GOOD MORNING, AND WELCOME TO Q+A. I'M SIMON DALLOW WITH HEATHER DU PLESSIS-ALLAN. TODAY ` IT HAS BEEN DESCRIBED AS THE WORST CYCLONE IN PACIFIC HISTORY. THOSE PICTURES JUST IN OVERNIGHT, WITH FEARS OF A SOARING DEATH TOLL IN VANUATU. BUT JUST HOW PREPARED ARE WE FOR CYCLONE PAM? THE MINISTER OF CIVIL DEFENCE, NIKKI KAYE, IS STANDING BY AS PAM HEADS OUR WAY. ALSO THE DAIRY INDUSTRY 1080 SCARE. YES, THERE ARE IMPORTANT QUESTIONS ABOUT WHETHER THE MINISTRY OF PRIMARY INDUSTRIES HAS HANDLED THIS RIGHT. THE BACKLASH AGAINST SOME OF OUR PRODUCTS HAS BEGUN, AND INFANT FORMULA MAKERS ARE ANGRY. I'LL BE SPEAKING TO ONE OF THEM, PLUS THE MINISTER IN CHARGE, NATHAN GUY. IS THE THREAT OVER? AND HOW WILL THE GOVERNMENT STOP COPYCAT ACTION? THE ECONOMY'S BUZZING, SO TIME FOR A PAY RISE, RIGHT? WELL, IT'S JUST NOT REASONABLE IN THE CIRCUMSTANCES. WHY IS BILL ENGLISH DAMPENING DOWN EXPECTATIONS? WHAT THE NEW LOW-INFLATION ECONOMY MEANS FOR ME AND YOU. HE'S INTERVIEWED BY POLITICAL EDITOR CORIN DANN. AND WE'LL ANALYSE ALL THE ISSUES WITH OUR PANEL ` POLITICAL SCIENTIST DR GRANT DUNCAN, FORMER LABOUR CANDIDATE DEBORAH MAHUTA-COYLE AND HIVE NEWS PUBLISHER BERNARD HICKEY. DUE TO THE LIVE NATURE OF Q+A, WE APOLOGISE FOR THE LACK OF CAPTIONS FOR SOME ITEMS. AFTER CUTTING A DESTRUCTIVE PATH THROUGH THE PACIFIC, HERE'S WHAT WE KNOW REGARDING CYCLONE PAM'S IMPACT ON VANUATU. MANY COMMUNICATION LINES ARE DOWN, BUT THERE ARE REPORTS SOME NZ AID WORKERS AR UNACCOUNTED FOR, AND THE DEATH TOLL IS EXPECTED TO RISE. THE NZ GOVERNMENT HAS GIVEN AN INITIAL $1M CONTRIBUTION TO ASSIST OUR PACIFIC NEIGHBOURS DEVASTATED BY THE CYCLONE. THE MINISTER OF PACIFIC ISLAND AFFAIRS, HON SAM LOTU-LIGA, HAS JUST ISSUED A STATEMENT TO Q+A WITH HIS PRAYERS AND THOUGHTS TO THE PEOPLE OF VANUATU. PAM IS EXPECTED TO HIT NZ LATER TODAY. WITH MORE ON THIS STORY, THE CIVIL DEFENCE MINISTER, NIKKI KAYE, IS IN WHANGAREI. GOOD MORNING, MINISTER. We understand about six Kiwis may be missing in Vanuatu. MFAT are working very hard to ensure families are communicated with. We have to get the communication infrastructure up and running. What on the ground is being done to reach the six Kiwis? The MFAT staff are working around the clock. The communication structure has to be up and running. We have a Hercules going over later today. The best thing New Zealanders can do is look on safe travel.GNZOVT. To send short text messages. Are you concerned about these six Kiwis ? Obviously we are concerned about any New Zealanders that can't get hold of their loved ones. There are total of 160 New Zealanders in Vanuatu. Will you be trying to get them out? There will be a lot of meetings today. Minister McCully said we will know more once the assessments happen. We have to get to the outer islands. Until we get that picture today then we will know more. $1 million is going to aid agencies. Keep updated on the MFAT website. When the storm reaches New Zealand, does it have potential to take lives? We always had to be prepared, and you can't prepare for freak accidents. The advice I'm getting is we're not on a direct storm path. Cyclone Pam has weakened as it is come towards New Zealand. Our buildings are completely different standard than Vanuatu. But people need to be prepared. Tyre things down, the peer emergency kits, the advice I have is this is not of the street that has hit Vanuatu. The prediction seem to have underestimated things. Nodded all. I spoke to forecasters from MetService last night. They are all saying pretty much the same thing in terms of the strength and part of the storm. The issue in Vanuatu has been the quality of the building structures. I have a conference call with controllers across New Zealand later today. What is your advice to New Zealanders? My advice to New Zealanders is treat this seriously. Make sure your emergency kits are updated. Move things that will keep you out of harms way. If you are in an area like Gisborne or great barrier island or Bay of Plenty, make sure you use use essential travel. That is where we sometimes have accidents. Do you expect you may need to evacuate people out of those areas? It is too early to tell. At the moment we're predicting severe weather. We've been through this before. I'll be talking to the civil defence controller is in listening to the plans for particular areas. We are very prepared for this. BUT BEFORE WE GO TO BACK TO HEATHER, HERE'S WHAT HE HAD TO SAY ABOUT THE 1080 THREAT AGAINST OUR DAIRY INDUSTRY. LOSING A BIT LESS SLEEP OVER IT NOW THAN PRIOR TO THE ANNOUNCEMENT, BECAUSE THE RESPONSE HAS BEEN FAIRLY CALM. THERE ARE BIG COMMERCIAL` THERE COULD HAVE BEEN BIG COMMERCIAL AND ECONOMIC RISKS. SOME OF