OFFICE OF THE PRIME MINISTER

POST-CABINET PRESS CONFERENCE: MONDAY, 9 MARCH 2015
TRANSCRIPT

OFFICE OF THE PRIME MINISTER

POST-CABINET PRESS CONFERENCE: MONDAY, 9 MARCH 2015

OK. Good afternoon. So as I mentioned here last week, Cabinet has decided to legislate under urgency to remove the Remuneration Authoritys discretion in setting MPs' pay. I also said that the sole criteria for MPs' total remuneration would be the average public sector pay increase for the previous year. As we agreed, that legislation will be backdated to 1 July 2014. indicated this would mean a pay rise this year of between 1 and 2 percent for MPs, instead of the increase of around 3.5 percent set by the authority.

I can confirm that Cabinet has today agreed that the average annual percentage change in the public sector pay, as measured by Stats New Zealands quarterly employment survey, will from now on determine MPs' pay rises. That means MPs' overall pay rise for the year starting 1 July 2014 will be 1.5 percent, and it will be backdated to that date. Thats less than half of what the Remuneration Authority decided, and in my view is far more appropriate. Ive also made clear last week that the authority will continue to have the ability to change the mix of cash and non-cash items. That has no impact in terms of overall total compensation, but they retain the right to actually make those changes.

We have chosen the Stats New Zealand measure for three very good reasons. Firstly, the quarterly employment survey has been used by successive Governments for setting changes in New Zealands superannuation and paid parental leave. Second, the average annual percentage change smoothes out some of the volatility that can appear in the straight annual movements of the QES. And, finally, this measure will meet my objective of ensuring that MPs' remuneration changes are in line with the wider Public Service.

This indexing of MPs' salaries to the quarterly employment survey will be done at the same time each year, following publication of the June quarterly employment survey. Legislation covering this change will be introduced to the House under urgency this week, and we expect it to be passed the same day. We anticipate MPs will receive this more modest increase, including the backdated component, in the coming weeks.

Northlandwell, theres obviously been a lot of interest in the Northland by-election, and Im sure it wasn't lost on you that I was in the southern part of the electorate on Saturday, campaigning with Nationals candidate Mark Osborne. Mark, in my view, is an outstanding candidate. Hes a local guy who understands the issues facing Northland. Mark tells me the response hes been receiving in the electorate has been very positive, and hell be working hard to win the trust and confidence of the people of Northland over the next few weeks. Overall, the by-election is tracking well and we are gaining momentum, from what we can

You would have seen this morning that Mark announced with Simon Bridges that National will commit to replacing 10 single-lane bridges on State highways in Northland over the next 6 years. This is a positive announcement for the north, along with our 1.75 billion investment in the Pühoi to Wellsford motorway and the three-quarters of a billion weve already spent on local roads and highways in Northland since we came into Government. This will open up Northland for economic development and tourism, and make the roads much safer for Northland.

Just in terms of the House this week, the Government will progress a number of first readings, including: the Weathertight Homes Resolution Service Amendment Bill, the Radiation Safety Bill, and we intend to introduce the New Zealand Flag Referendums Bill. On Wednesday we will have a 2-hour Budget policy debate, replacing the general debate. And, finally, in terms of my own activity this week, Ill be here in Wellington today and tomorrow and Wednesday. Ill be in Northland on Thursday, and Ill be in Auckland on Friday, and then Ill be in Queenstown during the weekend. Questions?

Media: If Mark Osborne doesn't win Northland, I assume that the bridge-building will still go ahead?

PM: Yes, it will. Look, in the end, weve been very committed to the roading projects in Northland. Weve spent three-quarters of a billion dollars there in the last 7 yearsits 40 percent more than Labour spent in the time that they were in office. Were very committed to Pühoi to Wellsford. So, yes, these bridges need upgrading and they will be.

Media: Why has it taken Winston Peters joining this race to get the bridges in the first place?

No, I don't think thats right. I mean, weve spent three-quarters of a billion dollars so far on roads in Northland. We committed to Pühoi to Wellsford well and truly long before Winston Peters ever came along. But, look, this is a by-election, and in elections you spell out your policies. This is one announcement weve got. Weve got several other announcements well be making in the coming weeks. You would expect us to want to campaign, and for Mark to want to campaign on what he wants to achieve as the next MP for Northland.

Media. It does look like porkbarrel politics though, doesn't it?

PM: Well, I think its really important that actually we spell out to Northlanders what our intentions are. We do that in a general election, and we do that in a by-election, unashamedly.

Media: When did you decide?

PM: Sorry?

Media: When did you decide?

