Key Points:

With a general election barely a year away, Labour is staring down the barrel as polls show that a National Party rejuvenated under John Key could govern alone. Political editor Audrey Young interviews Prime Minister Helen Clark

Q. Given your unhappiness over the handling of the Madeleine Setchell affair, which you made clear in Parliament this week, did you have a message for caucus?

A. Yes. I had a message for the Cabinet and the caucus which is that after the inevitable honeymoon had been given some time, I felt Labour had been setting the agenda again, picking up speed and getting momentum. No one should get in the way of that.

Q. Is leadership easier now than it was in 1999 when you first became Prime Minister?

A. You learn on the job and there is no substitute for that, so in many senses there is no challenge that is new. It might take a different form but I guess you do develop ways of handling things. You apply the sort of skills and the experience from the past to each new challenge.

Q. Are ministers becoming complacent or sloppy after all this time?

A. I don't think anyone is complacent. In the MMP environment it is inevitably a different environment from the security that governments have with one-party majorities, except if it was a one-seat, one-party majority of the kind National had in the 90s.

Initially, of course, you are a new team and people cut you a lot of slack. After a time, they expect experience in office to lead to probably more polished performers.

So if someone does make an error of judgment it is probably viewed more critically than it would have been at an earlier stage.

Q. Are you satisfied with the performance of your front bench?

A. I think the front bench is a very strong front bench and still a formidable front bench.

Q. Is anyone in the Cabinet safe?

A. That's an impossible question to answer isn't it because whatever you say, it tends to give an indication of what you may or may not do. But everybody knows there is a lot of competition for these jobs and people have to be on their mettle. Can you remember Geoffrey Palmer's dis-unifying reshuffle in 1990, election year, and does that put you off having one in election year?

I do remember 1990, but I think there were a lot of other issues around that too. So I'm not sure it is that relevant.

Q. But did it help to make you a better manager of reshuffles?

A. In my observation, from the time of Norm Kirk's untimely death right through to 1997, the Labour Party fought and immeasurably worsened its own prospects as a result.

So I have put a huge premium on team cohesion and you see very little evidence of anything else out of the Labour Party caucus. And the key thing is for the management to be seen to be fair. I think the problems of the past with factionalism ... that is not a factor any more and that is a good thing.

Q. Is it that factions exist but co-exist happily, or don't exist any more?

A. I personally don't think they exist.

Q. Can I ask you about the reshuffle?

A. What reshuffle?

Q. Do personal loyalties and friendships make reshuffles difficult?

A. You know most of us have known each other for a long time. And that is not just people on the front bench or second bench. There are people like Charles Chauvel who I knew as a student. Most of us go back a long way because most who come to be a Labour Member of Parliament have been around the Labour Party for quite a long time.

So when you have been given a lot of loyalty and when the party has been given a lot of loyalty, of course all issues have to be very carefully managed. But at the end of the day what has to be the first priority of every single one of us is what is in the best interests of the Labour Government and that always comes ahead of any personal interest.

Q. It is much better if people come to realisations themselves, rather than you having to point it out?

A. Leading question.

Q. Are you going to have a fresh look and feel next election?

A. Yes I think so. I've always said there would be renewal and that would be seen in some people - an unspecified number - retiring in the course of the term, and others indicating they wouldn't be seeking re-election. So that creates some room.

Q. Can you pull it back?

A. Yes. I would have said the same if you had asked me that three years ago.

Three years ago Colmar Brunton was telling us we were 10 or 12 points behind. July 04. And the course of this has run pretty much like post-Orewa.

Q. Isn't this a bit different because there is no one thing you can put it down to?

A. It is essentially a change of leader and a change of leader out to make impact. Brash did it one way. This guy has done it another way. But in essence that has been the honeymoon effect.

At least with Brash you knew what he stood for.

Q. Doesn't that make this leader harder to attack then?

A. No because it makes it more shallow.

Q. Is that the line of attack you are going to run against him next year?

A. Where's the beef? What's the policy? I do think their main problem is, to coin the phrase, they have a policy that dare not speak its name because it is not popular in New Zealand - to go out and say you are going to privatise public assets.

It is not popular to say you are going to constrain public spending because everyone knows that means health, education, and pensions.

It is not that popular to say that workers are going to lose their rights to personal grievance, that the Accident Compensation scheme won't remain. So they will try to say nothing about policy. That's unavoidable in the heat of a campaign.

Q. That was easier to combat with Brash because you had all his speeches from his time as Governor of the Reserve Bank.

A. There's plenty from this guy too. You can't hide your real intentions in the scrutiny of the campaign.

Your opponents, namely us, won't let you and the media won't let you. The media wants to know what's on offer.

Q. Is the public asking that question yet?

A. Not particularly. I wouldn't expect that in a mid-term year. New face. People are entitled to have a look and I have always taken the view, let the honeymoon run its course. No point trying to spoil it. You have never heard a sour or bitter note cross my lips.

Q. Are you surprised it has run so long?

A. I would have expected [the honeymoon] to run a bit beyond this. Pretty much what we saw with Brash.

Q. In the Listener you described John Key as the least substantial National Party leader you had faced. But he is probably the best all-rounder wouldn't you think?

