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TRANSCRIPT OF JOINT PRESS CONFERENCE WITH PRIME MINISTER JOHN KEY

WELLINGTON

16 FEBRUARY 2011

Subjects: Australian and New Zealand bi-lateral relationship; Afghanistan; MRRT; climate change;
asylum seekers

PRIME MINISTER KEY: Okay good afternoon, so the programme is that I'm going to make some opening
remarks and then I'll pass to Julia Gillard to make some remarks and then we'll go over and sign
the investment protocol then we'll come back and take questions. You'll appreciate there is a
limited period of time we have for questions because of the Parliamentary reception.

Firstly, can I just welcome everyone here, I'm pleased to welcome Prime Minister Julia Gillard here
to Wellington, on her first visit to New Zealand as Prime Minister. Australia is our indisputable
ally, partner and friend. Our relationship is growing stronger and closer all the time. We share
close business and commerce links and our people-to-people links are very strong, through
everything from family ties to our rivalry on the sporting field. But nowhere is the bond between
our two countries stronger than in our shared Anzac history and tradition.

It is particularly poignant today to receive news that a New Zealand soldier serving in Afghanistan
had been killed in a vehicle accident. Three other soldiers were injured, one seriously. I want to
offer the New Zealand Government's sincerest condolences to the families of Private Kirifi Mila.
Both our defence forces are operating in a difficult and dangerous environment in Afghanistan in
order to help the Afghan people. Later today Prime Minister Gillard and I will lay wreaths at the
National War Memorial to again acknowledge our shared Anzac history.

Prime Minister Gillard's visit has been an excellent opportunity for us to talk about our shared
ambitions, to further develop the trans-Tasman relationship. Last night we had a working dinner at
Premier House, followed this morning by talks with myself and the Cabinet. Discussions have been
wide-ranging, covered everything from the economic conditions we face to our security
responsibilities both in the region and further afield and the role that we play together.

Prime Minister Gillard has just addressed MPs in Parliament as you are aware, an event that further
underscores the close and unique nature of the relationship between our countries. In our talks we
have discussed the good progress being made on various fronts and we will be releasing a joint
statement on this shortly.

We are continuing to progress the single economic market agenda to make a seamless trans-Tasman
business environment a reality. A concrete example of that agenda is in the CER investment protocol
which we will sign shortly. It increases the screening thresholds above which foreign investment in
business assets require regulatory approval. For New Zealand firms investing in Australia, the
screening threshold will increase from A$231 million to A$1 billion.

For Australian firms investing here, the threshold will increase from NZ$100 million to NZ$477
million. These thresholds will be updated annually based on changes in GDP. This latest move builds
on existing goods and services agreements and aligns CER with other modern, high-quality free trade
agreements. I will now pass over to Julia to say a few words and then we'll sign the investment
protocol.

PM: Thank you. Thank you very much to Prime Minister Key. Can I start by saying, as I said to the
Parliament, Australia and New Zealand are family, the bonds between us are very, very strong indeed
and so on this occasion where New Zealand is grieving the loss of a brave man in Afghanistan, I do
want to offer my condolences and the condolences of the Australian people to the New Zealand people
and particularly to the family and friends of Private Mila.

We know what it's like to grieve the loss of brave men in Afghanistan and we will grieve this loss
as one of our own. I do, too, want to reaffirm how honoured I felt to have the opportunity to
address the members of the New Zealand Parliament and to be the first head of a foreign government
to have that privilege. In honouring me, the New Zealand members of Parliament have honoured
Australia and I thank them for that.

In that address, I talked about the bonds between our two countries. They've been forged throughout
the Anzac tradition, they've also been forged by working together to build our economies and our
prosperity. The trade liberalisation between us is gold standard, it is envied around the world and
today we are going to take another big step forward in that integration of our economies, that
working together, that growing together and strengthening together through signing this investment
protocol, enabling freer and freer investments in each other's countries will simply mean more
prosperity and more jobs for both the people of New Zealand and the people of Australia, so I'm
very pleased to be here and very pleased to have the opportunity to formally sign that investment
protocol.

