Hon DAVID CUNLIFFE (Minister of Immigration)
on behalf of the Minister of Finance: I move,
That the Reserve Bank of New Zealand Amendment Bill be now read a second time. This is an omnibus bill that will amend two Acts, the Reserve Bank of New Zealand Act of 1989 and the Racing Act of 2003. The amendments to the Reserve Bank of New Zealand Act are a significant step in the trans-Tasman single economic market agenda. They will promote trans-Tasman cooperation on banking regulation, which is important given that Australia and New Zealand have banking markets that are among the most highly integrated in the world.
The bill implements the recommendations of the Trans-Tasman Council on Banking Supervision, which was established in 2005. The Governments of both countries agreed to make the legislative changes that are necessary in order to implement the council’s recommendations. I am pleased to report that since this bill was introduced in June, reciprocal legislation of almost identical effect has been introduced to the Senate in Australia. The bill, and its Australian equivalent, should reduce the compliance costs of banks with trans-Tasman operations and assist in the maintenance of financial stability in both countries. The bill will require the Reserve Bank, in its prudential supervision role, to support prescribed Australian financial authorities such as the Australian Prudential Regulation Authority in the performance of its statutory responsibilities for financial stability and prudential regulation in Australia.
The Finance and Expenditure Committee has considered the bill and recommended two amendments in order to better align the bill with the Australian equivalent legislation. The first amendment modifies the duty upon the Reserve Bank to support its Australian counterparts by aligning the drafting with the equivalent Australian legislation. “Support” is intended to have its ordinary meaning and in practice will require the Reserve Bank and the Australian Prudential Regulation Authority to support each other in ways such as providing and sharing information, cooperation on policy development, and coordination on matters of common interest, particularly crisis preparation and management. The second amendment adds a new clause that will provide that no action taken by the statutory manager will be invalid by reason of the failure of that statutory manager to comply with its duty to consult the Reserve Bank where it has undertaken an action that is likely to have detrimental effect on financial stability in Australia. The Australian legislation has a similar clause.
Part 2 of the bill amends the Racing Act by delegating the responsibility for rounding dividends to the New Zealand Racing Board. The board will be required to make betting rules that specify the denomination to which dividends must be rounded and paid out. The committee has not recommended any changes to the amendments proposed to that Act.
It remains for me to thank the members of the Finance and Expenditure Committee for their hard work in considering this bill. I commend the bill to the House.
JOHN KEY (National—Helensville)
: I rise on behalf of the National Party to support the Reserve Bank of New Zealand Amendment Bill. I will start by saying that there is an interesting dynamic to this bill, which is that the bill does not go as far as the Australian Treasurer, Peter Costello, wanted it to go. He wanted to have a single banking regulator, in the form of a kind of Australasian version of the Australian Prudential Regulation Authority, that would have overseen the banking activities of Australia and New Zealand. One can understand why Peter Costello would want that, because 85 percent of the banks that operate here in New Zealand have an Australian parent. They would have enjoyed that situation, and it was an issue to be considered.
I say there is an interesting element to that because Michael Cullen believed in that model. He privately supported a single banking regulator in the form of a New Zealand and Australian prudential regulatory authority, and he was very happy to make those comments known to those who should know them. An interesting person to whom he made those comments known was none other than the Australian Treasurer, Peter Costello himself. So Peter Costello, for quite a period of time, believed that his New Zealand counterpart, Michael Cullen, was indeed an honourable member and would honour what he was telling him in the private little soirées they had as they met on each side of the Tasman, as they do on a yearly basis.
Interestingly enough though, Michael Cullen, who has proven that he has been unable to get support for much of what he does, including the carbon tax, his own agenda of not wanting to have tax cuts—I could continue to list them, but it would take up the entire 10 minutes I am allocated for my speech—could not get support in New Zealand for a single banking regulator. FinSec made some pretty strong claims, as did a number of other people. So he had an interesting dilemma, if one likes. On the one hand, over a nice bottle of Australian Penfolds red, he promised Peter Costello—
Dr the Hon Lockwood Smith: Was it Penfolds Grange?
JOHN KEY: I do not know whether it was; I am not sure whether Peter is quite up to Penfolds Grange. But, anyway, over a nice bottle of Australian Penfolds red by the fireside, Michael Cullen promised Peter Costello that he need not worry, because it was a done deal that there would be a single banking regulator in New Zealand.
Back in New Zealand, Michael Cullen could not actually get that over the line, not the least reason for that being that the Governor of the Reserve Bank, Alan Bollard, saw a part of his fiefdom moving away. That case was put to Michael Cullen in New Zealand in no uncertain terms. He realised he was out of step with what he could pass in New Zealand, and at some point he had to deliver the bad news to Peter Costello that his word was not worth very much and that, by the way, they needed to back away from that position and get something else.
Why is all that interesting? It is not particularly interesting in terms of talking to the character of Michael Cullen, because he does that all the time—there is nothing new about Michael Cullen doing that. He is the same guy who, before the election, was up on the ninth floor telling Helen Clark and Heather Simpson that Labour was so far over the line on using taxpayers’ funds for paying for the pledge card that it was not funny. But he said they should not worry about that, and that because Labour was kind of desperate to win the election, it should just go ahead with that spending anyway. I bet Helen Clark did not put quite that spin on that situation on Tuesday, when Labour was having its 5 percent giant whip-round. All of that is an aside. What is interesting about this is—
Eric Roy: A good point, though.
JOHN KEY: It is a good point, and it is all fair, but a lot of it is an aside. The serious part of it is that Peter Costello thought he could trust Michael Cullen, and found he could not. If Peter had rung me, I would have put him straight at the outset and saved him from all the embarrassment. But the reaction—
Dianne Yates: Did he ring you?
JOHN KEY: He does ring, actually.
