JOHN HAYES (National—Wairarapa) : I move, That the report of the Foreign Affairs, Defence and Trade Committee on the briefing from the New Zealand Baha’i community be noted. The issue that we are here this evening to address is a report back from the Foreign Affairs, Defence and Trade Committee, following a petition to the committee by members of the Baha’i community in New Zealand. They had expressed concern about the detention of members of the Baha’i community in Iran.

One of the things that is quite important to explain to the House is that the Baha’i faith was established in Iran in the 19th century by the prophet Baha-ullah, and herein lies the problem. The followers of Islam recognise only the prophet Muhammad. Baha-ullah lived after Muhammad, and this is the core of the problem. Iran is essentially an Islamic State, and those of the Baha’i faith cause some dissension with the Government. Nevertheless, the committee investigated the issues that were raised with us by the members of the community here, and we sought comment from the Ministry of Foreign Affairs and Trade. We learnt that successive New Zealand Governments have raised human rights issues regarding the Baha’i community with the Government of Iran on a number of occasions. The Iranian Government maintains that Baha’i is not a religion but a political group, and that in Iran there is no difference between religious minorities regarding their standing before the law.

The committee was concerned that there was some evidence that members of the Baha’i community in Iran were being held in circumstances where it was not immediately clear that they were receiving the same treatment as all other people held in prison in Iran. Clearly there had been some postponing of trials and retaining of Baha’i members in custody. We were told that the New Zealand Government had made representations to the Iranian Government and that the New Zealand Ambassador in Tehran had called on Dr Tahereh Nazari, director-general of human rights at the Ministry of Foreign Affairs, and made a démarche on 3 September 2009, citing New Zealand’s concerns about the treatment of the Baha’i community in Iran and the imprisonment of seven senior Baha’i members. The committee considered that the persecution of the Baha’i members was a serious human rights issue in Iran. We noted that the New Zealand Baha’i community and the National Spiritual Assembly of the Baha’is of New Zealand regularly express appreciation of the support of the New Zealand Government on this issue.

The committee thought long and hard about the recommendations that it might make to this Parliament, and they are three. The first is that the Government takes the opportunity to discuss these issues during the political and economic cooperation consultations between New Zealand and Iran and raises New Zealand’s concern about human rights violations and the treatment of the detained Baha’i members of the Yaran. Secondly, the committee felt that the Government might consider co-sponsoring the Canadian resolution on human rights in Iran in the Third Committee of the United Nations General Assembly. Thirdly, the committee felt that New Zealand should lobby other countries in support of the Canadian resolution. Thank you.

Hon CHRIS CARTER (Labour—Te Atatū) : I rise to speak on the briefing from the New Zealand Baha’i community, which was received by the Foreign Affairs, Defence and Trade Committee, of which I am a member. The chair of the committee, John Hayes, has just spoken about the concerns that the New Zealand Baha’i community brought to our committee about the condition of Baha’is in Iran. They raised with us specific cases of family members of Iranian Kiwis from the Baha’i community who live in New Zealand. They also spoke about others of their faith who are imprisoned or have lost jobs, and who have suffered over a long period of time.

That has not happened just during the period of the Islamic Republic in Iran, which was established, of course, after the return of Ayatollah Khomeini in the late 1970s, but prior to that. There has been a long period in Iran where Baha’i followers have not been considered, either under the Shah’s regime and under the Islamic republic, as full citizens of that country. That is very sad, because it gives the impression to non-Muslims that Islam is an intolerant faith. Actually, that is far from true. Indeed, during the Middle Ages the Jewish community was driven from Spain by the Catholic rulers of that country and found refuge in the Ottoman Empire ruled from Constantinople. That showed that at that time an Islamic State was a more welcoming place for diversity than Christian Europe. Similarly, during the time of the Abbasid rulers of Baghdad during the Middle Ages, when Baghdad and Cordoba were two of the greatest cities on earth, that Arab Islamic State was marked by tolerance of its many different nationalities and religions. Indeed, during the Ottoman period, in the Balkans people could practice both Orthodox and Christian faith. The only penalty was that they paid taxes, whereas Muslims did not. That was quite an incentive, of course, for many Bosnians to become Muslims.

