In the same week that the US voted for change in November last year, so, too, did New Zealand. The election marked the end of Helen Clark’s nine-year Labour-led government. Voters chose the conservative National Party, which had enjoyed a lead in the polls for many months. As the economy continued to worsen, prime ministerial hopeful John Key seemed a safe pair of hands.
Key was raised in a Christchurch state house by his Austrian-born mother. He led a career as an investment banker for Merrill Lynch and spent much of his adult life overseas, before returning to New Zealand in 2001 to stand for parliament. He rose through his party’s ranks and held the shadow finance portfolio before taking the leadership in 2006. With a net worth of NZ$50m, he is believed to be New Zealand’s richest prime minister.
As a ‘money man’, there are high expectations of Key’s ability to handle the economic crisis. New Zealand, like Australia, has not suffered great turmoil in its banking system, although many medium-sized financial institutions have gone bust. The business sector is feeling the pinch, and the government has not yet declared whether it will consider bailing out companies.Enjoying this article? Click here to subscribe for full access. Just $5 a month.
Key is focused on driving efficiency, protecting the labour market and stimulating the economy with his party’s long-promised tax cuts programme and infrastructure developments. He wants to expand New Zealand’s relationship with Australia and explore the possibility of a joint economic market. Although the two countries’ interests are similar, Key promises to promote New Zealand’s own ideas about how the Asia-Pacific region should be shaped.
Most people are frustrated about the condition of the economy. You have a strong business background. Has that made you stronger or weaker in the eyes of the public?
I’d like to think it has added value to my role. My job is extremely consumed with economic issues at the moment, and it will be for the foreseeable future. One of the reasons that the New Zealand public elected the National Party was that they saw us as strong economic managers, at a time when New Zealand was facing economic weakness. I’m very confident that we can take New Zealand through this recession and come out the other end stronger.
Some believe that the current economic crisis proves neo-liberalism has failed, that we need to find a new ideology to underpin our governance and economy. How do you view that argument?
It depends on how you apply it. My view is that capitalism is alive and well, and it will be the basis of our economic advancement. That doesn’t mean we don’t need to reflect on the causes of the credit crisis and put in safeguards. We can clearly point to the excessive amount of leverage, our inability to deal with asset bubbles, and the lack of control around certain institutions, particularly some of the banks, which were out of control. Those issues need to be dealt with, but I don’t think we’re going to see a reversal of capitalism.
Before the financial crisis hit, you used Ireland as an example of economic progress. What can New Zealand learn from that country?
Ireland used tax policy to drive inbound investment. We have to realise that foreign investment is dispassionate; it’s not parochial. It’s about economic returns. New Zealand has strong competitive advantages in many areas. We have a unique tax credit system which encourages investment. We must also ensure that our government is seen as ‘business-friendly’, that our operating environment is welcoming to foreign business, and that the government is behaving in a predictable way. I believe we are ticking those boxes.