Kiwiblog

The Herald reports:

Newly released papers raise fresh questions over Prime Minister John Key’s claim that Solid Energy asked for $1 billion of taxpayers’ money to fund its transformation into a massive resources company.

Mr Key made the claim earlier this year when it was revealed the state-owned coal miner was on the verge of collapse under the weight of almost $400 million in debt.

Former chairman John Palmer, who approached the Government with the plan in 2010, denied asking for the money but later said he understood why Mr Key might have said the proposal involved “those sorts of costs”.

But Solid Energy documents released by Treasury yesterday detailing the proposal contain noreference to a request for the money.

Solid Energy’s business proposal said the Government’s willingness to forgo dividends from Solid Energy and Kupe were essential for the project to proceed, and it would require extra equity of up to $1 billion on top of that to fund the expansion.

However, it did not seek that from the Government in the proposals, saying: “All this can be achieved … without requiring a direct Government equity contribution (other than forgoing dividends from Solid Energy and Kupe for up to 5-10 years).”

This is being pedantic, and the PM’s interpretation of Solid Energy seeking $1 billion (in fact up to $3 billion) of equity is entirely consistent with being interpreted as a potential call on taxpayers. The difference between not taking dividends and a capital contribution is semantics. Both increase the Crown’s equity in the company.

Thank God, the Government said no.

Also interesting to note in the released papers that what forced out into the open the lack of substance to Solid’s forecasts was in fact the mixed ownership model preparation. It was only the preparation for potential partial float that got the detailed coal price forecasts out of Solid Energy. Without that policy, the extent of their optimism may have gone unnoticed for much longer.

Solid Energy is a superb example of why the Crown should not be the sole shareholder of a risky commercial business. The transparency and discipline you get from being listed on the NZX is significant.

I loved this line:

Credit where credit is due. The Labour Party has finally adopted one of the very sensible policies of the National Government, and that is the Mixed Ownership Model. That’s right, these days the Labour Party is 51% owned by Labour and 49% owned by the Greens

Heh.

Colin Espiner gives his 10 things he loves about Wellington:

1. Better coffee. Wellington is powered by caffeine. And there’s none finer than in the capital. 

2. The Brooklyn windmill. Don’t scoff. One of the first in the country and now a major tourist attraction. The views from the carpark are stunning. 

3. The Bucket Fountain. You’ve got to love a town that keeps something so hideous and so broken that it’s become a city icon. 

4. The Penthouse cinema. Arthouse cinema at its finest, complete with decent red wine and its own theatre cat. 

5. Westpac Stadium. Sorry Eden Park, but the Cake Tin is better in every respect. 

6. Public transport. Aucklanders haven’t heard of this, but it’s a fast, cheap, convenient and quick way to get to work. 

7. Sunshine and fresh air. OK, sometimes too much fresh air, but Welly clocks up many more sunshine hours than its northern sibling. 

8. Cuba Street. No other city in New Zealand does cool grunge like Wellington’s Cuba Street. Plus it’s home to Midnight Espresso, home of the finest nachos in the country.

9. Wellington’s waterfront. Whereas Auckland and Christchurch have turned their backs on their ports, the capital’s is a living, breathing, human space. And you can’t beat Oriental Parade in the sunshine. 

10. Houses you can actually afford to buy. Not much point in living somewhere if you can’t afford it. Wellington house prices are not cheap, but they’re not stupid either. 

I love the bucket fountain. As a kid I would spend ages sitting in Cuba Mall watching it until the large bucket at the bottom would finally empty.

John Armstrong writes:

He had originally said he had the phone number on hand. Then yesterday he said he did not have a clue how he had come to have the number. Then he said he had not had the number. Then he said he said he had rung directory services to get the number. Then he said he was not sure whether he or one of his staff had rung directory.

Yes, amazing he doesn’t recall the exact details of a one minute phone call three years ago.

Labour’s Grant Robertson asked Key whether he could understand why New Zealanders were struggling to believe anything he had to say on the matter when he could not even say how he came to have Fletcher’s phone number.

Yes, this is the issue that Labour has decided is of prime importance to New Zealand. Did John Key call Fletcher directly or go through an operator! Next they will focus on whether the phone call was one minute long or shock horror two minutes long.

But quite possibly with good reason. Most people could not really give a toss about how Key got hold of Fletcher’s phone number.

The very real danger for Labour is that in building a case against Key it is thus seen to be fixated by relative trivia; that Labour is so obsessed with destroying Key as a political force that it can no longer see the wood for the trees.

Indeed. I encourage Labour to keep asking questions about whether or not John Key used directory service. They should do so for at least the next six weeks.

Some people may say that they should focus on the Budget next month, but they are too smart too fall into the trap of focusing on the economy. After all we have a Budget every single year.

I’m disappointed that Labour have only dedicated half of their oral questions to this issue. I think they should use 100% of their questions.

John Key has announced:

“Today I am announcing that, as part of this package, we will be investing an additional $158 million over four years into tourism,” says uriMr Key.

“Achieving growth in tourism earnings requires targeted new investment to position New Zealand as a high value destination in markets with real potential for growth.”

In the year ended March 2012 tourism generated $9.6 billion of revenue and was 15.4 per cent of export earnings. It was 3.3 per cent of GDP and employed 6.2 per cent of the workforce.

“Later this week when I attend New Zealand’s premier tourism conference, TRENZ, I will announce details of where this $158 million will be invested,” says Mr Key.

Tourism is a great export earner, and helps reduce the current account deficit.

Current Vote Tourism is:

• Departmental Costs $7.6m
• Tourism Strategy $1.2m
• Tourism Marketing $83.8m
• National Cycleway $12.1m

A $158m increase over four years is an average of an extra $40m a year which is basically a 50% increase in the marketing budget.

John Key has announced changes to the oversight of the GCSB and SIS:

1: The pool of candidates who are able to perform the role of Inspector General will be widened, by removing the requirement that the person be a retired High Court judge. This will broaden the range of experience and capability available to the role. For example, Australia’s equivalent is a former ombudsman.

