GOOD MORNING, AND WELCOME TO Q+A. I'M SUSAN WOOD. ON THE PROGRAMME THIS SUNDAY ` WE'RE LIVE AT THE G20 SUMMIT IN BRISBANE. THE PRIME MINISTER'S SEALED A TRADE DEAL WITH SOUTH KOREA. WHAT ELSE DOES NZ STAND TO GAIN? OUR POLITICAL EDITOR, CORIN DANN, JOINS ME SHORTLY. ALSO ON THE PROGRAMME ` PROPERTY INVESTORS MAKE UP 45% OF HOME BUYERS. ARE THE YOUNG BEING SQUEEZED OUT? IS IT TIME FOR NEW RESTRICTIONS ON PROPERTY SPECULATION? WE DEBATE THE ISSUE WITH INVESTOR OLLY NEWLAND AND HIVE NEWS PUBLISHER BERNARD HICKEY. PLUS ` AIR NZ CEO CHRISTOPHER LUXON. ARE CUTS TO REGIONAL ROUTES YET ANOTHER BLOW FOR OUR SMALL TOWNS? WILL AIRFARES GET CHEAPER? AND CAN OUR NATIONAL AIRLINE NAVIGATE ITS FUTURE ALONE? WE'LL ANALYSE ALL THE ISSUES WITH OUR PANEL, POLITICAL SCIENTIST DR RICHARD SHAW; PR CONSULTANT AND POLITICAL COMMENTATOR MATTHEW HOOTON, PLUS INTERNET PARTY LEADER LAILA HARRE. DUE TO THE LIVE NATURE OF Q+A, WE APOLOGISE FOR THE LACK OF CAPTIONS FOR SOME ITEMS. GOOD TO HAVE YOU WITH US, AND CORIN JOINS US FROM BRISBANE WHERE HE'S BEEN COVERING THE G20 LEADERS SUMMIT, THE MEETING OF THE WORLD'S TOP-20 ECONOMIES. WE'RE A VERY SMALL COUNTRY AT THESE TALKS, AN INVITED GUEST, SO WHAT WILL NZ GET OUT OF THIS? GOOD MORNING, CORIN. If we can put systems in place and work towards making the banking system stronger, it will benefit New Zealand. John key is not talking about being out there in the room and pushing himself around. He is listening and engaging. He is not trusting New Zealand on to the agenda here. We are an invited guest. It is clear that trade is an important focus for New Zealand. The deal signed with South Korea was a breakthrough. New Zealand will push with the Europeans and there is a meeting with France and David Cameron from Britain. The EU trade deal. While we go to APEC and other things like that, we do not always get to rub shoulders with as many of the world's most powerful leaders. It was quite a different agenda on Obama's mind. Climate change. It was much too Tony Abbott's annoyance. He wanted to be about jobs. John key concedes that climate change is an issue. We will talk to him about that later. As New Zealand doing enough? Have we been dragging our feet? Now we have the US and China and even the EU and Great Britain leading the way, in some ways, on emission cuts. As New Zealand doing enough? They need to get their act together a head of the big summit in Paris which will sort out the emissions targets for post-2020. There is a big call for New Zealand to make good on that and how hard we go. It will cost New Zealand a fair amount of money. The elephant in the room, if you like is Vladimir Putin. He is leaving early today. He has been having his meals alone. How much is the tension with Russia over shadowed things? I think we saw when they greeted that Tony Abbott and Vladimir Putin, they were all smiles in the media centre. There were a few chuckles about that. There was not obvious tensions in the room. There are clearly differences. The focus is very much whether it is on agreement or disagreement. It is an issue. The warships their wretched things up. Obama got talking about the defences in the Pacific. You will see Tony Abbott and to some extent Vladimir Putin put on the economic things today and get some games there and see if they can push this Cold War type stuff off the agenda. They may not succeed. We will see. AND CORIN IS BACK LATER IN THE PROGRAMME WITH PRIME MINISTER JOHN KEY. SEND US YOUR THOUGHTS. WE'RE ON TWITTER. YOU CAN EMAIL US AT Q+A@TVNZ.CO.NZ THE RESERVE BANK IS NOT BUDGING ON ITS LOAN-TO-VALUE RESTRICTIONS, DESPITE CRITICS LAMENTING ITS IMPACT ON FIRST-HOME BUYERS. INTRODUCED LAST YEAR, THE LVR HAS REDUCED THE NUMBER OF FIRST-HOME BUYERS TO ABOUT 17% OF NEW LENDING. THE AVERAGE FOR THE PAST DECADE HAS BEEN 19%. RESERVE BANK GOVERNOR GRAEME WHEELER THIS WEEK ACKNOWLEGED THE RULES DO FAVOUR INVESTORS OVER FIRST-HOME BUYERS AND HINTED IT'S CONSIDERING NEW MEASURES TO ADDRESS THIS. I'M JOINED NOW BY PROPERTY INVESTOR OLLY NEWLAND AND HIVE NEWS PUBLISHER BERNARD HICKEY. BERNARD, WHAT COULD THE RESERVE BANK DO? They have been considering forcing banks to hold more capital. They were going to introduce at this month. They delayed it. They are now looking at a new way of banks allocating capital. The reserve bank is looking at trying to control the growth into the rental property investor sector. It is complicated. There are so many ways that you can buy property. How confident are you that they will come up with something that has the desired