PAUL  See what I mean, culture and heritage over wealth and jobs and growth, are we silly?

DON   No well, I think I mean Phil made the very point I was making, no political leader’s going to win an election on this one, and I wouldn’t expect Phil to suggest it. I’m saying by the time the next generation comes round, technology, the movement of people everywhere, New Zealanders won’t want to be in the situation of paying taxes in both countries, filing different tax returns, all the time going through Immigration and Customs, they want to try and eliminate all those things.

PHIL    But we can deal with all of those things that Don’s talking about and we are dealing with it, you know for example now any money that’s in your retirement fund, your superannuation fund in Australia can be transferred to the KiwiSaver here.  We’ve got new electronic means and special cues for Australians and New Zealanders. But New Zealanders are proud of their culture, they are proud of their history, they are proud of their sense of identity.  As Peter said before Australians are more relaxed about it because we simply become a seventh state and they maintain their identity, but the other way around, we give away our identity, we simply become one small state in Australia without our own identity.

PAUL  Why do we have to give away our identity, I mean I’m sure the Tasmanians have an identity….

PHIL    Well to be part of Australia that’s what you are you’re Australian, and yet we are not Australian we’re proud of being Kiwis.

PAUL  Let me bring in Peter Slipper again, Peter your committee, this Constitutional Committee under John Howard, you said the strong ties between the two countries, and you were talking about the possibilities of further cooperation before, perhaps even a confederation, but your committee said the strong ties between the two countries the economic, cultural, migration, defence, governmental linkages, suggested an even closer relationship including the possibility of union, is both desirable and realistic.  What is in it for Australia?

PETER Well I just want to make the point, this was an all party parliamentary committee and it was a unanimous result.  What’s in it for Australia is less than what is in it for New Zealand, I mean we get access to a larger market, but it’s only a larger market by degree. New Zealand gets access to a much larger market. But I don’t think it’s a question of New Zealand losing its identity, because this would be a process of evolution.  I mean John Key and Kevin Rudd 12 months ago talked about a common border.  If the countries of Europe which spent most of the 20th century fighting one another are able to have a common currency, how much easier should it be for us to have one across the ditch.  Why on earth should an enduring power of attorney die when one leaves the airport in Brisbane to fly to Auckland.  I mean there are so many things that we could do while both countries remain two countries, the  process of integration could be evolutionary and I just think that by talking about New Zealand becoming a seventh state, that’s just about killing the process, because I can understand why New Zealanders don’t want to become a seventh state, but would they be prepared to become an equal partner in a trans-Tasman confederation, maybe a joint Defence policy, and so on.

DON   That’s the evolutionary thing that it’ll just go on for the next couple or three decades moving, and it’ll be people driven because the people, not the politicians, it’s the people that actually want freer movement, freer availability, freer access, and not have impediments.

PHIL    And that’s exactly what CER and a single economic market has been about.

PAUL  Peter Slipper what do you make of Phil Goff’s fears of losing our identity and having to sing Advance Australia Fair at Eden Park?

PHIL                Ha ha, Aussie Aussie Aussie oi oi oi.

PETER Well, or having the All Blacks sort of wearing Wallaby colours and so on – look I just think that is unhelpful to talk about that sort of thing because I don’t believe anybody wasn’t New Zealand to lose its identity, and what we should be focusing on perhaps is closer association in the shorter term.  There’s a long way to go to improve the CER agreement, there’s many more things we could do, for instance, mobile phone calls I’m told in New Zealand are extraordinarily expensive, why not allow all Australian companies to operate in New Zealand and vice versa, the consumer surely has to be the beneficiary.  Look I think that we can achieve much closer integration, while we remain two countries you know in the short term, until this people driven process asks the two countries to basically become even closer.

DON   But when we get politicians of this country beating up on Australian owned banks about every six months, that is not a good message, even though we know why they’re here. They’re going to be here for a long time, they’ve been here for a long time, but it’s one of those things that defines to separate us more than it does unite us.

PAUL  Peter what about a single currency now, I can’t see – well here’s what John Key the Prime Minister said about that when asked by Guyon last year about a single currency.

Guyon: ‘You seem to be saying, which I think is quite interesting and quite significant, that barring that you think it’s a good idea?

John Key:  Well that’s my point, I think it’s not a completely barmy idea, it’s not one of those things you can say well this is just madness, I’m just saying I think there are benefits and pros and cons.’

PAUL  So the question being, would New Zealanders be prepared to pay for their milk and bread and eggs at the dairy on Sunday morning with a ten dollar Australian note?  Peter would Australians wear a currency called ANZAC do you think?

PETER             Look I’m sure Australians would.  I mean Dr Cullen many years ago suggested a joint currency, I think Peter Costello as our Treasurer rather unhelpfully suggested that New Zealand was free to adopt the Australian dollar, but I just think that it would be better if we had a trans-Tasman currency, an Australasian currency. Of course there’d have to be equitable representational arrangements for New Zealand on the resulting Reserve Bank board, but when you look at the fact that Europe and look at the history of Europe during the 20th century, most of those countries are able to have the Euro, and how much closer culturally and historically and geographically are we.  I mean honestly we have a shared past and a shared future.

DON   Let’s pick up on Germany, France and Italy. Who would have thought they would have had the same currency now?

PETER And a common border.

DON   And that’s the evolutionary factor that we should be looking at.

PHIL    Hang on, there’s something more relevant in that, look at the situation that Ireland is in at the moment. Ireland is caught in very recessionary conditions having to trade at the value of the Euro rather than having their own currency. Look, if there’s going to be a currency it won’t be a common currency, it’ll be the Australian dollar, that’s the reality of it, that means that if the mineral wealth of Australia is doing really well and forcing up the value of the Australian dollar, that makes it so much harder for a whole lot of New Zealand manufacturers and producers, that will be trading at a dollar level that will be hugely uncomfortable and put a lot of them out of business.

DON   But if we concentrate on just the dollar and the All Blacks, nothing will ever happen.  We’ve really gotta go to those issues that are workable, need dealing with, and the big hard high profile ones they will evolve probably in 20 or 30 years time.

PAUL  But isn’t it extraordinary, let me go right back to the start that while Peter is telling us that even to ask should we become the seventh state of Australia, is probably inflammatory and setting all cooperation further back, you’ve still got 25% of New Zealanders in this survey who said let’s go?

PHIL    Yeah that’s the extraordinary thing, I think, when we can get the benefits of a closer economic relationship and a single economic market, what are the additional benefits of simply being the seventh state? As a Minister I frequently, and Don would have done the same, sat on joint ministerial councils with the Australians to watch the wrangling between the Federal government and the State governments. Frankly why would we want in New Zealand our decisions to be made in Canberra rather than here in Wellington?  In Auckland we’re worried about our decisions even being made in Wellington.

PAUL  Well they’re probably being made in Hong Kong at the moment aren’t they?

PHIL    Well I mean I think New Zealanders want to keep control of their own destiny insofar as you can in a multi-lateral world.

PAUL  Yes, so you won’t surrender sovereignty at all, okay.

PHIL    Absolutely not.

PAUL  Now there’s one other thing about this… Back in 1901, Peter Slipper you’ll be interested in this, the reason for the New Zealand parliament voting – it’s not just the 1200 miles and the slowness with which Australia could defend us and so forth, it was concerns that we, I think native affairs is what they called it back in those days, but the involvement between the colonial community and the Maori people was evolving and so forth, and there was a feeling I think that that could not be understood in Canberra, that you people weren’t too flash on that particular area.  That was a concern.

PETER Both countries have indigenous populations and both countries I think have understood the place that those populations have in the future and the past of the country and I think that we’ve moved a long way since 1901 in Australia, and I suspect also in New Zealand.  I just think it’s a complication but it’s one that could be worked through.

PAUL  Interestingly Don, in the research, when you do a breakdown of who is in favour or is opposed to any federation or confederation, or becoming the seventh state, the further right wing people are the more they want federation, or the more they want to become a seventh state. But Maori Party voters they are very very opposed to this idea.  Would the Treaty of Waitangi ultimately be a complete barrier to full integration with Australia?

DON   Well that is always a major factor in any New Zealand political decision and I think it’s one of those cases where its more a case of ensuring that Maori are equal partners everywhere, but do not underestimate the number of Maori that now live in Australia, and commuting back and forwards all the time.

PHIL    Yeah I don’t think that’s a make or break issue, I think it’s about national identity, it’s about making decisions in New Zealand for New Zealanders by New Zealanders, that really matter.  We can have a closer relationship, we can get the best of both worlds, submerging ourselves into Australia is not required to achieve that.

PAUL  Would the All Blacks Mr Slipper have to give up the black jersey, in any vision you have of a union?

PETER Oh look I think this is one of the issues that probably is very unhelpful to discuss, I think we could organise an arrangement whereby we had two national teams. Let’s look at the UK I mean they have England Scotland Ireland and Wales, and there’s no reason that we couldn’t do that across the Tasman.  But one point I’d like to make is I’ll be very interested to know what poll findings would be if the question asked was ‘Do you support closer integration or perhaps a confederation across the Tasman rather than New Zealand becoming the seventh state?’.

PAUL  Most interesting Peter Slipper, that’ll be our next question in the next poll, thank you very much for getting up so early on a Sunday morning in Maroochydore and all the best.  And Phil Goff for coming on and Don McKinnon, thank you very much.