Well, last week we were looking through the various policies we want to

announceso they were finalised, I suppose, last week. Weve got another couple of announcements. Well be making another one this week on something else. So weve beenyou know, as part of the overall by-election strategy, we work through the particular policy announcements weve got.

Media: Are those 10 bridges justified on the cost-benefit analysis that the ministry has done?

PM: Youd have to ask Simon Bridges that. I don't know. I assume thats the case. mean, the ones that the local councils have lobbied very hard for, some of them, you know, without doubt would definitely have been done anyway. Theyve always been on the list, but the issue has been about their priority. What were saying is, look, well make sure we give them the priority over the next 6 years.

Media: Prime Minister, what do you make of Andrew Littles signal to Labour voters to Vote for Winston Peters?

Not terribly surprised. I mean, look, in the end, you know, what youve really got happening in Northland is a drag race between kind of the old sort of informal coalitionLabour, the Greens, NZ Firstversus National, and that makes the race a bit more interesting, and its obviously going to make it tighter, because instead of us versus Winston Peterswhich would be pretty straightforward, I would have thoughtits now us versus, you know, three or four political parties ganging up. But, look, thats the way it goes. Thats the nature of by-elections. Thats why theyre often a bit tight, and you couple that with a lower turnout, you know, it adds to the unpredictability. But were very confident. Weve got a good candidate, actually. I think this guys performing well. He knows the local area well. Hes very passionate about it. I think hed be a very, very good MP.

Media: And what do you make of Andrew Littles language? It was very guarded, although obviously a hint.

PM: Yes.

Media: What do you make of his language, not being upfront, essentially, about what hes doing?

Well, hes a bit all over the shop, because you look at some of the comments hes, on the one hand, been making about Winston Peters, but on the other hand, you know, clearly giving a signal. It wasn't that subtle that, you know, Labour voters should vote for Winston Peters. I mean, it is what it is. He may as well be upfront about it.

Media: Is it a deal?

PM: Yes, clearly. Look, I think theyve done a deal.

Media. It is a deal?

Well, I think they have. I mean, you know, I cant explain it any other way. I mean,

if he was serious about people voting for his candidates, its pretty clear he just needs to come out and say Labour voters should vote for their candidate. Hes not saying that.

Media: Why do you think hes not being open like you are these days quite open with your deals? Why is he not?

PM: Well, I think hes being a bit hypocritical. I mean, the Labour Party criticise us for these things but, actually, theyve done this sort of stuff before, and thats clearly what their intention is here. If its not, then he can clarify that straight away. All he needs to do is come out and say: every Labour voter should vote for the Labour candidate. I bet you won't hear him saying those words directly.

Media: He doesn't need to, does he, if youre doing it every 5 minutes?

PM: Well, the point is were pretty upfront about what we did. We did that in the last election. We were very clear about it. There was no, you knowThere wasn't any sort of hidden stuff about it. We werent the ones criticising people for doing it. But its not the first time theyve got people to tactically vote. They also did that, in my opinion, in places like Epsom, where they got Labour voters to vote for, you know, a National candidate.

Media: Going back to the bridges: this is now Government policy? Im just trying to get to the bottom of how a National Party candidate who isn't even part of the Government announces a policy that presumably hasn't gone through Government yet, or has it?

Oh, well, the ministryits going to be Government policy in so much that the Government is signalling quite clearly to Northland its committed to these projects. Its going to cost us, you know, between 32 million and 69 million. Itll have to be allocated as part of the process. So, you know, its not unusual for a candidate to go and campaign on things that are going to happen, and we see that all the time. I mean, I remember standing on the edges of the Waikato Expressway in 2008 saying: If Im Prime Minister, and we win the election, well, well be building the Waikato Expressway.” We did that. Last year, you might rememberI think it was at the National conference, from memorywe had Roads of Regional Significance, where we laid out the roads we were doing. So, yes, I mean, we

Media: But this isn't quite like that, is it? Because this is going to happen irrespective of Whether he is in Government or not?

PM: Yes. But the point is its a by-election. So Winston Peters has got his ideas. [Inaudible] happen to think theyre top priorities, but hes got his ideas. Weve got our ideas; and were campaigning on it. You know, politics is the battle of ideas. Thats what were doing.

Media: Are you bringing forward these announcements? If there werent a by-election, would you have announced this this week?

PM: Probably not this week, but we need to understand were in an election, and in election campaigns, you announce your policieswhat youre going to do. Theres no point in us, you know, waiting 2 months and saying to the people of Northland: Oh, by the way,

this is what were intending to do” I mean, theyre entitled to know upfront, before they vote, What our intentions are.

Media: Prime Minister, what was the last big policy announcement that you made during a by-election campaign?

Cantcant tell you. Don't know. Id have to go and have a look.