effect? They have tried to work out how many rental property investors they have got. The original approach the reserve bank took was to look at who had five rental properties or more. A lot of investors have loans with a lot of different banks. That is a problem for the banks and the reserve bank and they are trying to find a way around that. You are shaking your head. The whole idea of trying to restrict property investors is a nonsense. The fact that investors are buying properties allows tenants to get cheap rentals. But the playing field has been changed with the LVRS and the reserve bank governor has acknowledged this week that first-time buyers have been hurt by that. Wearing my investor hat, you are right. Wearing my other hat, it is not fair on people who are trying to get on the ladder and trying to get their first time. You can see the poor people sitting in their flats trying to save for a deposit. As they try and save it dollar by dollar, the price of property is going further ahead then they can say. That's not right. Something should be done then, with that hat on. Remove all the restrictions and allow the banks to decide. He is opening it up, is that the right way to go? The reserve bank has been very effective so far with its LVR restrictions. The reserve bank has a right to say that this week if they had imported and, it would have been even harder for first-time buyers. With interest rates falling around the world, it is pricing first-time buyers out all around the world. Otherwise, there is a risk to the banking system. That is what the reserve bank is focused on. I think that is absolute nonsense. This is political claptrap. This is the reserve bank trying to protect its banking system. It is important for the social fabric of society for first-time buyers to get a home and not be pushed by forced to stay in rentals and not even own the letterbox. You should allow them to get in. I would encourage first-time buyers to get in. They should be able to borrow up to 99%. It is the risk. If they go broke, it is a risk for the banks. It is not our job to look after the banks. If you are talking about borrowing 99%, you are borrowing a large amount in Auckland. I should agree that people should have about 10% deposit. $900,000 is a lot of debt. It is an educational thing. People should put 10%. How concerned are you about debt? We could not afford our own homes. It is a particular issue in Auckland and Christchurch. Outside those areas, Auckland is much more affordable. If you think that interest rates are going to stay low or even go lower, it makes sense to keep borrowing. The problem is when interest rates rise. It is my view that interest rates at going to go down. We are looking at a downward barrel. We are looking at deflation. The rest of the world is stepping on the edge of deflation. You do not want that. If house prices continue to rise and rents rise, the government has a fiscal problem. They are providing accommodation supplements. They are you can argue subsidies for rental investors. What would you do to help first-time buyers? The reserve bank would reduce those restrictions. Olly hates this idea. The government is working on supply. Whether they are doing a fast and after is another issue. Increasing the supply of housing and restricting the lending to rental property investors, as they are doing all around the world. And failing. You are saying let them borrow to the hilt. On a $500,000 house, there are $75,000 tax. There is no rebate for first-time buyers. When you buy a new house, you not only have the margin, but you have the GST. Is that too complicated? This is the reserve bank doing what it does to protect the rental system. It has been failing. Bernard, there is a fair point. New Zealand, because we are becoming more of a rental nation, we need those property investors there to provide the rental accommodation. They are probably not doing it entirely for the rental return, but for the capital gain, when you live in your own home, it shows that you are more stable. We will be ending up with a landlord nation. That is the last thing we need if we want a healthy society and country. What we need is a change of attitude. People should be able to rent homes is a lifetime option. Overseas, it is quite common to rent a place for 20, 40, 50 years. Do you reckon? Do you rent? Of course not. Why should other people not have the opportunity to own? Those people who are tenants remain as tenants forever. We have Christchurch which hadn't own unique