Press Release – TVNZ

PM: I don’t want to ban foreign buyers from buying & SERCO about consistent with other prisonsPM: I don’t want to ban foreign buyers from buying & SERCO about consistent with other prisons

Q + A

Episode 22

JOHN KEY

Interviewed by CORIN DANN

CORIN Good morning, everybody. We’re here at Sky City. It is the National Party’s annual conference. Time for a bit of reflection on the economy and how National in government is performing. The Prime Minister joins me now. Good morning, Prime Minister. If we could start with the issue of housing, which is arguably— Bill English talked about this as arguably the biggest issue confronting your government at the moment. There seems to be a feeling in New Zealand at the moment that owning a home is now only for the privileged few. How on earth did it get to this position?

JOHN I don’t know whether that would be strictly correct. I think you’ve got a far more pronounced issue in Auckland than you have in the rest of the country. There’s no question it’s always tough. It’s probably always been tough for people to buy a house. And you do have very low interest rates at the moment and actually fairly high degrees of confidence that people will have a job.

CORIN Strictly correct or correct? Because I want to put what you said in the House today. You said it’s ‘extremely difficult’ – those were your words – for low-income families to buy a first home. It shouldn’t be extremely difficult.

JOHN I think it’s always been challenging for low-income families. By definition, they are low income, so their capacity to establish a deposit or ultimately pay the mortgage is challenging. Those low interest rates do help. And actually, 90,000 people coming on board with a new home as part of KiwiSaver HomeStart, where we essentially give them a deposit, that’s a welcome thing.

CORIN Do low interest rates really help, though? Because we’re talking about an Auckland housing market, for example, where prices are running at 20% per annum. Low interest rates are just going to keep boosting that. How on earth is somebody going to even have the hope that they can get into a house in Auckland now?

JOHN Yes, in a practical sense, obviously interest rates matter. Because when people go to see the bank, the very first question they ask is, ‘What’s your combined family income? What’s your capacity to repay?’ But I accept the point you’re making. When Auckland house prices rise rapidly, then that’s a) not sustainable, b) it can challenge the fundamentals of the banking system. So you’ve got to be careful of that, as we saw in the United States. And thirdly, actually, while you make people who own a home wealthier – and there’ll be plenty of people in Auckland feeling quite a lot wealthier, actually – you’re locking out people who want to buy a home.

CORIN David Seymour, on the right of you, says it has got to a point where his friends – doctors and lawyers – they need parental help to get into the market, that it is for the privileged few. And this Auckland housing problem has been around for a while. Granted, you might have been a bit slow on the uptake, but you’ve known for a good solid year or so. And yet in that year, it has gone up 20%. Why haven’t you done more?

JOHN So if you put a bit of context around the debate. House prices doubled under the previous Labour Government, so this is not a new issue. Department of Prime Minister and Cabinet looked at that issue for Helen Clark.

CORIN So it’s not a new issue, so you knew there was the potential for that. Why couldn’t you stop that house price increase at those rates?

JOHN Because funnily enough, if you were to replay these Q+A interviews from 2008, 2009, 10, 11, we weren’t talking about this issue. And the reason was there was a global financial crisis. First-home buyers were concerned about their jobs, they were concerned about the capacity to sustain paying for the house, so the demand was very low.

CORIN Sure, I accept that. That’s why I make the point that it’s really only in the last year or so that the debate really has ramped up. Yet still, you can’t actually get it under control, even though you’ve done enormous amounts on supply, a lot of good work. It’s not going to address the short-term price issue. So are people going to lose hope?

JOHN Actually, I suppose that’s the point I’d push back on you a little bit. There’s no question there’s a lag factor here. So when we have a special housing area, our capacity to fast-track the release of land – of which the government gave itself the capacity to do that, and there’s over 100 of them in Auckland – it’s not instant. So when the Auckland Council says, ‘Yes, this is a special housing area with the support of the government,’ you still have to get the infrastructure put in place, you still have to get the actual land divided up and the titles established. It takes some time. If you look at Christchurch, where there was also fast-rising house prices and rising rents, we have got on top of the supply issue there.