2: The Inspector General’s office will be made more proactive, taking it a step further from the role it currently has, which is more review-focused. The office would be able to undertake its own inquiries more easily, and it will be expected to specifically note publicly each year its view on whether or not the agencies it oversees are compliant with the law.

The Government will increase the scope of the Inspector General’s active review programme to include a much broader range of the agencies’ activities. This will have the effect of making the Inspector General’s role more proactive.

3: The resourcing and staffing of the Inspector General’s office will be increased, and the new role of Deputy Inspector General will be created.

4: Legislation will explicitly expand the Inspector General’s work programme, including compliance audits and greater reporting responsibilities. GCSB’s own quarterly reporting processes will be tightened up.

5: The Inspector General’s work will become more transparent, through greater availability of its reports and views publicly.

These all look like good changes, in line with what Kitteridge recommended.

I presume these proposed changes be open for submissions, and there may be further changes that can be proposed and considered.

“It is now the responsible thing to do to clarify the legislation, to make it clear the GCSB can provide support to agencies which are undertaking their lawful duties.

“To do anything less would be to leave our national security open to threat, and as Prime Minister I am simply not willing to do that. To do nothing would be an easy course of action politically, but it would be an irresponsible one.”

Mr Key says thetre proposed changes to the GCSB Act will clarify its long-standing practices, so the GCSB can provide assistance to other agencies, subject to conditions and oversight.

I think this is inevitable and desirable. It would be silly to allow what was basically a drafting error in the 2003 law, neuter our capacity to respond to potential security threats.

However it is important that any legislation restricts the GCSB to assistance where an independent warrant has been granted to the other agency. And the changes above must include specific disclosure of such assistance as part of regular reporting so that one can see that any assistance is rare and only in line with warrants issued by the appropriate authorities.

I assume and hope that the legislation will follow the normal legislative path, including committee submissions. Of course it will go to the Intelligence and Security Committee, rather than a select committee.

The ISC comprises (I think) John Key, David Shearer, Peter Dunne, John Banks and Russel Norman

Today, Mr Key also released the terms of reference into the unauthorised disclosure of Ms Kitteridge’s report.

The Commissioners of the report, DPMC Chief Executive Andrew Kibblewhite and GCSB Director Ian Fletcher, have appointed David Henry to conduct the inquiry.

Good. It is outrageous that the draft report was leaked, and there are only a few people who could have had access to it. Hopefully the inquiry will discover the person responsible.

John Key was on Q+A yesterday. A number of interesting aspects of the interview:

JOHN KEY – NZ Prime Minister 
 Well, I think that’s the, sort of, $64 million question or maybe the 1.35 billion question, given the number of people here.   I mean, what we know is we produce what they want to buy.  That’s the really good news part of the story.  Fundamentally, they want food, whether it’s ultimately aquaculture or dairy, meat, it doesn’t really matter.  They want that food.  They want the quality of that food.  They want the assurance that the food will be of a standard that they expect.  Secondly, they want to educate their children, and they want to come and travel.  And there are specialist areas where it can be a niche in the Chinese market, like, say, Rakon is to New Zealand, for instance.  But in this market, you know, a niche can be a very, very big order for New Zealand, so there’s lots of potential.

CORIN Tim Groser – I heard him say on this trip New Zealand’s trade to China – China could be our biggest trade partner within two years at current growth levels.  What does that mean for New Zealand longer term?

It means we may be not so fucked as the rest of the world when Europe crashes

JOHN  Well, I think the good news part of the story is, I mean, we’re here and we promote this relationship and the trade aspects of this relationship because we genuinely believe it means better jobs, it means more jobs, it means, you know, greater opportunities for New Zealanders.  I mean, the challenge always for New Zealand, I think, is a) making sure that we maintain our brand and quality, maintain margin so we make money, and the second thing is we don’t want to become solely China dependant. I mean, this is a market that could at one level buy everything New Zealand produces, but the reason we go to Latin America, as we did a few weeks ago, or we sell to other markets and focus on them is that in our history, we’ve been solely-

While China will become our largest trading partner, we must make sure it doesn’t become our only one.

JOHN Okay, but let’s put that in a bit of context.  If you take the situation where Ian Fletcher was appointed, so, you know, we had significant media coverage and, you know, a lot of very, very& highly critical claims being made personally directed at me, right? 
  
CORIN But you did not make it clear when you were asked that you had shoulder-tapped Ian Fletcher.

JOHN  I was asked a specific question in Parliament not with any warning, as a supplementary question, didn’t even know it was coming, it bore very little relation to the primary question at the end of a parliamentary question session, and, actually, the answer I gave was perfectly correct.  Now, if the test is I’ve got to give you absolutely all of the full information – it comes back to the point I was making last week – then I need to actually slow that process down so that I can be- you know, I can meet the people’s expectations-

CORIN Did that episode get to you, though?  I mean, you only a couple of times in your whole time as Prime Minister have you lashed out at the media.  Were you genuinely wounded by that?

JOHN  Well, firstly, it wasn’t at all media, and secondly, the point is that my view was that there wasn’t balance on the way that that was being reported. I mean, you had the State Services Commissioner coming out totally supporting what I was saying, and, actually, that wasn’t always fully covered in that way.  My reputation matters to me because, you know, I am honest and I am up front.  I also am way more accessible than virtually any other leader in the world, so if you want to go and ask other leaders, you have a limited number of questions, you have lots of warning what they’re going to ask them about, they have lots of time to prepare questions.  I do two or three stand-ups a day, and I’m asked questions about a huge number of issues. 

It is a fair point that Key as Prime Minister is more accessible than not just any of his foreign counterparts, but also I think more so that any of his predecessors.

Helen Clark, to her credit, did re-institute the formal weekly press conference, and was more available than her predecessors. But I’m pretty sure that she didn’t do anywhere near the number of media standups that Key does – a lot of her engagements would be photo ops only.