issues and we have Auckland and we have the rest of the country. We have a differentiated market. The problems with affordability a really around Auckland. The market cannot rise forever. It will certainly slow down. I think that will start levelling off. The clients are investing long-term. I know that the word speculator comes in there somewhere. To me, that is a very good thing. Thank you both for your time. LOTS TO TALK ABOUT AFTER THE BREAK, PLUS AN INTERVIEW WITH AIR NZ'S CEO, CHRISTOPHER LUXON, ON NAVIGATING THE FUTURE IN AN INTENSELY COMPETITIVE MARKET. HOW WILL FLYING CHANGE? WILL WE SEE CHEAPER AIRFARES? LET'S BRING IN OUR PANEL, POLITICAL SCIENTIST DR RICHARD SHAW FROM MASSEY UNIVERSITY; PR CONSULTANT AND POLITICAL COMMENTATOR MATTHEW HOOTON; AND LAILA HARRE, TRADE UNIONIST, POLITICIAN AND, MOST RECENTLY, LEADER OF THE INTERNET PARTY. It probably feels a bit safer over here. Safer with you, Susan. Do you think the Reserve Bank is going where politicians are fearing to tread? I think it's going where it has to go. I think it's going for the people who have large property portfolios who have the ability to increase those because of the LVR restriction on buyers I think this situation has become more complicated than people can handle that is why there are more people renting. If we could agree on the answer to these questions, there are endless results for controlling this problem. The problem is the government doesn't know where it stands on these issues. It doesn't know if it wants to control the environment for renters it doesn't know what it wants to do in terms of people wanting to buy homes. I think if you go through policy of wanting to expand supply or the Labour policy of wanting 10,000 builds a year if you're trying to manipulate these properties, this is going back to Muldoon times. There is no way you are going to be able to do this. As you as you hear people talking away that way, you know you are in fantasy land. If we are starting to into the intergenerational unfairness, the political risks are there. I want to come at it through Muldoon reference. The margarine act for example. If you were farmers to turn on the outskirtsof Auckland in a large land, you would not be selling it, would you? There's a problem around construction. We needed 14,000 houses a year just to keep up with the demand in Auckland. In 2014 7000 houses only have been built. People of a certain age what the take of are earning capacities have benefited from tax cuts; we have insisted some of that and have helped to drive it that inflation. It's now harder and harder for younger people to pay mortgages and get an education. Loan-to-value ratios are appalling mechanisms. They're the ones that attack people getting people into their first home. It has helped to reduce price inflation. One the Reserve Bank says it was... let's go back to the supply issue. This is a massive red Herring. We are told by authorities that there's something between 5000 and 30,000 shortages of thousandsin Auckland. How can you rely on authorities like that? They can't agree whether we have 5002 few houses or 5000 more. These people don't understand what the problem is. Meantime plenty of the people have the third fourth or fifth house of for renting out I living in large houses and certainly don't have a problem of shortage and bedrooms. We have to clear this out. But you can't force people out of their homes. We have actually forced 30,000 families out of homes. That is the number of NZ families were officially homeless. So we can actually force people out of their homes; we just decided were not going to touch people who are of influence in power. I think that would be... I'm not sure if it would gain more than one or 2% of the vote. Once she has done is raised the issue of income. What we haven't done is tackle income. The Reserve Bank quite explicitly says housing in NZ is by international standards expensive. And we've got migration driving it. So does San Francisco and Berlin. Look into those cities and you will know instantly there is something deeply wrong with the way we price our houses. One that's because in those places there are very low levels of homeownership. I'm sorry. We've got to go. AIR NZ HAS ANNOUNCED IT'LL BE CUTTING SERVICES TO THREE TOWNS ` KAITAIA, WHAKATANE AND WESTPORT. THE AIRLINE SAYS THE ROUTES WERE TOO COSTLY TO RUN. INSTEAD, IT'S PROMISING TO DELIVER LOWER FARES ON ROUTES THAT WILL BE SERVICED BY BIGGER AIRCRAFT. IN AUGUST, THE AIRLINE WAS CRITICISED FOR THE COST OF