PAUL  Just to repeat those poll figures – of Australians 37% are in favour of a union, of New Zealanders becoming the seventh state. Of the New Zealanders, 24% of people tell us they want to see a union.  But while 71% of New Zealanders are opposed only 52% of Australians are.

Neville Jordan Interviewed By Paul Holmes

PAUL Mr Jordan, good morning.  Let’s establish your bona fides if I may without being patronising, but some people may not be familiar with your extraordinary record.  You’re a businessman with a fascination for science, the only Kiwi to list on the NASDAQ, how did you achieve that?

NEVILLE JORDAN – Chair, CRI Task Force
Shall we start off you asked a wee bit about me.  I grew up in some very impoverished circumstances in Petone, and only in later years did I realise how impoverished things really were.  So I suppose that led to a certain degree of independence and creativity, in order to survive and do well.  Those characteristics then came to the fore when I had my own company, which as MAS Technology.  We looked at further development, and at that time in the mid 1990s things were going pretty well in the US and particularly on that NASDAQ Stock Exchange.  I spoke to people here about the possibility of doing a listing on that exchange, and was told that I was dreaming, you couldn’t do that.  So I think that creativity that independent streak came to the fore, I literally dialled 0172, found the telephone number of the NASDAQ Stock Exchange in the US and gave them a call.  I asked did they have a Vice President of International Affairs, it turned out they did.  I spoke to the person involved and gave him the parameters of the company, he said that was interesting, so I said I would see him the following week, and I did, and then the rest is history.

PAUL And then you got on the NASDAQ, fantastic.  But of course you are a very adventurous kind of a person Neville, you’ve motorcycled through the Andes, you’ve dived under Arctic or Antarctic ice, you’ve done 50,000 kilometres in yachting, so you’re a risk taker we take it, you’re an adventurer.  Is New Zealand science entrepreneurial enough do you think?

NEVILLE No it’s not, it is alive and well and there are extraordinary scientists and engineers, technologists in New Zealand, but apart from that we also need leadership within government to encourage those people, and then of course we need capital, both early stage capital and later stage capital to pull that science, the applied science and the engineering through to make the products or the services relevant to people, who will then pay money for those products and services, so there’s a continuum that we need, just good science or technology by itself is not enough.

PAUL Where are we going to get the capital?

NEVILLE The capital primarily I suspect will come from offshore.  We have some very very good support from the New Zealand government for really early stage capital, unfortunately New Zealand institutions are not at all interested in early stage companies, I suspect that will come from offshore.

PAUL Let’s talk about innovation in New Zealand, because actually while we think we’re very good No.8 wire people and tremendous world class innovators, perhaps we’re not.  A recent survey in February, IBM and Auckland University got together and they came up with an innovation index, a way of measuring New Zealand’s innovation, and they showed that New Zealand’s innovation rate has been flat for almost a decade.  Does that surprise you, and how do we change it?

NEVILLE I’m not sure how that innovation was measured, we can change it by, as we’ve put in the report, collaboration between the great repositories of science and engineering that we have, and that lies within the Crown Research Institutes, but also we shouldn’t forget the universities and nor the Independent Research Associations.  So it’s the partnering, the collaboration I think which will help propel New Zealand forward.

PAUL I should say also to be fair, in agriculture, forestry and fishing, the innovation has been very good, they rated very good through the decade.  Alright CRIs is what you’ve been looking at, that’s what you’ve reported to the government on.  What is first of all the purpose of the Crown Research Institutes, just simply tell us what that is please.

NEVILLE Our report has suggested that the  purpose should be to put one hundred dollars on to the New Zealand balance sheet, rather than just one dollar on to the balance sheet of a particular CRI, in other words as we develop the intellectual property the science, the engineering, the technology, which can help solve opportunities or address opportunities and help solve challenges that the country faces, then that intellectual property needs to be put out, licensed, or companies formed within New Zealand, rather than held just within a particular Crown Research Institute.  So in other words it’s getting it out into the market, that’s one of the keys here.

PAUL Well are they doing that, are they performing, because you talk about the CRIs having the capacity to be powerful engines of economic growth, are they doing that?

NEVILLE Yes that’s right.  It has worked a little in the past, there are some very good examples of it, but it’s not enough, and we’re saying that there should be more, and there is commerce and industry around that can absorb that science and engineering, and also there are companies yet to be started.

PAUL Alright, now this is something that Guyon was talking about with Dr Mapp and it’s the business of short term thinking over long term scientific development, and you say the trouble with CRIs at the moment I think in your report, the main trouble they’ve got is they don’t really know whether they exist to make a dollar or to increase the prosperity as you say by a hundred dollars, so can you explain that.

NEVILLE We’re very clear, one that the one hundred dollars prosperity is needed.  One of the other recommendations in the report is that government do take a look at what we’ve called the purpose of the CRIs.  Surprisingly it’s not very clearly spelled out, and of course over the last 20 years their purpose has changed as each individual CRI has developed it’s own personality, then some have drifted away from a core purpose, and that’s not a bad thing.  However we’re saying let’s redefine that and then within that let’s take a look at the purpose of each individual CRI as well.

PAUL Yeah so what you’re saying is there’s too much short term work going on at the moment because the CRIs are expected to produce too much revenue so let’s set some real and more money aside within the CRIs for some long term scientific development, which will increase the prosperity by a hundred dollars rather than one dollar.

NEVILLE That’s exactly right, but also we said that long term funding does not come without milestones, in other words we want the individual CRIs to certainly take advantage of that longer term funding, but also to take up the responsibility of performing to some milestones which are agreed to government, and also putting some of that revenue at risk if they don’t meet those agreed milestones.

PAUL Now one of the reasons that Simon Upton set the CRIs up as they are was to almost make them compete, so that we didn’t get a little bit lazy, and you are now urging – have we gone too far in this competing business, you’re talking about more collaboration?

NEVILLE We have gone too far, good tension, good healthy tension is good for any industry, for any company, and set of organisations, such as CRIs, there’s no question about that, however we’re saying that that’s gone a bit too far, there still needs to be a tension of course, but let’s go back and through defining the purpose of each CRI, looking at the gaps, looking at the overlaps, then I think we can get a better overall response from that science and technology group as a whole.

PAUL Does the government spend enough on research, science and technology.  I mean we’re well down the spending list on RS&T aren’t we, in the OECD tables?

NEVILLE My personal view is that we do not spend enough overall, but remember that’s government funding, as well as private funding, and it’s that private sector funding which is dismal compared with other countries.  So we need to increase the overall amount, not just that from government.  If we do talk about the government portion, what we’re saying is, let’s get some fundamentals right, and then be in a very good position to go back and convince government that more funding is needed, but those fundamentals have to be got right first.

PAUL But you know when you go on the internet, I was on the internet yesterday Mr Jordon and I’m looking at a Science Park in Singapore, 8000 scientists, a couple of universities, purpose built laboratories, incubation clinics, you know for young industries and businesses and so forth, I mean – and there’s one in Taiwan, they have them in Europe, have we missed the bus in terms of scientific development?

NEVILLE I’m not sure that we’ve missed the bus, it may be pulling away, and it’s an interesting set of countries that you talk about, even more so in Saudi Arabia where I was about ten days ago, there are seven universities being built right now in Saudi Arabia, a country that we’d not normally associate with science, engineering, technology.  So there are countries pulling away with their massive financial resources.  We have to compete with brainpower, with innovation, with creativity.

PAUL Are you hopeful the government are going to act on what you propose, because I’ve been doing interviews for years Mr Jordan about how we need to get innovation in science and research and development in New Zealand going, nothing seems to happen.

NEVILLE Paul if you look at the various responses that have come in as a result of the publishing of the report, they all look pretty good.  So all of us are very hopeful that government will in fact pick up on the recommendations and implement them, and if there’s one thing that we can do is implement them with haste because quite often it’s the speed of decision making, speed of policy making, speed of implementation which does enable us to complete with other countries.

PAUL And finally Mr Jordan, I thank you very much for being with us but I’d better hit you with the compulsory – it’s become the compulsory Q+A question about whether from your point of view as a very successful businessman, a venture capitalist, do you think that New Zealand can catch Australia by 2025?

NEVILLE To me the question is a bit of a nonsense.  I would rather think about catching other countries and the characteristics of those countries.  How about the industriousness of Vietnam, how about the overall economic activity of Australia, how about the happiness index of Bhutan, so for me it’s rather, let’s take a look at some benchmarks across all countries rather than slavishly just try and catch one country.

PAUL Neville Jordan, I thank you very much indeed and I’m sure Petone is very proud of you.

NEVILLE Thank you Paul.

PAUL All the best and congratulations on your success.

Response to JOHN KEY interview

PAUL So National’s plans for the year, what John Key has called his government’s crucial year of action, we go to the panel.  We’d better deal with the uranium shares.  Should the Prime Minister of New Zealand a nuclear free country, be the owner of however amount he’s got of them at 13 cents, not very good shares by the sounds of things, should he be the owner of uranium mining shares.

JON JOHANNSON – Political Analyst
Well I mean he’s got a blind trust right, so you know you’d like to think that he hasn’t got a clue what is included in his portfolio these days, but I think the wider question here is really about the use of overseas companies you know that may come in and do mining and that, and whether in fact a lot of this mineral wealth – you know the wealth could get repatriated with us just sort of clipping the ticket.