So Islam is not by nature a religion that is intolerant, but its practice in Iran in the Islamic Republic towards the Baha’is certainly infringes human rights. It is very important that New Zealand, a country with a proud tradition of human rights—indeed, as all members of this House know, the very first country in the world to give women the vote—a small country far from Iran, but, nevertheless, the home to some people of the Baha’i religion, sends a message to Iran. Although we admire the material progress that the Islamic republic has made, particularly in its redistribution of wealth to the poorer sections of that society—it has made tremendous progress in that area, and in education and health—nevertheless, in the area of human rights, particularly pertaining to the Baha’i community, serious questions were raised in the Foreign Affairs, Defence and Trade Committee, and serious questions have been raised at the United Nations, and globally. They are legitimate questions. The declarations of the Islamic republic, whose re-elected President Ahmadinejad says he is a great proponent of human rights—indeed he has spoken on this very subject at the UN—about the equality of peoples, particularly of all peoples within Iran, constitute a very important promise to be kept.

We have listened carefully to the evidence brought before us. We have recommended, as Mr Hayes has said, that these issues are raised with the Iranian authorities. I understand the deputy secretary of Foreign Affairs and Trade has been in Tehran in the last few months meeting with the Iranian Foreign Ministry and the human rights commission, raising our concerns yet again. I know that, when Phil Goff as our Minister of Foreign Affairs visited Tehran, he raised those issues with the Foreign Ministry of the Islamic republic. I know that in the past—in the last 7 years, for example—at the United Nations, when Canada moved a resolution on human rights in Iran, New Zealand has been a co-sponsor of it. I understand in the Third Committee of the United Nations General Assembly we are considering attaching our name again to the Canadian resolution. I urge the Minister of Foreign Affairs, the Hon Murray McCully, to ensure that that happens, because we did it under a Labour Government for 7 years.

We ought to send a strong message to the Islamic Republic of Iran that the Baha’i community in Iran must enjoy the same civil and religious rights that other Iranians of different faiths enjoy. President Ahmadinejad spoke about the small remaining Jewish community and its place in Iran. There are many members of the Arab minority who are Sunni rather than Shi’ite Muslims. They have a guarantee under the constitution of the Islamic republic of full rights. It is only the Baha’is, the 350,000 or so Iranians of the Baha’i community, who appear to not enjoy any of those rights. This Parliament is sending a message by tabling this report. We are saying to the Islamic Republic of Iran to please consider its actions in regard to the Baha’is, that these actions, in our view, contravene human rights, that the Baha’i community in New Zealand is especially concerned about friends, relatives, and co-members of their religion, and that they be treated equally. This document has the full support, I believe, of all parties in this House. Speaking as a united voice in this Parliament, we say to the Islamic Republic of Iran to please respect the human rights of its citizens of the Baha’i religion.

KEITH LOCKE (Green) : On behalf of the Green Party, I would like to endorse the comments of John Hayes and Chris Carter on this matter and the Foreign Affairs, Defence and Trade Committee that considered the briefing from the Baha’i community. It worked quite well and came to consensus conclusions. Many MPs around the country will have been lobbied by members of the Baha’i community. They are a very active community and are very strong in defending the rights of their co-religionists in Iran. The Baha’i faith is quite strong in Iran. In terms of the total Iranian population it is not large—about 350,000 people—but I think it is the largest religious minority.