REGIONAL FLIGHTS AFTER POSTING AN AFTER-TAX PROFIT OF $262M. EARLIER, CORIN SPOKE TO CEO CHRISTOPHER LUXON AND ASKED WHETHER THE AIRLINE WAS WORRIED IT WOULD BE REGULATED TO BRING THOSE AIRFARES DOWN: NO, NOT AT ALL. WE'VE REALLY HAD A REVIEW GOING ON FOR THE LAST 10 MONTHS, AND IN FACT, WE'VE HAD QUESTIONS AND CHALLENGES ABOUT OUR PRICING IN REGIONAL NZ FOR SOME YEARS. AND REALLY, WHAT WE'VE TRIED TO DO IS TAKE A STEP BACK AND SAY, 'FUNDAMENTALLY, HOW DO WE STRUCTURALLY SOLVE 'FOR THE CHALLENGES THAT WE ACTUALLY SEE IN THAT REGIONAL NETWORK?' AND REALLY, WHAT WE'VE DISCOVERED IS THAT WE'VE GOT THESE 19-SEATER AIRCRAFT FLY TO 15 OF THE 25 TOWNS THAT WE GO TO; WE LOSE MONEY ON ALL OF THOSE ROUTES. IT ACTUALLY IS ABOUT $26 PER PASSENGER THAT IS ACTUALLY ON BOARD EACH OF THOSE AIRCRAFT, AND WE FUNDAMENTALLY HAVE TO SOLVE FOR THAT PROBLEM. BECAUSE THAT IS NOT THE WAY IN WHICH WE WILL BE ABLE TO CONTINUE TO DELIVER SUSTAINABLE AIR SERVICES MOVING FORWARD. SO THEY WERE LOSING MONEY. IS THERE A CASE`? I KNOW AUSTRALIA HAS GOT A SIMILAR SYSTEM WHERE THEY HAVE A SUBSIDY FOR REGIONAL, OUTBACK AREAS. IS THERE A CASE IN NZ WHERE THE GOVERNMENT SHOULD PERHAPS PROVIDE SUBSIDY TO SOME OF THESE TOWNS, SUCH AS WESTPORT, IN ORDER TO HELP THEIR REGIONAL DEVELOPMENT AND NOT TURN INTO A ZOMBIE TOWN? WELL, THE FIRST THING I WOULD SAY IS NZ IS INCREDIBLY WELL-SERVED BY REGIONAL AIR SERVICES. IF YOU LOOK AT THE INDEPENDENT DATA COMPARED TO AUSTRALIA, THE US, SCANDINAVIA AND EUROPE, WE ARE COVERING 100% OF TOWNS OF 20,000 PEOPLE OR MORE. THE NEXT BEST REGIONAL NETWORK ANYWHERE ELSE IN THE WORLD WOULD BE ABOUT HALF OF THAT. SO WE'VE GROWN UP WITH THAT EXPECTATION. WE'VE OBVIOUSLY ALSO GROWN UP IN A COUNTRY WHERE TOWNS ARE CLOSE TO EACH OTHER. IF YOU THINK ABOUT AUSTRALIA AND BITS OF CANADA, YOU'VE GOT REGIONAL TOWNS THAT ARE TWO OR THREE HOURS AWAY FROM OTHER PLACES. SO I THINK FOR US, THE REALITY IS I'M NOT SURE THAT MODEL IS ACTUALLY GOING TO WORK FOR US HERE IN NZ. AND ULTIMATELY, IT'S A CALL FOR OUR COMMUNITY AND THE GOVERNMENT TO HAVE. BUT FROM OUR EXPERIENCE, I HAVEN'T SEEN THE MODEL WORK CONSISTENTLY WELL ANYWHERE AROUND THE WORLD. ARE AIRFARES IN GENERAL ` OUR DOMESTIC AIRFARES ` TOO EXPENSIVE? STATISTIC NZ FIGURES ` OUR PRICE IS UP 9.1% IN THE YEAR TO JUNE. INFLATION IS RUNNING AT 1%. THAT IS QUITE A BIG INCREASE. WHY? YOU HAVE TO SORT OF LOOK AT THE LONG RUN. LET'S SAY YOU TOOK THE LAST FIVE YEARS` IF I JUST TAKE REGIONAL NZ, OUR ACTUAL AVERAGE FARES ARE DOWN ABOUT 2%. IN THE STATISTICS NUMBERS, THERE'S A DIFFERENT WAY IN WHICH IT'S CALCULATED. AND OBVIOUSLY OTHER PLAYERS AND OUR COMPETITORS ARE IN THERE AS WELL. BUT FOR US, IF I LOOK AT THE LAST FIVE YEARS, OUR AIRFARES ARE DOWN 2%. WE ARE DOING IT THAT AT A TIME WHEN FEW WILL HAS BEEN UP TO 15%, AIRPORT NAVIGATION CHARGES ARE UP 23%, AND AIRPORT CHARGES ARE UP 46%. THOSE THREE COSTS ARE ABOUT 40% OF THE COST BASE OF REGIONAL NZ. AND SO THE UPSHOT IS I THINK WE'VE DONE AN INCREDIBLY GOOD JOB, ACTUALLY BEING HIGHLY PRODUCTIVE, MANAGING OUR COSTS INCREDIBLY WELL IN ORDER NOT TO PASS THOSE COSTS STRAIGHT THROUGH TO CUSTOMERS. CAN YOU KEEP THAT GOING? CAN YOU GIVE A GUARANTEE TO KIWIS THAT YOU WILL KEEP THAT PRICE? WELL, THIS IS EXACTLY WHAT THIS WHOLE REGIONAL REVIEW HAS BEEN ABOUT. WE CAN DO A WHOLE BUNCH OF THINGS THAT REALLY WOULDN'T BE FOR THE LONG-TERM SUSTAINABLE, AND WHAT WE'VE HAD TO DO IS TAKE A STEP BACK AND SAY, 'IF WE WANT TO CONTINUE TO HAVE SUSTAINABLE REGIONAL AIR SERVICES 'IN NZ, WE HAVE TO FIND A STRUCTURAL FIX 'THAT FUNDAMENTALLY DEALS TO THAT CHALLENGE.' AND SO WHAT WE'VE DECIDED TO DO IS INVEST $300 MILLION IN THESE MUCH LARGER AIRCRAFT. EVERY TIME YOU CAN INVEST IN A LARGER AIRCRAFT. THAT'S A REALLY GOOD THING COS YOU GET A LOWER COST PER SEAT. WHY? BECAUSE TODAY WE'VE GOT 19 PEOPLE DEFRAYING AND SHARING THE COSTS OF RUNNING THAT AIRCRAFT, WHEN WE CAN GET 50 PEOPLE` WITH THOSE LARGER AIRCRAFT, UM, DOES THAT MEAN THOUGH INTO SOME OF THOSE TOWNS THAT YOU ARE GOING TO SEND THOSE LARGER AIRCRAFT, THEY WILL GET AS REGULAR SERVICES? YES. SO I THINK WHAT'S GOING TO HAPPEN IS THAT FIRSTLY, WHEN WE CAN GET PEOPLE FROM A 19-SEATER TO A 50-SEATER ` AND THAT WILL HAPPEN IN 12 OF THE 15 TOWNS THAT HAVE THE 19-SEATERS TODAY ` WE'LL BE ABLE TO OFFER CUSTOMERS 15% FARE REDUCTION. THAT'S THE WAY WE STRUCTURALLY` WILL THEY GET THE SAME NUMBER OF FLIGHTS? MANY OF THE TOWNS WILL GET THE SAME NUMBER OF FLIGHTS; SOMETIMES WOULD HAVE... THAT'S A LOT OF EXTRA SEATS FOR THOSE TOWNS TO ACTUALLY MEET` DEMAND TO ACTUALLY MEET THE SUPPLY. THERE'LL