Post-Cabinet Press Conference: Wednesday, 1 February 2017

Prime Minister, you said it was unlikely that you would work with Winston Peters and New Zealand First. If it came down to it, would you be prepared to have them in a confidence and supply agreement and, indeed, have Winston Peters as your Deputy Prime Minister?

Well, look, the reason it’s unlikely is because we are a open—we are a party that believes in an open New Zealand, outward-looking, open to investment, immigration, and New Zealand First are an inward-looking party, who believe in a closed-up New Zealand.

So there’s big differences. But, as I've said, depending on the make-up of Parliament, we may be in the position where we would be negotiating with New Zealand First. Certainly, our focus would be on getting sufficient party votes for National so that we can continue working with the parties that we have now.

But would you have Winston Peters as your Deputy Prime Minister—yes or no?

Look, I wouldn't be ruling anything in or anything out at this stage. We've got an election year to run, an election campaign to run, a result to consider, and then negotiations.

Just for clarity, for the public—Winston Peters could be your Deputy Prime Minister?

Well, 'm not ruling anything in or anything out. We're not going to start negotiations today through the media.

Can we expect there to be electoral accommodations again in Ohariu and Epsom, and would you go so far as to withdraw a National candidate altogether?

Look, I think you could expect us to stick with a formula that’s worked pretty well for us but worked pretty well for stable government, so Epsom and Ohariu discussions are part of election year discussions from our point of view, and we'll just see how those go. But I think you could expect that existing arrangements that have worked would continue to underpin, you know, a stable National-led Government.

Do you expect the election to be fought over the economy?

Oh yes, I think it'll always be the central issue. And I think there'll also be an election discussion about who's fit and able to form a stable, cohesive Government, because one of the factors that I think will be become clearer through the year is that there is no longer a mainstream, moderate Labour Party alternative Government.

Are you concerned, though, in terms of the economy and your economic management, that despite growth running at 3.5 percent, wage growth is falling backwards and now only really at par with inflation—it’s not really delivering across the board, is it?

Well, it is delivering across the board to a bigger labour force than ever—I think today the figures show, for the first time, we've reached 2.5 million. But these things— always cycles in an economy. You'll go through a period where there's very large numbers of new jobs created—I think, last year, over 130,000 jobs; we were only forecasting 140,000 over the next 3 or 4 years. A very large number of new jobs created, a lot of people coming in the workforce, a lot of people who weren't active in the labour market now signalling they want to come into the workforce—that's why we've got the highest participation rate we've ever had—and as the cycle goes through, you'll see those things slow down and inflation, wage growth, pick up.

Is 1.3 percent acceptable, though? It should be coming through stronger than that, shouldn't it?

Well, as I said, with the big inflow of people who weren’t working now coming into the workforce, the rapid growth in jobs, it’s not surprising that wage growth is what I would call moderate but consistent—still ahead of inflation. And, looking out ahead, you can see bond rates rising, inflation’s going to be coming up, wage rises will probably increase a bit, and it'd be surprising if you could continue with the same inflow of people to the workforce.

But doesn’t it concern you that, you know, over 90,000 young people are either not in education, employment, or training, and that’s up from a year ago?

Oh, well, it always concerns us if there are young people who can be contributing to the economy and arent. When you look into that group, it's quite a complex story.

There's any number of young people, for instance, who are caring for family members— that’s one of the bigger categories—people are on gap years for all sorts of reasons. What we've got in place, though, now, with the sort of welfare and social investment framework, is Youth Services, which are designed to, basically, find young people and get them on track, because every one of them matters. That's what we've learnt. We've learnt that it’s worth spending time and money on each one. We're at a stage now where the services are available, but there's more to learn in Government working with the people who actually know the kids, because quite a number of them opt out of the programmes. Others just don’t find they're building a relationship with the Government bureaucracy, and we’ve got to find someone they can build a trusting relationship with.

Unions argue that it's the low-skilled industries where the jobs are being created—in accommodation, tourism—and that you're not seeing enough wage pressure coming in in those areas because there is a ready supply of labour coming in. Should employers be paying people more in those roles?

Well, we're not going to tell them what to pay, other than that they must pay the minimum wage—and that’s just gone up—which does have an impact in areas like accommodation and hospitality and tourism. So they have to pay that. But, look, otherwise, this is, you know, supply and demand, and I think, as I said, we've had these big inflows to the workforce. It's hard to see them being maintained, because we've got participation at a record level.

Immigration’s at record levels, so you have got a ready supply of working-age people coming into the workforce.