PAUL Well yes but the uranium shares, you know is it a bother?

PHIL O’REILLY – Business New Zealand
That was a sideshow, so really the issue here is how are we gonna make sure that the economy’s more successful.

PAUL Fair enough and we’ll get on to that very shortly,  Uranium shares bothers you?

MAXINE GAY – National Distribution Union
Yes of course it does, he shouldn’t have them, nobody should have them.

PAUL Alright let’s talk about the tax cuts he’s talking about, here’s what the Prime Minister said.

John Key: ‘From middle to higher New Zealand in my view on a straight GST income split they’ll be much better off, or they’ll be better off or much better off.  Lower income New Zealanders, those between 0 and $14,000 won’t be worse off they’ll be a little bit better off but not a lot better off because they don’t pay a lot of tax there.’

PAUL So I mean that is the question Maxine isn’t it, that the more tax you pay, when we get tax reductions, you know you’re gonna get a better reduction.

MAXINE The Prime Minister is attempting to sell the biggest tax increase in 20 years.

PAUL He says that’s nonsense Maxine.

MAXINE Well I want to dispute.

PAUL He’s talking about tax cuts Maxine, how can you say that’s an increase.

MAXINE He’s talking about increase in consumption tax by 20%, so it’s very difficult to see how low income people who spend 60% of their income staying alive, getting to and from work, can be compensated, so a 20% increase in consumption tax by personal income tax reduction, the money has to come from somewhere.

PAUL You’re saying there’s no way they can balance the GST rise against reduction for low income earners.

MAXINE Absolutely there is no way, the money has to come somewhere, it’s in order to give a significant and spectacular decrease in tax to the upper income earners.

PAUL Why would he want to do that, well he wants to keep graduates here for a start.  Phil O’Reilly what do you think?

PHIL This isn’t just upper income, this is plumbers we’re talking about, this is everybody above 70Ks on the top row, that includes many of Maxine’s members I suspect so this is really about getting some fairness in the tax system.

MAXINE When Phil O’Reilly and the Prime Minister talk about wanting to do something for the workers I think it’s time for the workers to be afraid, very very afraid.

PHIL The Prime Minister’s also said that he’s gonna look after the less well off, he made that point again this morning.  Now, the truth will be in the pudding of course, and one of the political difficulties he’s got is the people like us who are gonna double guess him for the next few months trying to work out what he really means, and I saw Guyon doing that today, but this is not just about the so-called rich listers, this is about plumbers and electricians all the rest, that go to Australia and don’t then deliver quality jobs in New Zealand.

PAUL Well of course it’s the Rich List he’s attacking is not paying what they really ought to be paying in terms of tax, and I mean Maxine go to the speech and you will see nothing but the word fairness written all the way through it.

MAXINE That argument says that if we reduce the top rate people will pay it more, that’s akin to saying if we reduce the price of cars, car conversions won’t happen any more.  I mean that’s a nonsense, it’s a complete nonsense.

JON I agree with Phil about the second guessing business, but I walked out of that speech on Tuesday and my comment to my colleague was, that sounded like an opening bid to me, and I think he wants us to discuss this and debate this, and there’s gonna be a hell of a lot of polling done by the ninth floor to find out what is actual political – you know what he’s gonna be able to sell.

PAUL Jon in that first part of the speech he painted a picture of what that achieved last year, 11,805 more elective operations, the P crack down, Plunket Line 24 hours and so on, this kinda stuff.  There’s a perception they didn’t do a lot last year, why is that?

JON Well I think it really emanated from the budget in the fact that you know he didn’t do a big stimulus as was done in elsewhere, and I think that fuelled the perception that  pretty much it was a status quo government, and I think that’s probably got to the Prime Minister and why you know in many respects this is a very elaborately constructed continuation of last year’s sort of policy programme.

PAUL What do you think on the business of perhaps if people don’t really look for a job Maxine after a year, well maybe they shouldn’t be getting the benefit, maybe that’s not fair to their fellow citizens.  I take it you would fundamentally disagree with that.

MAXINE Well that’s disgraceful, it’s completely disgraceful, we have 7.3% unemployment and we’ve already had the Prime Minister’s own admission that there are insufficient jobs, where’s the investment strategy that’s supposed to sit behind all this, where’s the industry policy that’s supposed to sit behind it.

PHIL He actually points to some of that in his speech as a matter of fact, but the media just didn’t cover any of that kind of industrial policy sort of stuff.  The  point I’d make is, I’d agree with Maxine a little bit on this, you need to be very careful about having a one size fits all welfare policy, just because someone’s been on the dole for a year doesn’t necessarily mean that they haven’t been trying, but if they haven’t been trying then I think the system needs to get quite ….

JON Then but you still have the problem, okay you chop a benefit at the end of the year, then what?

PAUL And at the moment we’ve got 72,000 what people between 18 and 24 not in training, not in work, and of course the longer you’re unemployed I spose the harder it is to get a job.

MAXINE And the effect of what has been talked about today will simply increase the inequality in society and all of the problems that come with that.

PAUL Yes he was hardly the Dark Lord of Mordor on this was he?

MAXINE Well people opposed to mining might think he is, what are we going to do ….

JON My thoughts from this money-go-round really is that okay it’s revenue neutral, so we’re still gonna have a deficit problem and it’s gonna be some years before they’re chipping away at the public sector is going to make any dint on that.  So you know I think they’re entitled to re-engineer the tax system to make it cleaner, but I just – I think some of the assumptions there are heroic about over like the depreciation, whether they’re actually going to get this 1.5 billion back, because these people can restructure their affairs.

PAUL Well we see there is much restructuring and thinking through by the government to be done before May of course.

*********

Response to Russel Norman and Doug Gordon interview

PAUL Alright so let’s find out what the panel thought about mining in the conservation land.  Does that debate show us a little bit about what this debate is gonna be like?

JON Absolutely, that was a microcosm of what’s going to occur over the next few years, because people feel emotionally attached to their place and it pits two different visions of New Zealand, you know New Zealand primarily as a place to live, versus New Zealand primarily as a place to do business, and people feel very heated about it in both camps.  So this is gonna be a rancorous debate and I think what the government has to do is make it very very clear to the public precisely what is being done, how they’re going to weigh this trade off between the environmental as Russel points out, and the potential mineral wealth as Doug was talking about.

PAUL It’s not just a green issue too, it goes to the middle classes doesn’t it, you know the Aucklanders with the house at Omaha Beach, with the place at Whitianga or Whangamata, you know who wants a mine over the back yard and great big trucks rolling up and down the road in the summer time.  So it’s got big capacity, big political capacity, do you think Phil?

PHIL Well one of the things that worries me about this whole debate is the absolutism of it, it’s ridiculous, so we’re gonna dig a hole and no tourists are gonna come, get outa here, so it’s really a case of what’s reasonable and how you work out that balance.

JON But we have not had the debate in this country about how resilient that brand is, and what the opportunity cost is if that brand is destroyed.

PHIL Precisely, but it’s because there’s been absolutism on the other side.

PAUL But we go to countries as New Zealand is, and we admire the natural beauty, we go to the Grand Canyon, we go to Yosemite, and we know they’ve got huge mining operations somewhere in that country, but it doesn’t stop us going there, what do you think, gonna be a big one?

MAXINE Well I found it interesting, particularly following Kim Hill’s interview yesterday with Sefton somebody or other who has written a book called The Resource Curse, and he made the point that just because you discover oil or minerals it doesn’t actually mean that the citizens in your country are going to be better off, and in fact in many cases they can be even more impoverished.  We have the equivalent of a mining industry here, we have white gold, and all the degradation that comes from that, and one of the fascinating things in Don Brash’s report looking at the gaps between New Zealand and Australia, was if you took Australian mining and the mineral industry out of the GDP per capita, and you took New Zealand’s agriculture and fisheries out, what you ended up with was the gaps that were exactly the same.

PAUL Alright, petroleum exports last year accounted for one billion dollars of revenue, 550 million of that was just clipping the ticket, it was royalties, I don’t see how that damages the country, but no you’re right about the absolutism.  I mean why can’t Russel agree to perhaps looking at every case, case by case when he’s assured by the Prime Minister who is also the Minister of Tourism that there’ll be very strict rules.

JON You need to turn down the volume and turn down the slogans on this Paul and just have logical debate about it, we’re already mining the conservation estate.

PHIL So you know the sort of absolutism of the debate really concerns me, but I’m a Kiwi too, you don’t want to go and destroy the natural environment in the way that we see in so many other countries.  So this is a real New Zealand debate I agree.

JON But to have that debate you need a lot of information so people can make informed decisions.

PAUL If you look now at total revenues from mining in New Zealand being two billion a year and it could be by 20-25 250 billion, god where’s the argument.  Jobs.

MAXINE Well in a free market world price environment it’s a fallacy to say that the citizens in that country may well be better off as a result of that, the fact of the matter is that they aren’t …

PAUL You shouldn’t be listening too much to old hippies on national radio.

MAXINE Well you and I can remember a day when we used to get free milk or subsidised milk, if the dairy farmers did okay.  It’s illegal to do that now, so similarly if we found oil and the world price for oil goes up it would be illegal for New Zealand citizens to be subsidised or have cheap oil, so it’s a nonsense.