They collect and publish data in the US on how often the President has done press conferences, interviews and gaggles or stand-ups.

It would be fascinating if anyone collated and published the same data on NZ Prime Ministers.

On the wider GCSB issue I’m one of those who said I thought the phone call to Ian Fletcher was unwise, and I stand by that. It would have been better to have just passed the details onto the SSC.

But one has to understand how different PMs have different styles, and they come with both pros and cons – and you generally can’t just choose part of a style.

Some refer to Key’s style as CEO style. He is constantly engaging with people, including (very importantly) those outside Wellington. He talks constantly to numerous leaders in business and other areas. He is very focused on getting the job done, more than process.

What this means is that sometimes he’ll not get the process right, and make a mistake.

But you know what. If I have a choice of a Geoffrey Palmer type Prime Minister who is a stickler for proper process at all times or a John Key type Prime Minister who actually gets things done, I know what I’m happy with. Now that’s not to say it is a choice between too extremes. In no way am I saying process is not important, just that you have to accept different leaders have different strengths and weaknesses.

CORIN Do you still want to do this job?

JOHN  I do. 
  
CORIN Do you want to carry on?

JOHN Well, look, you know, the thing is I’m actually enjoying it.  As Prime Minister, what are they going to remember when they look back?  And the answer is going to be is the economy strong, does the education system work better, does health system work better, is New Zealand a stronger, more confident country?  I’ve been Prime Minister for four and a half years.  My own personal view is that we are building that sort of New Zealand.  Now, you know, is there perfection?  There will never be perfection in politics, but you can do your very best and you can see the course, and that’s what we’ve done.  I really believe passionately that- And again, I’ve read lots of stuff in the media that I’m not going to be there in 2014, I’m not going to run National in the election, that’s not true.  None of that is true.  I’ll be there.  As long as National wants me there, I’ll be there in 2014.  Why?  Because I don’t think we’ve actually finished the job yet. And, you know, there will always be some weeks that are better than others, but for the most part I’m in an incredibly privileged position.  You know, I’m the 38th prime minister of New Zealand, and I’ll always be grateful to the New Zealand public that they gave me that chance.

If anyone thinks that John Key won’t lead National into 2014, they’ve either been having too many drinking sessions with David Shearer’s office (as Mr Robins at The Standard appears to have done) or they’re deluded.

If National wins a third term, it would not be guaranteed that Key would want to lead National into a 4th election. But that falls into the category of “nice problems to have and resolve” if National gets re-elected in 2014.

Next month, National and John Key will have been in power for four and a half years – half the nine years of the last Labour Government. I’ll blog some interesting poll comparisons comparing the parties and leaders at the 4.5 year marks.

Media often talk about a new Government having a honeymoon, and it is pretty garbage journalism as it suggests that the Government’s support up until the end of the honeymoon is artificial or delusional, rather than earnt.

Toby Manhire has blogged how the media have declared the GCSB issue is the end of John Key’s media honeymoon, and then gives 12 previous references dating from 2007 to 2012 when various media or commentators also declared the honeymoon over.

It’s a cliche that should be buried. It has some validity in the first six months of a Government’s term, but after their first Budget, I think it is a near meaningless term.

The PM has announced:

Prime Minister John Key today released the report of Rebecca Kitteridge into compliance at the Government Communications Security Bureau.

Ms Kitteridge was seconded to the GCSB to undertake the review in October 2012.

The review had two main areas of focus – ensuring that all the GCSB’s activities are lawful; and reviewing the agency’s compliance framework.

“I had intended to release this report to the Intelligence and Security Committee next week, however the public disclosure of the contents of the report means I have taken the decision to release it today.

“Members of the Intelligence and Security Committee have received the report a short time in advance of my releasing it publicly.

“The report makes for sobering reading. At a high level it finds long-standing, systemic problems with the GCSB’s compliance systems and aspects of its organisation and culture.

Ouch. That is quite damning.

The report Andrea Vance was leaked was a draft report it seems. It would be interesting to speculate on who had a copy of the draft. Drafts normally go to people who might be the subject of critical comment, so they can respond.

“I acknowledge this review will knock public confidence in the GCSB.

“This is why the Government has a comprehensive response underway to address the organisational problems at the GCSB.

“The steps we are taking will be outlined in detail next week and are intended to begin the process of rebuilding public confidence in GCSB.”

The GCSB Act has been in place for 10 years. Over that time, GCSB has been providing assistance to other agencies, including the New Zealand Police, New Zealand Defence Force and the New Zealand Security Intelligence Service.

It has done so in the belief that it was acting within the law on all occasions.

The essential problem is legal uncertainty over whether they can assist the SIS with communications interception, when the SIS have gained a warrant to intercept such domestic communications. There is no question the SIS were legally able to intercept communications of these people – the issue it seems is whether they could use the GCSB to assist them.

There are 88 cases identified as having a question mark over them since 2003.

Police have conducted a thorough check of all their systems. Police advise that no arrest, prosecution or any other legal processes have occurred as a result of the information supplied to NZSIS by GCSB.

“I have written to the Inspector General of Intelligence and Security and asked him to look into those cases.

“I have asked him to inquire into each of these cases to determine in each case whether or not GCSB has acted in compliance with the law. I have requested that the Inspector General determine whether any individuals have been adversely affected and, if so, what action he recommends be taken.

“It is not my intention to disclose details of those cases. However, the results of the review will be made public after its completion.

The level of transparency over this is welcome. It would have been politically easy to treat the Dotcom issue as a one off mistake. Instead the PM sent in the Cabinet Secretary to do a full review, and has published the report.

“When I return from China, I will announce details of legislative proposals the Government will be bringing to Parliament to remedy the inadequacies of the GCSB Act.

“At the same time I will announce proposals to significantly strengthen the oversight regime across the intelligence community.

That will be interesting.

The report is not online yet but will be placed on the GCSB website.