Yeah, that’s right, but you wouldn't expect those inflows to be maintained. I mean, all our forecasts have been along the lines that immigration slows down, flows into the workforce slow down, and then I think you're going to see a bit more pressure on wages, and for a lot of people that would be welcome.

Are you still committed, though, to a families package—a tax package—to help families who are clearly, you know, going to find it tough?

Well, you'll just have to wait and see. I mean, we've got some surpluses that we've worked pretty hard to get, and so we've got some positive choices, and, yeah, we are concerned about incomes. We'd like to see people with higher incomes. We've demonstrated that through the minimum wage increases, through the increase in benefit rates for families. So you'd expect, you know, something along those lines in the future.

The Mt Roskill by-election showed that a lot of National supporters stayed home. Now, if John Key couldn’t get them out, what makes you think that you're going to be able to get them out in September?

Oh, good policy and a general election, and, you know, an electorate which has increasingly moved to National with its party vote, even though it's clearly stayed with Labour as its candidate vote. And we would expect to be able to continue that trend, with a combination of good policy focus on things that matter to New Zealanders. I'm not going to be giving a state of the nation address that’s about the vibe; it's actually going to be about some policy proposals that impact on the community of Mt Roskill. And we think that'll get them out.

Will we see “Team English”?

What's that?

Will we see “Team English” replacing “Team Key”?

You'll just have to wait and see, and I know the tension will be hard to handle.

Just getting back to the question on immigration, there—you mentioned the expectation is that that can’t be maintained, but we've had that expectation for a couple of years now and it has been maintained. There does seem to be some indication that we're in a new ball game here, particularly given the global turbulence that you mentioned earlier. So what if it keeps running at this level—that’s another underlying election issue here, isn’t it? Are you looking at any changes in policy in that area?

Well, the other factor that’s been surprising is I think, in the last 12 months, we've still got a net inflow from Australia. It was 39,000, 5 years ago, and, I think, plus 2,000 net inflow. So we have to adjust in two ways. One is the investment for growth—I mean, people are here. The PLT’s not a very good measure of migration and residency and skills, and all that, but it's a rough measure that there’s volume pressure. So we have to invest for that growth, and that's why there’s such a big programme of roads, schools, the Government housing programme—it's really starting to pick up pace this year. And the second adjustment is to work pretty hard on those migration settings to make sure we're getting what we want, which is the skills that we need. And that’s a bit of the tension here, isn’t it? That you need—in a growing economy, take an area like IT. If we don’t let the people come here, the businesses will just be taken away to where the people are. So we want to enable these skills to come in. We believe—like the study last week—that the effect is positive and certainly, as they say, not negative.

So just—that final part of my question there was: are you looking at any changes in that area, given there is quite a bit of public concern about immigration levels?

We've been looking at settings through the last 12 months, and we'll continue to do that. It’s quite detailed. We've got a much better understanding of the components of the flow now, particularly because we've invested a large amount in the whole—in the global IT system for immigration, because it’s, you know, a network that covers a big chunk of the world. So now you can see a lot better in detail who's turning up and when, and how that flows through to residency and citizenship. So, yeah, we're keeping a bit of an eye on it and made some adjustments at the margin last year—probably make some this year.

Is there too many people with low skills coming in—that is, suppressing wage growth?

Oh, look, I think that's an arguable conclusion. Some people have put that forward, but all you've got to do is go to the industries like tourism and hospitality to hear about the demand for people who'll turn up for work every day and do the job. So we're in a fantastic position of having an economy generating, you know, in the last 12 months, well over 100,000 jobs. We need the people to do them.

Prime Minister, on these migration settings, or immigration settings, would you be prepared to cut immigration if that was a condition of getting New Zealand First's support— would you be prepared to cut immigration?

I think you know what I'm going to say, and that is that we're not ruling things in or out, and we're not starting negotiations 9 months out from an election.

That shows that you're open to changing the immigration settings, if you have to, to get another party’s support, though, doesn’t it?

Well, look, we always look at this in the whole. We're open to the arrangements that would be required by the voters and the make-up of Parliament to achieve stable Government. And, you know, there’s always a game through the year about what's a bottom line or a red line or a top line—or, in the case of Labour and the Greens, what's the vibe—and we're not going to get into all that. We're going to be focusing on getting our party vote up by talking to New Zealanders about issues that matter to them, and negotiation comes after the election.

And when—and this is not a negotiation question. When will the New Zealand public know how you're going to spend that surplus money—when will the New Zealand public know if you are going to put up a family package or a tax package, or both?