JON I think what the Prime Minister needs to do as Phil was saying, we need to understand what terms mean, like there’s going to be you know special protections and looking at how they’re going to do it cleanly and all of that, so that we understand better what is being done.

PAUL Didn’t you know old Doug Gordon’s line though about how mining is in fact 36,000 people go to the Pike River Mine or something like this, so the mine can be a fascinating thing and a tourist attraction.

Now to the week ahead – what are you looking at happening this week?

MAXINE Well this week I think we’ll see increasing opposition to the government’s programme of tax cuts for the top end and rises ….  In addition to that we’re going to see ACC back on the agenda with you know the opposition to the privatisation and cuts with the rally forecast outside parliament in Wellington and the NZEI bus collecting signatures will be in Auckland to have a trial of industry standards.

JON Cos those of us not obsessed all our lives in economics the big politics this week is going to be the announcement on Tuesday about the MMP referendum and the Electoral Finance Act, and I think that’s actually going to shift our discourse off on to fundamental democratic stuff.

Points of interest:
– New mines on conservation land could be in Mt Aspiring National Park, the Coromandel Peninsula, north-west Nelson and Stewart Island
– 75 cents of every mining dollar stays in NZ, says Mineral lobbyist
– Green Party wants 13 percent of New Zealand land under Schedule 4 free of mines
– Minerals Industry Association calls for geological survey of country’s potential mineral wealth
– Gordon: Mines can be tourist attractions
– Norman: Government’s planned Conservation Fund from mining profits nothing more than “a bribe”
– Waihi: Greens say it’s a “very poor community” even with Martha Mine, miners say it would be “a ghost town” without it

The interview has been transcribed below. (Please note that the transcript is complete but may be hard to follow where the guests have talked over each other)

Q+A is repeated on TVNZ 7 at 9.10pm on Sunday nights and 10.10am and 2.10pm on Mondays.  The full length video interviews and panel discussions from this morning’s Q+A can also be seen on tvnz.co.nz at, http://tvnz.co.nz/q-and-a-news

RUSSEL NORMAN & DOUG GORDON interviewed by PAUL HOLMES

PAUL  As the Prime Minister mentioned in his speech last Tuesday many New Zealanders might indeed have been surprised to learn that petroleum is our third biggest export earner  after tourism, it is apparently.  Now he wasn’t to unlock other rich resources of mineral wealth in New Zealand.  Before the government’s stock take is even completed he announced he announced this week that he will allow mining on some of the conservation estate.

The conservation group say he’s buying a major fight, they promise not only civil disobedience but also an international backlash.

So a lot to be lost or much to be gained and already we see the US Greens this morning saying it’s insult to conservation what we’re planning to do.  

Russel Normal is Co-leader of the Green Party and Doug Gordon is with us from the Minerals Industry Association, an association that represents private sector companies that mine our precious metals, industrial minerals, aggregates and our coal.  Welcome to both of you.  Alright 30 seconds each to start us off, state your case, for or against.  Doug you go first.

DOUG GORDON – Minerals Industry Association
Okay, I’m for what the government is doing, it’s trying to close the GDP gap, it’s wanting to have a look at the minerals estate as a possibility for that, and that’s all they’re suggesting.  The only way we can do anything with the minerals is to know what we’ve got and where they are.  Saudi Arabia knows what it’s got, it’s oil and where it is, we know we’ve got minerals, we raised those potentials, the 140 billion to the government when it came in, but we need to know exactly where they are and we also need to know what the biodiversity is above them, so we can weigh rationally and come to a rational decision as to whether we should or shouldn’t access the minerals.

PAUL Russel – why shouldn’t we?

RUSSEL NORMAN – Greens Co-Leader
Well these are Schedule 4 lands, it’s a subset of the conservation estate which has the most important and precious part of the conservation estate on it.  We’ve reached an agreement as a country that – and people, who came before us put these lands aside, and we said these lands and this piece of biodiversity we’re gonna protect for future generations and we reached an agreement not to mine it.  What the current government’s doing is they’re unravelling that agreement whereby we agreed to protect our most important lands, on which we built a 20 billion dollar tourism industry, the reason that New Zealand’s known as clean and green isn’t because of mining, it’s because of those precious lands in the conservation estate, and that’s the agreement that we’re talking about unravelling.  So we will get rid of what is a public good, a public conservation estate and exchange it for private profit for overseas companies.

DOUG Already we have some misinformation there.  That agreement that was struck by the parliament in 1997 for Schedule 4 Lands does in fact allow underground mining on the Schedule 4 Lands. In fact in the Paparoa or wherever Pike River is, is in a national park, one of those lands, an underground mine, that’s the sort of thing we might get.

RUSSEL Coromandel for example, in the Coromandel Peninsula which is tremendously important not only to the people of Coromandel but the people of Auckland, it’s a very valuable place, about half of it is in Schedule 4, roughly speaking including the coastal areas, the reason we put that aside is because it’s so important to our tourism industry, and it’s so important to the people of our country.

DOUG The Minerals Industry is not suggesting that we role back Schedule 4.

RUSSEL Well you’re suggesting we mine Schedule 4 Land, that’s what you want to do, for overseas companies to make profit.

DOUG No no no we’re suggesting that we find out what is beneath those lands in terms of minerals.

PAUL Oh come on Doug, let’s not be cute….

RUSSEL If you’ve agreed not to mine it that’s fine.

DOUG No we haven’t agreed, there should be a public process and that’s what Gerry Brownlee is also trying to get through to the country when he says look right now under the law the Conservation Minister has the power of veto.

PAUL No Doug, we’ve gotta move along, because we know that he’s going to do a stocktake and that’s not gonna hurt a single tweety bird, but you fellows will want to go in and mine and that is the debate we’re having. But I mean there is a very good point in terms of the actual potential mineral wealth that’s there.  You tell me a very interesting thing about Saudi Arabia, New Zealand in relation to Saudi Arabia what is that?

DOUG Well the World Bank says we’re second only to Saudi Arabia in terms of natural capital per capita.

RUSSEL And that natural capital isn’t about the minerals, it’s about the natural environment, if you actually read the report instead of the  Prime Minister’s rhetoric about it, what it actually says …

DOUG It includes that you’re right, it includes that as well.

RUSSEL It’s about the natural capital, not about the minerals under the national parks, because the national parks are much more valuable to the tourism industry than they are to the mineral industry.

PAUL Let’s get down to some brass tacks, where would the new mining be, would it be in national parks?

DOUG This is the whole point, this is for the people of New Zealand and the government and the conservation interests and the mining interests to decide, it hasn’t been decided yet.

PAUL But if you look at where we think the mineral wealth is, you know it’s in the most beautiful parts of the country.

RUSSEL Mt Aspiring National Park.

DOUG It could be, Stewart Island, north west Nelson, the Coromandel, the Taupo volcanic zone.

RUSSEL All the important parts.

PAUL But I don’t know why you’re so emphatic, you see, why the defensive on this – because mining accounts as the Prime Minister says for only 40 square miles.

RUSSEL 40 square kilometres but that’s wrong…

PAUL 40 square kilometres in New Zealand, well whatever, but we already mine on conservation land.

RUSSEL That 40 square kilometres figure is not really right, it’s like saying that the forestry industry only uses the piece of land where they’re currently cutting trees, because in fact there are mining licenses across thousands of square kilometres off New Zealand, but we also know that our much more important industry in terms of long term sustainable income is the tourism industry.

PAUL Which is now 21 billion.

RUSSEL That’s right 20 billion dollars and we think that we need a long term economic plan for New Zealand, not short term extractive industries, we’ve done those in the past …

PAUL Is mining necessarily going to ruin the tourism industry, what do you think?

RUSSEL Okay, so we’ve done the kauri in the past, you asked me right, you asked me the question, the answer is that we need long term economic strategies which are based on our strengths around sustainability and embracing the new green economy which is happening globally,

PAUL Can’t we get some of our mineral wealth and still have the kauri tree we all go and look at?

DOUG There’s a win-win Paul, I think both things can exist in conjunction with each other. In terms of tourism, nobody wants to jeopardise our 21 billion dollar tourism industry, in fact 32,000 people go and visit the Martha Mine every year as tourists.  The Horizon Tourist Company run tours into the Oceania operation in Reefton which is in the Victoria National Park, and believe it or not tourists actually go and visit the Stockton Plateau that we’re seeing a lot of, that people are interested in that sort of thing.

RUSSEL It’s an extraordinary sight, it is an extraordinary sight. A moonscape, you might say.

DOUG And most of the heritage values on the conservation estate are all mine sites.

RUSSEL And so what you would say is what is the long term future of the last 13%, remember we’ve destroyed the biodiversity on most of the country, we’ve put aside 13%. They can have, they’re already mining the other 87%, we’ve put aside one fraction which is critical to our long term future and is also precious to New Zealanders, and they want to mine that bit.

PAUL Is there such a thing as clean mining Doug?  Do mining companies give a bugger about the landscape really, what about the tailings, what about the roads in, the trucks, the dusty trucks, the whole business.

DOUG Yes they have to give a damn about it, under the law they have to.  Even if Schedule 4 was removed in terms of a mantle of protection from some of these areas, there are incredible strictures that relate to access or conducting a mine, including insurances, bonds for clean up should there be a problem, and the protection of the biodiversity.  Of course we care, we’re Kiwis too.