CORIN A recent study, Prime Minister, pointed to struggling middle-class families in Christchurch paying enormous amounts on housing. People are really doing it tough there as well when it comes to housing.

JOHN Well, the data we have on Christchurch, as best as I’ve seen it, reflects now that house prices now have actually stopped rising in any significant way in Christchurch. Rents are starting to pare back a little bit. My main point is simply this: it’s not unique, what’s happening in Auckland. I know it’s cold comfort to those who want to buy a house in Auckland if they’re locked out of the market. But it is not new. We have exactly the same situation in Sydney and Melbourne and around the world.

CORIN Sure, but what I don’t understand is why, if there is a feeling where people are battling to get in, people are losing hope, people are talking about housing segregation, housing apartheid. Extreme talk. But nonetheless, why can’t you just stop the speculation?

JOHN OK, so I think the first thing you have to say to yourself is what can the government do? What are the tools in the toolbox? And they are – release more land so you can build more product, speed up the building process, take all of the additional costs off building, make sure that there are the people there to actually build it, make sure people can afford through interest rates to actually do all of these things, release government land. The government’s doing all of those things.

CORIN And you government deserves credit for putting all this effort into it. I’m not disputing that. But there is still enormous speculation. We know people are making thousands and thousands – hundreds of thousands of money, of dollars.

JOHN Again, the government’s addressing that in a number of ways. Firstly, what we’ve done is made sure that there are more tax inspectors, and as a result of those inspectors, we’ve collected literally hundreds of millions of dollars of tax revenue for people that would’ve otherwise not paid that tax.

CORIN Will you push the two-year bright-line test out further if you need to?

JOHN Look, I don’t think we’re likely to require that. The first thing we should do is establish that, which takes the ambiguity out.

CORIN But it’s the time frame, isn’t it? If you push that to 10 years, that would make a difference. Because people aren’t going to hang on to their houses for 10 years, are they?

JOHN Yeah, but I think you’d also say within any normal sort of cycle, 10 years is an awfully long period of time. So the family home is excluded anyway. It isn’t part of the bright-line test. So you’re really talking about investment going into rental properties — people buying holiday homes and the likes. So my view is a) I think a lot of people don’t understand the tax laws and are getting pinged already have and will do and should do. Secondly, the bright-line test and the registration of foreign buyers having to have a bank account – all of those things — they actually will help with the process. But I’ll just simply make the point Auckland is an attractive place to live. It’s an international city. When I became Prime Minister– You’ll remember me going into the Westpac Stadium just before I became Prime Minister and said, ‘This stadium leads to Australia.’ Well now, I’ll point out in my speech in an hour or so’s time, actually, that’s now reversed. And you’ve got more Australians coming to New Zealand. So we’re an attractive place. If I read the Australian papers – I’m sure you do – the front page of the Sydney Morning Herald every single day is full of exactly the same stories as in Auckland.

CORIN Attractive place. But a lot of people feel locked out. A lot of people feel there is now, we’re being told, is a landed gentry. And I just wonder, and I know this is a sensitive area, but we’ve got your son, Max Key in the front page of the Sunday Star Times this morning talking about wanting to be a billionaire. Great, ambitious, all the rest of it. But are you worried that when people see him, that they feel they haven’t got the same opportunities to get ahead in New Zealand?

JOHN No, I think he’s ambitious for himself, and, yeah, I’m certainly ambitious for New Zealand. I will, till the day I die, defend the record of this government for the less well off. I mean, we supported people through Working for Families payments and all sorts of entitlements in the worst of the economic crisis. We’ve worked hard to make sure the economy is strong. We’re the first government in 43 years to raise benefits. I know my history of growing up in a state house with a solo mother extremely well. You’re asking a simple question about should I put rules on my son around social media that other people wouldn’t. And I think, yes, of course he has to be conscious of the situation he’s in. But if I say to him, ‘Look, mate, you can’t have an Instagram,’ or, ‘You can’t run a Facebook,’ like so many kids, pretty much – let’s face it, most youngsters in New Zealand – except he gets a bit more attention, then one day, I think he’ll wake up and be a bit resentful. And I think New Zealanders say, ‘We want a Prime Minister, and we want a family that’s involved in the roll that I’m in – with Bronagh and the kids – and we want them to be normal. We want to let them be normal.’