[SIGNING OF PROTOCOL]

PM KEY: Okay, so we'll take some questions, maybe it's polite if we take one from the Australian
media to start, as you are our guests.

JOURNALIST: Prime Ministers, you're saying that today is a step forward towards a single economic
market - where will that journey end?

PM: Well, every journey requires the taking of steps forward and what we've done today is another
important part of what's been a journey of almost 30 years in building closer and closer economic
relations between our two countries. This is a very significant piece of the jigsaw that's been
missing and that is to enable there to be freer investment exchanges between our two countries.

We both recognise we've got more work to do, and that work is continuing, some of it happens well
beyond the gaze of the public spotlight because it's not necessarily viewed as intrinsically very
interesting for media reporting and I understand that but it's the technical work that can make a
lot of difference as we harmonise regulations in areas like patent protection, so that rather than
people who seek that kind of protection for things that they've invented needing to go through two
sets of procedures and two sets of processes, there is a seamless way of doing it. So that work on
greater and greater regulatory harmonisation is continuing.

PM KEY: Well, I suspect the fact that we are separate countries with separate Parliaments means
that there will always be work in progress, as new technological advances come along, but I think
what you can see is a real determination to try and integrate each other's economy where there are
net benefits for both countries.

What we've seen is that if you look at CER from a trade perspective and as we move into the
investment protocols, substantial gains have been made over and above what we would expect the
status quo to be without it. So, look, we're moving into areas that are increasingly sometimes more
tricky or complex and as the Prime Minister said, not all of them are going to be headline news,
but, you know, from the conversations that we would have with Australian businesses and New Zealand
businesses, they welcome the moves that we're making and if anything, they continue to make the
point that the faster we can move, the better.

JOURNALIST: Prime Ministers, (inaudible) can you honestly say this increasing human sacrifice on
the part of both countries is actually worth (inaudible)

PM KEY: Well let me start by saying our sympathies go to the family of Private Mila, it's a tragic
day for his family and for New Zealand. I think it's important secondly to recognise that this was
as a result of an accident, and motor vehicle accidents do happen. Tragically I think New Zealand
lost around about three people in East Timor in similar conditions.

Nevertheless, the point that you make is a valid one, that it is a dangerous and difficult
environment in Afghanistan. I believe that New Zealand should remain absolutely committed to seeing
the job done, because I think that to not do that will allow insurgent forces, the Taliban,
al-Qaeda and the likes to regroup in Afghanistan and the implication for Australian and New Zealand
citizens is significant and as we know, New Zealanders are not immune from the activities of global
terrorism, many of which were born out of training camps and environments like Afghanistan.

So, in my view, as tragic as it deeply is that we've lost this young man, I don't think we should
change course as a result of his death and, in fact, I think we honour is death that ensuring that
we do everything we can and in the case of Bamiyan to make sure that we can hand over that province
to Afghan control but in a way where all of the good works that we've done in the last decade can
bear fruit in years to come.

JOURNALIST: Do you think we're actually winning this war (inaudible)

PM: I'm very happy to answer that, and certainly progress is being made. Clearly it's not easy and
Australia very much endorses the strategy now being pursued in Afghanistan under the leadership of
General Petraeus and progress is being made through that strategy.

I had the opportunity a little bit earlier today to talk to the Prime Minister about some of my
insights into the work in Afghanistan. One of those insights comes through the eyes of our most
recent VC winner, Ben Robert-Smith, who has been to Afghanistan on a number of occasions and can
talk with great force and conviction about the changes he's seen and the progress he has seen in
the security environment since he was first deployed there.

So, yes, we're making progress. I've also been very frank with the Australian people, we expect
there to be some hard days ahead. Today is a hard day for New Zealand and I expect there to be hard
days ahead. But, we are making progress and we need to see the mission through.

We went to Afghanistan to deny terrorists, people who would seek to take the lives of Australians
and New Zealanders, to deny them the opportunity to use Afghanistan as a training base. In order to
do that, we've got to complete the mission and enable the Afghan people to provide their own
security and to deny terrorists the benefit of those training possibilities and so we will continue
the mission. My determination on that is very clear, until we can transition that security
leadership in a way that is sustainable to Afghan forces.