BE SOME ADJUSTMENTS TO THE SCHEDULES FOR A FEW TOWNS, BUT WE REALLY DESIGNED THOSE SO THEY STILL HAVE QUITE MINIMAL IMPACT, AND EVEN THEN THERE ARE BIG INCREASES IN CAPACITY. SO IF I TAKE TIMARU FOR EXAMPLE... TIMARU-WELLINGTON TODAY HAS A 19-SEATER AIRCRAFT GOING BETWEEN THE TWO TOWNS. IT'LL NOW HAVE A 50-SEATER AIRCRAFT, AND EVEN AFTER WE MAKE A LITTLE BIT OF SCHEDULE ADJUSTMENTS, THERE'S 44% MORE SEATS GOING TO THAT MARKET` DO YOU SEE THIS AS A...? REGIONAL NZ IS STRUGGLING IN SOME AREAS. DO YOU SEE THIS AS A CONTINUING PROBLEM THOUGH THAT A FEW YEARS DOWN THE TRACK, YOU'RE GONNA HAVE TO LOOK AT MORE REGIONAL ROUTES THAT ARE UNPROFITABLE`? THERE IS JUST A GRADUAL CENTRALISATION TO THOSE MAIN ROUTES? NO, I THINK REGIONAL NZ IS ACTUALLY QUITE DIFFERENT. IT'S NOT HOMOGENOUS IN TERMS OF WHAT'S HAPPENING ACROSS REGIONAL NZ. YES, THERE ARE SOMETIMES DOING IT REALLY TOUGH; YES, THERE ARE SOME TOWNS DOING IT REALLY TOUGH; BUT THERE ARE OTHER TIMES DOING INCREDIBLY WELL, AND WE SEE THAT IN THE WAY` ISN'T IT A BIT CHICKEN AND EGG? BECAUSE, I MEAN, TOURISM GETTING PEOPLE INTO THOSE TOWNS, PEOPLE BEING ABLE TO COMMUTE INTO THEM IN ORDER TO BE ABLE TO GROW THOSE ZOMBIE TOWNS. LOOK AT THE THREE TOWNS THAT WE'VE ACTUALLY COME OUT OF` ANNOUNCED THIS WEEK. IF WE THINK ABOUT KAITAIA, WITHIN A SHORT DISTANCE, YOU'VE GOT AN AIRPORT IN KERIKERI ` 3KM AWAY ` LESS THAN AN HOUR'S DRIVE AWAY. AND THEN YOU GOT WHANGAREI SITTING THERE. BOTH THOSE AIRPORTS NOW HAVE MUCH BETTER, MORE RELIABLE SERVICES. THEY'VE BOTH MOVED TO A LARGER AIRCRAFT. I KNOW IT'S AN INCONVENIENCE TO TRAVEL THEN FROM KAITAIA TO KERIKERI, BUT ACTUALLY, IN THE SCHEME OF WHAT A COMMUTER DOES IN SOME OF THE BIGGER TOWNS ACROSS NZ, IT'S NOT A BIG ASK. BUT MORE IMPORTANTLY, WE CAN CONTINUE TO PROMOTE THE TOURISM SERVICES INTO KAITAIA. IT'S JUST THAT THE GATEWAY WILL ACTUALLY BE THROUGH KERIKERI. WHEN WE HIT THE BAY OF PLENTY, AT SLIGHTLY DIFFERENT, BECAUSE YOU'VE GOT TAUPO, WHAKATANE, ROTORUA, TAURANGA, AND THESE ARE FOR AIRPORTS NOW WITHIN AN INCREDIBLY CLOSE DISTANCE, WITH THE ROADING INVESTMENT THAT'S GONE ON. THAT MAKES THOSE CONNECTIVITIES MUCH EASIER. READING SOME OF THE FEEDBACK IN RESPONSE TO THE STORY, YOU'VE GOT PEOPLE WHO SAY, 'WHY CAN'T YOU CUT MANY IN OTHER AREAS ` 'FOR EXAMPLE, HIGH SALARIES, YOUR SALARY, THE SAFETY AIRLINE VIDEOS ' 'FOR EXAMPLE, HIGH SALARIES, YOUR SALARY, THE SAFETY AIRLINE VIDEOS 'THAT ARE` MUST BE PLEASURABLY REASONABLY EXPENSIVE?' WHY CAN'T YOU LOOK AT OTHER PLACES, FOR EXAMPLE SALARIES, TO CUT BACK? THE TRICK IN RUNNING AN AIRLINE IS THAT YOU FIRST OF ALL NEED TO BE ABLE TO GROW, AND WE'VE BEEN IN A PERIOD WHERE WE'VE HAD SIX YEARS DECLINING GROWTH, DECLINING PROFITABILITY. AND SO WE HAVE A $5.5B ASSET BUSINESS, $5B WORTH OF SALES MAKING LESS THAN $100M A YEAR. EVERY TIME SOMEONE SAYS TO ME, 'CHRIS, I'D REALLY LIKE A NEW AIRCRAFT 'ACTUALLY RUNNING ON A REGIONAL NZ,' THAT IS A $25 MILLION INVESTMENT TO BUY THAT AIRCRAFT. EVERY TIME WE REPLACE AN AGEING 737 WITH AN A320, THAT IS A $50 MILLION INVESTMENT. EVERY WIDE-BODIED AIRCRAFT THAT WE ARE BUYING, LIKE THESE DREAMLINERS, $150 MILLION INVESTMENT. SO IN THE CONTEXT OF OUR $262 MILLION PROFIT, AND I KNOW SOMETIMES IN NZ YOU GET THE FEELING MAKING MONEY AS A COMPANY IS A BAD THING, IT'S AN ABSOLUTELY CRITICAL THING, BECAUSE THAT'S HOW WE ACTUALLY SECURE OUR FUT` BUT ARE YOU IN A PRIVILEGED POSITION AS AIR NZ? YOU HAVE AN INCREDIBLE BRAND; ON THE PUBLIC FEELS VERY STRONGLY ` STILL 53% OWNED BY THE TAXPAYER. DO YOU RISK SOME OF THAT BRAND ASSOCIATION AND POSITIVE GOODWILL BY MAKING DECISIONS WHICH ARE GOING TO HURT SOME REGIONS WITH THESE REGIONAL FLIGHTS? I MEAN, ARE YOU PUTTING THAT BRAND IN SOME DANGER? WELL, I THINK WHAT WE ARE TRYING TO DO IS THERE'S THREE THINGS THAT WE'VE GOT TO BALANCE OFF. FIRST OF ALL IS YOU HAVE TO MAKE SURE THAT YOU GOT PEOPLE THAT ARE ACTUALLY HIGHLY POSITIVELY ENGAGED, ATTACHED EMOTIONALLY TO THE COMPANY. AND I THINK IF YOU LOOK AT OUR ENGAGEMENT SCORES AT AIR NZ RELATIVE TO OTHER AIRLINES I LIVED EIGHT YEARS IN THE STATES AND YOU TRAVEL AMERICAN AIRLINES, AND YOU REALLY DIDN'T GET THE SENSE THAT THE STAFF ARE PART OF THE ORGANISATION AT ALL. IT SHOWS WHEN YOU ACTUALLY DON'T THEN GET HAPPY CUSTOMERS. WE WANT ENGAGED STAFF SO WE HAVE HAPPY CUSTOMERS, SO WE'VE GOT A STRONG BUSINESS. EQUALLY, WE'VE HAD PERIODS IN OUR HISTORY WHERE WE PROBABLY HAD GREAT CULTURE, GREAT CUSTOMER SERVICE, BUT WE REALLY HAVEN'T HAD THE FINANCIAL FIREPOWER WERE MUSCLE TO BE ABLE TO INVEST BACK IN THAT BUSINESS WITH NEW, MODERN AIRCRAFT. SO FOR