THAT MAY PLAY OUT. BUT IT'S PROBABLY RUNNING ABOUT AS WELL AS WE COULD HAVE EXPECTED GIVEN THE NEED TO INFORM CONSUMERS ON THE ONE HAND, AND ON THE OTHER HAND TO PREPARE TO ENSURE THE SAFETY OF OUR PRODUCTS. I'M JOINED NOW BY MICHAEL BARNETT, FROM THE INFANT FORMULA EXPORTERS ASSOCIATION. Michael, do you feel as calm as Bill English does? Do you have a ship and they can't get into China? Some individual exporters have a lot of skin on the table. Sitting on the wharf and being delayed, they have more concern than the Minister. The Chinese are smarter than what we have alluded to. They understand sloppy process. When we talked about botulism last year, they couldn't comprehend. They know that terrorism is quite difference. The social media has been a lot quieter than I would have expected. Update us with that shipment? The ship has arrived outside of China. This particular exporter sends about 20 shipments a year. Normally you do a seven day pre-shipment clearance with your documents. Your shipment should give up the wharf in about 20 days. The shipment has arrived at the port and the Chinese say they need extra certification. They will spot check 1480. Did you not know the extra certification was needed? No. Since the letter was sent to Fonterra and Federated farmers, there has been a void of communication between MPI and the exporters. The end product has not been tested. So MPI failed to let your exporters know ? From an industry perspective, if there was any real risk, they should have told us to stop, test and certify. Then you could've told a relatively small group of people and had control of the endpoint of your product. You have been kept out of the loop. MPI will look back and say there is a group of stakeholders. There is a constituency out there. It doesn't matter whether you are Fonterra or a small exporter, you deserve communication that keeps you in the loop. Do you think MPI as you say didn't keep you in the loop to try and limit the number of people who knew? And nationally admired been the case, but it got to us is an exporter Association before we were briefed by government. As a small market. Had to go too far before somebody talks. You have said some of your members have seen a drop-off in sales. The government says the has been minimal impact on the market here. If you are looking at Fonterra, and people at Fonterra and Tatua have been superb to the small guys. They can probably survive. Small exporters putting the product into Chinese markets, a slowdown in payment and I'm dead. I have to convince the distributor to work for me. He has choices and can say I could deal with other countries. He doesn't have to deal with the New Zealand brand. Hey is going to look at the New Zealand product and say I have a higher risk of the year. Distributors have come to New Zealanders and say we'd like to put a hold on the orders that we've got with you at the moment. We want to see how this plays out. I use saying that added as a hat that has the potential to come? They haven't taken a hit yet. The only hit is a delay at the border. The future hit as a distributor waiting to see what happens in the China market. So far the response from the China argument has been muted. Earlier in the week you said your members had taken a hat. They have taken a hit. The orders they had in place, the distributor has put a hold on taking those, so they have taken a hit. That doesn't mean that will flow through into finances that they lose. The production these people have in place and the orders they thought they had, the cash flow has stopped. They are waiting for a distributor to come back and put those orders in place and confirm them. You are critical of the government for going public. Irrespective of what happens, there will always be a number of opinions. The major food distributors around the world, most that I have spoken to and most experts have said you do not go public on these sorts of issues. It has a flow on effect. You get a copycat. To show that you ensured security, you expose your weaknesses. Do you accept the government's position that if we had all found out, they would have been hauled over the coals? You could stop and tested and certified. I think there's always going to be a difference of opinion as to the process that you undertake. Most exporters with the food industry would say they get 40 or 50 of these a year. They do not go public. Has done harm to go public? We've been fortunate. It has showed up a weakness in our system. If we had something like this, we need a bigger plan. We need better engagement with business. How cross are you with the government for going public? You