JOURNALIST: Prime Minister Gillard, on the issue of the economy, today your (inaudible) has
indicated that there are 60 billion dollar (inaudible) last week you were talking about using the
mining tax to (inaudible) superannuation and various other economic initiatives. Are you still
confident you can do that and is this an indication that you gave away too much on the tax
negotiations?

PM: Dennis, we always understood that, with a mining tax that was going to tax on the basis of
profits, that there would be years that there were high tax collections, but there would be years
when there were lower tax collections.

To give you a simple example, flowing from the disasters that we've seen in Queensland, a number of
those mines have not been able to operate as usual. That will impact on their profitability this
year. The kind of tax the Mining Resource Rent Tax is, is it's calibrated on profitability and I
think that's appropriate.

Understanding the design of the tax we made the expenditure decisions which use that revenue to
make a difference to company tax rates, to our pool of national savings, through superannuation and
also to support, tax cuts for small businesses and infrastructure. We've obviously worked so that
that is sustainable on the Government's budget. We need to remember that this is about getting a
fair share for Australians of our mineral wealth, but also about balancing our economic growth. We
do want to encourage balanced growth which is why cutting the company tax rate as well as giving
tax breaks to small businesses is appropriate.

JOURNALIST: Prime Minister Gillard, the Greens have said that this is further evidence as to why
you should go back to the original proposal. You're going to need them to get it through Parliament
- are you willing to move at all on the design of the MRRT?

PM: No, I'm not. I've been consistent on this proposition and I've been asked on more than one
occasion. So I will repeat what I've said every time I've been asked. We will deliver, through the
Australian Parliament, the tax as I agreed it with Australia's biggest mining companies. We will
not be compromising that agreement in order to secure the legislation through.

JOURNALIST: Just on the apple issue - do you regret it taking so long to be resolved?

PM: In Australian sporting matches, sometimes, ah, people might give a little bit of advice to the
umpire along the way, but we are a people with a tradition that says you abide by the umpire's
decision. We've had the umpire's decision. You would expect that in a rules based trading system,
which is what our world trade system is through the WTO, that as a nation we would use those rules
and use appeal rights as they were made available. But the umpire has now spoken, we will abide by
the decision. We believe in free trade, we believe in free trade, ah, in, in, its benefits and in
its obligations and accepting the umpire's decisions is one of the obligations we expect.

JOURNALIST: So you can guarantee that next apple growing season we'll see New Zealand apples
exported with open arms into Australia.

PM: I can't guarantee what conduct will be engaged in by people who grow apples in New Zealand, but
what I can say, for the Australian Government, is we will abide by the umpire's decision at the
WTO.

JOURNALIST: Prime Minister (inaudible) China central television news (inaudible) and the news said
that it could be bad for the relationship between China and New Zealand because under your defence
policy. How do you respond?

PM: Look, I would say simply that both Prime Minister Key and I have been at a number of
international meetings together where China has been represented. Our engagement with China is a
constructive one and we will continue that constructive engagement. Obviously with the growth in
the Chinese economy, our economic relationship with China has gone from strength to strength ever
since the days of the Whitlam Government, our political relationship and strategic relationship
with China has been one that's based on mutual respect and on constructive engagement and that's
what people should continue to see.

JOURNALIST: Prime Minister Key, do you expect New Zealand businesses to gain much at all out of the
investment protocol you've just signed, I mean allowing a billion dollar threshold without
(inaudible) because what we've seen recently is New Zealand business simply don't have cash to get
together on our own investments, let alone across the Tasman (inaudible).

PM KEY: Well I do expect to see New Zealand businesses gaining an advantage through the investment
protocol that's been signed. For a start off, we need to acknowledge that New Zealanders have $36
billion dollars invested in Australia.

We have some very large funds that, invest, out of New Zealand. The Super Fund, with tens of
billions of dollars now invested so that's a significant force. We obviously have very large
private companies in New Zealand in the form of someone like Graeme Hart, so there will be New
Zealand companies, and you can see that with Fletcher Challenge's recent attempt to buy Crane in
Australia, that you're seeing bigger and bigger deals being undertaken.

