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Fran O'Sullivan: Plenty of concerns to drive Key's year

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John Key will need to keep his eye on the ball as National aims for a third team. Photo / APN
John Key will need to keep his eye on the ball as National aims for a third team. Photo / APN

John Key will probably get in a few more rounds of golf in Maui before he returns to New Zealand to get his election year planning under way in earnest.

Key is never that far away from official business despite holing up at his Hawaii home for about three weeks over the Christmas holidays to recharge.

It is a safe bet that the election will be uppermost in his mind as he contemplates this year. In particular, how to ensure that a National-led government gets a third term in office - even if that means a very different permutation when it comes to enlisting viable support partners.

There will - and should be - plenty of challenges ahead on the policy front including those posed by a similarly recharged David Cunliffe to keep the Key Government on its toes. Think compulsory national savings; broadening the tax base to include capital gains taxes; raising the age of national superannuation eligibility; dealing to youth unemployment and the underclass, all areas where Key is vulnerable when it comes to the long-term trends.

That will play out.

But one of the challenges Key faces is how to balance his pattern of being New Zealand's "face" overseas with the very necessary need to stay present and focused within the country itself during election year.

At first blush it looks as if Key will again be very busy indeed on the international front.

His "apology" trip to China will loom fast in 2014 as well as a proposal to visit the Gulf States where a free trade deal has been under negotiation.

Moscow is also again on the agenda; a trip that had been previously postponed.

But the Prime Minister faces a political risk if his international dance card is too full. Many of Key's foreign trips have been marred by television footage of him commenting on domestic issues (such as the leak of Rebecca Kitteridge's GCSB report) from foreign climes rather than dealing with them from his Beehive office.

Domestic crises cannot always be foreseen. But it should be possible to delegate more run-of-the-mill domestic issues to the Acting Prime Minister to manage. However, Key's practice - as became common with Helen Clark before him - is to engage.

Talk late last year was that Key was anxious to get his promised trip to China out of the way early - January or February - to build renewed confidence in New Zealand-sourced infant formula within our biggest export market. At the height of the Fonterra "false-positive botulism" scare, the Prime Minister indicated he would go up to Beijing to quell confusion in the Chinese market where consumers initially believed that much of the infant formula made from NZ milk powder may have been contaminated.

The scare fortunately turned out to be a false alarm.

But it has provided a ready impetus for the Government, officials and Fonterra to concentrate on ensuring the valuable export trade is in future underpinned by clear regulatory standards, good inter-agency relations with overseas trading partners and increased vigilance at company level.

The Ministry for Primary Industries has yet to report if there were any legal breaches during the affair and the Chinese government agencies will want to study all various reports before the official visit takes place.

The big positive as far as New Zealand is concerned is that demand for milk powder remains high. It is debatable whether the Prime Minister does in fact need to apologise or simply explain the steps that have been taken to prevent a recurrence.

Key's overall agenda is driven by politics. He displays a publicly affable nature (he concedes he is careful to use his "smiley face") and has proven to be good at engendering national confidence by taking the country with him after the global financial crisis and the Canterbury earthquakes.

But that confidence also springs from the sound management and the skill Finance Minister Bill English has shown in keeping the bureaucracy focused on getting the Government's books back into order.

English's partial privatisation programme for state asset sales has not produced the fiscal proceeds he initially flagged.

The Mighty River Power float has also turned out to be a disaster for those who bought shares in the IPO at an issue price of $2.50. But the stock may well provide a good long-term investment at yesterday's price of $2.13.

The Air New Zealand share price has recovered after initially diving. And Meridian Energy's instalment receipts are similarly lineball.

English can argue that investors in the energy companies have been spooked by Labour's plan to intervene to drive electricity prices down if it wins government. But that line is not going to wash if National proceeds with its proposed Genesis Energy IPO.

English has been in charge of the purse strings since the rocky days of the GFC. It is now a moot point that having wound back National's 2005 election tax-cuts programme after unveiling the so-called "decade of deficits" that English and Key might be tempted to announce a new tax cuts programme to take place in the 2014-2017 parliamentary term. The Finance Minister is expected to announce a $86 million Budget surplus for 2014-15 - but the forecast for subsequent years is for much bigger surpluses.

Cunliffe will want to target the need for the country to bank those surpluses to cater for the long-term fiscal challenges posed by an ageing population.

The Prime Minister will run a fast pace this year to try to stop Cunliffe gaining purchase. But he will also need to come up with some new policies to address the challenges that the country faces this year and beyond to erode the sense of complacency that befalls all governments as they enter their sixth year in office.

One thing we do know is that Key is good at managing circuses.

His Government brilliantly leveraged the Rugby World Cup in 2011. Key will also leverage the visit by the Duke and Duchess of Cambridge (and Prince George). It won't be the only star turn before the election (which is expected to be early).

Fran O'Sullivan's column returns on January 22.

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- NZ Herald

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