can't be cross with the government for going public. I'm frustrated on behalf of the small exporters. There wasn't a full engagement with the industry sector. You are finding out through the back door. It has been a frustration and attention going through this. It's been 100 days to get to a balloon going up and been a media frenzy. MPI Minister coming up. What would you like to say to him? Better engagement. When I look at how this has been handled. We had to have somebody lead. Prime Minister key step down and operated well. A better engagement with MPI and the sector. Controlling the product to the consumer. They could have got 25 people in a room and explained and controlled endproduct. Rather than including big guys and excluding the little guys. We're all part of one sector and should all have had good communication. THANKS, MICHAEL, AND WE'LL HEAR WHAT MINISTER NATHAN GUY HAS TO SAY AFTER THE BREAK. SEND US YOUR THOUGHTS. WE'RE ON TWITTER, YOU CAN EMAIL US... OR TEXT YOUR THOUGHTS AND FIRST NAME TO 2211. KEEP THEM BRIEF; EACH TEXT COSTS 50 CENTS. I'M BACK WITH THE MINISTER OF PRIMARY INDUSTRIES, NATHAN GUY. Why did you go public on the 1080? We always knew we would have to go public. When fund her and Federated farmers got the letter in November, the police stepped up the criminal investigation straightaway. It could turn out to be a hoax. But we had to go public. The reason we had to go public was ultimately there are thousand people that were involved in discussions. We had to alert manufacturers and international trading partners. Particularly the regulators who had to provide information to consumers. It was never an our minds that we should sit on this. A lot of people knew, and we needed to give New Zealand consumers the utmost confidence. Why did you go public? Did you not go overboard calling it a matter of national significance? We didn't overplay it. We had to go out and be very strong and tell our consumers here in New Zealand that we had all the new testing processes 1080. There's been no panic buying on the supermarket shelves. Sales have been very stable. Consumers have reacted as we would expect. They know that the 1080 testing we haven't found, as you would expect, any traces of 1080 in any formula products. But this goes against all national advice to go public? Some advice is saying that. What advice has told you that you should go public? Looking at the whole spectrum, some are saying we should have gone out winner was found. We should have responded when they got the letter. I don't agree with that. I think we've got the balance about right. It gives me confidence because of the consumer reaction here in New Zealand. And the consumer reaction around the world. You said it was muted. Michael Barnett said it has been muted. Who's right? By and large it's been a very muted response from our international partners. It's too early to say whether there's been an impact or not. We're working very closely with international trading partners. Our international trading partners have said thank you New Zealand for being upfront and honest. We let them know early in the piece. They appreciated the fact we were upfront and honest and it's a low probability of this criminal black bow 3 to being carried out. You say, this is muted but surely a shipment stopped outside China says there is some concern. It is early days. Let's wait and see. Our export certificate was signed from China over the weekend. That is great news. They will introduce a new testing regime for 1080. I'm very hopeful we won't see an impact on our border. From time to time shipments are held up. Why do you think this shipment has been held up? Is it to do with the problem of certification? Everything will be certified from 10 March going forward. I'm asking about this shipment. I don't know the details of this shipment. You are the Minister for this. How could you possibly not know? I'm asked my officials to work through the issues with this shipment. That's the appropriate place for our officials to work through with the regulator. I have seen documentation to prove that is exactly why that shipment has been stopped. I'm worried that there was significant cold upset the border. So this is not significant? The information from my officials over the weekend as we're seeing a calm response from our international trading partners. They have asked to be kept informed. That's why I can come on your program and say we have had a measured response from international trading partners. We will get through this by providing clear information to them. We have tested over 50,000 samples now and right through from the processors