The reaction from Peter Costello was this. New Zealand wanted the streaming of imputation credits with Australia. We wanted that because without it, more New Zealand companies will head offshore. Interestingly enough, for those who follow the stock market—and I am sure all members of the Finance and Expenditure Committee do—on Friday the Fletcher Building share price went up by about 25 cents or 30 cents very late in the day. It looked as though—and this could still well be the case—there was a lot of buying in Fletcher Building on the basis of yet another rumour that Fletcher Building was moving to Australia. So here is another company that is potentially moving, on the back of the fact that the streaming of imputation credits causes its Australian shareholders a problem. Here was the deal. Over a nice bottle of red wine, in Australia, Michael Cullen told his old mate Peter Costello that he would deliver for him a single banking regulator, in return for Peter Costello delivering for him the streaming of imputation credits. Peter Costello said there would be no problem in doing so, and that the way things were done over there was on the basis of a handshake, so it was a done deal. Michael Cullen came home and could not deliver on his side of the bargain. So there is no surprise that the streaming of imputation credits is off the agenda with Peter Costello and Michael Cullen.
The Minister and my colleague the member from New Lynn, which is very close to my electorate in Helensville—
Hon David Cunliffe: You fly over me on the way to work.
JOHN KEY: No, I do not fly there. Mr Cunliffe has made it clear that this Government is committed to a single economic market. That is interesting, because Australia and New Zealand had a leadership forum, but Michael Cullen was too busy having his hair and nails done in Napier to pop up to Auckland to that meeting. He did not go, and why did he not go? It was because Peter Costello did not go. Why did Peter Costello not go? It was because they both care very much about a single economic market with Australia, except that they do not care enough to have a single banking regulator and they do not care enough to have the streaming of imputation credits. Actually, they do not even like each other any more, because Michael Cullen has done the dirty on Peter Costello.
So there members have it. That is the interesting little tale about the Reserve Bank of New Zealand Act. So if any New Zealand company is wondering why it is moving to Australia, I say it is because it has to, because otherwise it cannot get the streaming of imputation credits. It has Michael Cullen—that winning Minister of Finance, as he likes to think of himself; the man who could not keep his word with Peter Costello—to thank and to blame for that. That is a very interesting situation and, I think, a very interesting addition to this debate.
I move on to the second, more interesting, and important bit of this debate. Why do we have regulatory oversight of our banks? I ask people who are interested in those things to go back to 1997 and the Asian debt crisis. That was caused by a lot of countries in Asia—the Malaysias, Thailands, and Indonesias of the world. They had a great issue because their banking systems were fundamentally flawed, there were no good oversights, their banks were fundamentally insolvent, and that caused a collapse. It went on, and I saw exactly the same scenario in Russia in the Russian debt crisis. For those who have nothing to read over Christmas, I recommend Bob Rubin’s
In an Uncertain World—a very interesting read on those kinds of matter. Amazon knows about it. What is interesting about that scenario is that he talks about the rating of countries. A country is rated, in part, on the health of its financial system. That is really important. In the financial system in New Zealand, 70 percent of the assets are controlled by the banks and regulated by the Reserve Bank of New Zealand, and 85 percent of the banks are owned by Australia. There is a huge interdependent relationship between the two.
This week Michael Cullen met with Moody’s Investors Service. There are three big rating agencies in the world: Standard and Poor’s, Moody’s, and Fitch Ratings. A week earlier, Michael Cullen had been on
Close Up with me, telling the good people of New Zealand that if we have a tax cut, we will be downgraded. Interestingly enough, we are running a surplus in New Zealand of 7.3 percent of GDP. ANZ also thinks New Zealand could be downgraded if we do not run a surplus. The bank thinks a surplus of less than 1 percent could be an issue, but that is quite a long way away from 7.3 percent. What do Moody’s think about whether New Zealand could be downgraded on a tax cut? The company says there is not a dog’s show that New Zealand will be downgraded. In fact, New Zealand has probably more chance, in the long term, of being downgraded if it does not have a competitive tax system. As we saw from the OECD data that came out last week, we are becoming less competitive under the Labour Government.
Interestingly enough, Standard and Poor’s made some interesting comments. Kyran Curry, the analyst for New Zealand, made a few comments that could be interpreted—
Hon David Cunliffe: I raise a point of order, Madam Speaker. Amusing though the member can sometimes be, this diatribe has absolutely nothing whatsoever to do with prudential supervision by the Reserve Bank. That is the subject of this debate.
The ASSISTANT SPEAKER (Ann Hartley): I think that the member has stuck to the tenor of the bill.
JOHN KEY: Speaking to the point of order, I suggest that Mr Cunliffe, when he goes back to his office, looks at the impact of the supervisory oversight of banks on the rating of a country’s financial system, and at how important that is.
The ASSISTANT SPEAKER (Ann Hartley): That is not a point of order—
JOHN KEY: I think that he will then realise how on message I actually am. Interestingly enough, Kyran Curry has made a few comments that were interpreted in the New Zealand press as meaning that there could be a downgrading of New Zealand’s rating if there were a tax cut. Our office rang Kyran Curry to ask him whether that was accurate, and I can assure the people of New Zealand that those comments are not accurate. New Zealand will not be downgraded if there is a tax cut—and there certainly will be a tax cut under a National Government.
R DOUG WOOLERTON (NZ First)
: I see that I was nearly beaten to the call by the chairman of the Finance and Expenditure Committee. I hope that he gets the call after me, because we recognise these little chats from John Key. They are interesting, and what makes them signature tunes, if you like, is that they are exclusively about finance; the fact that people are involved never actually occurs to him.