Audrey Young reports:

New Zealand’s ambassador to Beijing, Carl Worker, passed on a salient fact to Prime Minister John Key while they were waiting for President Xi to welcome them into the meeting room at the stately Bo’ao guest house.

If the southern Guangdong province (where Key arrived last night) were to break away from China – and there’s no suggestion it ever would – its economic strength is such it would immediately be in the G10, the top 10 economies of the world.

That’s quite extraordinary. That one province would make the G10.

Key recounted the fact on the balcony of his own hotel in Bo’ao before a mad dash to the airport for the next leg of his trip (to Guangdong) because the meeting with Mr Xi had gone well over time.

Mr Key was fizzing about the meeting about the state of relationship so far, the personal rapport between the leaders themselves but mainly because of the readiness of both parties to take it to a new level.

The fact that Key could raise something as serious as direct currency conversion between the Kiwi dollar and the reminbi with a senior minister at lunchtime and have it ticked off by Xi for further work in the talks a few hours later would make any former banker go giddy.

The possibility of direct currency conversion is fascinating. Not so much for what it means for China and NZ, but equally the decline of the US dollar as the global reserve currency. This is what happens when you start to print money because you are spending too much.

The scale of development is huge – Xi said yesterday within five years it is projected that China’s imports could be worth $US10 trillion.

He could see a day when 400 million Chinese a year could be outbound tourists.

I noticed in South Africa that a huge proportion of tourists were Chinese. As a Chinese middle class numbering several hundred million gets wealthier and spends more, the potential economic growth is immense.

Fran O’Sullivan also reports:

Like other leaders Key planned to acknowledge Xi’s recent ascension to the presidency. But his main game was to position New Zealand as a valuable partner to China in developing global supply chains to feed its people. “It makes sense to team up with Chinese capital and use other countries’ land masses to produce food we can’t produce in New Zealand,” Key says.

New Zealand has limited arable land left for developing new farms. If the nation’s agricultural businesses want to expand, they should take their expertise overseas and form partnerships in countries with bigger land masses.

Which is why the Landcorp partnership with Shanghai Pengxin should be seen as a great opportunity, instead of being condemned by xenophobic MPs from the left.

This graph shows annual exports to China. Readers will recall that the Greens and NZ First railed against the Free Trade Agreement with China signed in 2007.

I was fascinated that a former GCSB Director went on Campbell Live (a good scoop for them) and criticised the selection process of Ian Fletcher.

He seemed very miffed that Fletcher had no military background and that someone he had known for 25 years was not interviewed. I wonder if that person was the former Associate Director who has now left the GCSB for his actions in the Kim Dotcom saga?

The review of the GCSB by Cabinet Secretary Rebecca Kitteridge should be released soon, and I suspect it will be very scathing (in a diplomatically worded way) of the CGSB processes, and As Sir Bruce Ferguson was Director from 2006 to 2011, he could feel slighted.  Time will tell.

My view is the same as yesterday that it would have been preferable for the PM not to have called Ian Fletcher to ask him if he was interested in applying. But to be fair to the PM, it has been revealed that he did not solely phone Fletcher, but also another person to see if they were interested. The other person was not available.

The better course of action would have been to pass on the contact details of both people to the State Services Commissioner.

The Dom Post editorial today says:

There is nothing wrong with John Key calling an old mate’s brother and telling him there’s a public service vacancy he might be interested in applying for.

There is everything wrong with the prime minister misleading the public about his involvement in the appointment of that old friend’s brother, Ian Fletcher, as head of the Government Communications Security Bureau.

Mr Key’s fondness for picking up the phone and talking directly to those at the coalface is a trait he shares with other go-getters who have become prime ministers. However, his predecessors all recognised the importance of maintaining public confidence in government.

Mr Key has now failed to do so on at least two occasions – first by advocating on behalf of one of the potential builders of a new convention centre in Auckland and now by being less than candid about his role in Mr Fletcher’s appointment.

Again it would have been better to have had the full details put out there at the beginning.

David Shearer was ridiculed for forgetting his foreign bank account for four years. While it is more believable to forget about a phone call, it means that politically the focus shifts from Shearer’s blunder to Key’s actions.

Andrea Vance at Stuff reports:

Spy boss Ian Fletcher was not short-listed for the top job at the Government’s foreign spy agency – but applied after a phone call from Prime Minister John Key.

The short list – drawn up by a recruitment company – was rejected by State Services Commissioner Iain Rennie. …

Mr Rennie confirmed yesterday that he had rejected the short list. Mr Key said that after he and Mr Rennie “agreed to look elsewhere,” Mr Key phoned Mr Fletcher, who was working in Australia.

“[Mr Key] said that if he was interested in the position of director, GCSB, he would need to go through a process and should call Maarten Wevers in the first instance,” the statement from Mr Key said. Sir Maarten was head of the Department of Prime Minister and Cabinet at the time.

Mr Fletcher was the only candidate interviewed by a panel made up of Sir Maarten, defence secretary John McKinnon and deputy state services commissioner Helene Quilter.

Mr Rennie said the “panel was unanimous . . . that Mr Fletcher was suitable for appointment”.

I think it is unfortunate the Prime Minister phoned Ian Fletcher to suggest he applies. While he would not have got the job if he wasn’t qualified, a phone call from the PM soliciting the application would carry weight with the State Services Commission.

I think Ministers should generally be very wary of suggesting people for state sector roles. David Parker, as Environment Minister,  endorsed Clare Curran for a role with the Environment Ministry, which was heavily scrutinised.

Now Fletcher has no political connections, but I think the same principle applies. Ministers are best to avoid involvement outside their formal roles.

A former diplomat, Mr Fletcher was chief executive officer of Queensland’s Department of Employment, Economic Development and Innovation when he was appointed. A high-flier in the British civil service, he had also worked for the European Commission and the United Nations.

Mr Key says he and Mr Fletcher met a “couple of times” when Mr Fletcher was in Queensland and no more than a “handful” of occasions between the mid-2000s and his GCSB appointment.