As John Hayes pointed out, it has a particular problem because it came out of Islam and its members are considered heretics by some of the more extreme orthodox Islamic leaders. Those leaders do not accept the Baha’i faith as a religion; instead, they define it as a political movement, and the Baha’i people suffer discrimination. It is not just informal discrimination but also systematic discrimination in the workforce, in getting places in the education system, and in certain social services provided by the State. We were told that about 220 Baha’i are imprisoned in Iran, including seven of their leaders, called the Yaran. Seven top leaders have been imprisoned there for over a year, and there has been a particular international campaign to get them freed. The charges against them are quite extreme; they include “espionage for Israel, insulting religious sanctities and propaganda against the Islamic republic.” These charges carry the death penalty. Even one of their lawyers has suffered. He was in prison for quite a while in the aftermath of the big protest that took place in Iran following the June presidential elections—the disputed presidential elections. That lawyer, Abdulfatah Sultani, has now been released, but the seven Baha’i leaders are still in jail in Iran.

As John Hayes and Chris Carter indicated, we advocate that New Zealand continue to take up the case of Baha’is at bilateral meetings with the Iranian Government and in the United Nations, where motions are put up regularly, particularly by the Canadian Government. Post our report coming out, the meeting that John Hayes talked about took place in November, at the Third Committee of the UN General Assembly. It discussed and passed a motion expressing deep concern at the serious, ongoing, and recurring human rights violations in Iran. It urged the Islamic Republic to end the harassment, intimidation, and persecution of political opponents, and it pointed out that five people were sentenced to death in the aftermath of the protests. I do not know whether any of the protesters have been executed yet, but a lot of executions go on in Iran. It executes large numbers of criminals each year. Unfortunately, it is one of the leading countries for executions.

The motion that the UN carried also talked about increasing discrimination against persons belonging to religious and ethnic minorities. Some of the ethnic minorities there are Arabs, Kurds, and Azeris. I disagree a bit with Chris Carter that the Baha’i are the only religion persecuted in Iran. In fact, some other religious adherents, such as Christians, are persecuted too. It is to a lesser degree than the Baha’i, sure, but it has been a fact, including in some of the refugee cases in New Zealand, that Christian converts from Islam going back to Iran could suffer persecution. A motion in the Iranian Parliament is seeking to determine that apostates—that is, people who have converted from Islam to Christianity—could be subject to the death penalty. That has not gone past the first reading in the Iranian Parliament yet, but it just shows that there is a prejudice and climate of persecution against more than the Baha’i. That being said, though, the Baha’i are the main targets. The other thing the motion at the UN pushed for in November was the right of UN inspectors to look at the human rights situation, but that request was turned down, as it has been for several years.

The whole question about the Baha’i is relevant to the general and growing opposition to what is essentially authoritarian rule and rule from a grand leader, like the Islamic leader Khamenei. Those demonstrations are still continuing, and about 6 months ago this Parliament, after those demonstrations took place in June and there was persecution of those demonstrating, endorsed unanimously a motion I put forward to convey the concern of this Parliament to the Iranian authorities. It was very good that we moved that motion, but since then the situation has not really improved. Human Rights Watch put out a report on 11 November that talked about the fact that there are credible, verified reports of torture, rape, and ill treatment in detention and show trials without due process, and that thousands of people are arbitrarily arrested and they disappear or are held incommunicado. Journalists, human rights defenders, students, and other groups have been targeted, and people have been beaten and shot for their protests—not a very good record, at all.

Then, just recently over the last few days, protests have re-erupted, led by students in the main from their university bases in Teheran but also in other cities. They had coordinated demonstrations across the country on 8 December to mark the anniversary of the killing of three students by security forces back in 1953. The fact that the students went back to that date is quite interesting, because since 1953 they have suffered after the overthrow of Mohammed Mosaddeq, who was the first real democratically elected leader of Iran and who was overthrown, essentially, by the American Central Intelligence Agency. There is a lot of history and documentation of that. The Shah ruled that country with an iron hand, tortured and executed people, and refused to have any opposition. Now, under the Islamic Republic, there has been repression as well, yet the students went back to mark a particular series of protests back in 1953. But the revolutionary guards who serve the regime, plus the military, have surrounded campuses over the last few days and have prevented the students from getting out to join others in the community in protest. The authorities have even gone to extreme lengths over the last couple of days to shut down the whole mobile phone network and the Internet to stop students and other protesters communicating with each other.