New Zealand First is supporting both parts of this Reserve Bank of New Zealand Amendment Bill. We think they are necessary and should be passed, and I do not think that anybody thinks any differently. When Mr Key talks about his nice little speculation of what might or might not have happened between Peter Costello and Michael Cullen, and of whatever sort of wine they were drinking, it makes a good little story, but it is sort of like watching
on TV. It is more infotainment than anything else, but very good infotainment, and it connects up a whole lot of speculation.
I think that this bill is important, and whatever it is that has brought Michael Cullen to the realisation—whether or not he was ever of any other view is beside the point—that we in New Zealand would like some control over our finance industry, our banks, exchange rate, and those sorts of things, I think is to be welcomed. We in New Zealand First do not, and are certainly not ready to, accept that New Zealand, either partially or totally, will be run by Australia. We certainly do not accept that our financial markets and our banks should be run from there. It is bad enough that our banks are being bought by Australians or being taken over by Australians—mainly through compulsory superannuation funds, I might say—but Dr Cullen would certainly not be popular if he were to subsume our finance industry into that of the Australians. But we are not doing that. We are lining up with Australia; that is true. We are lining up taxation and we are lining up a lot of things. That is a very different thing from being told what to do and having decisions made in Canberra rather than Wellington. We will certainly oppose any moves of that sort.
Part 2 of the bill—which will become another bill, I understand, if Dr Cullen’s Supplementary Order Paper comes into play—is the business of getting rid of the 5c coin. The Reserve Bank is calling in 5c coins, and the bill provides for the Racing Board to have the authority to set its payouts and round down its dividends, and to make those sorts of changes come under the purview of the board rather than of Parliament, in future years. We also agree with that, because we think that it would be nonsense for the board to keep coming back to Parliament to change things like that. It is far better to give that body itself the power to do that, and we are sure that the board will do it responsibly and properly, as it should. If the board does not, of course, then it will be up to Parliament to make sure that it does.
So New Zealand First supports both parts of this bill. We will indeed support both bills when the bill is split.
SHANE JONES (Labour)
: Kia ora, Madam Assistant Speaker. Greetings to the House—
Lindsay Tisch: I raise a point of order, Madam Speaker. There is a format to follow when we are looking at—
Madam SPEAKER: Yes—we just got it out of order with New Zealand First taking a call before the Labour speaker. Labour was next on the list.
Lindsay Tisch: Well, fourth on the list for speakers is National. If New Zealand First took Labour’s spot, then it does not mean that Labour should come in ahead of National. The No. 4 call is a National call, and Dr Lockwood Smith is ready to take that call.
Tim Barnett: Madam Assistant Speaker, my understanding was that Labour also went for that call, and New Zealand First got the call. So now we go back to Labour and then to National.
The ASSISTANT SPEAKER (Ann Hartley): No, I have called Shane Jones.
Dr the Hon Lockwood Smith: I raise a point of order, Madam Speaker. Madam Assistant Speaker, the order in which you take speakers in this Parliament is actually quite important. You chose to take New Zealand First second; that does not mean that you then call Labour. I went for the call immediately and you should have called me. It is important, because members have engagements they have to attend. If you get the call order wrong, you cause considerable difficulty for members. I insist that you give the call, correctly, to National.
The ASSISTANT SPEAKER (Ann Hartley): The position is that the order is a guide only, and usually we are able to stick to it. It is a guide only and quite often it gets out of order. That is not uncommon, and we try to get it back into order as much as we can for the next speaker. I have given the call; there is nothing that can be done about that unless the House, by leave, wants to change that.
Lindsay Tisch: I raise a point of order, Madam Speaker. The order of calls is determined at the start of the parliamentary session. This is the 48th Parliament, and we had earlier determined what the calls would be on the readings. Although calls can be transferred and are tradable between parties, when we look at the schedule in front of us we see that National gets the fourth call. In this case, New Zealand First took the call—you gave the call to one of its members before giving the next call to a Labour member—but that was not because we were not ready to take the call. Dr Smith was on his feet seeking a call when the fourth call came along, and it was our entitlement to take that call. Otherwise, he would have jumped up immediately following the previous speaker, which was our own speaker John Key, and gone for the call then. But we know that there is an order—there is some decorum here—and that is what we have been following. Now we find that you are giving a call out of sequence to another party. Madam Assistant Speaker, you have made a ruling; we do not agree with it, but I understand your ruling. I seek leave for Dr Lockwood Smith to be able to take the fourth call, as determined by the Business Committee.
Hone Harawira: Point of order, Madam Speaker—
The ASSISTANT SPEAKER (Ann Hartley): I am sorry; leave has been sought and it must now be put, then I can deal with your point of order. Leave is sought for that purpose. Is there any objection? There is objection.
Hone Harawira: I raise a point of order, Madam Speaker. I can suggest a way forward from this situation. To deal with the conflict between the speaker from Labour and the speaker from National, you can simply follow the list. The last speaker was from New Zealand First, and the Greens are not taking a call, so that would make it my call.
The ASSISTANT SPEAKER (Ann Hartley): Well, it was a good try. However, the call has been given.
SHANE JONES: Kia ora anō. I speak as the chairperson of the Finance and Expenditure Committee, and I am sure that the deputy chairperson, Dr Lockwood Smith, will have very interesting things to say. At a time prior to the torrid bout of name-calling, etc., we recently endured, he might have got to speak before me. However, that time is past.
Firstly, I will obviously speak in support of the Reserve Bank of New Zealand Amendment Bill. As we heard during the course of our select committee proceedings, we should not overlook the importance this bill represents in relation to the infrastructure between our economy, our apparatus, and that of the Australians. Naturally, there was fear that the quality of our governance and our sovereignty might be compromised if our Reserve Bank could not continue to exercise a distinctive and independent level of prudential control and oversight in respect of banking infrastructure. So it was particularly pleasing to receive information and submissions in relation to the bill that that was not to be the case. Who knows what will happen as globalisation gathers pace, and as we see the migration of investment further over to Australia. But I think that that trend can be overstated, because there are always new shoots and new leaves growing on the tree of capitalism, despite the attempts of John Key to deprecate, diminish, and doubt the quality of our Kiwi entrepreneurialism to replace the companies that are predated upon.