Media: But can you remember?

Well, the last one was today10 new bridges at, , thing.

Media: Can you recall

PM: Another one before that?

Media: Another policy promise during a by-election campaign?

Ah well, Ill have to go and check them.

Media: Do you think you might not have ever done this before?

Don't know. But were in the middle of a campaign, and we intend to make a number of policy announcements. If you think this is the last, youd better keep glued to the TV sets because theres plenty more coming.

Media: Would you have announced this if Winston Peters had not stood?

Yes, because we want to campaign to win that seat, and were in an election campaign. This is a policy for ideas, you know, and its a campaign on ideas. Weve got a candidate that were running. Weve got some good ideas for Northland. Weve got a very good track record up there. Weve spent three-quarters of a billion dollars40 percent more than Labourcreated lots of jobs, and weve got lots of ideas, and were going to continue to talk about those.

Media: Inaudible] appears though, isn't it? Its policy. I mean, what youre announcing is policy, which is distinct from an idea that Winston Peters has.

Well, it just shows the difference though doesn't it? I mean

Media: It shows that youre in Government

Were in Government and we can do things. Hes in opposition and he can just yap on about things. So you know, theres quite a big difference. Well be doing things, and we have been doing things for Northland, and I actually think our records a very good one. Thats why our party vote numbers are so strong thereI mean, theyre 50 percent.

Media: One of the most important sort of ideas thats at stake in this by-election is the future of your RMA reforms. But we don't see the draft of the bill at some point during the campaign?

Don't think its ready yet. It hasn't come to Cabinet yet, so given were running out of timel mean Im here next week for Cabinet; the week after Im overseas. So I would be amazed if we saw it before then.

Media: Isn't that the sort of policy you should be upfront and focus on before a byelection?

Well, in the end the critical point there is for the people of Northland. I think the RMA reforms really do matter, and passing those is critically important. So, in terms of needing the vote of the next Northland MP, absolutely thats critical. But they cant hurry something up thats a very complicated piece of legislation.

Media: On the GCSBl mean, this morning you were asked about Bruce Fergusons commentsis there a difference between mass surveillance" and mass collection? Can you draw the distinction between that?

Im sure the lawyers would tell you theres a difference but, you know, Im just not going to go and critique all of those different points. I mean, the fundamental issue with the GCSBand to a certain degree its true with the SIS-is that they canyou know, in the case of the GCSB, theyre our foreign intelligence agency. They gather intelligence about particular reasons; they have for many, many, many Governments' lifespan. They do it for good reasons, and theyre controlled by the law. But Im not going to go into what their particular targets are, what a warrant is raised for, you know, how information is actually gathered, and how its processed. And noby definition its covert. No agency does that. So in the end, you know, youve got a bit of, sort of in my opinion, what you sort of demonstrated with the moment of truth - stuff last year was the moment of inaccuracy. Because, actually, what they came out and said was just plain wrong. And in my opinion some of the assumptionsor the definitions of the assumptionsare wrong, and some of the way the information is presented is wrong. But Im just not going to go through all of those individual things because, in the end, thats just not the way you run those intelligence agencies.

Media: Well, you said youd resign if theres found to be mass surveillance out of GCSB. Does that promise apply to mass collection of information as well then?

PM: No, because in the endyou know, I was asked a very specific questionwithout recreating historyand that was: are we conducting mass surveillance of New Zealanders? And the answer is no. Thats the advice Ive had from GCSB. Its not capable of doing that and, legally, its not allowed to do that.

Media: But youve just said no to the question: “Does it apply to mass collection” So mass collection would not triggerif it was proved that there was mass collection, it wouldn't trigger a resignation under the promise youve given?

PM: No.

Media: So it meansbecause the possibility is surelyand I don't know why this cant be clarified, but the way GCSB operates is it hoovers up a whole lot of information and then just drops out the material that relates to New Zealanders.

Well, thats your assessment of it. And, look, in the end, the law is pretty clear. The law says you cant collect information about New Zealanders unless there are certain circumstances, and in the event that you collect incidental information about New Zealanders then, you know, theres a way of treating that. And so my view is, look, we have the law; we have the purpose and what its allowed to do. And, actually, you have an inspectorgeneral thats both had the resources massively increased and the powers significantly increased. And in theso far, in the 12 months that the new inspectorgenerals been in the job, she hasn't raised with me concerns. Im sure shell continue to do her work. Shell continue to look at these matters. No other previous inspectorgeneral has raised concerns with me. The assurances Ive had on a repeated basisbecause, as the former Minister, Ive asked them on numerous occasions, especially when the questions were being asked some time agoand the absolute assurances Ive had from the Minister is that they do not undertake mass surveillance against New Zealanders. Thats all I can tell you.