There are very brave people in Iran, despite all the repression. They are standing up and demonstrating, knowing that they could be arrested, could be tortured, could be killed, etc. So I think that it is very relevant we are having this discussion tonight and I support the report of the Foreign Affairs, Defence and Trade Committee. Thank you.

Dr RAJEN PRASAD (Labour) : It is a special pleasure to speak on the report of the Foreign Affairs, Defence and Trade Committee on the briefing it received from the Baha’i community in New Zealand. In doing so I pay tribute to the late Murray Smith, a Baha’i, and a member of this House from 1972 to 1975. He passed away recently.

Hon Member: The member for Whangarei.

Dr RAJEN PRASAD: The member for Whangarei, yes. I place on the record of this House the nature of Baha’i community members in New Zealand, their essential characteristics, and the real concerns they have about the persecution of their members in Iran, the birthplace of their religion. I choose to bring this to the attention of my colleagues in Parliament because I know they are intolerant of religious persecution, because New Zealand is a key player in the interfaith world, and because I have known the Baha’i community in New Zealand for 45 years.

New Zealand has a large Baha’i community. It is an active, responsible, productive, hard-working, intelligent, spiritual, honest, and inclusive group, a group of accepting and proud New Zealanders. Many are Iranian Baha’is who escaped the persecution in their homeland in order to lead a better life away from Iran, but for whom escape cannot be entirely celebrated because members of their families still remain in their home country and are persecuted. In a country like New Zealand, where we tend to take religious freedom for granted, it may be difficult for us to imagine persecution on religious grounds—especially the State-sponsored religious persecution that other members have referred to—yet that is exactly the situation faced by the Baha’is in Iran. Baha’is in New Zealand number about 3,000 to 4,000, and they are perhaps the most diverse community of any in this country, comprising people of many different ethnicities, nationalities, and religious and socio-economic backgrounds. They work consistently and constantly towards the creation of a more harmonious New Zealand society, and they are one of the prime actors in promoting the concept of unity and diversity through their race relations work, which is something I found particularly helpful to my work as the Race Relations Conciliator from 1996 to 2001.

The Baha’i faith is the world’s youngest independent monotheistic religion. It was founded in Iran in the mid-1800s and is now practised by around 6 million people around the globe. It is geographically more widespread than any other religion except Christianity, according to the Encyclopaedia Britannica. Baha’is constitute by far the largest religious minority in Iran, with approximately 300,000 adherents. Their teachings emphasise equality, unity, justice, and peace. They insist on obedience to Government, and non-participation in partisan politics. They condemn violence and any form of subversive activity, and they strongly encourage a spirit of service to the whole community, regardless of religion, race, gender, or socio-economic background. Yet the Iranian authorities have viewed the Baha’i faith as an apostasy that is turning away from the religion of Islam, and they have treated it as a threat since its very beginning.

In the early years more than 20,000 Baha’is were killed for no reason other than being Baha’i. The present regime officially recognises Christians, Jews, and Zoroastrians as religious minorities but does not extend the same status to Baha’is. Instead, they are regarded as unprotected infidels. More than 200 Baha’is have been executed since the 1979 revolution. In 1980 the clergy moved to destroy the Baha’i leadership. On 21 August of that year all nine members of the Baha’i national governing council were arrested, and they disappeared without trace. It seems certain that they were executed. The following year, eight of the nine Baha’i elected to replace those who disappeared were also executed. In 1983 the Iranian Government formally banned all elected Baha’i religious institutions—a ban with which the community immediately complied as a sign of goodwill in order to demonstrate their obedience to the Government.

