John Key - living the dream

TRACY WATKINS
Last updated 08:19 09/11/2013
Fairfax NZ

John Key talks about family and life as the prime minister.

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How long have I got?

That's the question all political leaders must ask themselves after the flush of their first victory fades. One day you are prime minister, the next it's over with no more mad rushing from place to place, a retinue of minders and advisers, and police protection officers, trailing behind.

John Key, 52, and wife Bronagh, have made a pact over what happens when that day comes. Theirs will be a life lived in the slow lane – or slower, at least.

Life after politics will probably involve some commercial work, a board chairmanship or two and even some "ex-prime ministerial things", said Key.

But he won't be doing a Helen Clark and chasing a top United Nations job. He has been living the dream for the past few decades – a high-powered investment banking career, then a "dream run" in politics – he has been prime minister for almost half the time he has been in Parliament. The sacrifices have all been Bronagh's, he insists.

When it's all over "she doesn't want me taking a really high-powered, seven days a week job".

But nor has Bronagh – who was in her 30s when he entered Parliament and celebrates her 50th birthday next week – ever put a time limit on this part of their lives, he said.

"She wants me to get the job done".

And that day is not yet. The clock is ticking on John Key's Government as it does on all governments after five years in power. But there has been no let-up in the breakneck speed.

On one day alone this week Police Minister Anne Tolley hauled the nation's top cop over the carpet for the Roast Busters saga, the Government was struggling to save its flagship ultra-fast broadband programme over the Chorus debacle and Gerry Brownlee was withholding his full support for the leadership of EQC, suggesting a shake-up.

Meanwhile ministers' offices keep churning out policy and punting out new legislation. It is a grinding relentless pace of round-the-clock government.

In an age of extreme sports and extreme tourism, it is probably no surprise that this new form of extreme government has also evolved in response to disasters including the global financial crisis, the Pike River mine disaster, the Canterbury earthquakes and a relentless 24/7 news cycle.

If the aim is to show momentum and starve the Opposition – a tactic honed during five extraordinary years of crisis management – it has worked. The Government's ratings over the last five years are virtually unchanged.

PROMISE V REALITY

The National Government swept into power promising a step change in the economy but mostly selling John Key's eternal optimism at a time when the world had become a very dark place.

Key recalls being taken aback when leaving his house after watching the 2008 election unfold on telly to discover hundreds of his neighbours partying in Parnell's plutey St Stephens Ave in celebration of National's victory.

Reality gatecrashed the party over the next couple of days.

The world was in meltdown, people were talking about recession and the Treasury was glum.

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"Treasury were basically saying to us 'you know this is quite serious. You've got a whole lot of programmes you've inherited that are unfunded, the tax revenue is going to collapse because a lot of it's corporate driven and will go down, and you will have more people on unemployment benefits."

Then the Christchurch earthquakes struck, New Zealand's greatest natural disaster, and also one of the world's costliest on a per capita basis.

That reality has shaped Key's Government's programme to a large extent, he says.

"It's not that we haven't done … the things we want to do. But you have to live with the circumstances you're in. So there's a lot of time consumed with trying to get the economy back into shape, back into growing, or things like welfare reform.

"You have to tackle those slowly and carefully and you're actually swimming against the tide because you had people pouring on to welfare rolls [during the recession]."

BIG TICK

On economic management, the Key Government gets a big tick from most quarters for fiscal stewardship, but there is criticism that the careful pace of change under the prime minister's mantra of "taking the people with you" is too slow.

Tech entrepreneur Rod Drury says New Zealand is "absolutely" a better place under National, and the Government's focus on getting the books in shape, and bringing down debt, has been commendable.

Overseas, New Zealand had become the model for climbing out of recession after the global financial crisis, says Drury.

"So a nice big tick in terms of being financially responsible. But what would be great to see is a bit more vision, and a bit more strategy around actually really growing things."

Drury's accountancy software company Xero is a darling of the IT world, its value hitting billions of dollars. He would like to see the Government do more to encourage an entrepreneurial spirit, and thinks what's lacking from National's agenda is excitement.

"I would love to see some more imaginative projects … there's' nothing really for New Zealanders to get excited about. So we've sold some boring assets. Let's build some new cool ones."

Building a bigger international internet cable would be top of Drury's list.

"As we've seen with Xero there are some awesome opportunities to create value … it's more about creating a real vision for where we need to get to. We seem to be lurching from domestic trivial entertainment kind of issues, rather than the really big stuff that is actually important."