Why are those companies being predated upon? Because of the surplus pool of funds they have as a consequence of the savings industry, they have a bit of a head start on us. Of course, the Government has a plan for that, and we will soon see a surplus pool of funds arise as a consequence of the KiwiSaver Bill—but I will say more on that at another time.
In relation to the proposed amendments, I say that, yes, it is important that our regulators take account of their Aussie counterparts. I have to say in this House that we were assured the Australian legislature would not be indulging in its most famous sport, which is “Aussie Rules”, and that, in actual fact, we would see a statute come into being in the fullness of time that would be a mirror image—or something remarkably close—to what we are working on today. Of course, it is a rather dim and troublesome thought to even utter the words “statutory manager”, but coordination was received there.
The final thing I have to say, in relation to the Racing Bill, is that we were reassured by officials from the racing industry about the concerns punters may have had in relation to how the rounding policy would be carried out. Firstly, those concerns would be taken account of and, secondly, the punters who participate in the racing industry would not be left in a net negative position. If the rounding policy continued and amounts came down, then the cost structure surrounding their industry would also come down, so that there would be no net negative impact. I personally, as chairperson of the committee, along with various other members, paid particular attention to those assurances, because at the end of the day the committee has some very competent people and experienced parliamentarians—although the deputy chairperson may be in a slightly sour mood—and we have to trust the integrity and the quality of the advice we get. We were given advice from the racing industry that the punters would not be negatively impacted upon as a consequence of its rounding policy, so I in particular will watch this space into the future.
I wholeheartedly support the bill. The committee worked quite well in a collaborative sense—no doubt that was due, in some part, to the quality of the chairperson. Kia ora tātou.
Dr the Hon LOCKWOOD SMITH (National—Rodney)
: In speaking to the second reading of the Reserve Bank of New Zealand Amendment Bill, I acknowledge and thank the chairperson of the Finance and Expenditure Committee, Shane Jones, who has just spoken. He was prepared to allow me to take the call ahead of him. I appreciate that, because my reason for seeking the call was that I had organised—on the basis of the schedule this afternoon—an interview in a few minutes’ time. I note New Zealand First members were so mean-spirited that they would not allow that, but that is their decision. They have had their snouts in the trough to the tune of $157,000 of taxpayers’ money, which they have stolen. New Zealand First is the only party in this House that has refused to promise to pay back the money.
Ron Mark: I raise a point of order, Madam Speaker. I take absolute offence at that member in particular—the “Calendar Boy”—suggesting I am a thief. I ask that he retract and apologise for saying that I stole money.
The ASSISTANT SPEAKER (Ann Hartley): The member has taken offence at that remark. The member will stand, withdraw, and apologise.
Dr the Hon LOCKWOOD SMITH: I withdraw and apologise. The voters of New Zealand will note that New Zealand First members have made no commitment to pay back that misappropriated money, and other members will not let them forget about it.
This bill amends two Acts. First, I will follow up some comments made by the Labour member Shane Jones in respect of the amendment to the Racing Act. Of course, it is necessary to amend the Racing Act 2003 because the Reserve Bank is withdrawing the 5c coin. Mr Jones mentioned the importance the Finance and Expenditure Committee attached to the issue of rounding down.
This is an important issue, because when the 5c coins are out of circulation, we will be looking at a situation, say, of rounding down up to 9c—for argument’s sake, it may be $1.29 being rounded down to $1.20. We can well understand that good New Zealand punters might say: “Hang on! We will miss out here.” With it being a systematic system across the board of rounding down, punters might think that a rounding down of, say, 9c would mean that they were significantly worse off as a consequence of this amendment. National members of the committee also gave considerable attention to this matter because we must always make sure that legislation such as this, which, on the face of it, seems technical, does not result in systematic damage to the interests of New Zealanders.
The New Zealand Racing Board gave evidence to the committee and it gave us an assurance. Although this legislation gives the board the power to set the rules for how it rounds matters, it will be rounding down to the nearest legal unit, once the 5c coin is withdrawn. The board assured us that it will alter the proportion of the betting revenue or, if you like, alter the margin that is retained. So the total amount paid out, after the extra rounding down, will remain the same. The committee questioned the board very closely about that and we received an absolute assurance that its margins, or proportion of revenue gathered that is retained, will be reduced to compensate for the rounding down. So punters will receive exactly the same proportion of total bets back into their hands.
This bill also deals with trans-Tasman matters. The New Zealand Racing Board pointed out that it was quite important that the method of rounding used in New Zealand be consistent with that used in Australia, because with our two economies—and, in fact, our societies—almost being one big trans-Tasman family, a lot of trans-Tasman betting goes on. If the New Zealand arrangements were significantly different from those in Australia, and if they did not match the Australian arrangements, there could be an incentive for New Zealanders to gamble offshore and to do more of their betting on races in Australia rather than on races in New Zealand. That would not be in New Zealand’s interests; it would not be in the interests of our thoroughbred industry. So it is quite important that we take the advice of the New Zealand Racing Board. As has been mentioned, this matter needs to be watched to make sure that there is a reduction in the retained margins so that payouts to New Zealand punters are maintained at their previous levels, despite the larger quantum of the rounding down.
Most of us on the select committee, when we first heard about this rounding down, said: “Hang on! Why do you not round to the nearest legal unit, rather than automatically rounding down?”. But we were satisfied that the arguments presented by the Racing Board for supporting the rounding down were sufficiently sound and robust. However, we need to make sure there is a reduction in those proportions retained so that New Zealand punters are treated fairly.