US, WE TALK A LOT INTERNALLY ABOUT WANTING TO MOVE FROM JUST BEING A REALLY GOOD COMPANY TO BEING A TRULY GREAT ONE IN A WORLD-CLASS ONE. DOES THAT MEAN EXPANSION? I MEAN, WOULDN'T YOU LOOK AT...? SO YOU TOOK OFF SOME OF THOSE INTERNATIONAL ROUTES WHEN YOU CAME IN BECAUSE THEY WERE UNPROFITABLE. WOULD YOU LOOK AT ADDING INTERNATIONAL ROUTES IN THE FUTURE? MOST DEFINITELY. THAT'S A BIG PART OF WHAT WERE SAYING IS THAT THE REALITY OF AIR NZ THIS WE WOULD MAKE MONEY IN DOMESTIC NZ; AT ONE POINT WE'D LOSE $1 MILLION A WEEK FLYING TO AUSTRALIA AND THE PACIFIC ISLANDS; AND THEN THREE YEARS AGO, IT WAS VERY PUBLIC, WE WERE LOSING $2 MILLION A WEEK FLYING INTERNATIONALLY. WE'VE NOW FIXED THOSE BUSINESSES. THAT'S A GOOD THING, BECAUSE WE'VE NOW GOT A MUCH HEALTHIER SET OF MARKETS THAT WE OPERATE. NOW THE FOCUS IS ABOUT GROWTH, AND ITS UNPRECEDENTED GROWTH, SO THE AMOUNT OF NEW AIRCRAFT THAT WE'VE GOT COMING IN TO AIR NZ, WERE GOING TO SPEND $2.2 BILLION IN THE NEXT FOUR YEARS. WE ARE THE ONLY INVESTMENT GRADE` THERE'S FOUR INVESTMENT-GRADE RATED AIRLINES IN THE WORLD; THE REST ARE WHAT'S CALLED JUNK STATUS. SO WHAT, CHINA? IS THAT WHERE YOU DO IT? BIG FOCUS FOR US IS` YES, SO WE'VE GOT MORE EXPANSION POTENTIAL INTO CHINA. WE'VE CERTAINLY GOT A VERY BIG EXPANSION IN SOUTHEAST ASIA, INDIA AND ULTIMATELY EVEN BITS OF CONTINENTAL EUROPE, THROUGH OUR PARTNERSHIP WITH SINGAPORE AIRLINES, AND WE'VE TALKED VERY MUCH PUBLICLY ABOUT WANTING TO BE ABLE TO FIND A WAY TO OPEN UP LATIN AMERICA. AND SO YOU CAN SIT IN NZ AND KNOW THAT THROUGH THE AIR NEW ZEALAND NETWORK OR THROUGH OUR ASSOCIATION OF ALLIANCES, ACTUALLY BE ABLE TO GET INTO THOSE` AND DO YOU NEED CAPITAL TO DO THAT? WOULD YOU LOOK TO RAISE CAPITAL? NO, THE POINT IS HAVING THE ECONOMIC ENGINE OF THE BUSINESS RIGHT. WE ARE GROWING OUR SALES; WE ARE KEEPING OUR COSTS UNDER CONTROL INCREDIBLY WELL. WE'VE GOT VERY GOOD COST CONTROL IN THE BUSINESS. THAT EXPANDING THE PROFITS, AND THOSE PROFITS ARE BEING PLOWED STRAIGHT BACK INTO THE BUSINESS. AND YOU HAVE THE SUPPORT OF YOUR NUMBER ONE SHAREHOLDER, THE GOVERNMENT, IN THIS? BECAUSE WE'VE BECAUSE WE'VE BEEN DOWN THE ROAD OF AN EXPANSION GONE TERRIBLY WRONG WITH AIR NEW ZEALAND AND THEN A PUBLIC BAILOUT. DO YOU HAVE A SUPPORT OF THE GOVERNMENT IN DOING THIS? THERE SHOULD BE NO CONCERNS ABOUT THE PLANS THAT WE'VE GOT FOR THE NEXT FIVE YEARS WHERE WE PLAN TO GROW THE COMPANY 5% TO 6% EACH AND EVERY YEAR. THAT IS QUITE DIGESTIBLE FOR US. YOU HAVE TO REMEMBER THAT IN NZ IS IN A VERY STRONG POSITION NOW. WE HAVE WORKED INCREDIBLY HARD WHEN A LOT OF AIRLINES AROUND THE WORLD LOOK AT AIR NEW ZEALAND AND SAY, 'WHY DO YOU EXIST?' I CAN'T FIND MANY 4MILLION-PEOPLE COUNTRIES HAVE AN AIRLINE. AFTER THE BREAK WE CROSS BACK TO BRISBANE WHERE CORIN WILL INTERVIEW THE PRIME MINISTER. CLIMATE CHANGE HAS BECOME A MAJOR ISSUE AT THE G20 SUMMIT, AND THAT'S FORCED JOHN KEY TO DEFEND WHAT NZ IS DOING. TIME TO GO BACK TO BRISBANE AND THE MEETING OF THE G20 LEADERS. NZ IS THERE AS AN INVITED GUEST OF AUSTRALIA. CORIN JOINS US WITH PRIME MINISTER JOHN KEY. President Obama in the last week or so to his words and actions has put climate change back in the forefront of the global agenda. Is he expecting countries like NZ to do more? I think he's just following his instincts. You remember when he became president that climate change was a very big part of his agenda. Fundamentally, countries will say its economic recovery. now Now it is about climate change now. Our economy is growing. We are the rockstar economy. Why isn't climate change in our agenda? We a the 22nd biggest emitter. I would say yes, but the important thing with climate change to understand is that every country has a different profile. If you look at these different countries. They have 1% renewable energy of their 1990 base. We are 70%, 75% renewable. We are not making our biggest industry, the dairy industry, pay as one of the biggest emitters of carbon. We're actually making them pay through diesel charges. The behavior we are trying to change is something that we cannot control. The question is even the treasury is saying we are going to have to set a post-2020 target. It will cost a lot of money in carbon credits and cutting back emissions. I you saying the dairy industry isn't going to pay for that? I think everyone pretty much accepts we need to deal with this issue. Globally 14% of the emissions come from that industry. Let's be a bit pragmatic about this. There is a technological solution for agriculture. The rest the world is going to say