Media: Prime Minister, whats your view on the Reserve Banks proposal to increase capital requirements for rental property mortgages?

Well, I havent seen the proposal other than the sort of they havent actually brought it to me. Im sure they may well have spoken to Bill English about it, but they havent spoken to me about it, so I can only look at the media reports of that. Look, there might be some logic in that, but wed have to see.

Media: Because property investors say that this would increase their costs and put up rents.

Yes, and thats always the concern. Its one of the reasons why I don't like capital gains taxes, because I think, in the end, the instance of those capital gains taxes are actually paid by those people renting properties. But in the end, you know, the Reserve Bank, as we know, is trying to expand the number of tools it has in its tool box to ensure that it can keep interest rates lower for longer. I mean, given where inflations at, goodness know where those interest rates are going, but, you know, they certainly look like theyre going to stay low for quite a lot longer.

Media: What about if they looked at some form of income ratio to lending that is used, say, by the Bank of England?

I just don't have enough details on that. I meanstrikes me what the Reserve Banks trying to do isits clearly, you know, given what it was doing around the LVRs, was trying to ensure that theres not a bubble emerging in the housing market and that it can control where it sees the pressure points, but doing so in such a way that its not having to overall increase interest rates. I mean, in reality, given youve got inflation at .8 percent, and, I think, potentially lower when the new information comes out, then I think youve got a scenario where theres not an option, actually, for the bank to raise interest rates. So it does have to find other ways, potentially, in that sort of very benign inflation environment, to work out how it can control what it sees as pressure in the system.

Media: Don't they have an option to cut?

Well, I don't know. I mean, in the end thats a matter for the governor. But the Act is quite clear. The Act says that, you know, the banks got to work to have inflation at its midpoint of 2 percent. And its .8 percent, and all the signs I see is that potentially its going lower from that level.

Media: What would a cut do to the Auckland housing market?

Well, I don't know. I mean, you know, its great for mortgage holders, and, mean, its great for the, you know, probably 540,000 people in Auckland who own a house whosome of whom will have a mortgage. And its good for businesses and things. But overall, you know, clearly it also helps, you know, increase demand, because it makes it more affordable for people to buy a home.

Media: Are you concerned, then, the Reserve Bank might undershoot the targetfail to meet its policy target?

I just don't know. Imall I know is that there doesn't appear to be any upward pressure on inflation and, generally, if anything, it looks a bit like its downward. And the Acts quite clear about, you know, what point theyre shooting for, which is 2 percent.

Media: Right. So they shouldthey should move towards the target that continues to trend lower? The Reserve Bank should do What?

Its a matter for them. The governor has to decide.

Media: But you would take a dim view, equally, of an undershoot over a long period of time as an overshoot, in terms of the governors

PM: The governor has to manage it, and hetheyyou know, he or she has the flexibility to ride things out a little bit. But overall, theres a reason why the targets set at 2 percent. Thats whats, you know, perceived to be the correct level of underlying inflation in New Zealand.

Media: And how long would it be acceptable for the Reserve Bank Governor to be wildly outside that band or away from that midpoint

Don't know. I mean, youd obviously expect to cut them a bit of slack because, you know, they make their interest rate predictions orand changes for an inflation view 18 months out. You know, its quite a long way into the future, and they are working on lots of

different factors. So its a bit like turning around an oil tanker. Its not quite as simple for the governor, in his defence, at the moment.

Media: But, you know, is there ais there a-3 years too long to be outside the band?

Don't know.

Media: Did you see it trending lower over that 18-month period?

PM: Well, I wouldn't be surprisedI don't know for a fact. I just wouldn't be surprised, with everything see, that inflations lower. I mean, look at oil prices; theyre coming down. The exchange rates still been reasonably strong. Imported inflation looks to me to be pretty low

Media: So playing devils advocate, shouldn't they be doing something to bring it back up, in forecast terms, to the midpoint of their range sometime over the 18-month period?

Technically, thats what the Act would say, yes.

Media: Well, only technically? I mean

Well, as I said, you know, theres discretion and subjectivity in what they do.

Media: Isn't the Reserve Bank Governor acting outside his mandate, because hes got interest rates highera large part of that is to control house price inflationand thats not his mandate? His mandate is underlying inflation, and thats too low.

PM: Well, hisitsId have to go back and reread the Act, but his core responsibility is an inflation target, but within that theres a whole bunch of other criteria that sit around that, and thats, for instance, you know, employment and economic stability. And hed just be arguing, I think, that its within some of those other criteria.

Looks like you don't want me anymore. Byebye.

Conclusion of press conference.

ENDS

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