In my remaining minutes I will just follow on from the excellent and insightful comments made by my colleague John Key—the next Minister of Finance in this country—about the issue of trans-Tasman banking regulation, which is hugely important. I well remember that when I was trade Minister for New Zealand in 1999, at the time of the Asian financial crisis, I did a lot of work around Asia because New Zealand was chairing APEC—the Asia Pacific Economic Cooperation group. That group involved 45 percent of total international trade.
One of the reasons why the Asian financial crisis became so serious was the problem around the banking sector. Asia, unlike New Zealand, has many small, often private, banks, and banking regulation would not be of quite the same standard that we have here. Banks were simply not as sound as they should have been, and they went broke. That was part of the reason why the Asian financial crisis spread as widely and went as deeply as it did—and it is for that reason that banking regulation in New Zealand is so important.
Many people criticise the fact that most of our trading banks are Australian-owned banks. Some people lament that fact and say how terrible it is that we do not have our own banks operating in New Zealand. I do not happen to share that view. I think the important thing for an economy like New Zealand’s is how sound and efficient the banking sector is. It is less important who owns it. What is important for the confidence of the New Zealand economy is how well regulated it is, how sound it is, and how efficient it is. I think New Zealand is reasonably well served with a banking system that is sound and well regulated.
What is fascinating—as my colleague John Key said—is that there is an issue, though, around this loss of New Zealand companies to Australia. That issue will become worse as New Zealand’s Labour Government presses ahead with its proposed changes to our foreign tax regime. As the Government presses ahead with its concept to introduce a 5 percent fair dividend rate on the ownership of foreign shares in New Zealand, the Finance and Expenditure Committee has been warned that doing that will add to the problem of New Zealand businesses shifting to Australia.
That is why the issue raised by my good colleague John Key—the issue of streaming of imputation credits or full franking of credits between Australia and New Zealand—is so important. It is very interesting that Dr Cullen failed to achieve that for New Zealand, because the select committee has heard in recent weeks how hugely important that is for New Zealand investors. The benefit of having a single, trans-Tasman economic market is probably the No. 1 issue for New Zealand investors. I think the fact that Dr Cullen promised Peter Costello that the single banking regulator, the Australian Prudential Regulation Authority, could deliver for New Zealand, say, a full franking of imputation credits is kind of sad. That could have delivered so much benefit for New Zealand when, in fact, having a common banking regulator with Australia would not have been a huge loss for New Zealand. I think that is a very revealing aspect.
Despite the fact Dr Cullen could not deliver that for New Zealand, National does support the legislation, as it will deliver sound regulation for our banking sector. There is no question that any move to improve the stability of the banking sector—which this bill delivers—is beneficial for New Zealand, and the bill has the support of National.
HONE HARAWIRA (Māori Party—Te Tai Tokerau)
: Kia ora, Madam Speaker. Kia ora tātou katoa. Every time an omnibus bill such as this Reserve Bank of New Zealand Amendment Bill comes before the House, the Māori Party asks about the value of jamming an apple and a pear into the mixer to get a smoothie when all we want is a decent apple and a proper pear. The completely separate issues of trans-Tasman financial sector regulation and the bizarre notion of rounding dividends in the racing sector following the recall of the 5c coin are ones that we think would be better addressed in two separate bills. But the bill remains intact, with two separate agendas.
The first issue is the alignment of the Reserve Bank of New Zealand Act 1989 with Australian legislation. My judgment about trans-Tasman cooperation is a little coloured at the moment by Australia’s victory in the netball the other night and its win in the rugby league on Saturday, but I freely admit to feeling a little chuffed about “Wee Willie Wonker” getting squared away after insulting our nation’s haka. But, getting over that, it is obvious that the amendments to the Reserve Bank of New Zealand Act, following hot on the heels of the Trans-Tasman Council on Banking Supervision 2005, are all aimed at moving us closer to a single economic market.
The proposals discussed at the council indicate very close links between the two countries’ banking systems, and throughout the select committee process we heard that the success of this bill depends on the same changes being made in Australia. So a critical issue for us today is whether we can trust the Aussies to do the right thing. This issue relies a lot on both parties having a relationship based on cooperation and mutual respect, and, given the lack of respect from Governments in this country to the Treaty of Waitangi, I have to suggest that New Zealand should not be too put out if its intentions were not treated honourably by Australia.
While I am on the Treaty and relations between Governments and indigenous peoples, I cannot help but ask whether tangata whenua in Australia are likely to benefit from the financial capacity that will result from reduced banking operating costs. In fact, how exactly will the goal of a single economic market enhance opportunities for the indigenous peoples of both lands?
This bill suggests that cooperation between banks on both sides of the Ditch will help financial stability. But a reference in the bill to outsourcing will have a big impact on us, because the bill says that outsourcing will be bad for Australia, but our own Reserve Bank’s 2004-05 report says that outsourcing is a main priority, and its 2005-06 report says that outsourcing is a key priority for financial stability. We are keen to see how this pans out, because the Māori Party wants to be able to assure bank workers in this country that no New Zealand jobs will be lost through outsourcing.
Last month the finance workers union, FinSec, called on New Zealand’s three big Aussie banks to say they will not be outsourcing New Zealand jobs to cheaper labour markets. Its call was in response to an announcement in Australia that three major Australian banks are planning to outsource jobs to India, and an estimate by the Australian Finance Sector Union that up to 50,000 of Australia’s 280,000 finance jobs could disappear if outsourcing continues. In the light of recent decisions by Air New Zealand to outsource a lot of its finance and clerical work to Fijian low-cost labour, the Māori Party is supportive of proposals to restrict outsourcing. The irony, of course, is that last month Air New Zealand announced a net profit of $96 million—hardly an argument for outsourcing work and denying jobs to Kiwis. It also bears reminding this House, just after International Anti-Poverty Day, that our very own Government has an 80 percent shareholding in Air New Zealand—a clear statement that the concerns expressed by this Government about lowly paid workers are just hot air.