In 1991 a memorandum was prepared at the request of the Supreme Leader of Iran, Ayatollah Ali Khamenei, and the Iranian president, Hashemi Rafsanjani. That memorandum includes statements such as: “The government’s dealings with them must be in such a way that their progress and development are blocked … They can be enrolled in schools provided they have not identified themselves as Baha’is.”, but they are required to identify themselves. “They must be expelled from universities, either in the admission process or during the course of their studies, once it becomes known that they are Baha’is.” It goes on: “Deny them employment if they identify themselves as Baha’is. Deny them any position of influence, such as in the educational sector, etc.” This policy remains current and is being applied with increasing intensity throughout Iran. Indeed, it has given birth to a number of other policy documents calling for all Baha’i to be identified and for their activities to be monitored. It smacks of some other persecutions that we can all identify.

As a result of such policies Baha’is are routinely arrested, detained, and then released, having paid sometimes exorbitant bail. Baha’i students are denied access to tertiary education and may even be denied access to kindergarten and to primary and secondary education. Baha’i businesses are being denied licences and may be subjected to arson. Cemeteries are being desecrated, property confiscated, bank loans refused, and employees sacked.

Early last year the Iranian regime imprisoned seven unofficial leaders of the Baha’i community. They have now been held for more than 18 months without access to legal counsel, without formal charges being laid, and in seriously substandard conditions. In February of this year news media reported that the seven would be tried on charges of espionage for Israel, insulting religious sanctities, and propaganda against the Islamic Republic. I add my caution to what the Hon Chris Carter said, which is that this is not a commentary on all Muslims; this is a commentary on a particular regime. Later, an additional charge was announced: spreading corruption on Earth, a charge that may result in the death penalty. Trial dates have been set and repeatedly postponed. At present there is no trial date.

I have been reliably advised that there is abundant documentary evidence to confirm not only that this persecution is taking place but also its scope, intensity, and almost routine nature. This evidence has been accepted as genuine by the United Nations, Amnesty International, the International Federation of Human Rights, the Muslim Network for Baha’i Rights, Human Rights Watch, Nobel Peace Prize laureates, and numerous Governments around the world, including New Zealand’s. Still these actions continue, despite the fact that Iran was one of the first signatories to the Universal Declaration of Human Rights and is also a signatory to the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social, and Cultural Rights. Its actions are also in clear violation of its own constitution and of the Holy Koran.

I think this Parliament would agree that such actions are unacceptable and constitute a serious breach of human rights. They are a travesty to everything that New Zealand parliamentarians believe in, and because New Zealand has always stood firm and spoken out when it has needed to, I commend to this House the three recommendations of the select committee. This issue affects us all, not just because it affects some of our compatriots but because we are responsible world citizens and advocates and upholders of human rights everywhere. It has been my pleasure to speak on behalf of the Baha’i community in New Zealand. I have heard these comments from them for a number of years now, and this is the first opportunity I have had to formally put this on the record of the House. Thank you.

• Motion agreed to.

Dr RUSSEL NORMAN (Co-Leader—Green) : I move, That the House take note of the report of the Finance and Expenditure Committee on the Reserve Bank of New Zealand’s financial stability report, November 2009. It is great to have an opportunity to talk on this report, because it contains a quiet revolution in monetary policy in New Zealand—a very quiet revolution that has gone largely unnoticed but is actually changing some of the policy fundamentals in our country. The Reserve Bank is leading that revolution. I will note very briefly some of the key points that came out of the financial stability report before I get into some of the detail.

The Reserve Bank pointed out that the global financial system has stabilised but is still quite fragile. Lending standards for residential borrowers have eased, but the Reserve Bank is encouraging banks not to return to some of the earlier mortgage practices of lending that created some of the instability in house prices. The Reserve Bank also has been urging the large commercial banks not to restrict their business-sector lending unduly. There has been a problem with businesses in New Zealand gaining access to the credit they need, because the banks have really dried up on providing credit to the business sector. The Reserve Bank also pointed to one of the problems we have in New Zealand, which is one of the most dangerous parts currently, and that is the level of indebtedness in farming. If there is a subprime mortgage crisis equivalent in New Zealand it will be in the farming sector. The Reserve Bank also pointed to the need to lift savings in the medium term. New Zealand, obviously, is highly dependent on inflows of foreign capital, and we need to increase savings to reduce that. And it talked about a new prudential liquidity policy, which I will come back to.