So look, obviously it's a high threshold, but that gives great confidence to New Zealand investors
that if they want to buy a slice of an Australian company, then they are free to do that without
reference to the authorities if it's under one billion Australian dollars.

JOURNALIST: Prime Minister, what about the other way, what about Australian investment in New
Zealand? Is there any concern domestically that Australia will be able to buy up too many New
Zealand assets and businesses, is this relationship, can it be too close?

PM KEY: Well firstly, we've seen significant investment from Australian companies in New Zealand,
they have been the major investor in our economy and I believe our economy has been stronger and
has delivered more jobs as a result of that investment and you can see that domination in the
banking system and other sectors of our economy.

I think the second thing that's worth remembering is that this means that from an Australian
company's point of view, under $477 million they don't have to have referenced the authorities, but
even if they were referenced the authorities it doesn't mean that that deal would be turned down, I
mean, very often it is the case that those deals will go through.

So look, I think from an Australia New Zealand perspective we are stronger because of the ability
to invest in each other's economy and from time to time we will see that investment, foreign
investment always has it detractors. We need to acknowledge that, but I come from the camp in
believing that it's enhanced New Zealand's economic growth and therefore the wellbeing of our
citizens by being supportive and that's really what the protocol is attempting to do.

JOURNALIST: Prime Minister Gillard, on your health reforms, why did you go ahead spending millions
of dollars advertising Kevin Rudd's now obsolete reforms before the deal was done and are you
planning another advertising campaign?

PM GILLARD: Look, the health reform arrangements I struck at COAG on Sunday are right for the
country, they're a better deal for patients, they're right for the country's future. We're going to
move now to working with state and territory colleagues to enter the in detailed agreement which
builds on the heads of agreement we entered into on Sunday.

You should expect me to be talking to the Australian people about how these health reform changes
will work for them, including the creation of Medicare locals, local hospital networks, what the
transparency measures will bring, what an efficient price means. So I will continue to explain that
to the Australian people. I don't have any plans for an advertising campaign, but I do believe it's
important that Australian's understand how these reforms will benefit them, what difference it will
make to our health system, and the fact that it's a truly national deal, whether you're in Perth or
in Brisbane, that this is a health arrangement that is going to impact on you and have benefits for
you.

JOURNALIST: Why did you go with the advertisement before the deal was done?

PM GILLARD: You're talking about the advertising campaign in the past, well, once then Prime
Minister Kevin Rudd had reached agreement with all of his State and Territory colleagues except for
Western Australia, the Government set about implementing that agreement. I formed the view, as I've
been very clear about earlier this year, that we were not going to reach agreement with Western
Australia and that I wanted to get sustainable, long term health reform that required us to move
away from the financing model and to talk about health, that's exactly what we did and we've got a
national agreement as a result of it.

JOURNALIST: On the MRRT again, how do you justify the Government taking a hand in hand to the
Australian people for a $1.8 billion flood levy when you're essentially giving away 60 billion
dollars to big miners which we see in the case of BHP and they're making enormous profits?

PM: Well that's a completely apples to oranges comparison. The revenue coming from the MRRT is
revenue that will flow over time, the flood damage and cyclone damage we need to rebuild from is a
pressing matter that needs to be financed now.

For example, we are making a pre-payment of $2 billion dollars to the Queensland Government. We're
making a prepayment of half a billion dollars to the Victorian Government. We are dealing with a
damages bill where people want to see us rebuild as quickly and efficiently as possible, we're
looking at a damages bill pressing now of $5.6 billion, that's why, as one part of financing that
$5.6 billion, it is the right decision to have a fair, temporary, targeted levy which will generate
revenue in the next financial year starting the first of July, to immediately get to the task of
rebuilding.

Can I just say on the issue of natural disasters and the impacts in Australia after the summer of
incredible hardship we've already had, I am monitoring events with the weather bureau's warning
about a cyclone for Darwin in the top end of the Northern Territory. As is normal, we will work
with Chief Minister Paul Henderson and his Government and the emergency workers there to assist
them.