Well, look, the rough outline of that's already pretty clear, I think. We've said there’s going to be improvements in public services—so it's more spending. We've already indicated, before Christmas, a big uplift in the infrastructure spend—in the capital spend— from, I think, $1.5 billion to $3 billion, which I think is three times what the allowance used to be 2 years ago. So that’s tracking the growth. And then we've got to pay off debt because we've got a debt anchor—we want to be getting debt down when times are good because we ran it up when it was bad—and there’s the opportunity for doing something about incomes, across the board.

So will that happen—is that going to happen in this year's Budget?

Well, you'll just to have wait and see.

Prime Minister, I asked this morning about the situation in South African visas, and you said you were going to ask for advice. What was that advice? Did you get any clarity?

No, I haven’t had that advice yet.

Did you ask?

What's that?

Did you ask?

Yes, I have—yeah.

Prime Minister, if you could choose—you know, just a lighter question here, if you like. If you could choose one word that you think that the election is going to be about, what would that word be?

Oh, just growth.

What's more important, Prime Minister: paying down debt, infrastructure spending, or giving New Zealanders income tax breaks?

Well, we have the great opportunity to have a balance of those things, because I think, you know, New Zealanders are smart enough. They've been through a few economic cycles. They know that they need to see some investment in the infrastructure that helps them get to work and get their kids to school, and they're not going to forgo that to get a bigger tax cut. But they do want their hard work recognised and, you know, people on low incomes want to think that there’s some hope their income’s going to rise. And we're in a position where, you know, we can go some way to meet those aspirations, and that’s a fantastic position to be in. Very few Governments in the developed world have those choices.

Prime Minister, I just want to turn to your views on the Trump travel ban, and bring to your attention your newsletter from 9 May, 2005, where you're talking about Ahmed Zaoui, where you said at that point that “New Zealand is now seen as a soft touch for other fascists, terrorists, whoever is on the losing side of bad regimes, unwanted at home and unable to get into any other country. ... If you turn up with an Iraqi passport and references from Saddam Hussein you get in. ... We need migrants, but we don’t need leftovers from middle east terrorist regions. ... it's sent a green light to the world. National will certainly turn the green light red.” What does this sort of say about your views on those kinds of countries where Donald Trump has put a ban in—did you sort of have the same kind of feeling back in 20057

Well, I haven't seen what you're quoting from, so, you know, I can’t vouch for whatever it is.

You wrote it.

Well, I haven't seen it, so I don’t know what you're referring to there. But, in a sense—II mean, the job of the New Zealand Government is to protect the New Zealand public, particularly from terrorism, and we have in place now a pretty robust and well- invested border control system. Our security and intelligence capacity, in which we have invested considerably over the last 3 or 4 years—uwell, in the last 2 years, and that’s going to continue, so we can be—I think we're in a position where we can say we're taking the practicable steps we can to mitigate those risks—you can’t eliminate them. And part of the job of our security structure is to identify where those risks might come from and to take action to prevent them creating problems in New Zealand. That was the case then, and is the case now.

So do you still agree with your own words, which is: “We need migrants, but we don’t need leftovers from middle east terrorist regions.”?

Well, you don’t need terrorists here, and if someone turns up at the border with a reference from Saddam Hussein, or other terrorist credentials, then they won't be allowed in. And in that case, apparently, the character got in. He’'s—as I understand it, he lives here, but the border control system now would probably not allow that to happen.

So are you saying that he was a terrorist then who somehow got in, or are you saying he wasn’t a terrorist and we made a mistake?

Well, look, I don’t want to comment in detail on that case. It's now, what, 12 years ago, and you can talk to the, you know, Government of the time, who had to sort it all out. What I can tell you now is that our job is to keep New Zealanders safe. We have seen examples of actual attacks and potential attacks in Australia, and we have a security and border control system designed to achieve that objective. And the people who run that system have to have their eyes open about risks.

There's a story out today about the New Zealand Cabinet making quite a deliberate effort to restrict the number of refugees from Africa and Middle Eastern countries, and the situation at the moment is only that people with family here are, basically, getting entry. Are you able to comment at all on that?

Oh, not in detail—I mean, we take our 750. I gather there is some discussion about what works for the UN and for us about where they come from, because there is a pretty big pool of tens of millions of people, potentially, you can draw refugees from. But our main focus is that when they get here, we do a very good job with them, because the evidence is that refugees need a lot of support, so we commit around about $100,000 of support per person, starting with our brand new Mangere centre, to ensure that over, you know, 3 to 5 years the language—they get the language, they become employable, and their children get a good education.

This story talks about Cabinet discussions about potential security risks, and that was one of the drivers of this policy. Do you recall Cabinet discussions along those lines— about refugees from those areas?