will give them a dispensation because they have so much dairy. Potentially, yes. What they say is that we are on the right path. This is about behavioral change. If you cannot practically change something, you have to find another way through. When we go with this target, treasury says this is going to cost us one way or another, who is going to pay? Insomuch that you have an emissions trading scheme, what we are trying to do is put the charge in people who are emitting more one we go to Paris, People will say... so we've got dairy and then we've got transportation. So the households they but not the dairy industry. We been saying in previous elections campaigns you have the green party say we are going to reduce emissions. That means the NZ householder will pay more. What I'm saying is that we will try to do this without. President Obama still has to get it through Congress. And you got a Congress saying that they don't support that. Can you ever get the balance right? Something that won't be a burden on households but not make us look like we are lagging. When India or America sit down and say we are going to reduce our emissions by 28%, that is massive and they can push other people along. But NZ is too small to do that. The summit is really about ensuring we don't have another global financial crisis. Can NZ cope with another global financial crisis? Yes. Our debt levels are 26% of GDP. We are one of the lowest in the world. Just look at Germany. But NZ's problem is private debt. Especially the bubble for housing. Cracking down on speculators, is that something you can support as a government? What we are trying to do is keep inflation under control. That would erode people savings. Yes, we have high level private debt. We don't really haveinflation. It housing inflation. The government is not cracking down on property speculators. Are you happy for the reserve government to go after property speculators and not the government? Sometimes it is true in other parts of the country, but it is not as pronounced as it is in Auckland. The issue with Auckland is supply. The support people holding more than five houses? I haven't seen any advice on that. I want to look at what we are doing and whether it would practically work. The central bank saying that it is an issue, it doesn't look like an issue to me. The fundamental question isn't whether they own for five houses. The question is whether there is a bubble. What I've been saying for a long time now it's slowly rising house prices in Auckland are good; galloping house prices are not good. That is what's going to encourages speculators. The real argument is how do you slow up that increase and the answer is to supply more homes. Are you comfortable with Reserve Bank doing this part of the economic heavy lifting instead of the government? There's often a lot of confusion in this area. We changed overnight the depreciation rules on properties. $700 million a year, the equivalent of the labors capital gains tax. The second issue there is no evidence to support that if you put a straight capital gains tax it will do anything to keep the prices are going up. If you look at Melbourne, you will see house prices rising much faster than in Auckland. The question is what will work. My view is yes, you will do to her what is happening, but what the governor is saying is he doesn't want to raise these. So he's looking for other alternatives LOTS TO TALK ABOUT WITH THE PANEL AFTER THE BREAK, AND WE LOOK BACK TO THIS WEEK IN POLITICAL HISTORY. IT'S 1999, AND THERE'S ONE WEEK TO GO BEFORE THE ELECTION THAT ENDS JENNY SHIPLEY'S REIGN AS PRIME MINISTER. MAN: LET'S NOT GO BACK. POP! WELCOME BACK. LOOKING TO THE WEEK AHEAD. Laila, I want to start with you. Well, that is classic John key. Reassuring and encouraging people to be complacent. Giving people permission to not to worry about it. The nuclear arms race ` we did have a single nuclear weapon or power plant and yet we led that. It affected us negatively. There is no question that small countries have a small stake in the issue but we can still have a big influence. I want to challenge this agricultural issue. Since we are now joining the international chorus to quarantine anything related two food from the whole issue of emissions, we are promoting the expansion of dairying and meat production around the world. We would be acting as an investor to the emissions profile of China and Latin America I think we are becoming more and more part of the problem. we are not producing at all at