Emergency warnings have been issued; Darwin has already experienced very strong overnight winds
occasioning damages for some homes and power outages for quite a number of homes - 8,000 lost power
last night. So people are being asked to make appropriate preparations on the basis that they could
face a cyclone and I'll continue to get advised of what is happening with the weather and whether
this weather is intensifying into a cyclone.

The summer of hardship for Australia is not over yet, and my thoughts are with the people of Darwin
and the top end as they prepare for this and are already experiencing strong winds and some damage
and certainly as a Federal Government we will be working with them every step of the way.

JOURNALIST: Prime Minister Gillard (inaudible) luxury BMWs for your VIP visit?

PM KEY: Yeah, so, can I just give you some details on that - back in 2007 the then Labour
Government agreed a transaction which had two legs to it - it was a six year deal with a three year
roll over.

That decision to invoke the right to roll those cars over and bring new cars in was made by the
Department of Internal Affairs without reference either to their Minister or to me. So the first
that I was aware of that was last week when one of the crown car drivers in Auckland told me that
was the case.

So, it's not a situation where we as the Government have decided to do that, the Department has
made that decision. They believed that they didn't need reference to either their Minister or to
me, because they had the authority signed off by the previous Government. From that regard, would
it have been the decision we would have made? Well, it's a little too late to speculate on that now
because unfortunately those cars are going to turn up in New Zealand and economically on the brief
information I have it would be more costly to send them back than to carry on with the contract as
it was agreed by the Department of Internal Affairs.

JOURNALIST: Prime Minister Gillard, have you and Mr Key discussed plans for some sort of regional
trans-Tasman processing centre for asylum centres, and if so, how far down the line might that be
and (inaudible) set up?

PM: We have had a discussion about Australia's proposal for a regional protection framework and
regional processing centre. Australia will continue to pursue that dialogue, including through the
Bali process and bilaterally with our neighbours, including New Zealand. So yes, we have had some
discussions of that matter today.

JOURNALIST: Have you talked about possible locations of that or is it (inaudible)

PM: The Australian Government is in dialogue with the Government of East Timor as a location for
the regional processing centre, so I did have the opportunity to update Prime Minister Key this
morning on those discussions.

JOURNALIST: What's your position on that Mr Key (inaudible)

PM KEY: From our perspective, we certainly had that discussion this morning and as I indicated to
the Prime Minister, New Zealand is willing to continue to engage in that dialogue, we said this is
a regional issue, we're not quite sure how things will play out in the end but it's our view that
New Zealand is not immune from the issue of people smuggling, and on that basis a more advanced
regional solution that's part of the Bali agreement could we be useful and we're quite happy to
continue to have those discussions.

JOURNALIST: And on climate change, just a quick word, discussions on climate change?

PM KEY: Well I think that we've had a healthy discussion in that area, again, look, if the
challenge of climate change is to be resolved it needs to be tackled by every country. I think we
all may have a different approach in how we do that.

Putting a price on carbon, maybe changes in regulation or a combination will be invoked, I think,
by lots of countries around the world. From New Zealand's point of view, moves that are made by
Australia that are similar to New Zealand's are obviously welcomed because of the trans-Tasman
nature of the relationship but in the end it's for the Australian Government to determine what the
right policies are for their people.

JOURNALIST: Mr Key, is East Timor an appropriate destination for a regional processing centre?

PM KEY: I'm not in a position to assess that, but, look if that's the area where the Prime Minister
is having discussions than we're more than happy to continue in that dialogue with her.

JOURNALIST: One final one on asylum seekers, Prime Minister, is it fair to send the families of the
grieving asylum seekers from Christmas Island straight to Sydney for the funeral and then straight
back to Christmas Island?

PM: I know this was the subject of debate in Australia yesterday and I made my position clear that
it was appropriate to enable people to come and say a formal and tragic goodbye to their loved
ones, that that was the right thing to do.

We are a nation that operates a mandatory detention policy and that means of course that people in
detention whose claims are being processed need to be housed in appropriate places and Christmas
Island is one of the most major facilities that we do that in.