This report is interesting in a number of ways, and I want to start with the first one, which is about the New Zealand dollar. The Reserve Bank states very clearly that the ongoing strength of the New Zealand dollar is a major problem for our economy. In the view of the Reserve Bank the dollar is rather overpriced. The reasons for this are multiple, but they are linked to the fact that investors, or speculators, are driving up the value of the New Zealand dollar, in part because they see New Zealand as a safe place to invest money, and partly because we are a commodity producer. A number of commodity producers around the globe have had their exchange rates go up as commodities have recovered and international speculators have bought those currencies. In particular we have seen it in Brazil, another commodity exporter. The problem, of course, with the overvalued New Zealand dollar is that it is extremely damaging for the tradable sector in New Zealand—that is, domestic producers who compete with imports, and the export sector. The higher the value of the New Zealand dollar the harder it is for the tradable sector. If we do not have a healthy tradable sector, we cannot afford to pay our way in the world, and in the long run we will have to borrow money, which is, of course, what New Zealand has been doing for many years.

There is a very interesting discussion within this report about some of the options around how to deal with the overvalued New Zealand dollar, and I want to touch on just a few of them. One of the options Brazil has introduced is a small tax on incoming foreign capital. It is a 2 percent tax. The idea of it is to restrict some of the speculative foreign capital inflow going into the Brazilian currency in order to try to restrict the high level of the Brazilian currency, and there is a discussion of that in this document. It is one of the options on the table for us. Another option on the table is a level of quantitative easing. The quantitative easing in the United States is undoubtedly part of the reason why the US dollar has been falling, as the US Government has effectively been printing money. One of the policy options on the table for New Zealand to bring down the New Zealand dollar is to engage in some quantitative easing. It has risks, in terms of inflationary risks, but it is one of the policy options on the table. Another policy option on the table that we need to discuss, and it is unfortunate that we are not having this debate very widely—it is only within very narrow circles—is the sterilising of capital inflows. As capital inflows come into New Zealand, it is entirely possible to establish a policy that says that 50 percent or more of those foreign capital inflows must be deposited with the Reserve Bank at relatively low interest rates, with the result that it becomes extremely untenable for those foreign capital inflows to come into New Zealand. So that is another one of the policy tools on the table.

I think that perhaps one of the most interesting policy tools on the table with regard to the New Zealand dollar is that which has been promoted by the economic consultancy Business and Economic Research Ltd, which is to announce that the New Zealand Government has a maximum level that it wishes the New Zealand dollar to go towards, and if the New Zealand dollar goes over that level, then the New Zealand Government will simply start printing money and, of course, will devalue the currency. The idea of this is that if it is announced and the New Zealand dollar does then go over the target level, we actually do start printing money and bring down the value of the New Zealand dollar. We will have to do that only once before foreign currency investors get the message that the New Zealand Government is not willing to tolerate the value of the New Zealand dollar going over a certain level. It is a very interesting proposal that Business and Economic Research Ltd has been promoting, and I think it deserves proper discussion and debate within New Zealand policy circles. So far there has been reasonably limited discussion on it.

The other part of this report that I think is quite fascinating and revolutionary in its own way is the discussion of the Reserve Bank policy mechanisms. We are now seeing open acknowledgment by the Reserve Bank that monetary policy does not work. One of the paradoxes is that when Phil Goff came out and said that he was breaking the consensus on monetary policy, the Government reacted with horror, but in fact the Governor of the Reserve Bank has already broken the consensus on monetary policy. One of the extraordinary paradoxes that is not understood within policy circles, and certainly is not understood more broadly within the New Zealand community, is that the Governor of the Reserve Bank has already decided that monetary policy, as it has been exercised for the last 20 years, does not work, so he has changed it. He has done it very quietly, he has done it within the legal framework, and he has done it rather carefully.