Look, I'd have to go back and check, and I wouldn't want to say yes or no. Of course, we don’t discuss what's discussed in Cabinet. There's published Cabinet papers and Cabinet minutes that result from those discussions.

Is that a credible comment, that the New Zealand Government has moved to restrict the numbers from those particular areas because of that—one reason was the concern about security?

Again, look, I'd have to go back and check on discussions, but I think it's—itll almost certainly be the case that in determining how our refugee process works, we take into account the possibility of security risks, and, in fact, that's a big part of the UN screening process that to a large extent we rely on. They don’t randomly pick people out of refugee camps and send them to New Zealand. They understand, as we do, that part of the public support for taking refugees is public reassurance that we're not bringing high risk people into New Zealand. .So the UN—we’ve got to remember the primary screening role is carried out by the UNHCR, not by the New Zealand Government. But we would be clear with them that we would expect that they're not sending us people who are a high-security risk.

In regards to Waitangi, you're not attending on the 5" and 6". There's meetings going on up north about whether the trustees that were communicating with your office about how the formalities would be carried out, whether they should be actually stripped of those responsibilities because of the way that it's played out. Do you think that that is something that needs to be considered, and would perhaps different people organising things up there change your view on whether you went or not in the future?

Look, that’s really a matter for them—I mean, I wouldn't want to get involved in the internal politics of Te Tii Marae. When we're going up there to see the Iwi Chairs Forum, that will be what it has been for the last 10 or a dozen meetings, I think, that we've been to. It will be well organised, well focused, and pretty demanding of us, and us of them, and we'll come out of it having achieved something. And that’s the kind of approach that we can work with.

But in terms of the people that are doing that communicating, there's obviously different views in terms of who should be talking to you and who shouldn't. Is that confusing for your office, and is it something you'd like to see change?

Well, it's always been a bit of a challenge for the Prime Minister's office, I think, going back about 15 years. And I think it's a—look, they can have a discussion about who communicates with who, but I think the general environment there, you know, is one that they need to get to grips with about what's going to be supported by New Zealanders and by Governments.

Prime Minister, Murray McCully hauled in Brook Barrington this morning to tell him that he wasn’t happy with how MFAT dealt with this immigration ban issue. Are you comfortable that it took so long to confirm what was going on, and do you have anything to say on these expectations that Kiwi officials in the US will be more assertive with the Trump administration?

Well, look, it's always better to know more sooner, and I haven't seen Mr McCully’s remarks. But it's his agency and he'll know what they should be capable of, and generally he’s a pretty demanding Minister. I think it's just another very small symptom of the way the world’s changing, and that is, you know, a different form of political communication coming out of the US. Things are moving fast; often people don’t know exactly what's happening. It's pretty important that we adjust, both in MFAT but as a country, to an environment that’s changing like that, and part of that adjustment’'s being responsive to it and the other part of it is to not get too distracted by it, because, you know, how the US administration runs itself doesn’t matter that much to all the parents who are taking their kids along to school for the first time today and trying to get their bills paid and get back to the cycle of getting the lunches made before breakfast and then getting off to work. So we don’t want to get too distracted by it.

But it did matter to those dual citizens who were left in the dark, and the Brits, the Aussies, and the Canadians managed to clarify very quickly what the situation is. So is it a fact that Tim Groser just isn't up to the job?

No, I wouldn’t agree with that at all. I think our ambassador’s doing a fine job. It's yet to be seen just what the—look, to the extent that we bother spending any time on it now the issues been clarified, it's yet to be seen just exactly what information Australia and Canada were acting on, because it wasn’t the official policy that's been put out today. So we're working with the official policy. It’s satisfactory for our dual citizens. We're happy with that. It would have been better to know a day or two earlier, and we've learnt for next time, you know, not to assume they're going to tell us—you have to go after it.

Has the Government asked MFAT to sort of rethink its strategy after the election of Trump—you know, think about how it does things differently and what it should do differently?

Well, it sounds like the Minister's explained his role in it in getting them to rethink today, but there has been a discussion, for instance—a formal discussion—about rethinking the trade strategy. That is under way.

What does that involve? What sort of things does that look at?

Oh, well, just the events of the last couple months, particularly with the US pulling out of TPP, a stronger commitment of the EU to a free-trade agreement with us, and the need to get on with achieving the objectives we always wanted out of the TPP, which is economic dynamism in the Asia-Pacific and an ongoing role for US leadership there. But, you know, we'll be looking at options for that over the next few months.

So is there any particular work being done? Is a task-force or anything like that being set up?