CORIN Fair point.

JOHN I can’t win either way. If I lock him up, people will say—

CORIN I’m a father as well, and I accept the point you make. But the bigger point is you’ve got a famous story. You fought from a difficult situation. Can people still do that in New Zealand?

JOHN In my view, absolutely yes. And of course you’ll get howls of outrage from Metiria Turei and others, but I think they are being immensely negative. If you look at the life cycle of low-income people, they are many people who are low-income at one point. And as they work through their lives, through better education, through hard work, through attitude – enterprise and hard work — they do well. Look, yeah, of course I’ve got a bit of a famous story of by back story of Mum and the state house. But actually, I’ve met thousands of people who come up to me and say, ‘My situation is exactly the same as yours.’ Look, the young guy that cut my hair on Friday night, he’s 20-odd years of age; he is actually saving up to buy a house; he’s working in a hair salon; and he told me he’s going to own salons one day; he’s going to do well. He’s working hard. He’s not on Facebook every day, and he’s not actually mucking around, wasting his money. But young people will, through things like HomeStart, get a deposit, get them into an apartment. Maybe it won’t be the massive house in Remuera and Parnell on day one, but they will get the opportunity, and people can actually turn their lives around.

CORIN But even that affordable house is actually 450,000. I mean, it’s still huge numbers for someone on very low income — $50,000.

JOHN Okay, but a young couple. Let’s imagine two of them are earning $40,000 each – not an unreasonable amount of money to expect in Auckland – under KiwiSaver HomeStart, they’ll get about $50,000 if they’re buying a new home after five years. Most people remember how difficult it was to establish the deposit and get there. If you look in Australia – and I’m not saying that’s the perfect answer to everything – but the life cycle for young people in Australia in those big cities like Sydney and Melbourne does start in an apartment. It does often ultimately move to a house when they’ve got more children, and it probably moves back to an apartment when they’re retired.

CORIN Prime Minister, we’ll come back in a minute. We’ll have more from the Prime Minister here at Sky City. We’ll touch on workplace safety and of course the issues with Serco that have dominated politics during the week.

PART II

CORIN Prime Minister, the workplace safety legislation that’s been reported back to committee – a lot of people, the unions in particular, they’re outside protesting this conference – they feel that you have watered this down, that you have not honoured the promises that were made after the Pike River Mine disaster.

JOHN Well, I don’t accept that. There is substantial change coming in the workplace, and it’s substantial change that will lead to a safer workplace. And essentially, the government has said there are certain areas or industries which are much more likely to be dangerous, and we need better protection there. And that includes, obviously, construction, agriculture, forestry, mining. Then there is a higher level of accountability right through the organisation. Large and small organisations have to have a higher focus on workplace safety. But yes, we have done some pragmatic things: taking the farmhouse out as a place of work, making sure that volunteers don’t get stopped from just being good volunteers.

CORIN Sure. There’s one issue that I want you to clear up for me. So the firms under 20 staff, they don’t have to have a workplace safety officer, essentially. Does that mean a forestry company with 12 people doesn’t have to have a designated workplace safety officer?

JOHN The advice I’ve had of that is no, because I think in the regulations, and this is where ultimately this will get reported through, but if it’s in a high-intensity industry…

CORIN What about a security guard?

JOHN That will all be subject to debate. I can’t give you the exact answer. But I think if it’s a forestry company, they will actually have to have the elected official. But this is the point here. Some people will say, and the unions will say without an elected representative, you are weakening the position because you don’t have the whistleblower. The other counter argument to that is, a) it depends on the industry and the risk, but also, secondly, they can voluntarily do it if one worker asks for it, and thirdly, and probably most importantly, the responsibility then rests with the employer to make sure that all workers have a level of training and understanding about workplace safety. And one of the risks with an elected official is that one person has a high degree of understanding; the other workers have less focus.

CORIN OK. We’ll hear more about this in coming days, I’m sure. I want to touch on the Serco dramas of this week. More allegations today in the paper. Why is it that we’re hearing more and more allegations? The reality is we would never have known about any of this if it wasn’t for the media and Kelvin Davis.