Former Reserve Bank governor and National leader Don Brash also gives National a tick for fiscal management. Comparatively New Zealand is doing well on nearly every front, including unemployment, he said.

"I guess the disappointing thing for me is the Government hasn't been able to accelerate our trend growth rate despite making pretty firm commitments to do that in 2008, and in addition to that we are still running a very large balance of payments deficit. Notwithstanding the very strong export prices."

The Government has also failed to tackle New Zealand's most fundamental problem, which is that we have been living beyond our means for the last 40 years, accelerated by spending going "bonkers" in Labour's final four years in office, Dr Brash said.

"Bill English described interest-free student loans in 2005 as an unprecedented electoral bribe and he was right, but National has not seen fit to reverse that.

"I absolutely understand the political problems … but if they're going to make an impact on economic growth, or the balance of payments deficit, there are some social cows that need to be slaughtered."

Of course slaughtering sacred cows was the last thing on National's list when it hit the campaign trail in 2008. The party ran a campaign that would have made some National leaders turn in their grave – flagship Labour policies became "third rail", touch it and you die stuff, a necessary pill to swallow to ensure election.

Key's campaign instead focused on improving people's lot by lifting the economy in other ways and helping the "underclass" out of generational hopelessness.

Federation of Family Budgeting Services chief executive Raewyn Fox says not much has changed for the people her organisation has seen over the last five years.

"Actually the last three years … we've seen the highest number of people in financial trouble coming to visit our services than we've ever seen before. Now that's not just because of Government policy, that's to do with the recession and people's ability and resilience to recover from the recession.

"But it's still a fact."

The Government has made moves in the right direction – such as introducing responsible lending laws.

"So that's good news. But in terms of the financial issues, we're seeing in families a lot of them are caused by recession, a lot of the issues are caused by redundancy, losing jobs, losing overtime payments, a change of circumstance for people which means they can't cope financially and that has got worse in the last five years."

However, Key is confident that the country is still in a better place.

"The legacy will always be in my view tremendous economic leadership at a time when the rest of the world has been struggling. It might look easy from the outside but actually we had to make a lot of decisions and change a lot of things. So there's no question we've made the economy sustainable competitive and successful over time."

SCORECARD

National was elected on a platform of five key messages. We asked John Key to score his progress and weighed that up against our own score.

Eradicating the "nanny state"

Key: 8/10 - "We've still done some things people would put in that category but still necessary."

Our score: 5/10

Lifting up the "underclass"

Key: 7/10 - "We've done a lot of things but it's been a tough five years.....there's a lot more work to be done".

Our score: 6/10

Cutting the "waste"

Key: 9/10

Our score: 7/10

Closing the gap with Australia

Key: 7/10 - "It's definitely closing."

Our score: 3/10

Economic management

Key: 10/10

Our score: 8/10 for fiscal management, 4/10 for transforming the economy.

ECONOMIC SIGNS IMPROVING - BY VERNON SMALL

The Key Government came into office in 2008 with the global economy on the rack, jobs under threat, a long string of forecast deficits threatening a debt blow-out and a promise to rebalance growth towards exports.

A string of "zero new spending" budgets followed as the Government pulled in its belt.

As it celebrates its fifth birthday in office, the economic signs are much more promising. Growth is on the rise, making this country a "rock star" among developed economies. A Budget surplus is forecast next year. Unemployment numbers fell this week and businesses and consumers are showing renewed confidence – though the Christchurch rebuild and a boom in house prices can take much of the credit.

So how does the Government's economic performance rate?

We asked Prime Minister John Key and his deputy Bill English to assess their own performance, with Labour finance spokesman David Parker and Green co-leader Russel Norman giving their take.

Then, for a more dispassionate view, we asked NZIER principal economist Shamubeel Eaqub to rate the Government's performance.

GOVERNMENT'S 'SELFIE'

English says that in 2008 "the general sentiment was really awful, in the global markets there was a sense the whole thing was melting down, heading for depression".

"They were saying to us 'you know this is quite serious, you've got a whole lot of programmes you've inherited that are unfunded, the tax revenue is going to collapse because a lot of it's corporate driven and will go down. You will have more people on unemployment benefits'."

But the Government had done enough to transform the economy.

"The OECD is saying we're one of the five most prosperous countries, one of the fastest growing economies."

Key says the World Bank rated New Zealand as a lot more competitive and one of the few countries getting back to surplus. Spending has been shifted from the back office to frontline services.

"No one big swinging change but ...we've shifted quite a lot to different purposes, different focus," said English.

Key says that as far as the public mood is concerned "people can sort of feel, that the Government is doing everything practically it can and relative to other countries doing well.

