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The Nation – Cunliffe, Peters and Norman debate super

Press Release – The Nation

‘THE NATION’ DAVID CUNLIFFE Joined by WINSTON PETERS & RUSSEL NORMAN Interviewed by DUNCAN GARNER Duncan To talk now about Labour’s retirement overhaul campaign I’m joined by Labour’s Finance Spokesman David Cunliffe. He’s had a lot to do with obviously …‘THE NATION’ DAVID CUNLIFFE Joined by WINSTON PETERS & RUSSEL NORMAN Interviewed by DUNCAN GARNER Duncan To talk now about Labour’s retirement overhaul campaign I’m joined by Labour’s Finance Spokesman David Cunliffe. He’s had a lot to do with obviously this policy. Will these changes be legislated for in the first three years of a Labour government between 2011 and 2014?

David Cunliffe – Labour Finance Spokesman That’s the plan, we expect to be elected and we expect to implement these as soon as we can.

Duncan So you would pass it into law in that time, in that first three years?

David The framework would be passed into law but there would be a tripartheid consultation process where the details would be fleshed out between government, employer groups, union groups and other interested parties, no doubt including groups like Grey Power and others.

Duncan What I’m getting at because if it’s not passed into law in the first three years it’s a meaningless promise isn’t it?

David There’s nothing meaningless about this. This is big bold change and it’ll be locked in as soon as we get the opportunity.

Duncan Big and bold but risky too isn’t it? Because you’re telling workers they have to work longer, and if you look at your compulsory Kiwi Saver people are going to take home less pay. Excuse me but what’s the good bit?

David Well I mean it’s not without risk. What we’re doing here is trusting the public with the truth, and the truth is there’s a hundred billion dollar hole in the fiscal outlook that has to be made to work, and the Prime Minister has misled the public by saying it’s all fine and I’ll resign before I change anything. We’re trusting people with the truth.

Duncan But you didn’t always agree with this, you didn’t agree with it, Phil Goff never agreed with it. I mean this is in many ways in politics we call this a u-turn don’t we?

David Well look we’ve been working on options for resolving these difficult problems for some time, and of course in politics you announce the change when you’ve got all the ducks lined up, you’ve done all the sums and you’re ready to go, and we now are, and that’s why we’re announcing it now, and I think it’s good for New Zealand. It’s good for workers who will get more back from the government in terms of the $5000 tax free zone, the GST off fruit and vegetables, the rise in the minimum wage, they’ll be protected. A minimum wage worker will be 76 or so dollars a week better off, and compulsory Kiwi Saver will cost only $11.

Duncan Well let’s talk about, you brought it up, your $5000 a year tax free zone, that’s $10 a week. Can you guarantee today, to New Zealanders and voters watching this programme that they will get that in the first year, $10 a week in your first budget, yes or no.

David It scales up I believe within the first term but it’ll be fully operational within our first term of government.

Duncan So what you’ve gotta do three dollars in the first year, three in the second and three in the third?

David I can’t remember whether it’s a two step or a three step process.

Duncan Well you’re four weeks away from potentially being government you should know this stuff.

David I should have probably known that one.

Duncan Well so why don’t you know this? I mean it’s important. you’re telling New Zealanders it’s $10 a week – is it $10 a week?

David It will be fully implemented within the first term, fully implemented within the first term, and there’ll be a ramp over two or three years.

Duncan Right, so what you’re saying is it’s three dollars a week for the first year?

David Probably about that.

Duncan If you look at the cost, let’s go back to superannuation. The cost of this in terms of what you’re going to save, you have talked about a 100 billion dollars this week up to 2040, 2050. How do you know that?

David Well that’s an estimate from Mercer Consulting who’ve done a comprehensive modelling exercise. We’ve worked off the models from the Savings Working Group and the fiscal baselines from the Treasury. That’s the best information that we have available to us.

Duncan Okay, now you’ve also talked about this transitional payment for workers who are in physical jobs, a lot of your blue collar workers, a lot of your voters. How many of them do you expect to take their earlier payment at 65 because they can’t get to 67 by working on the roads or so forth, because you must have that number if you know the costings?

David Well you know that’ll be determined by the fine print of the transitional entitlement, and we’ve said that that needs to be worked out in consultation with workers and their representatives through the tripartheid consultation process. So pretty hard to size that. What we’ve said is we want to err on the side of generosity. If somebody can’t readily keep working in their current job, then we think they ought to be able to move to the New Zealand super transition payment.