While we are talking about poverty, it is also appropriate that we look at the other aspect of this bill—the change to allow the New Zealand Racing Board to continue to promote gambling after the recall of the 5c coin. One might think this is a mere technicality to tidy up payouts, but it is also an opportunity for those, like the Māori Party, who see the pain and suffering of gambling to support any opportunity to restrict this disease within our society. A paper prepared by Dr Lorna Dyall for a conference in Darwin last month showed that despite having half the average income, Māori spend more on gambling than everyone else, and that one in three who seek help with gambling problems are Māori. Her paper also noted that one in three prisoners have gambling problems, with Māori making up at least 50 percent of the prison population. That situation is even more extreme for Māori women; in fact, even the Minister of Corrections recognises the link between the increasing numbers of Māori women in jail and their increased gambling problems.
Given all of this, why would the Māori Party support a bill that just makes it easier to offer attractive betting prices that satisfy TAB customers? This, of course, is where the trap of an omnibus bill is most apparent. If this bill was just about Reserve Bank cooperation with Australian financial authorities, the Māori Party might support aspects of it. But we will not support a bill to make things easier for the TAB. Gambling outlets such as the TAB, just like junk food outlets such as Kentucky Fried Chicken, are generally concentrated in low-income, high-Polynesian areas. The Māori Party has a duty to do what we can to eliminate gambling problems from our communities. We would suggest that other parties also take this opportunity to think about other strategies for minimising gambling.
We know of the potential for companies to benefit from overseas business through this bill. We know that lower banking costs and greater financial stability may also benefit Māori land incorporations. But in recognition of International Anti-Poverty Day on 17 October, we stand alongside the cleaners, the low-paid workers, and their supporters who are rallying in Auckland and Wellington this week against poverty right here in Aotearoa. The Māori Party stands alongside them in their challenge to the Government to face up to its responsibility to tackle poverty in its own backyard. I can do no better than to repeat the question asked by Pacific Island Presbyterian Church Minister the Rev. Mua Strickson Pua: “Why should low paid workers continue to bear the burden of a low wage society?”.
Whether the issue is the Racing Board and its damnable rounding of dividends because of the withdrawal of the 5c coin, or the outsourcing of key New Zealand jobs to overseas low-wage economies, we, as a nation, face critical issues whereby far too many families feel trapped in the cycle of poverty and, quite simply, are unable to make ends meet. The Māori Party can do no more at this point than speak up for those rallying for an end to poverty and the right to a decent standard of living. Kia ora tātou katoa.
GORDON COPELAND (United Future)
: The Reserve Bank of New Zealand Amendment Bill continues actions taken over recent times by the Reserve Bank of New Zealand to increase the quality of its prudential oversight over the New Zealand banking system. It is very, very important that the bill does so. Many of these actions—and this bill is certainly in this category—actually anticipate bank failure or a bank coming under stress. These are the kinds of bills we pass while hoping desperately that the provisions of the bill will never actually have to be brought into practice.
I, for one, clearly remember the mad banking days of the late 1980s, when we saw the State Bank of Victoria going under, owing billions, and the State Bank of South Australia going under, owing $3 billion. As most people remember, the Government of the day had to come to the rescue of the Bank of New Zealand, which was also owing a very, very significant amount of money and going under. This event led directly to the sale of the Bank of New Zealand; it went from the ownership and control of New Zealanders to what is now the ownership and control mainly of people living in Australia.
Because 85 percent of our banking industry here is owned by Australian-owned companies, it is extremely important that the Reserve Bank does all it can to protect New Zealand depositors in those companies. Recently, we had before this House the Westpac New Zealand Bill, which was also part of this same task of increasing prudential supervision. The legislation now sees the Westpac bank incorporated in New Zealand as a company, whereas previously it operated merely as a branch of an Australian operation.
John Key raised some interesting issues about the interrelationship of the New Zealand and Australian economies. When it comes to the dovetailing of banking operations, I think it is extremely important to bring to the attention of the House that in the view of United Future we should also be looking at the possibility of a currency union. Clayton Cosgrove and Pansy Wong were both members of the Finance and Expenditure Committee delegation that went across to Canberra in 2004. In one of those meetings with our Australian counterparts we talked about the whole subject of a currency union. I stress that it would be a currency union of the type that would see New Zealand retaining a New Zealand dollar and Australia retaining an Australian dollar, but would in some way merge or peg the rates between the two so that we became part of one complete, integrated currency system. I say to the House today that I think it is extremely important that the Government continues to look at that option.
We have been working for a long, long time now—we had the 20th anniversary of CER during the last Parliament—to try to ensure that we have one single market between Australia and New Zealand. But, in fact, there is one great defect in that, and that is that the exchange rate between Australia and New Zealand fluctuates up and down on a daily—indeed, an hourly—basis. Whereas we could potentially, with a currency union, create a domestic market of 24 million people for New Zealand companies, we are still, in practice, restricted to a domestic market of just 4 million people. That is a tremendous problem for the future growth and prosperity of this nation.
We want to get into exports right across the board in manufacturing, information technology, and other areas—and I must say that the 4 million Kiwis who live here are well-educated and entrepreneurial, by world standards—but we have a huge problem in that our domestic market is so small. The second problem is that, among official OECD nations, New Zealand is geographically the most distant nation in the world from its major markets. So we have a double whammy. We have a very, very small domestic market of just 4 million people, and we are a long way from our markets.