home, But we are certainly leading and helping other countries with their admissions as well. You're not looking scared at all are you? NZ is the leading country in combating climate change. We are the only country in the world to have legislated for an all sectors emissions trading scheme. It is for a comprehensive. It is more comprehensive than European trading schemes. That was the only positive outcome from the Copenhagen fiasco. It was led by NZ ` looking at ways to reduce methane ` without changing food production. What we are trying to do is encourage other countries to follow us. That hasn't been successful at all. This is an issue that comes down ultimately to the Chinese, Americans and Indians reaching an agreement. Everything that anyone else does is a political or scientific move. The Chinese and the Americans that certainly have a stake. The Prime Minister is going to have to respond to that. NZ has become a fast follower. China and Russia have made a very very clear. The term governments tend to face challenges. This is one of those challenges. We cannot rest on our laurels. So you think the NZ carbon unit should be you priced above the world price? I don't think NZ's carbon unit should be gifted to others. What I'm saying is after Obama's announcement, NZ has to address this. I worry dairy industry feeds 80 million people. We have a very low admission for country that feed 80 million people. China burns our units. When we export food, we pay the carbon costs. There is a disadvantage for agricultural producers. Other producers to not have to face that cost in their economy. We are miles ahead of any of them. We are trying to promote a model now internationally that basically gets NZ further off the hop in terms of our responsibility for our emissions. Perfectly well that we take in agriculture out of that the EU does not include aquaculture. Our emissions have increased. We are trying to negotiate we have to leave it there. Tuesday we will know the labour leadership. 2 PM is the time the announcement will be made. It is split in four different ways. They have built division in. I think it would be Little. BEFORE WE GO, LET'S LOOK BACK AT WHAT WAS MAKING POLITICAL NEWS THIS WEEK IN 1999. THERE WAS JUST ONE WEEK TO GO BEFORE THE NATION WENT TO THE POLLS. THE ELECTION SAW THE END OF JENNY SHIPLEY'S RULE AND THE BEGINNING OF HELEN CLARK'S THREE-TERM LABOUR GOVERNMENT. THE REPORTER IS JACKIE MAHER. HOW ON EARTH DO YOU EXPECT THE NZ TAXPAYERS TO PAY FOR THAT? GETTING HEATED IN WELLINGTON CENTRAL... THIS IS THE BIGGEST DISASTER IN THIS COUNTRY. ...AND TAURANGA. I DON'T CARE IF YOU COME FROM TIMBUKTU. YOU CAN'T STOP ME. THE NZ FIRST LEADER WAS BANNED BY RED TAPE FROM VOTE-CATCHING ON HIS OWN TURF TODAY. I'M NOT CAMPAIGNING. I'M JUST WALKING ROUND THE PLACE. NOR WAS THE PRIME MINISTER. SHE WAS TAKING A BREAK FROM FILMING A NEW BATCH OF NATIONAL PARTY ADS. MAN: AND THEY'LL PUT A TAX ON SUCCESS AND ON HARD WORK. POP! LET'S NOT GO BACK. POP! SIREN WAILS BUT HELEN CLARK, RIDING THE CAMPAIGN TRAIL IN AUCKLAND, IS SLAMMING NATIONAL'S ATTACK ADS. WHY DON'T THEY SHOW A VISION FOR NZ? WHY DON'T THEY HOLD UP SOME HOPE? THEY CAN'T. ALL THEY'VE GOT IS FEAR, FEAR, FEAR, AND IT'S NOT WORKING. HELEN HAS BEEN OF THE VIEW THAT SHE CAN JUST WALK HER WAY TO VICTORY. NZERS, CLEARLY, ARE NOT INTERESTED IN THAT. THEY WANT TO MAKE A CHOICE. ON THE ATTACK, TOO, WAS THE ALLIANCE IN WELLINGTON CENTRAL, LAMPOONING ACT LEADER AND ELECTORAL CANDIDATE RICHARD PREBBLE. ...DECLARE WELLINGTON A PREBBLE-FREE ZONE. ALL CHEER WE'RE GOING TO HAVE A MILITANT LEFT-WING GROUP IF WE HAVE A LABOUR-ALLIANCE-GREEN PARTY THAT WILL DETERMINE THE FUTURE OF THIS COUNTRY. I ACTUALLY FIND THAT VERY SCARY. HELEN CLARK LAUNCHED A MAJOR PLEA FOR VOTERS TO CHOOSE LABOUR WITH THEIR PARTY VOTE, PARTICULARLY THE STILL BIG GROUP OF UNDECIDED VOTERS. THERE WILL BE A CHANGE OF GOVERNMENT, AND IT'S IN THE INTERESTS OF MIDDLE NZ THAT LABOUR BE AS STRONG IN THAT GOVERNMENT AS POSSIBLE. THE GROUP JENNY SHIPLEY IS ALSO CAMPAIGNING FOR. THERE'S A LOT OF SOFT VOTE, AND NATIONAL WILL BE CAMPAIGNING VERY STRONGLY THIS WEEK. MARAE IS NEXT WITH THE RECENT OPENING OF THE MAORI BATTALION'S C-COMPANY MEMORIAL MUSEUM. AND, REMEMBER, Q+A REPEATS TONIGHT AT 11.35PM. THANKS FOR WATCHING, AND THANKS FOR YOUR CONTRIBUTIONS. THOSE WERE THE QUESTIONS, AND THOSE WERE THE ANSWERS. THAT'S Q+A. SEE YOU NEXT SUNDAY MORNING AT 9. CAPTIONS BY VIRGINIA PHILP AND GLENNA CASALME. CAPTIONS WERE MADE POSSIBLE WITH FUNDING FROM NZ ON AIR. COPYRIGHT ABLE 2014