from Kautu can we have reviewed all of that. They understand the importance of food safety. They understand how supply chain has tapped the securities on it. To take you back to the shipment. Do you not admit it is a bad looks that that has the potential to blow up and cause some serious concerns? You need to understand that exporters find the right delays at the border from time to time for a variety of reasons. In this case we know why that is. It has to do with the 1080 threat. Let's work through with our officials. MPI can have discussions with the port authorities. I'm very confident we can sort out this issue. China is a very important market. It is with $5-$6 billion. It's grown in the last 12 or 18 months by 75%. Yes there might be from time to time hold-ups at the border. Right now it is taking on average 30 to 40 days to clear a different formula I have to stop you there because we need to move on. Are you worried about the impact of the cyclone Pam on order culture and agriculture? A lot of our crops are coming into harvest now. If it falls on the East Coast of the North island, those areas have been impacted by drought and need a big drink of rain. Cyclone Pam will provide that. I'm hoping we don't get big destruction that we get to by rain. THANKS, HEATHER. THE PANEL'S HERE AFTER THE BREAK. AND LATER ` FINANCE MINISTER BILL ENGLISH. WITH THE ECONOMY ON THE RISE, WHEN WILL OUR WAGES TAKE A LEAP TOO? PLUS ` IS IT TIME TO FIND NEW TRICKS TO TAME THE AUCKLAND HOUSING MARKET? THAT INTERVIEW'S COMING UP. LET'S GO TO OUR PANEL NOW ` POLITICAL SCIENTIST DR GRANT DUNCAN FROM MASSEY UNIVERSITY ALBANY; DEBORAH MAHUTA-COYLE, FORMER LABOUR PARTY STAFFER AND CANDIDATE, NOW COMMUNICATIONS CONSULTANT; AND BERNARD HICKEY, HIVE NEWS PUBLISHER. When the 1080 scare broke, newsrooms were sent into panic. How has this been handled? We were told there was no risk to consumers. Threat of criminal charges. It's hard to know how to read it. If there was no risk, why would they announce at all? The government is hard against the ropes. Is in a no-win situation? Yes. It is quite confusing that the government uses language like in event of national significance and eco-terrorism and then sit in a chair and said everything is okay. What I want to know is what the testers, what the threshold is pressing the red button. Those with the government know that we get a lot of threats, on a daily or weekly basis. What made this threat bigger than all the others we've had so far? Is ultimately just a political risk? The context of the melamine, botulism situation has made the government to jump the. It is a legitimate question to ask ` big food companies overseas deal with these issues everyday. Is the right thing to push the red button? The global reaction ` is that what you expected? If it had been disclosed and the government hadn't been front footed, it might have been different. It's frustrating for infant formula Manufacturers. It is another piece of paperwork has to be filled out. The government played picking winners here? I think that Michael has an important question to ask. When he had dairy producers criticising then government, they need to ask questions about how they handled this. There could be some favouritism there. Maybe Fonterra gets the inside running. Is it to keep confidence? There could be a bit of bureaucracy like that. A industry is set up for a milk board type situation, where there's only a few people to deal with. When dealing with China, they are not just the big guys, but a range of small to medium. There is something our government will learn from, to communicate with a much wider group of exporters. We haven't seen a big change in the money markets. There was actually a risk, because the currency did move quite substantially ` about half a cent in the afternoon. It's a tough one to announce. A lot of people you have to inform and lots of press conference to organise. There was a real question about the big production number that was done. The signals were very severe. As of we had just caught foot and mouth, which wasn't the case., it was a no-win situation. How would you rate the government handling? Labour has been muted. They haven't played politics. I would wait until we caught the guy and then said we have this threat. The fear is if you set on this news and government was found to have it and a child was affected, that is political suicide. To some extent, we need to evaluate this in future when we have the benefit of hindsight and hopefully we will know who the perpetrator is, and that person will be arrested. Keep in mind, that person did have a sample of 1080 poison in the letters. In