Duncan And if you are to govern with this you’ll probably have to rely on the Greens and Winston Peters’ New Zealand First party to be in government. Does it matter that he thinks this is a terrible policy and won’t support it?

David Well you know with all of these things we have to leave it to the voters to select the parliament and we will work with whoever is there. I do believe that there’s a lot of congruence between the policies of the Labour Party and the Green Party, and we look like a government in waiting, and I think that’s good for New Zealand. ********* Duncan Welcome back to The Nation, we have more now on Labour’s retirement overhaul, and with me in the studio is Greens Co-Leader Russel Norman and also Winston Peters New Zealand First Leader. Good to see you here Winston, thanks for coming in. I’ll start with you though first Russel.

What is your policy on superannuation and the age of eligibility, cos I’ve looked at your website and unless I’m struggling with something I couldn’t find much there? Russel Norman – Green Co-Leader Yes, so in our Incomes policy we support the status quo. So our policy is to support the current arrangements, but we are very interested in long term fiscal sustainability. So we’ve put a lot of emphasis in our policy development to looking at the revenue measures such as around putting a good price on carbon and on water, the earthquake levy, to make sure that there is long term sustainability within the fiscal accounts.

Duncan But if you were governing in a Labour led government you wouldn’t have a problem with this, you would vote for it, you’d be flexible around it would you?

Russel Well it would be part of a post-election negotiation, like for any government in formation, and I’m sure this would be one of the things Labour put on the table. It’s not our policy but there are some other things that are our policy that Labour have adopted such as the Capital Gains Tax excluding the family home. So there’s some areas of commonality, but there’s areas of difference.

Duncan It seems to me in your comments from Thursday when this was announced that you’re extraordinarily flexible on this. This wouldn’t be something that you say no we’re not going to go into government with Labour on this. To me it looks like you’re leaving the door open for this debate which you know as an economic realist, has to happen.

Russel Yeah I mean we’ve said very clearly we welcome the debate, and I think it’s good that we’re having the debate. So long term fiscal and economic sustainability are critical issues for our country, and whether that’s making sure that our economy moves in a much more sustainable direction for sure price on carbon, or whether that’s having the debate around the long term affordability of New Zealand Super, I think it’s important that we have that debate.

Duncan But you accept that changes have to be made, I mean even this week I looked at the prefu, the numbers that came out, and 500 million dollars were spent more on superannuation in the past 12 months than in the previous 12 months because of our aging population entitlements and so forth. I mean it’s staring at you in the face.

Russel I agree it is a very real issue, the Retirement Commissioner produced a very good report I thought, on this issue. It’s also true though if you look at the budget we’re subsidising greenhouse pollution to the tune of 1.2 billion dollars. So there are other areas in the budget where you’d have to say, should we be spending over a billion dollars to subsidise greenhouse pollution. I don’t think that’s a very smart idea.

Duncan Mr Peters, welcome to this debate. How are you going to govern with Labour on this, because John Key’s ruled you out. It would seem to me that you’ve been boxed in with a Labour led government. If you make it back it seems to me that you think this is a terrible policy that you can’t support?

Winston Peters – NZ First Leader Well look you know, 15 years ago I tried to alert New Zealanders to the crisis that was coming, in a compulsory savings regime referendum. Everybody ridiculed it in the business world and many commentators, but now the day of reckoning has come. Second, you know if you run an economic plan which for 27 years has seen you slide down the competitiveness performance in the OECD, why turn on the victims instead of actually fixing the plan up, which is what’s happening now? Everybody’s finding ways to attack people who should be able to live properly in a decent country that was successful. The third thing I’d want to say is this here. The problem with the Labour’s plan is – and I agree with that coming around to compulsory savings, but the trouble with their plan on the 65 to 67 is, it does not address the economic crisis now, and it’s right here now. Next year, the year after, it doesn’t kick in till ten years from now. That’s the problem with it.

Duncan No, but the economic crisis is also more than just ten years. I mean if you’ve seen those long term fiscal forecasts, and I’m sure you have, the Treasury’s put them out yearly for the past few years. The numbers of our aging population doubles from 500,000 now to 1.3 million by 2050. It is staring at us all in the face, and it seems to me that only you and the Prime Minister are now in the same boat, which is highly unusual.