What he has done is look at the crossover between monetary and prudential policy objectives. Monetary policy objectives are obviously around the stability of prices. Prudential policy objectives are around the soundness of the banking sector. Basically, what the Reserve Bank has done is say that there is a crossover between these two objectives—monetary and prudential policy objectives—which is around leaning against assets booms. In particular, of course, the asset boom that has been of most concern in New Zealand has been the housing asset boom, but it is only one potential type of asset boom. There can be all sorts of asset booms and we have had many of them over the years. What the Reserve Bank is saying is that we can lean against these asset booms to achieve both objectives. I should explain how that is done. For example, if the housing asset bubble is a driver of inflation, it is a monetary policy concern. The way in which it works is that as households feel richer as their houses become worth more and more, then those people tend to spend more money. Because their houses are worth more they spend more money, so they drive the inflationary cycle. At the same time, the housing asset bubble is a soundness issue. It is a prudential issue because these housing asset bubbles threaten the stability of the financial system.

So the bank is proposing to introduce a series of policies that are basically counter-cyclical, that have both monetary policy objectives and prudential policy objectives. In the time I have here I will not go into them at any length, but they are around bank liquidity policies—that is, making the banks seek longer-term funding. They are around counter-cyclical bad debt provisioning—that is, making the banks provide for bad debts on the up-cycle of the boom, rather than doing it just on the downward cycle. And they are looking at capital adequacy ratios—at varying capital adequacy ratios, or at least setting a capital adequacy ratio that acts in a counter-cyclical way against a housing asset bubble, which would achieve both monetary policy objectives and prudential policy objectives.

These are minor revolutions in the way that monetary policy is being conducted in this country. They are happening in a very quiet way, but for those people who are watching this space they are a very significant change. Of course, the Governor of the Reserve Bank, as usual, talked about how we need to change the tax treatment of investment properties, which is something the Green Party wholeheartedly endorses, in order to send capital into the productive sector rather than the non-productive sector. There is a lot else in this report. I recommend that people read it. It is a fascinating report. Thank you.

Hon DAVID CUNLIFFE (Labour—New Lynn) : I would like to compliment the member who has just resumed his seat, Dr Russel Norman, on a very insightful speech. I remark to the House: who would have guessed that we would be here on a Wednesday evening, almost in the dead of the evening, debating, somewhat uncharacteristically, the presentation of a select committee report to the House because we are a little short of members’ bills.

In this space we just happen to have tripped across something that is actually truly remarkable. My colleague and friend Russel Norman said that there is a quiet revolution going on, and so there is. It is a revolution that has lined up an intriguing cast of characters. We have the Governor of the Reserve Bank and his staff, who are straining at the leash of convention to do what they know to be right in the midst of a world environment that is changing. We have Her Majesty’s loyal Opposition, which has just ended 20 years of consensus on a monetary framework that no longer works. And we have a Minister of Finance and a Prime Minister who have openly declared that nothing can be done even though their loyal civil servants are already busy doing it. That is a truly spectacular turn of events.

For the ladies and gentlemen who might be listening in, I want to unpick a little bit of that background in “plain English” and try to make it understandable, because whether or not we know it, we are actually watching history being made before our eyes in a really fundamental way. Firstly, what are the problems we are seeking to solve? What is wrong with the old consensus? There are basically two things.

The first is that the people who make stuff, sell stuff, and export stuff that allows us to enjoy the standard of living we do, and to which we aspire, are being creamed by the system as it stands. They are being creamed because they cannot plan a business at the start of the year at 50c kiwi against the US dollar, wind up at the end of the year at 80c, and still be running the same business model. It would be somewhat less bad if the exchange rate was steady and high, but for it to be high and volatile is a nightmare combination for Kiwi businesses. It means that New Zealand workers are losing their jobs, it means that New Zealand entrepreneurs are being denied fair profits, it means that our Inland Revenue Department is losing revenue, and it means that the Government’s options are being constrained. We all lose.