A. Well no. I wouldn't say so because I don't think that it's rounded. I think it is light on experience, light on substance, a very narrow experience of foreign-exchange dealing - much less well-rounded, actually, than any of the other four [Bolger, Shipley, English, Brash].

Brash had broad business and public sector experience, and the other three all had substantial parliamentary careers behind them where they had dealt with a wide range of issues.

Q. What is your expectation about what Labour will flag next year regarding a timetable for tax cuts?

A. Michael Cullen has said he will outline the Government's thinking on that subject next Budget so that is what people have to expect.

Q. Will it be the dominating issue again next year?

A. Well, every year from 1999 on, the National Party has run tax cuts so there is nothing new about this. In '99 they had legislated for tax cuts which we explicitly campaigned against and said we would overturn, and we did. They campaigned on it in 2002, 2005 so they are going to campaign on tax cuts. Will it be the defining issue? In a funny way, I don't think so. It is just too hackneyed now.

So I think by the end of the last election campaign - and they had been very dominant at the time of the Budget and came up again close to the campaign - the electorate looked at a much wider range of issues and I believe started to look in behind that to say "what would it mean? Would we want the consequences of what it meant?"

Q. What do you think will be the defining issues?

A. In many ways it may not be dissimilar to last time which is "What sort of New Zealand do you want and who is most likely to provide it?" "Do you seriously want change to the current settings?" "How destabilising will that be?" "Will it take New Zealand forward or backwards?" "Who has got the proven track record and experience?" "Who is putting up the best policies for the future to build on what we have got?"

Q. You've been in power for eight years. Is there any area of government where you want to take some action, but have not had the chance to do so?

A. Oh plenty. There are things you do in the second term that you couldn't have attempted in the first. There are things you can do in the third term that you couldn't have attempted in the second. There are things you can do in the fourth term that wouldn't have been possible in the third.

If you look at some of the things we have done this term, it has taken a while to build up the kitty for a substantial tax package. It has taken a while to build up the kitty for Working for Families. It has taken time to work up the kitty for interest-free loans and the early childhood programme. So undoubtedly there will be areas we will build on for next time, which will be new.

I think one of the key areas is obviously the sustainability programme rolling out. There are big decisions to be taken around the strategies and then the roll-out, so that is very much fourth-term implementation.

Another area that is going to be very important is in affordable housing and we have taken a completely fresh look at that, going away from demand side to supply side, looking at what actually puts more housing on the ground. We are following very closely what the British Government is doing there. They are actually setting a target for the number of new homes to be built every year and they are using a lot of innovative ways in zoning, development contributions, brown fields redevelopment to get those targets.

So we are taking a very intense look at the moment around that, and that will, I think, be an area of considerable activity.

Q. When will we start seeing some policy?

A. We are getting report backs in the next three months on the affordable housing proposals. This isn't about accommodation subsidies, it isn't about shared equity, it isn't about that side of it. Some of those things are running. It is about coming at it from the other end. What can we do to get more action on the ground, because if you are pumping in money to support people buying a home, but you are still not having enough homes built, all you do is inflate the price. So you have to look at what will boost supply.

Q. Including private sector?

A. Well some of the bigger ideas may well help the private sector in terms of brown field redevelopment, for example the sort of mixed public-private development you are going to see at Hobsonville, the Talbot Park redevelopment at Glen Innes. So there is a lot of thought being given in this area.

Q. Again for fourth term implementation?

A. Pretty much. There would be legislation required and then you get roll-out from there.

Q. Where do you get your new policy ideas from?

A. We actually find the exchange of ideas with British Labour pretty useful. In terms of this particular area they have been pretty innovative. In terms of early childhood education and care they have been very proactive. In terms of family tax credits, they were very proactive and pretty much at the same time of their time in Government as we were.

Looking back the other way, they look pretty closely at us too. They have been very interested in the wide range of superannuation and savings initiatives, very interested in the super fund, very interested in KiwiSaver, and with both [former PM] Tony Blair and [PM] Gordon Brown, very interested in the role I have played on the national identity issues because this is quite a critical issue for Britain now - what it is to be British, what defines national identity. They are also interested in the high level of social cohesion we get in New Zealand across a very multicultural, multifaith society.

It is very much a two-way dialogue across these issues. And I personally follow pretty closely the debate in Britain around these issues.

My favourite website at the weekend is The Guardian and I get The New Statesman every week so I am always following those debates and of course what comes out of the Fabian Society and IPPR [Institute for Public Policy Research] and some of the think tanks.

My husband is actually a great reader of all this too so he is constantly dropping in ideas - "did you see what they are doing?" - and Steve Maharey is very tuned into this kind of stuff as well.

It makes sense because we are the only two Labour Governments of the Labour Party in the world. Yes there are other social democratic governments but there is a lot of common tradition on domestic policy between New Zealand and British Labour.

Q. Do you get many of your ideas from the public service here in New Zealand?

A. No. It is a very blunt answer but it is true. We generate the ideas.

Now once you have generated the ideas, then you can get them worked up as a policy which can be implemented, but the source of ideas is very much from the reading and the interactions we have.