RUSSEL What do you say about the Tui Mine for example where currently taxpayers are spending 10 million dollars to clean up a mine site, which was abandoned by the company that did it? And so we, not only do we lose the public wealth when you mine our conservation estate, but then we have to put our hands in our pocket again to clean it up afterwards, because you leave a great big mess.

DOUG Tui’s important.  Tui occurred between 1967 and 1973. In 1973 legislation was brought in to require clean up and rehabilitation and bonds, it was done under a piece of legislation that did not require that before, and the minerals industry in the late 90s drove an initiative to get that mess cleaned up….

RUSSEL And the taxpayers are paying for it, we’re paying for it.

PAUL Why are you so emphatically opposed to it because we make two billion dollars in our mineral wealth at the moment, the potential there according to the Prime Minister, according to other sources, is some 250 billion we could be making by 2025.  Why can’t we just decide on selective cases, treat each case as it comes along?

RUSSEL Because what we need is a sustainable economic development …

PAUL Blah blah blah …

RUSSEL We don’t need a short term extractive industry.  Once again it is short term and extractive.

PAUL No what I’m asking Mr Norman is why can’t applications be made and they be considered by the Minister of Conservation and possibly the Minister of Tourism, and the rules are gonna be very strict.

RUSSEL And they can on 87% of the land, but what we’re saying is that on 13% which is the last of the special places, the last of the biodiversity, we want to preserve those and protect those, and that’s why we’re building a 20 billion dollar industry.

PAUL Alright you’ve not answered the question, let me ask you this one.

RUSSEL I did answer the question Paul, it’s about long term economic development, it’s not about short term extractive industries.

PAUL Doug Gordon, where would the money go, how would we know we’re getting fair value for our minerals, these would be overseas owned companies probably majorly wouldn’t they?

DOUG Well you know contrary to a lot of myth, 75 cents of every dollar that’s earned out of mines actually stays in New Zealand.  What the Prime Minister I think was suggesting was that were we to uplift some of these minerals on conservation lands, and by the way the whole of the conservation estate right now is open to mining, so it’s a myth to say that that possibility’s not there.  He’s suggesting that some of those royalties go back into conservation protection.  

RUSSEL That’s an outrage, that’s a bribe.

DOUG Every year when we hear about the state of the environment we see the steady decline in biodiversity, wouldn’t it be a shame if right under our feet …..

RUSSEL Doug, what about the conservation fund….

PAUL No no I want to talk about jobs, [Russel] don’t jobs matter to you?  It’s all very well having birdies flying around in the bush, 72,000 kids, aged 18 to 24 are not in training, not in work.

RUSSEL And so Waihi, let’s take Waihi for an example right, Waihi’s a very poor community and the mine, having the mine there for many years, I think it’s 20, 25 years now has not resulted in Waihi becoming a wealthy community …

DOUG Absolute rubbish.

RUSSEL I want to address the Conservation Fund ….

DOUG 45 million bucks a year goes into that community, 100 million comes out of balance of payments, I have relations there that have been there for yonks, when there wasn’t a mine there it was like a ghost town, it would be a ghost town if there wasn’t a mine there, and there are huge efforts on the part of Vision Waihi to make sure that when there isn’t a mine there that there’s sustainable operations going on there ….

PAUL Time once again is our enemy Mr Norman.

RUSSEL And so on the Conservation Fund let me just say the government abolished the Conservation Fund and now they’re proposing to give it back to us based on destroying the conservation estate.

PAUL Thank you both very much for coming in on the programme, I’m sure this’ll be the first of many meetings and many debates.

9:00am Sunday, January 31 on TV One

TVNZ’s award-winning political show, Q+A, is back on Sunday mornings starting 31 January at 9am.

Veteran broadcaster Paul Holmes and TVNZ Political Editor, Guyon Espiner return to scrutinise Kiwi politicians and the key decision makers in 2010.

“It’s a big year politically”, says Espiner. “The second year in a government’s term is the action year, the time when they try and push through change and really get stuff done ahead of the next election.”

Espiner and Holmes are committed to continuing what they started in 2009 with Q+A, “we want to get these guys to put it all on the record”.

He believes the value and reward of Q+A is the longer interview format, “it really does give Paul and I the chance to drill deeper, to get commitment and clarity from the people whose decisions really affect our lives”.

Q+A will continue with ‘The Week That Was’ and ‘The Panel’ in 2010, which will include the return of Dr Therese Arseneau and her insightful political analysis.

Espiner won’t be drawn on who the first guest on Q+A episode one will be, but hints, “it’s an important political figure who will have to take significant political risk this year, and we’re hoping they will talk freely and frankly about the year ahead with us”.

Watch the first episode of Q+A, Sunday 31 January at 9am.

The Q+A interview with Prime Minister John Key is transcribed below.

The full length video interviews and panel discussions from the last episode of Q+A for 2009 can be seen on tvnz.co.nz at,  http://tvnz.co.nz/q-and-a-news

Q+A is scheduled to return to TV ONE on Sunday mornings in early 2010.

JOHN KEY interviewed by GUYON ESPINER

GUYON
Thank you Prime Minister for joining us on the show, we appreciate our time this morning.  Let’s start there with the economy and let’s take you back to something that you said on our very first show in March.  You said that by the end of 2009 or early 2010 we’d be starting to come out of recession, and I quote to you, you said that we would actually be starting to come out of it reasonably aggressively.  Is that the situation we find ourselves in this morning?

JOHN KEY – Prime Minister
I think it’s a fairly accurate description actually, the second quarter of this year we’ve already grown, earlier than the Treasury and the Reserve Bank anticipated we would, we don’t know the numbers for the third and fourth quarter yet.

GUYON Reasonably aggressively though?

JOHN Well my expectation actually is the fourth quarter will be quite good, third quarter won’t be bad either, and obviously we’ve gotta come into 2010, so I think if you look at it on balance I remember, I think it might have been you stopping me on the way to a caucus stand up once saying that there was a latest economic forecast our unemployment rate would top out 11%.  We’ve now got the Reserve Bank taking the peak expectation of unemployment down to 6.8%.  So I think the government has navigated a very difficult pathway.  There were those who wanted us to have the slash and burn, I think that would have driven a much deeper recession, those who wanted us to spend a lot, and I think that would have ultimately encumbered future generations.  I think we’ve navigated a good pathway and we’ve taken the rough edges off the recession and kept people by and large in their jobs.

GUYON You mentioned the Reserve Bank there, but Alan Bollard this Thursday, he compared our situation with Australia and he wasn’t that complimentary, he talked about Australia riding a new minerals boom, selling heavily into China, and having avoided recession, and this is what he said about New Zealand – New Zealand has had a recession and the pick up is slower and more vulnerable – he doesn’t sound nearly as confident as you are.

JOHN Yeah well let’s understand the first thing, we went into recession earlier than pretty much any other country in the developed world because the Reserve Bank put us into recession, and that was to take the edge off the rising housing markets, we actually went in a lot earlier than other countries.  The second thing is, yes it’s true, Australia does have a big mineral boom, and it does have a big opportunity with China, so do we, our exports increased to China by 62% since we signed the FTA.  We’ve got a different kind of base, it’s largely agriculturally based, although minerals do form part of the mix and the Minister’s been looking at that whole issue and I think next year we’ll come back and talk to New Zealanders about whether there are greater opportunities to lift our wealth.

GUYON They are quite significant opportunities do you think?

JOHN Potentially yes.

GUYON Do you see this as a big part of our step change is the word you keep using, you see the minerals of New Zealand, and Bill English said this week, that we were as mineralised as Australia.  You guys are obviously eyeing this pretty seriously aren’t you?

JOHN Well I think it’s worth taking a stocktake.

GUYON But you don’t do a stocktake and then do nothing do you?

JOHN Yeah well let’s just have a look and see what’s there, there are a number of opportunities that might be out there, iron sands is an example of that, we know that there’s coal, we know that there’s quite a bit of gold.  Now we need to balance and I think this has been a government of balance, we need to balance obviously our 100% pure and environmentally strong credentials against our opportunities on the mineral front, but I don’t think we should completely dismiss them.

GUYON That’s going to be quite a balancing act for you as Prime Minister and Tourism Minister isn’t it, to be digging up potentially parts of the conservation estate in order to actually get our mineral wealth out?

JOHN Well firstly it would depend on where you do it and how you do it.  I’ve argued the case for surgically framed mining if you like, and we’ve seen that where the previous Labour government actually approved on the DOC estate for Pike River to have such a mine.  Now the early attempts to do something there were rebuffed and rightly so, because they weren’t structured the right way, but eventually they got there, iron sands actually don’t happen to be part of the DOC estate.  So let’s just see how it goes.

GUYON The mineral wealth is something that we often talk about in terms of the disparity with Australia, and I know that your government has a stated aim of pay parity with Australia by 2025.  Go back to Alan Bollard again, he said this week that we talk about catching up with Australian incomes, but we have better chances of taking advantage of their growth.  He’s right isn’t he to hint at the fact that you’re chasing rainbows here when you’d be better to ride on their coat tails.

JOHN Well he’s right that a strong economy in Australia helps New Zealand, so we should be grateful that they didn’t have a deep recession or actually didn’t technically go into recession, although I might add they measure their data in a slightly different way, if it was an apples for apples comparison it would be a slightly different picture, but putting that to one side, they are 25% of our exports, they’re a huge part of our tourism float.