Mr Key disclosed the links to Mr Rennie during the appointment process.

Wow, are things getting silly.

Andrea Vance at Stuff reports:

Prime Minister John Key has outlined the nature of his friendship with chief foreign spy Ian Fletcher under questioning about the illegal surveillance on Kim Dotcom.

Their acquaintance dates back to their childhood, when their mothers were “best friends”, Key said. He also went to school with Fletcher’s brother.

Their mothers were friends. Shock horror.

I hope no one is suggesting that Ian Fletcher should not have got his job, because his mum was friends with the PM’s mum before she died.

Oh wait, they are.

Tracy Watkins at Stuff reports:

Seated across from each other in a New York restaurant they made for an unlikely couple.

On one side of the table was John Howard, one of Australia’s most successful prime ministers; darling of the political Right, bogeyman of the Left after taking the role as America’s deputy sheriff in the Pacific, and becoming the villain in the Tampa affair.

His lunch companion was Helen Clark, the socially liberal former New Zealand prime minister, a flag-flying Iraq war opponent, standard bearer for the Left-wing social democratic movement – and the woman who even now, four years on from losing the election, can spark visceral dislike among many on the Right.

Mates? Of course, says Howard, after they caught up recently for a chinwag in New York.

“We don’t just exchange Christmas cards.”

It reflects well on both Howard and Clark that they worked well together, despite being from different sides of the political spectrum.

 But historic and geographical ties have not always been enough to put the relationship on a friendly footing. Before Howard and Clark it was Lange and Hawke, Muldoon and Fraser. Tension, backstabbing, and suspicion reigned.

Fraser was an idiot, and Muldoon a bully. Hawke thought Lange was a flake, and he was right. There was also Bolger and Keating – Keating was just simply untrustworthy.

Gillard and Key, again polar opposites politically, have forged even stronger bonds than Clark and Howard.

Key says getting the personal dynamics in the relationship right is “critical”. With Gillard, it helps that their partners get on as well.

Once all the official business was out of the way during their two-day summit in Queenstown last month, Key and Gillard escaped to the exclusive Millbrook resort for dinner with partners Bronagh and Tim. They did the same in Melbourne last year.

“We have a no officials, casual dinner, have a drink together,” Key said.

A good relationship between leaders is no guarantee of success, but it is almost a precursor.

The big unknown is a possible Tony Abbott government – though he and Key have already struck up a good relationship, and speak to each other regularly.

Howard, meanwhile, is confident Abbot can only be good for New Zealand.

“He’s got a good start. His wife is a New Zealander.”

Heh, that may be useful.

An interesting article by John Armstrong on why he thinks National was at 49% in their last poll. A summary of his 10 reasons is:

1. Key’s sky-high rating as most preferred Prime Minister
   
2.  Key’s moderate conservatism
3. Key is unashamedly pragmatic
4. Neutralising of troublesome issues rather than allowing them to linger and fester
5. A majority of voters view National as the better manager of the economy
6. Good at maintaining momentum
7. National is still largely defining what the arguments are about in most policy areas
8. Opposition parties are instead still devoting considerable time and effort to fighting battles they have lost
9. Public getting acclimatised to the rather chaotic nature of minority government
10. Few, if any, issues that are seriously divisive and on which National finds itself stranded on the wrong side of the argument for ideological reasons

I would also add on that the alternative looks chaotic and unconvincing.

In another article, three Herald staffers look at Key’s personal popularity. First Armstrong again:

Why is John Key still riding high in the polls? Put it down to several factors. First, an understanding of and empathy with the New Zealand character and what is acceptable and not acceptable. His moderate conservatism is straight out of Sir Keith Holyoake’s textbook.

Key’s second priceless asset is his finely-honed political instinct in which he has the sense to trust – even when receiving advice to the contrary. Few leaders who have spent six years in the job would have their feet still firmly planted on the ground. He is never aloof. Nor arrogant. He does not talk down to people. He can laugh at himself. …

Key’s affable nature is not a false front to be worn solely for public consumption.

Claire Trevett touches on that last point:

His show of a good-natured, even-tempered, self-deprecating personality is one of his most potent weapons. It makes him seem approachable, and that helps explain why his personal ranking is so high above his party’s popularity. It also blurs the fact that he is wealthier and more powerful than most voters. If his Government is having a hard time, the next time he gives a speech he’ll get in a self-mocking joke about it, a tactic that simultaneously acknowledges the headache it is causing him while getting across the message that it is not as major an issue as is being made out. …

His sense of humour is his most underestimated asset. Voters get bored of leaders – it is one of the most corrosive factors on their popularity. Only tyrants and comedians can slow the process of that boredom. Labour cannot abide it, and that alone shows how powerful Key’s persona is.

While Liam Dann says:

As the Bill Clinton campaign slogan said: it’s the economy, stupid.

People vote with their pockets even when they are complaining about myriad other issues.

And I don’t think voters think the economy will do better with a Labour-Green-NZ First-Mana Government.

The Herald reports:

Prime Minister John Key this morning released documents detailing Solid Energy’s ambitious expansion plans which would have required capital investment of $2-3 billion a year until 2021 or a total of up to $27 billion.

Key released the papers in response to Labour’s claims he misled the public about Solid Energy approaching his Government about a $1 billion investment to become the “Petrobras” of New Zealand, a request he says his Government turned down.

However, in his appearance before a parliamentary committee yesterday, John Palmer who was Solid Energy’s chair at the time, said while the company made the approach, there was never any expectation the Crown would bear the cost of the required investment and a figure of $1 billion was never mentioned.

I admire the ambition of the Solid Energy directors and staff, but this just shows again how unsuited it is to be owned by the Government.

When you are 100% Government owned, there are only two sources of funds for capital – the Government’s or borrowing. The Government’s contributions can be either direct capital investment or reduced (or no) dividends.

It is simply not possible that the desired expansion could be done purely through borrowing. A Government contribution was absolutely necessary and implicit.