The ability, therefore, for us to grow our companies outside this country and into strong export markets in manufacturing and other areas is extremely difficult. When we look at those figures, we see that it is more difficult for New Zealand to do this than it is for any other country on the face of the Earth. Therefore, to have the potential of having a domestic market of effectively 24 million people, without having the ups and downs of the exchange rate, would be most desirable. I talked to the Canterbury Manufacturers Association, for example, and heard that when the New Zealand dollar is weak against the Aussie dollar, manufacturers make money big-time. On the other hand, when the New Zealand dollar is strong against the Aussie dollar, manufacturers are on the verge of bankruptcy. No one can actually run a business, and no one can plan to grow a business, on that basis.
I want New Zealand First in particular to look very, very closely at that point, because that party is in favour of a New Zealand export growth market. I am sure Ron Mark will confirm that it is at the heart of New Zealand First’s policy to grow our export markets internationally.
Ron Mark: Yes, that’s right.
GORDON COPELAND: Yes, New Zealand First is a persistent advocate of that policy. But that position cannot be lined up with that of somehow being nervous about New Zealand losing its sovereignty if we go into some sort of monetary union with Australia. It does not work that way. New Zealand will retain its sovereignty; it will still be a separate country. There will still be an All Blacks team, there will still be a Silver Ferns team, we will still have the Kiwi rugby league team, and so on and so forth. Those things are not at issue; what is at issue is both our ability to expand and grow our economy through export-led growth and the way in which the variable exchange rate between our two nations affects that in a negative way.
So I want to advocate that at some point in time—and we would probably need to get some international experts here to look at it—we should continue to explore a currency union between our two nations based on a New Zealand dollar for New Zealanders and an Australian dollar for Australians, but with the removal of those risks and variabilities in the connections. Then, I think, we would have not only an integrated banking system but a truly integrated domestic and export economy. Thank you.
PANSY WONG (National)
: I am quite sure that the chairman of the Finance and Expenditure Committee, Shane Jones, must have breathed a sigh of relief in deliberating on the passage of the Reserve Bank of New Zealand Amendment Bill, because I note that there were only five submissions and one oral submitter, and all parties were in total agreement in supporting the passage of this bill. That must be a great relief, in contrast to another piece of legislation going through that select committee that relates to the taxation of unrealised dividends on overseas investments of New Zealand residents. That bill has attracted 3,000 submissions and it is now being opened up for a second round of limited submissions relating to the last-minute U-turn, which was made by the Minister of Finance for political reasons, examining an alternative method called a deemed dividend taxation regime. The reason I am contrasting these two pieces of legislation is to demonstrate that there might be, within New Zealand’s financial or commercial sectors, a lot more agreement and less nervousness around aligning the financial systems of New Zealand and Australia, because those people involved have by now gained enough interaction between our two countries to be confident about that. I want to encourage the Minister of Finance and the Labour Government to take that on board and reflect on it. The people of New Zealand, in effect, are a lot more confident and understand the benefits when there is alignment between Australia and New Zealand. That is actually good for them in terms of business interaction. After all, in most areas Australia is one of our biggest export markets, and it is our largest inbound tourist source.
Before I go on to define the changes to the Reserve Bank bill, I want to raise quite an interesting little issue that arose during the speech by the chairman of the Finance and Expenditure Committee, Shane Jones, when he was trying to explain something to punters. Mr Shane Jones and Labour Government members pride themselves on being ordinary New Zealanders who speak in plain English, but I was constantly bemused by Mr Jones assuring punters that because of the changes to the Racing Act and the rounding up of bets caused by the withdrawal of the 5c piece, they would not end up in a net negative position. Next time I go to a race meeting, I will just ask those punters how many of them understood what he meant by their not ending up in a net negative position. Apparently, he is going to be personally accountable to make sure that they will not end up in a net negative position.
Although National supported this legislation, particularly its intent to enable both regulators of the banking system to be operated in a seamless system, I do have feelings of nervousness. I hope that during the Committee stage the Minister will enlighten us further—firstly, on the issue of compliance costs. Certainly, most members of Parliament by now will have come to the observation that we are always assured that somehow a piece of legislation will reduce compliance costs, or will not lead to a significant increase in those costs. Well, we had a recent experience 2 weeks ago, when the legislation called the Standards and Conformance Bill was passed. There is now a joint New Zealand - Australia accreditation agency, and in future all certification bodies in New Zealand can seek accreditation only from that body.
There is nothing wrong with that if the intention is to simplify procedures and cause less confusion by having only one certifying body. The problem with that is illustrated by the very good example of an organisation called Health and Disability Auditing New Zealand Ltd. This organisation is accredited by the Director-General of Health to audit certain health service providers—that is, it is recognised by our Director-General of Health to be competent. Previously it was certified by a different accreditation agent. By a single piece of legislation removing that choice, that organisation’s fees will increase by 9.2 percent. Let us examine this. A mere $10,000 fee, for example, will suddenly become something like $92,000. No one will be convinced that overnight somehow this health and disability audit service should have to front up with $80,000, or more, in fees just to get itself re-certified. If that organisation is not competent and credible, why would the Director-General of Health, who already recognises it, authorise it to carry out audit services on various New Zealand health service providers?
During the Committee stage, I would like the chairman of the Finance and Expenditure Committee—because he seems to like taking personal responsibilities very seriously—to ensure that what his Government has promised will in fact eventuate. We all know that with regulators passing on increasing costs to organisations, eventually it is the consumers, the New Zealand public, who end up paying. That is an aspect on which we will seek further assurance and clarification during the Committee stage.