GUYON Sure it’s because they do well, and I don’t want to interrupt you constantly, but he’s basically saying it’s unrealistic to catch their incomes.

JOHN No I don’t think he has said that, I mean he said yes it’s a big challenge, and everyone would agree with that, we’re not trying to lasso a horse that’s in a stationery position, we’re trying to lasso a horse that’s running at sort of full gallop and is likely to do so because of their position in Asia, and because of the natural foundation wealth of that country, but on the other side of the coin it also happens to be the home of our largest source of net migration, whatever the number is, and it’s a little unsure, whether it’s five six seven hundred thousand New Zealanders living in Australia, we can’t ignore that wage gap, if we do our best and brightest will leave.

GUYON Okay and one of the big elements that people talk about there is tax, now I know you’ve got a review underway, so that you’re not going to want to give exact details, but let’s keep this broad.  Generally you’re looking at trying to lower personal and company tax, and fund that potentially by raising consumption taxes like GST, or possibly some sort of property or investment tax.

JOHN Well the mix to the tax regime is possible, I wouldn’t rule it out, but nor do I necessarily rule it in.  Let’s say a mix is possible, let’s go away and wait and see what actually happens, there’s a lot of different factors out there and I think the Finance Minister was on last week talking about some of those options around the edges of property investments and the like.

GUYON Yeah he said that we would seriously consider changes to the treatment of investment properties.  Are you committing to some change there?

JOHN Well what we do know from the tax working group, is round about 200 billion dollars worth of investment in that area, and basically the Crown’s lost money on that investment.

GUYON Well they pay no tax.

JOHN That’s right.

GUYON And in fact they pull down 150 million dollars, is that fair?

JOHN No, probably on balance.

GUYON Okay, so you’re going to do something about it aren’t you?

JOHN Well we need to go and look at all that, I’m not going to pre-empt that on the last show of 2009.

GUYON You’ve said that it has to be fair and equitable this tax review, you’ve just told me it isn’t fair, that they pay no tax because they can organise their affairs correctly, are you going to do something about it?

JOHN That’s a basic principle of the tax system.

GUYON So they can expect change in some form?

JOHN Well it’s also about an issue that both IRD and other have identified the Treasury, and that is the robustness of the tax system over time.  One of the concerns about New Zealand is that we tax labour and we tax capital, and they are by far the most mobile.  Now on the other side of the coin we also want to put the right incentives in the economy, and we also very importantly don’t want to increase the tax burden, I mean we are running a deficit we understand that, but actually the last thing you want to do is put a big sea anchor on the New Zealand economy, and the more you tax people the more effectively you do that.

GUYON It sounds like there may be some change coming for property investors, what about GST, will you raise GST?

JOHN That’s an argument that the Tax Working Group’s put up.

GUYON Cos you’ve previously ruled that out.

JOHN No, what we’ve said is we’d need to be convinced of a good case.

GUYON But you have to fund these personal tax cuts don’t you, somehow?

JOHN Yeah, well again it’s about a potential change in the mix, that’s a possibility, but I wouldn’t put it any higher than that.  We need to go and have a look.  There’s a number of different factors in there, and what is true about New Zealand is, if you take our top personal rate it’s lower than Australia’s but it kicks in a lot lower, we kick in at $70,000 they kick in at $180,000.

GUYON In fact until you earn $200,000 you pay less tax than in Australia, and they’ve got a review over there you’re gonna have to move aren’t you.  Are you going to move that top rate down?

JOHN Well one in four New Zealanders who are tertiary qualified now live overseas.  We are rapidly ….

GUYON Are you going to bring that top rate down?

JOHN Well we’ve said we have an ambition to do that, and to get that down to a 33% rate to align that with the company rate.

GUYON Do you think that’ll happen next year?

JOHN Let’s wait and see.

GUYON That’s high level sort of economic policy I guess, can we bring this back into people’s homes, and quite literally, because one of the major financial destroyers of people’s wealth for thousands of New Zealanders has been the whole leaky homes nightmare.  Now there have been reports over the weekend that the government’s going to put only 10% into this bill that Councils will foot the bill to something like 26% leaving the homeowner with a 64% of the bill.  Is that correct?

JOHN Well firstly what I would say is that the Minister responsible, Maurice Williamson, has actually been doing tremendous work over the last 12 months in this area, and unlike the previous government we have actually fronted up and said look we need to try and find the pathway forward.  So what I can say is there’s a proposal currently before the Councils, and the way that proposal would in very broad terms work because it hasn’t been signed off, is one, the homeowner would always retain the right to sue, if they want to go down the Weather Homes Resolution Service they can do that, but the most important thing is we need to make sure that homeowners have an opportunity to fix their house so that they can move on, either sell the property or do whatever they want.  So there will be an option available to homeowners that will ensure that they are guaranteed access to funds, to be able to undertake the repairs in their home.  Now there will be a contribution from local government.

GUYON What will that be?

JOHN That’s a subject of debate at this point so I can’t go into those details.

GUYON More than the 26% that’s been in the media so far?

JOHN Maybe, but the important point here is that if we can ensure that a homeowner has guaranteed access to funds, and a guaranteed ability to repay, in other words if they’re older they may not have a repayment schedule, if their income is very low they may not have a repayment schedule in a hurry, we can allow inflation and we can allow rising house prices to let people fix their home and actually move on and move out of the situation.

GUYON So are you going to subsidise their loans, pay their interest on those loans, how will that work?

JOHN There’s a structure in there which I can’t detail today but all I can say is the basic fundamentals are guaranteed access to funds if people want to take up that option, the ability to have the house repaired and the ability to over time work their way out of the situation, and it will depend on their income what their repayment schedule looks like.

GUYON Right, so their eligibility will be based on age and income, is it true that you’re looking at the elder people, people over 65, is it targeted at that?

JOHN What I can tell you, in British Columbia, where they had a very similar problem that we had, they allowed older Canadians in that case to essentially capitalise their costs if you like and take it off their estate when they passed away, so there was no repayment costs.

GUYON And just finally on this before I move on to coalition matters, how much public money are you going to throw at this over the next decade?

JOHN Well it’s hundreds and hundreds of millions of dollars, and it has to be, this is potentially as identified by Price Waterhouse Coopers, an eleven and a half billion dollar problem which comes down to about a six and a half billion dollar liability if you’re looking at a ten year period.

GUYON So you’re looking at a billion over the next decade?

JOHN Could be that kind of number, but I think the important point here is we’ve got around about 44,000 homes with New Zealanders who are in a terrible position, they can’t borrow the money, they can’t sell their house, their health is deteriorating, their single most important asset is evaporating in front of them, and I think all New Zealanders would say that doesn’t actually seem fair given they relied on a lot of other factors, not least of them being the Councils, and they would argue the government.

GUYON The remaining time we’ve got this morning I’d like to talk about your coalition relationships, both in terms of the policy progress they’ve made, and the state of the relationships.  One of the big outstanding things that ACT wanted was a bill which you’d said you would support, which would be essentially a cap on government spending, a cap on the growth of core Crown expenses – will that happen?

JOHN Well that’s largely in place if you count a one billion dollar increase, we’re increasing our expenditure by 1.1 billion.

GUYON But sorry Prime Minister, a law, it’s a very big different thing, will that happen?

JOHN Well, that is subject to debate, but I’ve never been a great fan of those laws, and the reason for that…

GUYON So you won’t give ACT that?

JOHN Well it’s a subject of debate.

GUYON But you’re not very keen on it?

JOHN Well it depends how the law works, but generally it’s been proposed as a law, which is a percentage of GDP, so let’s say 30% of GDP in government expenditure can’t be greater than that, and the problem you have with that, is in a recession where GDP is collapsing you actually have to dramatically shrink your expenditure and that worsens a recession, as was the case in Colorado.

GUYON What sort of mandate does Rodney Hide have to talk about reducing government expenditure when he’s been taking his girlfriend on these international trips, which happily coincide with weddings, we learn he quietly paid back thousands of taxpayers’ dollars after taking her on a holiday to Hawaii.  Does he have any mandate now to talk about other people tightening their belts?

JOHN Well I believe he does, I mean he’s really making a case very strongly, and he’s actually right that the quality of government expenditure is often low and that we need to do a better job there.  Now you know ACT will always have a slightly different prescription to National on the best way of achieving matters.

GUYON I mean the public would be looking at that, a lot of them, and laughing at him asking us to tighten our belts after what they’ve seen, I mean do you not agree with that?

JOHN Well it’s difficult to characterise one individual Minister when you look across the parliament and say exactly the same time that Rodney Hide took that perk, so did a whole lot of people right across the parliament, and it probably speaks a bit more about the whole structure of the benefit scheme that operates in parliament, and it speaks about the transparency regime that we now live in, and what I’ve tried to say to my MPs and actually other MPs as well, is look we live in a different world now, it’s open, it’s transparent, you are going to have to justify to the New Zealand public what you do, and that you might need to change your behaviour on the back of it.

GUYON He says you’re the do nothing Prime Minister.

JOHN Oh look, I think you’ve gotta accept that actually in the context of being light hearted banter not a serious comment.  I don’t think Rodney Hide would seriously believe that.