The legacy will be "tremendous economic leadership at a time when the rest of the world has been struggling", he said.

Both say they want to pay down debt as surpluses returned.

"You can also spend a bit more on public services and then we've got a number of the other longer term jam jars to fill," said English.

That included EQC, which had been emptied after the Christchurch quakes, and the Cullen Superannuation Fund where contributions had been suspended.

They believed the asset sales process had been a success.

SNAPSHOT FROM OPPOSITION

Labour's David Parker gives English credit for controlling spending, saying he had it "about right". Any further cuts would have been deflationary. Green co-leader Russel Norman says National did well to put in place an infrastructure plan, though the execution had been poor with plans like Transmission Gully and the Roads of National Significance.

But beyond that, they have little good to say about the Government's economic management, which included poor returns from the asset sales programme and the failure of Solid Energy.

The high current account deficit was a major concern – though Dr Norman noted it was higher under Labour – as was the failed promise to rebalance the economy towards exports.

Parker said exports at 30 per cent of gross domestic product had not changed and were well short of the 40 per cent target.

Norman agrees. "They have obviously failed after saying the tradeable versus non tradeable was an obvious threat."

Parker says the current account deficit is now forecast to be the worst in the OECD until 2017. It is much more of a problem now, with lenders nervous about total national debt, than before the GFC.

"We are increasingly in debt and own less of our country every year."

The wage gap with Australia was worse and more than 210,00 people had shifted there since 2008.

Parker concedes the incoming government did face rising debt, but said any government would have moved to control it in the teeth of the GFC.

"And the current debt is higher than it was forecast to be in 2008 even taking into account the earthquakes."

Both say income inequality was made worse by National's tax cuts. Parker said that also showed up in asset inequality, and the young and lower paid struggled to buy in the Auckland property.

They say the Government was going over the top criticising their parallel plans for a single buyer of electricity as "North Korean", when it was already in place elsewhere.

Dr Norman said on his recent trip to Europe green growth was on the agenda everywhere, but National set up a false choice between economic development and the environment.

"They are not letting the market rule - they're showing the reverse with coal mining, gambling, irrigation, asset sales, films and (a subsidy for) Rio Tinto."

ECONOMIST'S VIEW

NZIER principal economist Shamubeel Eaqub says overall the Government's fiscal management has helped the economy. But it can hardly take the credit for the Christchurch rebuild.

"There is not much growth without it."

New Zealand had gone into the economic recession earlier and harder than other countries and was coming out sooner.

But while the economic numbers were good now, that did not necessarily mean there was economic prosperity.

He dished out high high praise to English for fiscal management – without too much of a "crunch" on welfare. The finance minister had done a "spectacular job" steering the economy.

But asset sales had been a "questionable" success and would not make a fundamental change to the economy.

"Why spend so much time and effort doing something that's not ultimately going to make New Zealand a much better place?"

Progress on some of the big policy levers – Working for Families, interest free student loans and healthcare – had been "uneven". For whatever reason they had done nothing.

On debt, the Government had managed a Goldilocks result – neither too fast nor too slow.

Rebalancing the economy was always going to be impossible in the short term and lifting exports was a longer term challenge, he said.

But promising to catch up with Australia was "mad".

"It has not yet happened and will not happen in the time frame they have proposed."

There had been too much "summitry" with limited impact – such as the cycleway idea that sprang from the Jobs Summit.

Rebalancing the economy involved more fundamental issues; education, training opportunities and matching labour supply and skills with demand in the regions.

Politicians often claimed greater credit than was really theirs, he said.

"How much is the cycle, how much is the Government?

In summary he gave Key and his team a mixed score card.

The Government over the last five years had shown "prudent management but not necessary leadership" of the economy.

BY THE NUMBERS

Debt:

2008 $10.3b

The 2008 forecast for 2013: $29b

Actual 2013: $55b

The Budget:

2008: $5.6b surplus.

Forecast 2013: deficit $3.3b

Actual 2013: deficit $4.4b

Current account deficit:

2018: 7.8 per cent

Forecast 2013: -5 per cent

Actual 2013: - 4.7 per cent

Economic growth:

2008: -0.6 per cent

Forecast 2013: 3.1 per cent

Actual: 2013: 2.5

Unemployment:

2008: 4.3 per cent

Forecast 2013: 4.6 per cent

Actual 2013: 6.2 per cent

Economic rebalancing:

The gap between income from the tradeable sector and the non-tradables sector has widened since 2008.

- Fairfax Media

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