State of our nation
After 20 years relentlessly climbing financial ladders here and overseas, John Key burst on to the New Zealand political scene several years ago. He was a virtual unknown; a mover and shaker in fiscal trading and a money maker who had banked his fair share of dosh.
From the unknown to our top political job, Key captured the confidence of a nation many felt had fallen into the lap of “nannyism”, with his clear-cut commercial experience seen by many as the country’s key to economic growth.
As he was sworn in as Prime Minister, New Zealand was about to be dropped head first into the opening jaws of a recession just beginning to chew up the global economy. Taking time from a busy schedule, John Key sat down with Sandy Galland to share his thoughts on our place in the financial world — a “state of the nation” if you will.
As the recession makes its presence overwhelmingly felt, he believes we are in a much better position than many other nations. “Our banking system is still functioning well; that is not the case overseas. And the Government is stimulating the economy with extras spending rather than having to bail out our banking systems.”
In saying this, Key passionately believes New Zealand under-performs. “It is an amazing country that could do better. We do a lot of things really well and we shouldn’t sell ourselves short, but we can do better and I am determined that we do.”
Determination is a Key characteristic. Growing up in Christchurch, his childhood ambition was to become prime minister. At a young age, he reportedly wrote to the then leader, Labour Prime Minister Bill Rowling, telling him he wanted his job one day.
While the context for his desire to lead a nation might have changed, the underlying reason is as strong now
at 47 as it was as a 10-year-old. “When going into politics you have to re-evaluate. Is it more a fascination or is it something you want to do? For me it was definitely something I wanted to do — a belief that I could make a difference and make a contribution. And I was fortunate enough with my business career to be in a position where I could financially afford to do it.
“I also had to accept that there is a very limited market for second hand politicians, so once you go into politics you have to accept that you are on your own afterwards.”
As for second hand prime ministers; the market may be a little stronger, he says. Helen Clark has catapulted herself into a dominant international position, as did Mike Moore, Jim Bolger and Geoffrey Palmer, although Key says his future after politics is something he has “not focused on much anyway”.
For now, his focus is well directed elsewhere.
National made many campaign promises, undertaking to deliver them within 100 days. On deadline, a century of days after being sworn in, Key said they had ticked off every item on the list. “That’s why businesses are largely positive about us; because they are seeing real progress on things that have been holding them back for a long time.”
You can’t help but wonder if Key’s pragmatic nature has helped National’s rise in popularity. A man colleagues described as unflappable, he has also been tagged for being disciplined, focused, somewhat safe and bland, but demonstrating charm and exceptionally strong leadership qualities.
On the business coal face, Key was seen as offering a shining light at the end of a long, dark tunnel. “The underlying elephant in the room for a long time was that our productivity rates have been falling. We were less competitive than other countries. So from our point of view, additional fiscal stimulus, the Government spending more money, is part of the solution, but actually only part of it.
“We are reforming the Resource Management Act, the building act, changing how the Government interacts with the private sector to make it more user friendly, curtailing a bit of its activity, cutting out some compliance cost — there are a lot of things we are doing which will help.”
The recession does have a silver lining, extols Key. It is a chance to restructure the economy to drive long term productivity gains. We are still experiencing falling international demand, challenging a country that has a third of its economy tied up in export, but it is not as dire as it could be.
“The goods and services we sell are still in demand. We are not selling LCD TV’s and luxury cars where demand has fallen off the cliff.” Many of our exports are largely food orientated so demand remains, albeit somewhat diminished, but the world needs to eat.
The biggest risk we face is protectionism, says Key.
“Our risks are not on global interest rates on the fiscal side, our risks are on protectionism where America or Europe put up the trade barriers and we, as a small open economy that trades with a lot of people, become badly affected by that.”
Key characterises this as the worst recession since 1930, but in his view it won’t turn into 1930. “Governments and countries have learnt. Back in the 1930s they slashed spending and added to the recession; whereas what’s happening now is countries are very focused on making sure they continue to spend money.”
Despite all this, there are companies doing very well. “This is an unusual depression in that it is hitting some sectors; it’s hitting the building sector very hard, but for others it has hardly hit them at all.
“Funnily enough, tourism is holding up reasonably well. January had the highest inflow of tourists of any month we have ever had in our history. We need to keep stimulating that demand. That’s why the Government has put in an extra $2.5 million to advertise into Australia and has been backed by Air NZ with another $2.5 million.”
Government investment alone is expected to generate 34,000 extra tourists — that’s a $64 million dollar boost to the economy. “There’s a million tourists a year coming from Australia, so it’s a big part of our market.”
At the time we spoke, Key says Australia wasn’t yet in recession. “They are probably staring down the barrel of one — it’s had one quarter of negative growth. They are a big part of our market; their banking system, which is our banking system, has been strong. Their economy has been strong so I think tourism is doing alright.”
As Tourism Minister, you would expect Key to deliver statements like this. But despite the bombardment of negative news hitting us daily, are things really as bad as the media, economic commentators and the public makes out?
“It can be a self fulfilling prophecy.” Early in the year we returned from our summer holidays and saw dire things happening in the USA and across Europe.
We saw the massive dole queues, the negative headlines, the collapsing of banks and financial stalwarts of our economy. We reacted and we went into recession mode.
As a government, not reacting to what is happening would be suicidal. “There is a difference between being out of touch and ridiculously uninformed; we are an open economy, so you have to react. On the other side of the coin, there has been misunderstanding that there are some unique differences between New Zealand and the rest of the world.
“I think the media has been in the camp of America, which is having the worst meltdown recorded, therefore they think we have to follow the same way. I just don’t accept that.
“We are not immune to the recession, but we can take the rough edges off it.”
Key believes we need to be wary we don’t talk our way in deeper than need be. “We saw that in January and February when the numbers really started slowing down. Everyone got scared they were going to lose their job.
“When you think about it, at the moment 95 percent of New Zealanders have their job and for the vast bulk of them, there is no risk of them losing it.
“So for them (those with jobs) often the conditions are better, this is not a bad environment for a lot of families.”
Business is the lifeblood of New Zealand and as a nation we need to find solutions to the problems we face.
“I spent 20 years in the commercial world and know you have to find solutions that work. If you don’t, you go broke.”
Now, more than ever, it is time for businesses to get help, be it from a chamber of commerce, the MED
or other business professional. Key says many are trying to do an awful lot of things on their own as a large majority of the sector is made up of small and medium businesses who don’t have an HR, legal or accounting department.
“They have to make all those decisions themselves and because times are volatile and difficult to predict, we need them to be able to ride through it.
“There will be some businesses that get tossed out because of the recession and many of those would have survived if they had gotten advice.
“Get onto it early, stay focused on it, stay very focused on the cost side of your business and use this (the recession) as an opportunity to have a plan for growth.”
We are starting to see some “green shoots” at the moment, he says. But is it a “dead cat bounce?” Who knows… you just have to love the financial jargon!
Key says demand is returning to certain industries. This year will be tough, 2010 will be a year of recovery and he believes 2011 will be a big year for the economy.
Key himself is no dead cat. He exudes a certain charm that makes you want to believe what he says. A personality that draws you in and gives you confidence in his ability to deliver what he alludes to.
Describing himself, he uses the words optimistic, positive and even-tempered.
“I’m a very calm sort of person. I’m not biting my nails… well, no more than normal.”