the meantime, John key, Nathan Guy, keep calm and carry on. AFTER THE BREAK ` TEACHERS, POLICE AND OTHER PUBLIC SERVANTS WILL BE IN PAY TALKS THIS YEAR, AND THEY'RE WANTING BIG RISES. FINANCE MINISTER BILL ENGLISH GIVES A CLEAR SIGNAL WHAT THEY CAN EXPECT. THAT'S NEXT. INFLATION COULD FALL TO ZERO SOMETIME THIS YEAR, WHICH WOULD BE A FIRST FOR THE RECORD BOOKS, ACCORDING TO FINANCE MINISTER BILL ENGLISH. THESE ARE STRANGE TIMES. THE ECONOMY IS STEAMING AHEAD, AND YET PRICES ARE FALLING. POLITICAL EDITOR CORIN DANN SPOKE TO MR ENGLISH EARLIER AND ASKED HIM: IS IT GOOD NEWS FOR THE ECONOMY? I THINK, ON BALANCE, I THINK IT'S GOOD NEWS. IT'S A BIT HARDER FOR GOVERNMENT BECAUSE IT'S NOT ZERO INFLATION. IT MEANS THE TAX BASE ISN'T PUMPING UP AS FAST AS WOULD MAKE OUR JOB EASIER TO BALANCE THE BOOKS. BUT FOR HOUSEHOLDS, IT DOES MEAN THE COST OF LIVING IS NOT GETTING AWAY FROM THEM, AND WHEN THEY GET A WAGE INCREASE, IT'S A REAL WAGE INCREASE. NOW, THE LONGER TERM ISSUE IS THAT IF IT'S A SIGN OF POOR PERFORMANCE IN THE GLOBAL ECONOMY, THAT WILL, IN THE LONG RUN, AFFECT OUR TRADE. IF IT'S A SIGN THAT THE NZ ECONOMY MIGHT SLOW DOWN, THEN THAT WOULDN'T BE GOOD EITHER. BUT THE RESERVE BANK ` I THINK SOMETHING LIKE 20 CENTRAL BANKS AROUND THE WORLD HAVE CUT INTEREST RATES. THE RESERVE BANK, SURELY, MUST BE CUTTING INTEREST RATES IN NZ NOW WHEN WE'VE HAD INFLATION GOING TO ZERO. IT'S BEEN UNDER THE MID-POINT, THE 2% MID-POINT, SINCE SEPTEMBER 2011. AT WHAT POINT DO YOU SAY, 'HANG ON, THEY SHOULD BE CUTTING HERE. 'THAT'S THEIR JOB'? WELL, THAT'S EXACTLY THE DECISION THAT THE RESERVE BANK GOVERNOR NEEDS TO DEAL WITH. HE HAD SOMETHING TO SAY ABOUT IT THIS LAST WEEK. BUT ARE YOU WORRIED, THOUGH, THAT HE` HE HAS GOT AN ALTERNATIVE SCENARIO WHERE HE DOES CUT IF INFLATION GOES LOWER. I KNOW YOU CAN'T TELL THE RESERVE BANK GOVERNOR WHAT TO DO, AND I DON'T WANT YOU TO, BUT WHAT I WANT TO KNOW IS, DO YOU THINK HE MIGHT HAVE MADE THE WRONG CALL? HAS HE UNDERESTIMATED JUST HOW LOW INFLATION IS? WELL, IF YOU LOOK AT WHAT THE RESERVE BANK'S JOB ` IT'S TO HAVE INFLATION AROUND 2%. NOW, THEY KEEP FORECASTING IT COMING BACK TO 2%, AND THAT'S THE FORECAST THEY'VE PUT OUT. BY THE MIDDLE OF NEXT YEAR... THEY'VE GOT IT WRONG FOR SO LONG NOW. EVEN THE PRIME MINISTER POINTED THAT OUT ON MONDAY. AND, LOOK, THAT'S THE NATURE OF THE DEBATE. IS THIS TEMPORARY? SO AS TO SAY, THE DROP IN OIL PRICES ` IS IT A TEMPORARY THING OR A PERMANENT THING? AND NO ONE KNOWS THE ANSWER. AND WHAT DO YOU THINK? WELL, NO ONE QUITE KNOWS THE ANSWER. BUT YOU MUST HAVE A FEELING ON THAT ISSUE. IS THIS A TEMPORARY BLIP? WE'RE GOING TO GET BACK TO NORMAL FREQUENCY, WHATEVER YOU WANT TO CALL IT, OR IS THIS ACTUALLY SOMETHING NEW THAT WE'VE NEVER HAD BEFORE? WELL, IT CERTAINLY IS SOMETHING NEW WE'VE NEVER HAD BEFORE. WE'VE NEVER HAD ZERO INFLATION BEFORE. THE WAY I WOULD PUT IT IS YOU NEED TO WORK OUT WHAT THE COST OF MISTAKES ARE. LET'S SAY YOU THINK INTEREST RATES ARE A BIT HIGH, WELL, IF YOU HAD A SCENARIO WHERE INFLATION STAYED VERY LOW AND WE HAD A NUMBER OF YEARS OF LOW DAIRY PRICES, WE WOULD THEN LOOK BACK AND SAY THE RESERVE BANK GOVERNOR MADE THE WRONG DECISION. HOWEVER, IF THE NZ ECONOMY GROWS AT THE RATE THE RESERVE BANK SAYS IT DOES, DAIRY PRICES COME BACK UP, THEN HE'S GONNA LOOK LIKE HE'S GOT IT ABOUT RIGHT. BUT THERE IS SO MUCH AT STAKE HERE COS IT'S KEEPING OUR CURRENCY UP, WHICH IS HURTING OUR EXPORTERS, WHICH MEANS KIWIS, AVERAGE KIWIS, AREN'T EARNING AS MUCH. WELL, THE CURRENCY PICTURE IS A BIT COMPLICATED. I MEAN, WE'VE DROPPED FROM 86C TO 73C AGAINST THE US DOLLAR. PROBABLY FURTHER THAN WE THOUGHT WE WOULD. HOWEVER, WE'RE STRONGER AGAINST THE YEN AND THE EURO, SO I DON'T THINK THE CURRENCY IS AN ISSUE THAT'S HOLDING US BACK TOO MUCH AT THE MOMENT. OK, CAN I JUST BRING YOU BACK TO... I THINK IT WAS JUST BEFORE THE ELECTION YOU TALKED ABOUT THE AVERAGE WAGE INCREASES THAT YOU FORECASTED ` A KEY PITCH FOR YOUR GOVERNMENT AHEAD OF THE ELECTION. YOU SAID $7500 WOULD BE ADDED TO THE AVERAGE WAGE. I THINK IT WAS $62,500 WE'D REACH. ARE WE STILL GOING TO GET THAT, THOUGH, WITH INFLATION AT ZERO? WELL, LET'S SEE. I MEAN, WAGE INCREASES COULD BE A BIT MORE MODERATE THAN WAS EXPECTED, BUT THE EXPECTATIONS WEREN'T THAT STRONG. WHAT'S BEEN SURPRISING IN NZ IS THAT IN A GROWING ECONOMY, WE HAVE FOUND MORE PEOPLE TO DO THE WORK. NOW, AT SOME STAGE, WE'VE GOT THE HIGHEST PROPORTION OF NZERS IN THE WORKFORCE WE'VE EVER HAD. NOW, THAT'S FROM NET MIGRATION, RIGHT? WELL, THE NET MIGRATION, BUT ALSO WOMEN AND OLDER NZERS ARE MORE AVAILABLE FOR WORK. THAT'S GREAT. THAT'S GREAT. BUT COMING BACK TO MY POINT, CAN YOU GUARANTEE, AS YOU DID BEFORE THE ELECTION, THAT