Ah, there is particular work being done, yes. And when it’s, you know, getting somewhere, we'll let you know.

This morning in Dunedin, Andrew Little, in his speech, said that Auckland was unpleasant. Do you agree with that?

No, I don’t. I think Auckland's pleasant and, actually, having spent a lot of time in Dunedin, I think it’s pleasant, but in a different way. He's just trying a bit hard—you know, getting around everywhere outside of Auckland saying it's pretty awful, and in Auckland saying that no one understands their problems.

He's talking about the transport and the overcrowding—those being the main issues to making it unpleasant up there.

Well, look, that’s his opinion. You should ask him about that. I think you are seeing, you know, people—if you take Christchurch, for instance, houses are half the price as they are in Auckland, maybe less. Office space is just as good, and will end up—and is probably cheaper. So what I'm hearing as I get around these towns is they're pitching themselves into Auckland to people who may be dissatisfied by the traffic, but then Aucklanders like their beaches and their temperature. So it’s not that easy to get them out of there.

You mentioned a leftward drift in the Labour Party. With Greg O'Connor emerging as a possible candidate in Ohariu, is that consistent with a leftward drift, do you think?

Well, it's not consistent with fresh, bright faces for the future, that’s for sure. Look, that’s their problem. It’s a bit hard to tell if they're drifting when they don’t announce any policy in a state of the nation address. So the vibe is certainly moving leftward, and maybe the policy will follow the vibe.

Well, O'Connor would suggest that it's moving to the right, if anything. But in the absence of policy, what's telling you that it's moving left on policy?

Oh, just the fact that what used to be a mainstream Labour Party that struggled to talk to the Greens, let alone accommodate them, now seem to find it quite comfortable hugging them. That tells me something's changed, and it's not the Greens—it’s the Labour Party.

Didn't National do the same thing on home insulation with the Greens?

Yeah, we did. I mean, we tried to establish common ground there, and for a period we succeeded. But we found the Greens, maybe from—well, I'm not quite sure what it is, but we found them eventually just too ideological, too doctrinaire. They kind of couldn’ stand anyone else taking some credit for what they regarded as their issues. Labour is going to find exactly the same, and I think Labour have that sneaking suspicion. They're either going to have to get comfortable with it, or end up telling the country on the eve of the election that they're divorcing the Greens, and suddenly no one will know what the hell's going on.

So you said you wouldn't go with the Labour-Greens alliance. Would you go—is that ruling out just going with the Green Party on their own, as well?

Well, yes, it does—yeah. I mean, itd be easier to do an agreement with the Labour Party than with the Greens. I mean, there’s a reason why the Greens have been in Opposition so long, and we found that part of it was they found it very difficult to share the credit for anything. And they developed a habit—which Labour should watch out for—of attacking our leader in a personal and nasty way. So it's going to be pretty interesting getting the vibe and seeing how it evolves between Labour and the Greens, because there's a lot of history there and Andrew Little may not be aware of it. We've tried it. So to accommodate it, Labour will have to move quite, quite some way left.

It was one of the most successful policies, probably, of the Government, though, with the Greens, if you look at health rates rising, and everything. So, I mean, the one policy you did do with them was one of your most successful.

Well, look, it worked out pretty well—in fact, it's still running—and I think the lesson there is the Greens couldn’t bring themselves to build on something positive. We did that. We also put the money into the research on the technology for killing possums—very successful. I hope they claim credit for it—we certainly do. Again, that was another positive one, but they couldn't kind of bring themselves—it was too positive. It worked too well. They started looking like they could work with the Government, and it was a National Government.

Talking about being easier to work with Labour, would you work with Labour?

Sorry?

You said it'd be easier to work with Labour. Would you work with Labour?

Ah, no—not if at all possible.

Going back to the question about Ohariu and Epsom—ijust for the sake of clarity—uwill National Party candidates campaign for the party vote only in those seats?

Well, look, as I said before—II mean, we're not going to be definitive about that. In election year we have those discussions. We have a recipe that’s worked for us and for our coalition partners up to now, and, you know, you could probably expect those discussions to go on this year.

Will things change, though? I mean, are you worried about Greg O'Connor?

No, not at all. I mean, the interesting thing there is that on law and order, crime, we have a much more—a much deeper grip on the drivers of crime, a much longer-term social investment - type model for understanding where to intervene and, increasingly, how to intervene, and that hasn't been a feature of the Police Association analysis of law and order. So I think he'll be a bit left behind by the debate, frankly—Ilook like a bit of a leftover from previous decades, when the police could just kind of dial it up and win the argument.

OK, thank you.