Of course if private shareholdings were allowed, then Solid Energy may have been able to access capital without it coming from the Government. This entire episodes reinforces dramatically for me the undesirability of having these commercial companies state owned.

Stuff reports:

Prime Minister John Key says he is “totally relaxed” about former Solid Energy chief executive Don Elder appearing before a select committee, but the decision was one for the committee and the board of the state-owned coalminer.

“If he wants to go and they want him to go he is not going to get any opposition from my office,” Mr Key said today.

Totally relaxed is a step up from relaxed. This got me wondering on Twitter yesterday if we need a formal scale to measure the PM’s relaxed level. It could be:

• 1 – Fairly Relaxed
• 2 – Pretty Relaxed
• 3 – Reasonably Relaxed
• 4 – Relaxed
• 5 – Very Relaxed
• 6 – Totally Relaxed
• 7 – 100% Relaxed

So totally relaxed is pretty high up the (now) official relaxed scale.

Andrea Vance at Stuff reports:

Prime Minister John Key’s refusal to attend the funeral of Venezuelan leader Hugo Chavez is a “mind-boggling political blunder,” a former MP says.

Former Green MP Keith Locke says Key is wasting an opportunity to rub shoulders with leaders in the increasingly influential region.

I’m really not sure how news worthy it is that a former Green MP disagrees with the PM. If it was a current MP, maybe.

I thought Keith Locke was against leaders who abuse human rights. I guess he thinks it is okay, when they are of the same ideological persuasion.

Imagine you are David Shearer or John Key and you have just become Prime Minister after an election. NZ First held the balance of power, and you struck a confidence and supply or coalition deal with them.

You have say a two seat majority.

You first six months go pretty well. Then the Sunday Star-Times breaks the story about Brendan Horan. The allegations are he stole tens of thousands of dollars from his dying mother, to fund a gambling addiction.

This is no longer just a matter for New Zealand First. He is a Government MP. He is voting confidence and supply for your Government. If you lose his vote, your majority is halved.  You can’t afford to have NZ First lose an MP so you decide to back Horan’s right to stay as an MP. You say he has not been charged with anything.

For the next six months the Opposition dominate question time with questions of fraud, gambling, vulnerable elderly and the like. You drop 5% in the polls and finally charges are laid, he is expelled and he becomes an Independent MP. Your majority is now one. It will be like what Julia Gillard has just had to endure with Craig Thomson (note I am not saying Horan has broken any laws).

Just as you are coping with that, then the MP for Wogistan shares his thoughts with the nation on how anyone who looks like a Muslim should be banned from flying. Once again this is no longer a matter just for NZ First. It is a matter for the Prime Minister. He is a Government MP. You face questions on whether he should remain an MP. If you say he should go, then you no longer have a majority. If you say he made a mistake but should stay an MP, then you become crippled as a Government with your mandate to govern being based on the MP for Wogistan’s vote. It is like Alamein Kopu but far worse. You drop another 5% in the polls and just one year into the term you are facing either an early election on inevitable defeat at the next election – regardless of how well you are doing with your policies.

This is no far fetched scenario. This is what could well have happened if NZ First had held the balance of power in 2011.

The question that should be keeping David Shearer and John Key awake at night, is the thought that this could be what awaits them after 2014. Winston by himself is capable of destablising the most stable Government. But add in some maverick MPs and it is a nightmare.

This Tom Scott cartoon hits the mark.  How confident can you be that NZ First actually has a robust selection process where they vet, critique and scrutinise their candidates? Does anyone really think Horan and Prosser are aberrations?

That is not to suggest all NZ First MPs are flaky. They are not. To name just three, Barbara Stewart, Tracey Martin and (somewhat surprisingly) Andrew Williams have all been diligent MPs who have not caused any issues and are working hard.

But if you are a minor party in Government, you only need a couple of ones that implode, and the Government itself gets imperiled.

David Shearer and John Key should be be thinking very hard about their options after the next election.  If you are a Labour or Green supporter, you should be thinking about what sort of Government a Labour-Green-NZ First Government would be. If you are a National supporter, you should be thankful that National ruled Peters out in 2008 and 2011, and hoping they do so again.

UPDATE: Stuff has a timely article looking at the NZ First caucus and asking which MP may go next.

A few thoughts:

• Isn’t it amusing that when Helen Clark agreed to take some boat people who were seeking asylum in Australia she was lauded by the entire left for her humanitarian gesture yet when John Key agrees to do much the same, but annually, he is condemned by the exact same people. And yes, the Tampa refugees were treated as part of the quota also.
• How can one criticize this deal for encouraging queue-jumping yet also advocate that Australia should resume onshore processing which has been shown to massively encourage boat voyages and queue jumping.
• Personally I think there is a legitimate criticism that this deal may encourage queue-jumping, but probably not significantly enough to actually lead to a group of people deciding to make a boat voyage they otherwise would not have.
• There is a surprising lack of sophistication in understanding our relationship with Australia is not purely a transactional one. The decision by the NZ Government helps Julia Gillard (and any successor)  in what is arguably her most difficult domestic issue. That will not be forgotten.
• The notion that Australia bullied NZ into this is ridiculous. In fact as reported it was a NZ initiative
• What is surprising is the lack of focus on a centre-right NZ PM helping out a centre-left Australian PM. It’s a nice example of not letting domestic politics interfere with having a strong relationship.
• I’m surprised also no one has cottoned on to Gillard making an unprecedented early announcement of the election date, almost certainly being because Key the same thing in 2011.
• Personally I think taking in refugees is one of the better things a country can do, so long as they are able to integrate well into their new country and that the level is sustainable. Note that Australia takes in 20,000 to our 750. I’d like that to increase at some stage in the future when our economy is stronger. But I think it is best increased through the UNHCR process, not through increasing the number in the bilateral agreement with Australia
• You have to love Labour’s strong clear policy on this issue. They are outraged of course, but when asked what they would do, the answer is “Shearer said if elected, Labour would discuss the policy with Australia.” – you can’t make this stuff up.