Winston With the greatest respect to Treasury I’ve seen them write a mish-mash of predictions and forecasts before. These are the same people that wrote the forecast …

Duncan They’ve been consistent on this Mr Peters, they have been consistently pushing for change…

Winston No they have not, these are the same people that wrote the forecast that’s behind the Cullen Fund, which was at least a far better idea of trying to cost smooth the future expense. They made all those sort of predictions then, nothing’s changed, why have they changed in terms of the figures and facts?

Duncan Well the Cullen Fund which I think most parties agree with, the New Zealand Super Fund…

Winston Well National didn’t but we did.

Duncan Well no the National sort of kept it, they just haven’t funded it while we’ve been in debt. Do you agree with borrowing to put money into the Cullen Fund, to the Super Fund? Do you want to borrow overseas to put it into it, to restart contributions?

Winston Look if there is a logic to borrow to give taxcuts to the rich then this borrowing for long term savings is a far sounder economic idea. That’s the guts of it.

Russel Yeah I think you’re right about borrowing for taxcuts for the rich, so it’s costing two billion dollars a year to give taxcuts to the top 10%. I’m not so sure about borrowing for the Cullen Fund and I’d prefer to wait till we went back into surplus before we put money back into it.

Duncan Can I just get your view on that Mr Cunliffe, because you’re going to borrow – you’re going to put 750 million dollars from my memory in that first year?

David First year.

Duncan You’re going to borrow that from somewhere?

David Some of it will be but several things. Firstly we’re going to make a higher return on average on that investment than it costs the government in terms of its cost of capital. Of course your take some risk, but on average, since the inception of the fund, despite the global financial crisis, it’s done better than Crown cost of capital and we expect it will continue to. Second point, when matching the life of our assets, our financial assets to the life of our liabilities, that’s good prudent business practice. And thirdly, we need to build up financial assets in the same way that most people who have a home mortgage will also have a little bit of money in the bank for when they need it, and we’ve got New Zealanders retiring, we’ve got a baby boom bulge coming through. We have to provide for that.

Duncan I want to know, and I’ve got you both here right now, Mr Peters, can you work with David Cunliffe in government with a policy like this. Voters want to know because they’re deciding whether to vote for you or not right now? Now that’s an entirely legitimate question.

Winston Well I haven’t got a chance to answer it yet have i?

Duncan Please do.

Winston Just give me a fraction of the time and I’ll be on to it. We don’t decide until the voters have first voted, that’s a democratic decision that most countries believe in. Until they speak we don’t make up our mind what we will do and where we will go. But just to put things in perspective, yesterday you heard that South Canterbury Finance just cost you the taxpayers of this country a billion dollars because National was asleep on the job. Instead of arresting the situation, no, they put it in the hands of a group of people who made 15.3 million dollars and then had an investment binge guaranteed by you. A billion dollars. See, if you run the economy properly cost is not the problem.

Duncan But what I’m asking you is, is it a bottom line and I know we’ve used this term over the past 15 odd years under MMP, but is it such a problem for you, I mean is the superannuation policy something that would keep you out of supporting a Labour government?

Winston Well first of all that’s a decision for the courts to make, but let me give this answer. Of course it would not be a bottom line, I’ll tell you why. A plan that doesn’t kick in till another ten years is not the crisis we see it as come election day.

Duncan Right, so you would then vote for it to go through in that first three years, or you’d vote against it?

Winston Well, you don’t get it do you?

Duncan No no, I do get it because David Cunliffe has told me in the first question here that they will put legislation up in the first three years. How would you vote for it?

Winston Well again we’ll look at that when they come through with that sort of legislation.

Duncan You’ve got an open mind on that legislation?

Winston Well we’ve got to have an open mind on the legislation, but I don’t see it as being the solution to the problem now. You’ve got an economic crisis, we’ve got zero growth, we’ve got unemployment going through the roof. What you’ve gotta do is deal with the situation this year, and the next three years, the next ten years.

Duncan But are you telling me that you would or wouldn’t vote for this legislation, cos that’s what David Cunliffe is talking about?

Winston I’m trying to get into your mind.

Duncan I’m trying to get an answer from you.