PEOPLE WILL GET THAT $7500 EXTRA IN THE AVERAGE WAGE? BECAUSE WITH INFLATION AT ZERO, THEY'RE NOT GOING TO GET THE BENEFITS OF THAT GROWTH IN THE ECONOMY THAT'S 3%? WELL, IF THEY GET A 2% WAGE INCREASE, THAT'S 2% REAL WAGE INCREASE RATHER THAN 1% OF INFLATION. AND THIS IS THE POINT. DO YOU THINK THEY WILL, OR CAN THEY EXPECT 2%, BECAUSE THE RESERVE BANK GOVERNOR IS WARNING AND WATCHING VERY CLOSELY, AND THINKING, 'MAYBE THEY MIGHT ONLY GET 1%.' WELL, THAT'S UP TO THE EMPLOYERS AND THE EMPLOYEES, BUT THEY WILL SORT THAT OUT. THE POINT WE WERE MAKING BEFORE THE ELECTION IS THE PRETTY UNIQUE OPPORTUNITY WE HAVE IN NZ FOR CONSISTENT, MODERATE GROWTH OVER THE NEXT THREE TO FOUR YEARS. THAT WILL DELIVER CONSISTENT, MODERATE WAGE INCREASES FOR NZERS. BECAUSE THE FUNDAMENTALS IN THE ECONOMY ARE PRETTY SOUND. A LOT OF BUSINESSES HAVE HAD A BIG SORT-OUT IN THE LAST FEW YEARS. THEY'RE PRODUCTIVE. THEY'RE WELL ORGANISED. THEY SHOULD BE ABLE TO DELIVER. SO YOUR MESSAGE TO KIWIS TODAY IS, YOU SHOULD BE GETTING 2% AT LEAST. NO. I'M NOT PUTTING ANY NUMBER ON IT. THE POINT I'M MAKING IS THAT WHEN INFLATION IS ZERO, WHAT USED TO LOOK LIKE A LOW WAGE INCREASE, AROUND 1% OR 2%, ACTUALLY NOW HAS SOME SIGNIFICANT GAIN OVER THE COST OF LIVING. BUT YOU CAN'T RULE OUT THAT YOU'RE NOT GOING TO BE ABLE TO DELIVER ON THAT PROMISE OF THE $7500 OVER THE NEXT THREE YEARS, CAN YOU? BECAUSE IT'S JUST NOT GOING TO BE THERE. WELL, THOSE ARE THE FORECASTS. THEY HAVEN'T CHANGED MUCH FROM WHAT I'VE SEEN. AND WHATEVER THE DETAILS OF THE NUMBERS, THE GENERAL PICTURE IS A PRETTY SOUND ONE. REMEMBER, THAT WAS IN A POLITICAL DEBATE WHERE SOME PEOPLE WERE CLAIMING NZ WAS GOING BACKWARDS, NO ONE WAS GETTING AHEAD OF THE COST OF LIVING, GROWING INEQUALITY NONE OF WHICH WAS TRUE. INEQUALITY IS FLAT TO FALLING. INCOMES ARE RISING MODERATELY. THAT'S A PRETTY GOOD SUSTAINABLE OUTLOOK FOR KIWIS. ALL RIGHT. WHAT ABOUT YOUR EMPLOYEES THE STATE SECTOR? WHAT CAN THEY EXPECT? BECAUSE THERE ARE SOME BIG WAGE ROUNDS COMING ` POLICE AND TEACHERS AND A BIG CHUNK OF THE STATE SECTOR. THEY CAN EXPECT TO BE TREATED FAIRLY BY THEIR DIRECT EMPLOYERS. I MEAN, WE DON'T NEGOTIATE IT. WE DO SET SOME PERIMETERS. YOU'VE ONLY GOT A BILLION DOLLARS TO PLAY WITH, THOUGH, HAVEN'T YOU? WELL, IT WILL BE` THE GOVERNMENT IS STILL RUNNING PRETTY TIGHT ON SPENDING. BUT, LOOK, WE WANT TO DEAL FAIRLY WITH OUR EMPLOYEES. OVER RECENT YEARS, THOSE GROUPS HAVE DONE A GREAT JOB UNDER FINANCIAL PRESSURE TO DELIVER BETTER SERVICES. WE'VE GOT MORE HEALTH SERVICES THAN EVER. THE NURSES ARE AT THE HEART OF THAT. CRIME RATES ARE DROPPING. THE POLICE ARE AT THE HEART OF THAT. YES, I'LL PICK YOU UP ON THAT POINT, BECAUSE WE SPOKE TO MEMBERS OF THESE GROUPS, AND THEY'VE SAID THEY'VE BEEN VERY RESTRAINED, THAT THEY HAD MADE PRODUCTIVITY GAINS AND THAT THEY HAD HELD THEIR TONGUE, IF YOU LIKE, ABOUT GETTING SOME PAY RISES OVER THE LAST FEW YEARS, AND THEY'RE LOOKING FOR THINGS UP AROUND 4%. NOW, CAN YOU DELIVER THAT SORT OF A PAY RISE IN THE STATE SECTOR? I THINK I CAN SAY 4% SOUNDS A BIT HIGH, BUT IT'S A MATTER FOR NEGOTIATION. WELL, YOU'VE JUST ENTERED INTO THAT NEGOTIATION, BECAUSE THE TEACHERS SAY ANYTHING UNDER 4% WOULD NOT BE FAIR. THEY ARE CATCHING UP IN THEIR VIEW, AND YOU'RE JUST SAYING TODAY, FORGET IT. WELL, THERE'S NOT GOING TO BE A NEGOTIATION AROUND 4%. ARE THEY NOT WORTHY OF 4%? WELL, IT'S JUST NOT REASONABLE IN THE CIRCUMSTANCES. BUT A FAIR, NEGOTIATED SETTLEMENT THAT RESPECTS THEIR PROFESSIONALISM AND THEIR CONTRIBUTION AND ENABLES US TO GET ON WITH THE THINGS THAT REALLY MATTER, LIKE LIFTING ACHIEVEMENT, REDUCING CRIME, THAT'S HOW THE GOVERNMENT'S GOING TO` WE WANT THE PEOPLE ON THE FRONT LINE TO FEEL SATISFIED THAT THEIR CONTRIBUTIONS ARE BEING RECOGNISED, THEY'VE BEEN PROFESSIONALLY REWARDED, CONSISTENT WITH THE REST OF THE COMMUNITY. THEY'RE PRETTY FIRED UP ABOUT THIS, THOUGH. DO YOU THINK THIS IS THE SORT OF SITUATION WHERE WE'RE HEADING INTO STRIKE ACTION? YOU COULD HAVE A TOUGH SELL HERE. I'M SURE THERE WILL BE SOME TENSION IN THE NEGOTIATIONS. THAT'S PRETTY NORMAL. I'M SURE THERE WILL BE A BIT OF POSITIONING BEFORE WE GET TO NEGOTIATIONS. BUT WE'RE PRETTY CONFIDENT WE'VE GOT A POSITIVE ENVIRONMENT IN THE PUBLIC SERVICES. PEOPLE KNOW WHAT'S REQUIRED OF THEM. THEY'RE DOING A GOOD JOB. WE WANT TO SEE THEM ADEQUATELY REWARDED FOR THAT. THE PROBLEM WITH ALL OF THIS, OF COURSE, IS HOUSING. AND LET'S START FIRST WITH THE INFLATION. GREAT FOR CONSUMERS THAT THEY AREN'T PAYING BIG PRICES FOR THEIR FLAT-SCREEN TVS OR WHATEVER, BUT RENTS ARE GOING UP QUITE A BIT MORE THAN THE RATE OF INFLATION AND HOUSE PRICES ARE GOING UP 13%. SO FOR A LOT OF THE COMMUNITY LOCKED OUT OF THE HOUSING