GUYON We heard Fran O’Sullivan, a very respected journalist, just tell us a few minutes ago that he’s been saying those kinds of things at other meetings and saying that he’s the man who can slip things through Cabinet cos you guys aren’t watching.  I guess the point I’m getting to is, is your nice guy relaxed sort of manner, does it reach a point where you actually have to say this isn’t good enough, you can’t do those sorts of things without consequences?

JOHN Well unfortunately the vast bulk of people who come into parliament have A type personalities, so they are going to promote themselves, and it’s not unique to Rodney Hide, it’s right across probably the whole 120 MPs.  So everybody thinks that they make the biggest contribution in parliament, that’s just the way it is.  I’d rather stick to the record of the government and its long and expansive, whether it’s the 180,000 homes we’re going to insulate, whether it’s the bonding of doctors and nurses and teachers, the billion dollars of tax cuts, I could run through a big shopping list for you – the war on P.

GUYON So you don’t mind that one of your ministers is basically slagging you off behind the scenes?

JOHN Well of course that’s an unhelpful comment to make, but it’s also factually not correct and it’s in the context of probably some light hearted banter with his supporters, that’s just the way politics sometimes is, I don’t get too being  out of shape with it, I have a good relationship with Rodney, I support him as a Minister.

GUYON Can I talk briefly about Hone Harawira and his comments, did you think they were racist?

JOHN I thought they were offensive.

GUYON A tinge of racism…?

JOHN I was gonna say look they have a tinge of that, because they actually argue things the other way round, and racism goes both ways doesn’t it?

GUYON Yeah well should the Race Relations Commissioner be doing something about it, he says he can’t do anything.

JOHN Well he’s looked at it, he’s the expert in that area – I think the bigger issue here – well the bigger issue is – that’s an issue for the Maori Party how they deal with it, but you’ve gotta say the Maori Party is taking this issue seriously, and look again small parties, and it’s actually true of all parties to be honest, they have personalities which are sometimes larger than life, Hone is a bit of a shock jock MP, he’s that kind of guy, he says things which are sometimes completely outrageous.  People generally speaking don’t mind that, except when they sort of cross the line, and this one, it got over the line.

GUYON Just last question.  Seabed and Foreshore, you had an August deadline, November deadline, what’s happened to it?

JOHN Well progress is being made, I think it’s likely that the law will be repealed but I think before we repeal it let’s replace it with something that there’s agreement on.

GUYON What about just going back to the courts is that an option?

JOHN Could do, but we’ve been in discussion with the Iwi leadership and others about that, and I think their general view is that could be very expensive and not necessarily deliver the best outcomes, and my hope is that we can put up a piece of law that all political parties can potentially support, and this is a weeping sore, if we don’t deal with it it’s not gonna go away, just in the same way that Treaty settlements haven’t gone away just because of the passage of time, and I actually think we are navigating a way through that which will be acceptable to all New Zealanders, ensure that their bottom line rights of access are maintained.

GUYON Just one final point on that.  Let’s say they get customary right, some hapu and iwi get customary right, would you allow, or do you think it’s acceptable that they would then use that in a commercial sense, because a lot of iwi want to do that?

JOHN Yeah, well it’ll give them the right probably to have a discussion about what happens there, that is possible I guess, but ultimately let’s have a look at the final law, but they’re such small parts of the country that are likely to be there, I think you’d probably argue they have that right today and certainly the existing law as it stands gives iwi that right.  So I think what we’re really talking about is a situation where I think we can navigate our way through something, we can deal with an issue which otherwise future governments will be dealing with, and in a way that’s acceptable to the wider public.

GUYON Thanks very much Prime Minister for coming in this morning.

On Q + A this Sunday:

Guyon Espiner talks to Greens co-leader Metiria Turei about the future of the Greens. Having fallen below five percent in the latest TVNZ poll, what’s the next move for parliament’s third biggest party?

Paul Holmes interviews Roger Moore, the EU’s top diplomat for the Pacific. The EU is the region’s second largest aid donor, so what can they do in the wake of the tsunami. What’s the state of New Zealand’s relations with the old world? And as the EU pushes for strong action on climate change, what do European leaders expect of New Zealand?

Former National Cabinet Minister & New Zealand High Commissioner to London, Paul East and former Labour Party President, Mike Williams join Paul Holmes and Therese Arseneau on the panel.

Q + A is broadcast live 9-10am Sunday on TV ONE

Points of interest:
– Penalties for power companies: If electricity companies want customers to save power in a dry year they will have to pay each customer at least $10/week
– Government determined not to allow power companies to run power saving campaigns without wearing the cost themselves
– Electricity Commission faces reform: “there are changes to be made”, but he won’t say what
– Minister says it’s too hard for customers to switch power companies; wants it to take no more than 2-3 days
– Past governments have “socialised” power companies’ risks; Brownlee promises changes after ministerial review
– Minister “reluctant” to use state-owned power companies to drive down prices

The interview has been transcribed below.  The full length video interviews and panel discussions from this morning’s Q+A can be seen on tvnz.co.nz at,
http://tvnz.co.nz/q-and-a-news

GERRY BROWNLEE interviewed by GUYON ESPINER

GUYON
Thank you Minister for coming in and joining us on the programme this morning, we really appreciate your time.  It’s a diverse and complex portfolio Energy, I want to concentrate this morning on two aspects of this largely – whether we have enough electricity and how much we pay for that.  So let’s start with the really basic proposition of security of supply.  Last winter was the third since 1999 where New Zealanders have been asked to make serious savings, or face blackouts potentially.  Now is that just bad luck, or do we have a serious ongoing problem with the security of your electricity supply?    

GERRY BROWNLEE – Energy Minister
Well I think the thing that you look at is that we haven’t actually had black or brown outs since 1974, so you would say that yes there is sufficient to go around, the problem is that when we have dry years there appears to be an over dependence upon those public savings campaigns, and I wonder if some of that isn’t because the industry itself is structured in a way, and a market is set up in a way that means that some of those that become a little exposed during that time, in other words generators who have got a big retail supply to meet, but are out of water, in fact want to avoid very high spot prices, which would cost them, and the way to do that at the moment is to beat a path to the Minister’s door and say look let’s have a public conservation campaign.

GUYON Are you saying that those campaigns weren’t actually necessary, that we were conned into doing this?

GERRY No no I’m not saying that, I’m stopping short of saying that, but what I am saying is that I believe there are ways in which the industry can arrange itself, so that the exposure that you might have if you don’t have proper hedges against your obligation to supply – it all sounds terribly complex – should be in place so that you don’t have to end up saying well you know it’s the public who are going to have to get us out of this one.

GUYON It is complex so let’s simplify it.  At the moment when we have potential shortages of power, the Electricity Commission is the supplier of last resort aren’t they?  They come in and they buy that reserve power, and they put a levy on the whole industry, so no matter whether you’ve been irresponsible or not as an energy company, someone else can pay for it, they’re there to come to the rescue.

GERRY Well let’s leave aside any allegations about irresponsibility and simply look at what that situation is.  What it means is that we’ve transferred the risk form those who should be responsible for that risk, to the Electricity Commission.

GUYON And to the public at home who actually have to cut back their power.

GERRY Effectively we’ve socialised the risk in the provision of electricity, the security of supply.  I’d like to see that turned around and I think there are some things that we can do that would achieve that.

GUYON Well how are we going to do this because a review of that winter power crises suggests that essentially suppliers should be penalised if they fail to supply.  Are you going to look at doing it?

GERRY There are a number of options that you can take, some of it will relate to the way in which the market operates itself, and we’re going to be receiving advice on that very shortly, but I’m pretty enamoured of the idea that if in fact those who supply the industry come along to a Minister of Energy and say look it’s really bad, we’re going to have to have a public conservation campaign, then we have a mandatory arrangement whereby consumers are paid out for the power savings.  You might start at something like ten dollars a week, direct rebate to consumers, and sort of as the demand falls the payment rises.  I think that would mean that most of the generator retailers would say well look we don’t want to be that exposed, and I think we’d get a better deeper hedge market as a result.

GUYON So let’s just clarify that.  So the instant that a campaign to save power kicked in, the electricity companies, energy companies, would be forced to pay consumers perhaps ten dollars a week off their power bill as a penalty.

GERRY Depending on the structure to the consumer, but the average person in there, residential home, yes I think that’s the case.  Consumers responded very very well in the past occasions where they’ve been asked to save electricity.  The problem is that they are then taking all the inconvenience, they are taking all of the steps that are necessary to mitigate against the worst of the problem, where in fact there could have been some steps taken by those companies earlier in the piece.

GUYON So do you think that that will result in the fact that the energy companies don’t come to you and say look there is a crisis, do you think that that will enforce them to actually make sure that there isn’t?

GERRY What we would know is that if they end up at the Minister’s door, then there is a serious situation, because obviously they’re going to want to try and mitigate against such cost before that, and I think everything points to it.  We’ve got a body of information that’s in front of us that would lead me to think that.  This is just an option, it’s one of the things that we are going to have to look at.

GUYON It’s quite extraordinary though isn’t it, because the energy companies can’t obviously control the weather, I mean last year you had the lowest lake inflow since I think 1931, are we really saying that they have created a situation which is not real.  I mean if it’s simply the fact that they could avoid this, then wouldn’t they have been doing so?