JOHN Yeah, OK. So sometimes you’ll get things that just bubble up to the surface. Maybe they’ve been brewing for a period of time. If you go and have a look, I think you will ultimately see some stats around how Mt Eden prison and Wiri, or Serco, basically stack up against— certainly Mt Eden because it’s been in operation for longer – stack up against the general Corrections facilities.

CORIN Can we see those stats? Will you make them available? Because I think one of the missing bits in this debate is what’s happening in the other prisons.

JOHN Yes, and so the point will be, I think what it will show on reported instances that Serco is about consistent with the others, with the exception of they are a remand prison, so they have some different issues around transient people coming in and out. But just generally, say, sexual assaults or violent assaults, I think you’ll see that Mt Eden remand prison is pretty similar to the other prisons.

CORIN So are you saying that there could be unreported incidents in those other prisons as well?

JOHN Well, I think the point I think people would then come back at me and say is, ‘Yes, but these other things aren’t reported.’ And what I’d say to you is that, ‘Well, that’s unproven.’ There are always allegations. For instance, Nick Evans, the young man that’s died, basically what Kelvin Davis said was that he was thrown off a balcony and that’s what caused his injuries and that’s why he died. Well, I can’t answer that; I don’t know. But I know there, a) a coronial inquiry, very independent; b) the reporting I saw on the medical examinations of him were that he had a couple of medical examinations and they didn’t report lower-limb injuries. And, in fact, yesterday’s Herald reported inmates saying he wasn’t thrown off. So all I’m simply saying to you is we’ve got a lot of inquiries and we don’t know. But the government has two basic, broad points: one, this is what I expect of Serco, and if they don’t deliver it, there’ll be serious consequences.

CORIN The issue is here, though, that the government has been asleep at the wheel. Sam Lotu-Iiga– And I’ve seen ministers in select committees before. If somebody raises an allegation that people have been thrown off a balcony, then a normal course of events would be for them to get back to check that out, to get the officials to check it out. But he didn’t do anything.

JOHN Why I reject the notion he’s been asleep at the wheel: on the Thursday of last week, the information about the fight clubs emerged on the internet; by Sunday, there was an investigation. When that was raised in the select committee, they basically put it in terms of ‘the prisoner was thrown over the balcony’. Yes, Corrections maybe should have done more digging. But my understanding is that Corrections interpreted that as the Nick Evans case, and therefore there was the coronial inquiry.

CORIN But if you had been in that committee and you had heard Kelvin Davis talking about a case which was live – people knew there was an issue – and you had heard him say that there’s allegations of people being thrown off a balcony, I’m sure you would have asked officials to investigate that.

JOHN Well, I don’t know the discussions that Sam Lotu-Iiga had with Ray Smith and the Corrections officials. But what I know is their belief of what Kelvin Davis was talking about – I think what he was talking about – was Nick Evans. And all of both Corrections and the minister were aware that Nick Evans was the subject of a coronial inquiry. So there was an inquiry already in place.

CORIN Why should people have faith in your broader programme of using private companies in the social services, ie, a social bond involving a bank and a community provider for mental health services. Why should we have faith that there will be accountability and that we can trust them?

JOHN Because we’re delivering accountability now. If you look at Serco, these are the things we expect of them.

CORIN But only because the media raised it.

JOHN No. People can raise issues all the time, whether it’s through parliament, whether it’s through a variety of different avenues. The issue isn’t raising it; it’s what happens next. Here’s the issues: we expect Serco to keep prisoners safe, we expect Serco to carry out its contract, and we expect Serco to report.

CORIN With all due respect, Prime Minister, it is raising it. We would not be having this discussion if it hadn’t been for the Opposition and the media highlighting this issue.

JOHN It doesn’t matter how an issue comes to the surface. The issue is how it’s dealt with. And my point is, through the private contract we’ve got there are things we can do – a) we can have financial penalties; b) we can what we did on Friday – step in and take control; 3) we can cancel the contract. Actually, as I’ve pointed out earlier, there are highly likely to be other instances happening at other corrections facilities run by the public sector where the government doesn’t have those options available. So In my view, in the history of New Zealand over the last 30, 40 years, the private sector’s been actively involved with everything from health to retirement. If you are arguing that there’s no place for the private sector, I would say to you that will come at a tremendous cost in the reduction of service.