MARKET, THEY'RE NOT GOING ANYWHERE. WELL, THE HOUSE PRICES ARE ONLY RISING AT 13% IN AUCKLAND, AND THE REST OF THE COUNTRY THEY'RE FAIRLY MODERATE, AND, IF ANYTHING, GETTING A BIT MORE AFFORDABLE BECAUSE INTEREST RATES HAVEN'T RISEN THE WAY PEOPLE EXPECTED. AND IN AUCKLAND IT'S THE SAME ARGUMENT, I THINK, WE'VE HAD FOR A NUMBER OF YEARS. I MEAN, TODAY I WAS TALKING TO A DEVELOPER WHO'S RUN ABSOLUTELY FLAT-OUT. IT TAKES TWO AND A HALF YEARS TO GET FROM THE START OF HIS DEVELOPMENT TO GET HIS FIRST HOUSES UP. SO WE ARE WORKING WITH AUCKLAND CITY` IT'S NOT HAPPENING FAST ENOUGH, IS IT? WELL, WE ALL AGREE WITH THAT. IT ISN'T HAPPENING FAST ENOUGH, BUT IT CAN ONLY HAPPEN AS FAST AS THEY CAN GET THE DEVELOPMENTS THROUGH COUNCIL. BUT THERE'S GENERAL AGREEMENT THAT THE EFFORTS YOU ARE MAKING WITH SUPPLY ARE GOING TO BE GOOD, BUT IT'S NOT WORKING IN THE SHORT TERM. DON'T YOU NEED TO DO MORE TO REALLY GET ON TOP OF THIS, BECAUSE, SURELY, 13%, 14% A YEAR IS NOT FINANCIALLY STABLE? WELL, IT ISN'T. WE AGREE WITH THAT, AND I THINK THE FRUSTRATING THING FOR ALL OF US HERE IS THAT THE PIPELINES ARE REASONABLY LONG. TO START FROM A LARGE, BARE SUBDIVISION TO GET THE HOUSES ON, THERE'S JUST SOME PHYSICAL AND PROCEDURAL LIMITATIONS. WE'RE TRYING TO SHORT-CUT THEM. WE'VE GOT THE SPECIAL HOUSING AREAS, WE'LL HAVE FURTHER LEGISLATIVE SHORT-CUTS COMING, THE GOVERNMENT'S CRANKING UP THE DEVELOPMENT OF ITS OWN ESTATE, BECAUSE WE'RE A BIG LANDHOLDER. AND LET'S HOPE THAT KICKS IN, BUT HOW MUCH LONGER CAN THIS CONTINUE, WHAT WE'VE SEEN? ANOTHER SURGE BACK IN FEBRUARY ` HOW MUCH LONGER CAN YOU SIT THERE AND LET THIS CONTINUE? WELL, WE'RE NOT LETTING IT CONTINUE. WELL, YOU ARE. WE, ALONG WITH THE WHOLE INDUSTRY, ARE RUNNING AS HARD AS POSSIBLE TO GET THROUGH THE PLANNING CONSTRAINTS. YOU ARE DOING NOTHING TO CURB DEMAND. NO, I DON'T AGREE WITH THAT. THE PLANNING CONSTRAINTS ARE DETERMINED BY THE COMMUNITY WHO ELECTS THE COUNCIL. WE DON'T ACTUALLY RUN THE PLANS. THE COUNCILS DO. AND INSTEAD OF ATTACKING THE COUNCILS, WE'RE GETTING ALONGSIDE THEM, WORKING HARD... I COME BACK TO MY POINT, THOUGH. THAT'S A MEDIUM-TERM GOAL. IT'S AN ADMIRABLE GOAL, BUT WHAT ARE YOU DOING IN THE SHORT TERM TO DEAL WITH SOMETHING WHICH, AS YOU SAID YOURSELF A FEW MINUTES AGO, IS CAUSING FINANCIAL STABILITY RISKS? WHAT ARE YOU GOING TO DO? WELL, YOU CAN'T JUST CONJURE HOUSES OUT OF AIR. YOU COULD CURB MIGRATION. YOU COULD PUT IN CAPITAL GAINS TAXES, YOU COULD ENCOURAGE THE RESERVE BANK, PERHAPS, TO ACTUALLY FOLLOW THROUGH WITH ITS PROPERTY INVESTOR MOVES. WELL, MEASURES LIKE THAT MIGHT MAKE SOME MARGINAL DIFFERENCE, BUT I HAVE TO SAY, WE DON'T WANT TO GET DISTRACTED INTO TRYING TO CONTROL DEMAND, BECAUSE WE DON'T BELIEVE IT'S EFFECTIVE. THE ONLY WAY TO MAKE PROGRESS ON SUPPLY IS TO BE ABSOLUTELY FOCUSED ON IT, AND TAKE EVERY STEP TO MOVE IT ALONG, PRECISELY BECAUSE IT TAKES A WHILE TO BUILD THE PIPELINE AND TO GET MOMENTUM. WE'RE OPEN TO ANY SUGGESTION THAT IS GOING TO HELP US GET MORE HOUSES ON THE GROUND FASTER. NOW, IN CHRISTCHURCH, THAT'S HAPPENED TO A SIGNIFICANT EXTENT. WE MAY NOT BE TOO FAR AWAY FROM WHERE SUPPLY MATCHES DEMAND THERE, AND WE MIGHT GET SOME OF THE PRESSURE OUT OF THAT MARKET. IN AUCKLAND, IT'S JUST GOING TO TAKE A BIT LONGER. JUST ON THE RESERVE BANK ` SO THEY SAID THEY'RE LOOKING AT PROPERTY INVESTORS ` MAKING IT A SEPARATE CLASS. SO THE UPSHOT IS THAT IT WOULD BE MORE EXPENSIVE TO BORROW FOR PROPERTY INVESTING. BUT THEY ALSO DIDN'T RULE OUT THAT THEY'RE TALKING ABOUT INCOME RATIOS MATCHING THAT WITH THE BORROWING. ISN'T IT ABOUT TIME WE LOOKED AT SOMETHING LIKE THAT, GIVEN THAT'S WHAT THEY'RE DOING IN ENGLAND TO TRY AND REIN` AND THAT WOULD WORK IN AUCKLAND, WOULDN'T IT? WELL, IT MAY DO, AND, YOU KNOW IT'S BEEN LOOKED AT BECAUSE THE BANKS ARE TALKING ABOUT IT. BACK IN 2013, WE PUT IN PLACE A FRAMEWORK THAT ENABLED THEM TO DO THAT. THEY FOLLOWED WITH LVRS. NOW THEY'RE TALKING ABOUT THE INVESTOR... WHY ARE THEY TAKING SO LONG? WELL, YOU'D WANT TO TALK TO THE BANK ABOUT THAT. DO YOU THINK THEY'RE TAKING TOO LONG? I THINK THEY'RE GOING ABOUT AS FAST AS THEY CAN TO MAKE SURE THEY UNDERSTAND ALL THE ISSUES, BECAUSE BEAR IN MIND, EVERY TIME YOU INTERVENE LIKE THIS, IT HAS SOME UNEXPECTED CONSEQUENCES OR CONSEQUENCES YOU'RE TRYING TO MINIMISE. SO THE LVRS, FOR INSTANCE, MADE IT HARDER FOR FIRST-HOME BUYERS, AND SO THE GOVERNMENT'S GOT A SCHEME COMING OUT` NOW, CREDIT TO YOU THERE, BECAUSE YOU TOOK THAT. IT WAS UNPOPULAR POLITICALLY, BUT YOU WORE THAT COS YOU SAW THAT THERE MIGHT BE SOME BENEFIT. SURELY, YOU MUST BE DESPERATE FOR THE RESERVE BANK TO STEP IN HERE AND DO SOMETHING? YOU NEED THEM TO HELP YOU. WELL, YOU KNOW, AT THE