Features | Politics | Oceania

John Key interview

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.

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.

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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.

New Zealand consumers are being told to spend their way out of the recession, but the statistics show that Kiwis have very poor saving habits. Isn’t the public receiving mixed messages?

They probably are. It wasn’t that long ago we were telling people not to shop, and now we’re telling them to shop. Look, New Zealand has different issues to contend with. We have been consuming about $1.15 for every dollar we earn. We are dieting on debt, and that is consistent with most of the developed, Anglo-Saxon countries like Australia and England. But we just can’t keep spending more than we earn. Our extraordinary reliance on foreign borrowing is also a weakness of our economy. We have strong Crown accounts, but 92 per cent of what we owe is owed to foreigners. That is a position we need to address.

Your government wants to create incentives for Kiwis to stay at home, but New Zealand has been unsuccessfully fighting the ‘brain drain’ for many years. Why don’t you just let it go?

‘Letting it go’ presupposes that we can control the brain drain. Actually, we can’t stop New Zealanders leaving and working in other countries. But we have a skills crisis and we need to plug those gaps. Students pay a certain portion of their tertiary education costs, but the bulk is paid by the taxpayer. We want to anchor those students’ skills in our economy.

One thousand Kiwis leave for Australia each week. Why doesn’t New Zealand work harder to attract migrants from other Western nations?

We’re already doing that. While Australia is an important market for us, in terms of people coming to live and work here, our largest market is still the United Kingdom. The net migration numbers remain marginally positive. We know New Zealanders want to travel, and that’s quite important. People return home with a different skill set, or new capital. We’re not trying to build a massive fortress around our country. But we believe that, if we can drive a faster, higher-growth economy, with greater opportunities, New Zealanders will want to stay here of their own volition.

New Zealand is sometimes criticised for being too parochial and inward-looking. How do you rate New Zealand‘s role on the world stage?

I don’t think we are inward-looking at all. As a small country we intersect with other countries in many spheres, from multilateral platforms like the United Nations and the Commonwealth, right through to regional groups like APEC and the East Asian Summit. New Zealand takes a global perspective. Our country is built on a bicultural foundation, but we have become a multicultural society. For a country that is so far away from the big markets, I think we continue to punch above our weight.

Kevin Rudd believes we need new multilateral architecture in the Asia-Pacific region. Do you believe the current structures, like APEC, are sufficient?

I don’t think they are entirely sufficient. New Zealand wants to strengthen bilateral relationships, particularly trade ties. Korea fits that mould, India is an important market, and so is Japan. The regional framework is strong, but we are prepared to support Kevin Rudd’s idea for an Asia-Pacific community. That idea has merit, as long as it doesn’t diminish the existing structures that New Zealand is part of. But there is always room for improvement. The Trans-Pacific Partnership, for instance, may allow New Zealand to effectively get a free trade agreement with the United States. That’s an example of the benefits of regional relationships.

As many Kiwi businesses start to feel the pinch of the recession, some may forego their efforts to reduce their carbon footprints. Won’t that come at a cost to New  Zealand‘s clean, green image?

I don’t think so. The recession is definitely putting pressure on the aspirations of some countries to combat climate change. New Zealand wants to take a very balanced approach. We want to play our part, but we are also focused on economic growth. The two can go hand-in-hand. It is important that New Zealand takes the issue seriously, but we don’t need to be a world leader on climate change. When it comes to preserving our environmentally friendly image, climate change is one issue people will measure us by. But there are other factors, like air quality, water quality. We are also developing sustainable energy, and our contribution to research and development in that area will be recognised.

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New Zealand has a strong history of innovation and creativity. How will you protect that progress during these tough economic times?

I hold high aspirations for New Zealand in that area, and we are investing money to support it. There are resource issues and personnel challenges. For example, we need to think about the number of scientists we are training. But science is a vital part of New Zealand’s future. We need to become more efficient, we’ve got climate change to deal with, and the demands of consumers are changing. We have a strong competitive advantage in areas like food production and tourism, and Kiwis will always get through tough times, because we produce what the world wants in a smart and efficient way.

Have you tried to gauge how you are perceived by the many Australian leaders you are building new relationships with? What is their impression of you?

That’s difficult for me to judge. I have been in politics for a relatively short period of time, but I hope they see that I highly value New Zealand’s relationship with Australia and intend to preserve and grow it. Kevin Rudd has been very kind to me; he has dedicated time and energy, and he has been considerate to us. An example of our mateship came with the [Victorian] bushfires. We sent fire-fighters to Victoria, but New Zealanders at every level wanted to help our friends in Victoria.

Before becoming prime minister, you would have had expectations about what you would be able to achieve in the international sphere. Now that you have been in the job for a few months, have you had to temper those expectations?

I don’t think so. I’m not unrealistic. We are a small country, and we punch above our weight. People listen to us because they see us as the ‘honest broker’. We take a lead in human rights, and we were the first in the world to give women the vote. We don’t want to overstate that; we don’t see our country as a world superpower. We are not deluded about how we fit into the world, but equally, I believe New Zealand should continue to advance the causes we care about. We add to the consensus, we add to the debate, and we can be an important voice on the world stage.