Winston We don’t get any difficulty with this policy of Labour’s because it has no effect until three elections from now.

Duncan I know but they’re going to signal the change and pass legislation. Would you sit on the cross benches over it? Would you not vote for it? Would you vote for it?

Winston Oh look I’m not gonna come on here and negotiations.

Duncan Well answer my question.

Winston No and have negotiations?

Duncan Well look I’m asking for you position, I would have thought you would have voted against it sorry.

Winston No no I said we don’t have a problem with them making these statements now, because they’ll have no impact in terms of the decision the voters make because it doesn’t kick in till three elections. That’s the point I’m trying to make here.

Duncan Mr Cunliffe have you spoken to NZ First about this in your policy formation development?

David No we haven’t, but I do have some sympathy for Winston’s point, that of course it’s not the only thing we’ve got to do, and that before this policy kicks in there’ll be a raft of other measures that we’re working on with the potential … and they’re all legitimate matters for debate …

Duncan So it’s a kind of massive hurdle to putting together a government isn’t it? That’s what you’re all telling me today.

David I think what you’re seeing here is three parties that could work together on behalf of the future of the public.

Winston Just one caution here. If we were running the kind of economy that Singapore and Norway is running, we would not be sitting here having this debate. What I get sick and tired of is politicians who persist in an economic strategy that is failing against international competition and then blame everybody else for it.

Duncan You’re talking about growth here I take it. You’re talking about growth.

Winston Yeah I’m talking about growth.

Duncan Well you name the countries apart from the two that you just named who have got economic growth right now. Take China out of it.

Winston Taiwan, Hong Kong. Yeah but there’s three parts of China.

Duncan You’re talking about growth getting us through. If you look at the world at the moment we’ve averaged about 2%, even Treasury has brought that back this week to 2.9% for the next four years.

Winston Oh look I’m sorry, I’m sorry there’s countries like Malaya and Singapore are doing far better than us in real terms. That’s the fact, and of course they’ve got a compulsory savings regime.

Duncan Can the Greens and NZ First work together in government Mr Norman?

Russel Well I mean our approach has always been to where you’ve got policy common ground to work on that. I mean we’re working with National at the moment.

Duncan Have you got concerns over any of NZ First policies?

Russel Well obviously we have differences on some policies with NZ First and Labour and National, otherwise we’d be in the same party. But certainly I mean our approach is where we have common ground we work together. there’s 120,000 houses in New Zealand that are retrofitted with insulation today because the Greens and National said look we don’t agree on some really important stuff, but there are some areas where we can work together. I think that’s good.

Duncan I want to look at – just to end this in terms of spending and promises in the surplus. National says they’re going to get to surplus by 2014. Looking at those books this week I don’t know how, but they say they’re going to.

David They’re dreaming.

Duncan They may not be dreaming. Mr Cunliffe can you give that commitment of a surplus by 2014 with our promises?

David 2014/15 financial year. We’re in the process of reworking based on the prefu estimates and the finalisation of several policies, we’ll be announcing our fiscal – our whole fiscal package within the next week or two and everything will be transparent at that point.

Duncan Could you give the guarantee of 2014?

David It’s my expectation that we’ll probably be in the same year but I’m not gonna give a cast iron guarantee until we’ve finished the cut through.

Duncan Russel do you think it’s realistic?

Russel I think we just need a reality check as well. They said that they would be going into surplus by June 2015, so the end of that financial year, but they’re still running cash deficits all the way out past the end of the June 2016, and increasing government debt. Now the projections are that debt declines as a proportion of GDP but the actual debt increases right the way through the projected period. So the cash deficit remains and so that’s actually what National are proposing to do. So let’s be clear about what National are doing. They are talking about cash deficits, increase in government debt all the way through. Winston What do you think trade deficits are. Every deficit is a cost against the country. The National Party’s putting out spurious figures. Look the May Budget was hardly announced when the next – within two weeks they said it was irrelevant.

Russel The other great thing about the Treasury figures is if you look at how they come back into surplus, of course it’s the dividends that come from the state owned enterprises they’re planning to sell.

Duncan Seven billion dollars, which you all agree that you won’t sell.

David And the performance of the NZ Superannuation.

Duncan Right, this is where we’re gonna leave it gentlemen, thanks for coming in and we will see you during the campaign.

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