GERRY Well look we have limited time to be able to discuss that, but it would be my contention that last year’s decision by the government to subsidise the price of diesel burnt in the reserve plant at Whirinaki, effectively meant that the spot price didn’t go through the ceiling, and so one large SOE wasn’t as exposed to loss as it could have been.  The question remains though, could they have made arrangements with other thermal generators that might have smoothed the price all the way through that, and the question is to be asked, why didn’t they do that.

GUYON Well exactly, because they were actually using hydro at a time when the lake levels were very low, and when thermal was actually available.  So the incentive to them was to actually use water even when the lake levels were dangerously low, wasn’t it?

GERRY Well there’s a question and an answer, and that’s exactly what I’m saying, I think at the moment we’ve gotta shift the responsibility from government, from the wider society consumers, back on to those who are responsible for the industry, and I think given that 80% of the industry is still government owned, that’s not an unreasonable position to consider.

GUYON So would this ensure that we didn’t get into a situation like we’ve had in Auckland quite a few times when we’ve actually had a serious supply problem?

GERRY Well some of those supply problems have been about transmission and distribution issues.  You can’t use this mechanism for that, but when there is a genuine dry year then this might lead us to fewer occasions.  I mean it’s just all too easy to say that there’ve been four one in sixty dry years inside a decade.

GUYON The responsibility for security of supply essentially lies with the Electricity Commission, are they best placed to do that?

GERRY Well look they were put in place in 2003, and I think you know they’ve done what the legislation has required of them.  The question is whether or not that was the best solution, and that’s what we’re looking at at the  present time.

GUYON It looks as though you are going to carry out your election policy which was essentially to disestablish the Electricity Commission, I know you’ve qualified that to a degree in your policy, but I put it to you that that’s what National wants to do, they want to scrap the Electricity Commission.

GERRY What we want is to have better arrangements around security of supply.  You know the damage that it does to a country where you know people, even in the tourist industry, find out that every couple of years electricity could be short.  What it does to those who are considering making investment in either commercial or industrial applications, and indeed what it does just to people making a decision about their daily lives, is very constraining.  If you want the economy to grow then you have to have very secure electrical energy.  So that’s the first point.

GUYON So they’re not doing their job then are they?

GERRY Well, we think there are some changes that can be made that will assist in getting that security of supply, just what they are I’m not going to say today.

GUYON But that future does not include the Electricity Commission?

GERRY Can I also say that one of the things that we’ve been concerned about is the duplication of effort, particularly when it comes to price path for new investments, the interrelationship between Transpower, the Commerce Commission and the Electricity Commission, needs to be sorted out, and we’re going to do that.

GUYON You looked at a review on that too didn’t you, which was …

GERRY We’ve got a review going on.

GUYON You do, but there was also the review for Business New Zealand which included Graham Scott who now works for Bill English as his Purchase Advisor, and it was review that you spoke very highly of, and they concluded that there was no ongoing role for the Electricity Commission, do you agree with that?

GERRY I think you’re going to always have to have a regulator, you’ve gotta have someone set the rules.

GUYON But a new one, a different one.

GERRY Well, I’m not going to pre-empt today exactly what comes out of the ministerial review.  I’ve told you that we are looking at rewarding consumers if they’re put in the gun in a crisis year.  We believe that that will have quite a sobering effect on the industry, and that we’ll get better results as a part of it.  The actual structure of it is another matter, and when the review is released there’ll be a public consultation period and the government will make some decisions beyond that point.  But we do know that we do have to have greater certainty around security of supply, and we do have to have a much less steep price path than we’ve had at the moment.

GUYON Well let’s talk about that, because that’s the second half of this whole equation, price.  Now they’ve risen something like what is it 72% over the last nine years, it seems an extraordinary rise in electricity prices.  Why are prices so high right now?

GERRY Well remember that that price rise is also against the background of a 28% CPI rise over the same period of time.

GUYON So it’s rising a lot higher than inflation?

GERRY Very big gap.  It would also appear, there’s quite a bit of evidence, that the price is rising ahead of the …… cost of new generation.  So there are a number of factors that come into this, and I think a lot of it is to do with the way in which electricity is marketed and sold in New Zealand.  A lot of it is to do with the structure of the industry itself.  We’ve got a ministerial review of some very knowledgeable people out there reporting to me very shortly, and when they report that’ll be a facet of what they’re reporting on.

GUYON And are you promising as Energy Minister to bring electricity prices down or at least slow the increase?

GERRY I’m promising to make every effort to slow the increase, and you know I think you’re seeing some very interesting things happen in the industry since the review has been announced.  You’ve now got electricity companies out there offering fixed prices.  I think if we do things right we’ll see a greater amount of competition in the retail area.  I think consumers themselves need to get a lot more switched on to how you switch power companies.

GUYON Well is it easy enough Minister to do that, because it takes a lot of people perhaps two or three weeks to actually switch energy companies.

GERRY On average 23 days, but it’s too long.  I agree with you, we need to do something about that.

GUYON What will you do about that?

GERRY Well I would like to see it reduced depending on all the technicalities of how it happens, I’m not the engineer that works this out, but I think two or three days should be the norm that is aimed for, so that you can pick up the phone, give the new supplier your particular connection number and simply switch over to a better tariff.  I think it’s very important that we actually get the information out there to people about how you do that switching.  There is a small percentage of population who know about that, but we’re going to invest a bit in the whole concept of managing your energy and also energy conservation.

GUYON Are you talking about a campaign, a public campaign to …?

GERRY Well there is one that is ongoing.

GUYON But to get people to switch companies, or to alert them to how they do this?

GERRY I don’t think we’re going to deliberately say look we want you to go and switch companies, I think what we need to do is say look your average electricity bill in New Zealand is something around two to two and a half thousand dollars a year, if you want to contain that price, if you want to get the best deal for you, then you need to look around at who’s got the best tariffs in your area, but more importantly there needs to be more competition in all those areas, so we’re going to do something about that as well.

GUYON Well let’s talk about competition because a recent report which received a lot of attention that was commissioned by the Commerce Commission, and Professor Wallick did that report, he essentially is saying that the four big players have charged New Zealanders about 4.3 billion dollars more than they actually should have over the last six and a half years.  I mean that’s a gigantic rip off isn’t it?

GERRY Well it’s a contestable conclusion.

GUYON Okay it might not be exactly 4.3 billion, but it’s billions isn’t it?

GERRY Well I think even that’s contestable.

GUYON Do you think that they have been using their market dominance to actually overcharge New Zealanders?

GERRY Look I think the part of the report that is most interesting, and what we are wrestling with, is the conclusion that when you do get dry years, as a natural consequence of the way we do things now, there will be market power exercise.  Now that’s actually not illegal.  I would love to sit here and say look under the previous government New Zealanders were ripped off, but I in all honesty can’t do that.  I think what we have to look at is what I said right at the start, get back to shifting the risk which is currently carried by the taxpayer and by they consumer, back on to the companies in the industry.  I think that’ll change things quite dramatically.

GUYON Sure, but let’s not pretend that you don’t have a lot of power in this situation.  Three of the four big companies that the professor named in his report are owned by you, owned by the state owned enterprises.  I mean is there a case at all for taking one of those companies or several of them, outside of the state owned enterprises’ legislation which enforces them to actually make big profits, and giving them more of  a social role or even more of a Kiwibank type of role that that has in the banking industry, to try and put downward pressure on electricity prices.

GERRY Well the first point is that they are owned by the people, not necessarily by the government, they are administered by the government, and therefore I think we are able to do some things, but any slackening of the commercial imperative effectively comes back as a cost somewhere in the economy to the taxpayer or the consumer, so I’m reluctant to do that.  But what I will say is that we shouldn’t confuse the price that people pay for electricity with the performance of the companies, if that were the case then you’d say a company like the Warehouse for example which has generally low prices may not be profitable, that’s not the case, so I think there is a performance issue that my fellow ministers, SOE ministers are looking at, and rightly so.

GUYON Can I just end with a couple of personal examples that Jim Anderton raised this week, I mean I don’t want to get into political discussion about Jim Anderton per se, but he talked about some constituents who came to him with some stories about some their bills that they were facing in the winter, and I just wonder what these people do.  A solo mother with an eleven month old baby got a power bill for $369 over a four week period.  I mean how are they supposed to pay those kinds of bills?

GERRY They’re certainly difficult, and you know we’ve taken some steps that Mr Anderton and his cohorts could have taken in the nine years that they haven’t.  Well firstly we’ve looked at how the industry is structured, the review is going on, we’re going to get good information from the review team very shortly.  There will be a public consultation process and we will do the changes that we think will affect someone like that, but more importantly we’ve also introduced the insulation scheme which for someone on a Community Service Card would mean that their property, whether they own it or not, could be insulated at virtually no cost, and that would mean that of course those bills would fall.

GUYON Okay, so that’s the only assistance that you would offer, I mean you’re not going to – like some countries they actually give pensioners or vulnerable low income people – actually subsidise their power bills.  Is the government looking at anything like that?

GERRY No we’re not, and it’s interesting that Mr Anderton brings this up, having been formerly the leader of the Alliance Party that was left of Genghis Khan, I mean he didn’t manage to achieve it in his nine years and I think what we’ve really got to do is look at the way in which the structure of the industry operates to ensure that the price path in the future is not as steep as Mr Anderton presided over during his nine years in government.

GUYON Alright, I think that’s pretty much all we’ve got time for this morning.  Thank you very much for joining us, Energy Minister Gerry Brownlee.