Another issue I would also like the Minister to enlighten us on during the Committee stage is why, if the Government is so confident that this legislation will enable the banking regulators to carry out their functions properly, it is necessary to include a provision in the bill stating, in section 68A(4) inserted by clause 6: “No performance of a function or duty or exercise of a power is invalid by reason only of a failure to comply with the provisions of this section.” This is a very short bill. It comprises only 6 pages, but that qualification appears twice. Even if we, the New Zealand Parliament, go to all the trouble of examining the bill and approving its passage, the bill actually states that if any bank has not carried out the performance of a function then its action cannot be ruled to be invalid just because it failed to comply. Well, if we do not actually care about whether these people comply with the provisions of this bill, why should we go to the trouble of deliberating on it and examining it in detail? I am very much looking forward to the Minister and the chairman—
Shane Jones: Read the bill.
PANSY WONG: I read all six of the bill’s pages, and I am surprised that the chairman of the Finance and Expenditure Committee on a little bill like this has not detected the existence of this issue.
LINDSAY TISCH (National—Piako)
: The Reserve Bank of New Zealand Amendment Bill is important legislation amending the Racing Act of 2003. National supported the introduction of that Act, but it was not envisaged at that time that there would be a rounding-down of the currency, which will come into effect on 1 November.
It is important that the racing industry, which is a vibrant and growing one, has the support of this House. As an owner of a racing horse—
Hon Clayton Cosgrove: Shetland pony.
LINDSAY TISCH: I can assure the member that it is not a pony. It ran third yesterday. So I have a vested interest in making sure the racing industry is able to support the punters, the owners, and the investment in the industry. The racing industry depends on gaming for its viable operations, and it is underpinned, of course, by that. The significance of the industry is borne out in some figures.
I will give some background, because I think it is important that we see how important the racing industry is. I am not talking just about horses; I am also talking about greyhounds. They are part of the racing industry. The social and economic benefits of the industry are quite significant. In 2004 the study carried out for the racing industry showed that the industry directly contributes about $424 million to GDP. It supports about 9,500 full-time jobs and another 18,000-odd people are involved in an indirect way, so it is a pretty big operation. In the Piako electorate that I represent—the heartland of racing in Matamata, Cambridge, and those areas—racing is very, very important.
If we were to look at what the Racing Act did in 2003—and, as I said, National supported that legislation—we would see that it set up a new framework. It disestablished the Racing Industry Board and the Totalisator Agency Board, bringing them together under one umbrella, the New Zealand Racing Board. The board has the role of making the betting rules for totalisator, fixed odds, and sports betting. Sports betting is a growing part of the income for the racing industry
Of course, like all TAB operations around the world, the board retains a commission. That is how it operates. That is known as the betting deduction, and from each totalising betting pool it distributes the remaining to the winning bettors. If one has a win on a horse, then the stake money is paid out. On top of that, of course, for those bettors who put their money on a win, a place bet, a trifecta—whatever one likes to do—some money will come back. So the board takes out its deductions and pays the money back into the industry as a whole—the owners and the punters.
When declaring dividends for totalisator betting the board rounds down the dividend to the nearest multiple of 5c.
Jacqui Dean: Is that right?
LINDSAY TISCH: Yes, and this is why legislation is so important. Because under the Racing Act the board must pay the 5c to winning customers. So an example of this would be a totalisator race betting dividend calculated at $3.18, which is declared and paid out as $3.15, and the board would retain that difference between $3.18 and $3.15—that 3c is not paid out.
The Reserve Bank of New Zealand Amendment Bill is saying in the amendments to Part 2—and this is why it is so important—that we will not have 5c coins shortly. They will be phased out and the racing industry will not be in a position to meet the requirements under the Racing Act, because of that change, and that is why the Reserve Bank of New Zealand Amendment Bill is so important. The decision has been made to call in those 5c coins. They will cease to be legal tender from 1 November of this year. The board’s decision has implications for the racing board’s ability to facilitate racing and sports betting, because of the requirement, as I just mentioned, to round down to the nearest multiple of 5c and to pay the 5c to winning customers. That requirement will come into effect on 1 November 2006. That will cause some issues and this amendment looks to address them.
When that 5c is called in, how will the board operate and be able to promote racing and sports betting? Well, the board has been delegated the responsibility for making betting rules on the rounding of dividends for future-proofing of the Racing Act. This is so the board will be able to change the betting rules in response to any further decisions of the bank to call in other denominations of coins. Thus, further legislative amendments will not be required to address the consequences of that.
The submission that came from the Racing Board—which was a very good submission—was concerned, and the Finance and Expenditure Committee took this on board, which is good. Here is an example of what will happen. Although I do not know whether every party will support the amendments, they will be passed, as I understand that most parties will support this measure. The rules on the dividends will change and the dividends will be rounded down to the nearest 10c because we will not have 5c pieces.
Colin King: That makes sense.
LINDSAY TISCH: It will make sense, as my colleague Colin King says. Of course, harness racing in the area that Colin King represents is a very, very important industry, especially around the Blenheim area, and he understands the importance of this industry.
It would probably be best if I illustrate some points.
Hon Member: Who will miss out?
LINDSAY TISCH: No one, especially not the punter. Here is an illustration of that. At the moment if we look at the bet type and put some money on for a win bet the current deduction is 15.5 percent. Under the proposed deduction, with the passing of this amendment, the deduction would be 14.5 percent. If we place a bet for a place, which is 15.5 percent today, under this proposal it will be 14.25 percent. In terms of dollars, in the last financial year—2005-06—the amount of money that went through the totalisator was $1.4 billion in round figures. It was paid out at $1.1 billion, but under this proposal $1.11 billion will be paid out. So there is an immediate increase to the punter. So this is an advantage. There was some concern, of course that rounding down would, in fact, disadvantage the punter. Those examples show that it will not.
We have to have some commonality with Australia because it is very easy to bet offshore. We have to have that commonality. We have to have the flexibility and these rules will provide that. What New Zealanders have to do, and what this amendment does, and why we are supporting it, is to have the flexibility to meet the market. National supports this very important legislation.