MARGIN, THEY CAN MAKE SOME DIFFERENCE. BUT AGAIN, THEY DO THEIR JOB, WHICH IS COME UP WITH THOSE RULES RELATED TO FINANCIAL STABILITY ` THAT'S A DIFFERENT PURPOSE TO OUR PURPOSE, WHICH IS GET MORE HOUSES ON THE GROUND FASTER AND WORK WITH THE PEOPLE WHO CAN MAKE THAT HAPPEN. SO WE STICK TO OUR JOB, THEY STICK TO THEIRS, AND THEY'RE DOING A REASONABLE JOB. BILL ENGLISH. I'LL LEAVE IT THERE. THANK YOU VERY MUCH FOR YOUR TIME. THANK YOU. LOTS TO TALK ABOUT WITH THE PANEL. AND WE'LL GET BERNARD HICKEY'S VIEW ON MORTGAGES AND THE HOUSING MARKET AFTER THE BREAK. LET'S BRING IN THE PANEL. With a strong economy, is being trumpeted. inflation is almost 0. People are seeing CEOs get big increases. Yet, they are getting 2%, maybe. Rents are rising at 7% in part of Auckland, any have maybe one or 2% pay increase. It doesn't look great. All around the world, wages are very low. What other circumstances are required for people to feel that they are participating in strong growth? The minster of finance is trying to hose down expectations. Do people actually care about surplus it plays into the economic credibility and the status of the party of government. They want to get into their surplus come hell or high water. I disagree. Before this year, there was talk about being the lead singers of this rock star economy. We had housing and poverty. The gaps between the have and have-nots. I want to see some bold change, something visionary. The problem is they were giving an alternative vision, and voters said no. New Zealand voters really do Not like missionaries. They want about hope. They want to know things will get better. They want a little bit of that. They don't want false hope. You mentioned have And have-nots. That applies to the Auckland market. people who I leveraged up - if you have a 60% mortgage, you've made a lot of money. That's a problem for the government. With the high rents growths, they have high cost. Rising rates and rising property market is a problem for the government's finances. This is the elephant in the room when it comes to talking about everything ` Auckland changes the whole picture. You can see now why the government had to move very quickly to curb Mps pay rises, because it's difficult to give them a lot when teachers can't get 4. We are still waiting to see the legislation ` are the greens right in saying the government cocked it up? Oil prices are being kept a low. It may be something more structural going on in the economy/. That means the reserve bank keeps flogging a dead horse by cutting interest rates. What about the risks to deflation? What is that it is the economy? That brings on the risk of recession. It has a recessionary risk if we get to deflation. Maybe it's the right type of deflation, which is the supply shock tab of deflation, I like the deflation in Japan, which is caused by not enough demand. As Bill English says, when he had deflation, that makes it very difficult for the government to raise revenues. Should a government have cut the OCR last week? That's the question many of the markets were asking. The reserve bank was saying they are going to get it up at some point. There are genuine questions whether their modelling and forecasting us capturing what's going on. They are battling money printing and the rest of the world, which is flowing into the back door into New Zealand. Given the mid to long term projections, can you see even lower terms coming on? Not just dependent on the OCR. It is possible that interest rates keep falling. The reserve bank over monetary policy is to cut interest rates. Deborah, if we cut interest rates, that we just exasperate the market? There is no easy solution to the haves and have-nots. You got low wages, high prices and the supermarkets, so many things that are growing the gaps. The government is failing to take action any of those areas to narrow the gap. You can't solve it with interest rates. You had to have a holistic approach. Australia is imposing a tax on foreign buyers. Singapore has imposed similar taxes. The prices actually dropped. They are demand drivers here, including migration, which they can control. Everybody is looking at whether we have ebola in New Zealand. People are hoping it's a case of malaria. We will be looking at that. When can we expect to have a call on that? Soon. Anything else? Mps pay. It's a big thing. Thank you to the panel. MARAE IS NEXT, LOOKING AT WHY MORE AND MORE MAORI ARE CONVERTING TO ISLAM. AND REMEMBER Q+A REPEATS TONIGHT AT 11.35 PM. 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 JESSICA BOELL AND JUNE YEOW. CAPTIONS WERE MADE POSSIBLE WITH FUNDING FROM NZ ON AIR. COPYRIGHT ABLE 2015