Quite a few things announced by Gillard and Key in Queenstown. They are:

• Joint action to address the high cost of mobile roaming rates between the two countries
  
• an $8 million trial of fast‑track automated border technology for trans-tasman travel
• Commencement of new retirement savings portability arrangements between Australia and New Zealand from 1 July 2013
• Entry into force of the CER Investment Protocol from 1 March 2013
• New Zealand has agreed to resettle 150 refugees who are subject to Australia’s offshore processing legislation, as part of their annual quota of 750 refugees
• NZ$3 million in matched funding over two years to support trans-Tasman collaboration to identify potential vaccines for rheumatic fever
• Investigate a possible reciprocal student debt recovery scheme.
• An A$5 million memorial will be erected in Wellington’s National War Memorial park precinct by the Australian Government

When the PM was Opposition Leader he said he would attend Waitangi Day at Waitangi as Prime Minister, for as long as he was PM. He has kept his word and as far as I know is the only Prime Minister to have attended 100%.

I think it is very good for the PM to attend. It is a chance for dialogue and discussion. Shouting past each other is not a substitute for fronting up.

However there is some obligation on the hosts to be good hosts. By that I don’t mean that Waitangi should be protest-free. That is not under their control, and protesters have freedom of speech.

But what I do think is unacceptable is to keep the Prime Minister waiting for almost an hour, while you work out who accompanies him. It is rude, and inconsiderate. I doubt any other Head of Government would sit around for an hour while they have a silly squabble.

The fact that there are some strong personalities like Titewhai Harawira involved, is no excuse. Waitangi Day is once a year. They could have raised this issue months ago to try and get an agreement. Trying to change things at the last minute was always going to end badly.

While I am sure the PM will keep his pledge to always attend, it would be wise for the hosts to consider what responsibilities they have. Having the PM there is a privilege – not a right.

Teuila Fuatai at NZ Herald reports:

Prime Minister John Key shared tales of his Jewish mother’s escape from Nazi-controlled Austria at the United Holocaust Memorial Day event this morning.

Mr Key addressed a crowd of about 200 people, which included Holocaust survivors, politicians and Israel’s Ambassador to New Zealand, Shemi Tzur, in Auckland.

His mother, born in Vienna, Austria, moved to the United Kingdom in 1938 with her brother. She moved to New Zealand after marrying a British soldier.

She did not speak any English and left her own mother in Austria when she fled, Mr Key said.

My father and his mother also left in 1938. Sadly not all my family managed to get out.

He spoke of his mother’s pain over the Holocaust.

People often asked: “Why is it that I can’t speak German?

“The simple answer is my mother refused to teach me.” She “did not want to reflect on her history”, Mr Key said.

I didn’t even realise my father’s side of my family was of Jewish ancestry until I remarked one day how a schoolmate was Jewish and how he seemed so normal.  And never once did we talk about what happened with my grandparents. I can only imagine how awful it was.

ZB reported:

Newstalk ZB’s Allan Lee says it was a moving event, with Mr Key speaking passionately and without notes.

He says it’s personal for the Prime Minister – his mother was an Austrian Jew and was forced to leave as a result of the Nazi invasion.

“She never wanted to talk about it and he told the audience today that his mother, whenever he tried to question her about it, she would just not answer. So he’s never really found out the full story of what happened to her.”

Mr Lee says Mr Key also spoke about Holocaust, saying people who deny it happened can only be described as mad.

And to prove this point, we have the lovely intellectuals at Stormfront who reacted to the PM’s comments with:

When the evidence stacking up against the Holocaust, makes the world realise it was a plot to secure Israel and that we must teach the truth…

Will the UN then change the day to UN Holohoax Memorial Day?

What sad people.

John key gave today his first major speech of 2013. Some good sections to it, and a fairly major policy announcement. Extracts:

So here in New Zealand we have to be a magnet for investment.

That’s investment by individuals and small businesses as well as big businesses; and it’s investment by people from overseas as well as Kiwis.

The more investment we get, the more jobs will be created.

That’s not to say there won’t also be jobs lost.

In any three-month period in New Zealand, between 100,000 and 200,000 jobs disappear, and between 100,000 and 200,000 new jobs are created, as businesses start up, expand, contract and close altogether.

The labour market is a very dynamic place.

But the only way net new jobs can be created is by private investors putting their money into businesses in New Zealand.

Governments can encourage investment but they can also discourage investment.

A government can load up big costs and uncertainties onto business.

It can make people unwelcome because they are considered to be the wrong nationality to invest here, or in the wrong industry.

And it can lock up the resources of the country.

That would certainly discourage investment.

The fluid nature of the labour market is worth reflecting on. We are decades beyond the jobs for life NZ once had. Jobs get created and disappear on a daily basis. And it is investment that leads to more jobs.

But the big changes we are making this year are to industry training and, in particular, to apprenticeships.

Under Labour’s wasteful management, up to 100,000 people a year listed as being in industry training were in fact “phantom trainees” who achieved no credits and in some cases were no longer alive.

Heh.

1. From 1 January next year, we are going to combine Modern Apprenticeships and other apprenticeship-type training under an expanded and improved scheme called New Zealand Apprenticeships. These new apprenticeships will provide the same level of support, and the same level of subsidy, for all apprentices, regardless of their age. Fewer than half the people doing apprenticeship-type training are actually funded as proper apprentices, through the Modern Apprenticeship scheme, and we are going to change that.

2. We are going to boost overall funding for apprenticeships. The current top-up for Modern Apprentices will be redistributed across all apprentices, regardless of age, as an extension to their learning subsidy. In addition, overall subsidy payments will be increased by around $12 million in the first year, rising over time. Increased funding for apprenticeships will allow industry training organisations to invest in the quality of education for apprentices, lower fees for employers and encourage growth in the uptake of apprenticeships.

3. We are going to boost the educational content of apprenticeships. At a minimum they will require a programme of at least 120 credits that results in a level four qualification.