CORIN What about Serco being involved in, for example, child protection services? I did put that to the Social Development Minister, and she said yes, she liked the look of what they were doing, and she was open to it.

JOHN Well, firstly, Serco’s record around rehabilitation is very strong, as I understand.

CORIN You would still be open to them being involved in social services?

JOHN Well, in the end, the issue isn’t about the individual company. Cos we’re quite a long way away from that. The issue is – is there a place for the private sector to potentially, under contracted conditions, to take a role in some of these areas. And I think the answer to that is potentially, yes. It’s no different from saying, ‘Could a community trust or a community housing provider provide houses that have historically always been provided by Housing New Zealand – the government department?’ The answer is – if we can attract capital there and have better services, yes. We do that all the time in a variety of different organisations.

CORIN OK. I want to touch briefly on TPP. We’re running short of time. This week, Labour came out with their bottom lines for supporting it. The big sticking point, it seems to me is going to be the ability to— a future government, be it yours or Labour, banning foreigners from buying residential property. They say it’s a bottom line. Can you just clear up for me – if we sign the TPP, we won’t be able to ban James Cameron from buying more property, will we?

JOHN Correct. I don’t think you would be able to ban him under TPP. It’s important to note, of course, that China isn’t part of the TPP.

CORIN But if we do the TPP, could they then come back and say, ‘Well, you have to apply the same rules to us.’ So we couldn’t ban Chinese either.

JOHN Well, the issue with China is that when Labour signed the free trade agreement, they put in a clause in that contract that said, ‘If anybody else gets conditions, we get it as well.’ And so because we’re signing the Korean FTA, it means that that stops us banning Koreans from buying residential property either. But the point here is simply this – I don’t want to ban foreigners from buying residential property. I don’t think that’s actually good public policy that works. And actually, around New Zealand, there would be a whole lot of people who’d say, ‘I don’t want to stop an Australian buying a house in Queenstown or an American buying a place in the Bay of Islands or actually people buying a house in Wellington. What I would say to you is the government has to have control of the situation. It has to have tools in the toolbox. And we will have that. For instance, we could put a land tax on a non-resident. If you put in a high enough land tax on an annual basis on a non-resident, you can make it completely prohibitive of owning a home. So bans don’t work. Australia’s got them. They’ve been spectacularly unsuccessful.

CORIN Stamp duties. Is that another option?

JOHN Yup, they’re potentially options. There’s a range of options.

CORIN And you can do that without breaching the trade agreements.

JOHN Well, TPP’s yet to be finalised, so we’ll see whether the stamp duties are in or out. Every FTA and every double-tax agreement’s a little bit different.

CORIN Are you actually going to go back on these final state–? Cos we’re in the last two weeks of negotiation. So will your negotiators, because of this issue, go back and say, ‘We want to make sure we can put land taxes in if possible.’

JOHN No. Land taxes, I believe–

CORIN In general, are they going back there and writing in the clause, ‘We need the right to control this.’

JOHN We’re not proposing to go back and renegotiate. What is already in those clauses allow us to have, I think, far more effective tools. I just don’t think a ban, per se, has either been effective. It’s not widespread. I mean, for instance, this is the other issue – if you turn around and you say, ‘OK, as part of TPP, we’re going to have a ban so that people can’t buy residential property.’ If we want to say that, that also, by they way, means New Zealanders that want to buy a house in America can’t do it, because they may ban us. Let’s take a step back. My whole speech today is going to be about how New Zealand is thriving, doing well, internationally connected, multicultural, selling things to billions of people around the world. I happen to actually back New Zealanders to do well and succeed. Essentially, it’s a question of whether you believe New Zealand can compete on the world stage and be successful. And fundamentally, the view that Winston Peters is taking – and now increasingly, Labour – is the only way to protect New Zealanders is to quarantine them off and fortress New Zealand. Well, that has never worked in the history of New Zealand, and actually, New Zealand companies and individuals are amazingly creative.

CORIN We’ll have to leave it there. Thank you very much for your time on Q+A.

ENDS

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