4. We are going to set clearer roles and performance expectations for ITOs, and give employers other options if their ITOs don’t perform; and

5. To lift the profile of, and participation in, apprenticeships, we are going to give the first 10,000 new apprentices who enrol after 1 April this year $1,000 towards their tools and off-job course costs, or $2,000 if they are in priority construction trades. The same amount will also be paid to their employers.

The Govt estimates this will lead to 14,000 more people doing apprenticeships in the next few years.

We need more houses built in New Zealand, at a lower cost.

That means we need more land available for building, more streamlined processes and less costly red tape.

This doesn’t require the Government to spend a lot of money. We are already a huge player in the housing market and I’m very wary of spending more of taxpayers’ money.

But there are plenty of private sector investors who want to invest in housing – if only we can remove the roadblocks that are slowing down the process and driving up costs.

It’s ridiculous, for example, that developers can wait six to 18 months for a resource consent.

It’s ridiculous that we allow councils to demand almost anything as a condition for the consent.

And it’s ridiculous that we allow them to charge whatever fees they want.

Unless these sorts of issues are dealt with there won’t be more affordable housing built.

Labour’s so-called ‘plan’ to build 100,000 houses doesn’t do anything to fix the actual cost of building – so will either fail miserably, deliver dwellings that people don’t want to live in, or require massive taxpayer subsidies.

It’s dishonest and it doesn’t stack up.

Far better to reduce the cost of housing for everyone, than introduce Housing Lotto when 10,000 lucky people a year get a taxpayer subsidized house by having their names drawn out of a barrel. And yes – that is their actual policy!

… overseas investment in New Zealand adds to what New Zealanders can invest on their own.

It creates jobs, boosts incomes, and helps the economy grow.

Overseas capital can make things happen here that wouldn’t otherwise happen, grow businesses that wouldn’t otherwise have the means to grow, create jobs that otherwise wouldn’t exist, and pay wages that are higher than they would otherwise be.

So it’s sad to see the Labour Party that was such an advocate of trade and investment in the past somehow turning into the number one defender of Fortress New Zealand.

Indeed.

So as you can see, we’ve got plenty on.

But I can guarantee you one thing – Labour will oppose almost all of it.

And the few things they might find to like, Russel Norman or Winston Peters will vehemently oppose.

And that’s the irony of the New Zealand Opposition in 2013.

They criticise the Government for being too hands-off; and yet between each of the Opposition parties they oppose every hands-on change we make to encourage investment, growth and jobs.

Tax changes – they oppose.

Major roading projects – they oppose.

A free trade agreement with the US – they oppose.

RMA changes – they oppose.

90 day trials – they oppose.

Work expectations for beneficiaries – they oppose.

Oil and gas exploration – they oppose.

The Hobbit legislation – they oppose.

A national convention centre – they oppose.

Every piece of legislation or policy we have developed to encourage growth and jobs they have opposed.

And that’s because there is only one type of activist government they know – the big-spending and big-borrowing kind that we know so well from the Labour Party and the Greens.

It’s called “chequebook activism” and New Zealanders know it well because they’ve seen it before.

As a country we are still paying for it – literally.

It means big, wasteful and unaffordable spending, charged to the taxpayer’s bill. And it means Labour and the Greens meddling and choking off private sector investment.

Good to see the PM pointing out the inconsistency. There is a balance to be had when going on the attack. You need to both talk up your plans, but also point out the alternative. The announcement on apprenticeships was a nice anchor for it.

It will be interesting to see what Shearer announces tomorrow apart from the fact Labour will be “hands on”!!

John Armstrong writes:

John Key’s dramatic Cabinet reshuffle displays a streak of ruthlessness hitherto rarely seen in a New Zealand prime minister.

Ruthless is a very good word for it. I’m trying to recall the last time there was a reshuffle of this nature, and I can’t recall one. As I said yesterday generally Ministers are gently eased out at election time, or in the year before an election – allowing it to be arranged as a retirement. Or they are pushed out due to a major scandal or incompetence. To just dump two Ministers because you needed to rejuvenate the team, is a cold political call. It is however very much the correct one.

Above all, what the reshuffle does is put the entire Cabinet on notice.

Indeed. I suspect most Ministers also thought it would be a very minor reshuffle with Nick Smith just replacing David Carter. As news spread yesterday of two Ministers forced out, a cold sweat would have broken out with some of their colleagues thinking “That could have been me”. They will also be thinking “That could be me next time”. This is not a bad thing. Complacency is not a good thing in politics. No one should be thinking they have a eight or even expectation to remain a Minister for an entire Government. Renewal is crucial.

Tracy Watkins also calls it ruthless:

No-one saw the brutal dumping of long-time Cabinet ministers Kate Wilkinson and Phil Heatley coming – least of all them.

The usual route out of Cabinet for underperforming ministers is a slow slide down the rankings and reassignment to lesser portfolios.

But Prime Minister John Key, a man once known as banking’s smiling assassin, refused to offer them even that fig leaf, giving them just a few hours’ notice of their fate.

The smiling assassin. It’s nothing personal. It’s just necessary.

By launching 2013 in such dramatic fashion, Mr Key has signalled his intention to draw a line under those failures and regain the political initiative.

I think it shows significant determination that 2013 will not be like 2012. It also puts the acid on David Shearer’s reshuffle. It is widely acknowledged his front bench is not performing. Will he just move one or two people around or do a very significant reshuffle?

The Herald editorial approves:

With the Government holding up well in the polls, it would have been tempting for the Prime Minister to keep the changes in his forced Cabinet reshuffle to a minimum. Why, after all, change a winning formula? But in acting as boldly as he did yesterday, John Key has actually enhanced the prospects of prolonging his ministry. The Government has freshened its face at an appropriate time, rather than waiting until closer to next year’s general election, when such a shake-up would risk being seen as a mark of desperation.

I agree. Also it gives new Ministers a chance to score some runs on the board. If you become a Minister in the year before an election, it is hard to achieve much as election year is often so polarised.