All sides of this House ought to be united in saying that this is not good for any of us. If New Zealand, which is a great producer of protein and a few other things, wants to stride the world stage, then we have to fix this, because we have to export to prosper, and we are killing our exporters. We are killing our productive economy with exchange rates that are too high and too volatile.

The second problem is that we have all suffered from the housing bubble, where too much domestic capital is being sucked into the property sector because of preferential tax treatment and because Kiwis look a little bit askance at other forms of personal investment. Some people were burnt in the 1987 stock market crash. Some people invested in Hanover Finance and a few other finance companies—more fool them—and they have been burnt by the non-bank finance sector really badly. People do not know what else to invest in other than their homes. The problem with that is we spend all our money bidding up each other’s house prices and mortgages, and our businesses, our entrepreneurs—and we would expect the National members to be arguing this, but they are not—are starved of the capital they need to grow their businesses so that we can improve our current account.

OK—those are the problems. How do we fix them? Well, the first recognition is that it is bunkum to say that nothing can be done. If nothing can be done, then we may as well join John Key and Bill English and beg for statehood of Australia. If we want to be proud New Zealanders and to have a country in which smart kids can grow up and get good jobs, we need to grasp this issue with both hands, believe in ourselves, and back ourselves.

As my colleague Dr Norman has said, the problem is complex but it is not hopeless. We know that there is a complex feedback effect between high real interest rates that suck in the hot money of the carry trade through the banking system, which has made billions out of it and has forgotten to pay a bit of tax—but, hey, what is a couple of billion between friends? Those banks have essentially funnelled that carry trade money into our property market, accentuating the problem that it is nearly all going on housing. So the first step is recognition of the problem and belief in ourselves. The Financial Stability Report—this eminently conservative document I am holding—has recognised the problem, and the report of the Finance and Expenditure Committee of Parliament, which we are debating tonight, has picked up those problems, front and centre.

The Reserve Bank has gone further. The bank has stuck its neck out and said we need to have a mix of new prudential policy, evolved monetary policy, and new tax policy to fix it. The Governor of the Reserve Bank is saying what the Minister of Finance is not prepared, perhaps not courageous enough, to say. The Governor of the Reserve Bank is saying that we need a capital gains tax. Of course, Labour’s position is that we oppose having a capital gains tax on the family home but we are willing to talk about options to end the preferential treatment of real estate.

The Governor of the Reserve Bank has gone further. He has said that the Reserve Bank will move on broader monetary and prudential policy evolution in concert with the new global consensus—the new global consensus. Post - Basel II, post - global financial crisis, post-Davos, and post-G20, central banks and economic policy makers around the world know what Bill English apparently does not. They know that the old framework is so, so 2007. It is so pre-global financial crisis. You know, it is so pre-Paula Bennett. Bill English has not woken up to smell the coffee, and everybody else around Wellington is wondering why not and asking what is wrong with him.

What is wrong with the Government that it cannot see the obvious when it is in front of its face? I hope that the Government members are just a little bit embarrassed, because it has taken the Leader of the Opposition, along with our colleagues in the Green Party—and, I might say, ACT, whose members have been pretty useful about drawing attention to the shortcomings of the current situation—to take a stand and say that we need to do something. There is no perfect answer. There is no monopoly on truth, but we have to ask the hard questions.

I turn to the report—and, you know, it is wonderful. Let me read a couple of quotes: “The governor briefed us”—“us” being the Finance and Expenditure Committee—“on the introduction of prudential liquidity policy”—a new prudential liquidity policy—“by the Reserve Bank, noting that there is ‘a zone in between prudential policy and monetary policy’.” It talks about the authority of section 68 of the Reserve Bank of New Zealand Act, which allows it to “[lean] against” the housing boom and develop a “monetary policy objective that supports both macro and prudential policy tools.” The Governor of the Reserve Bank is evolving policy that supports both macro and prudential policy tools.

For mum and dad at home, this is probably not the time to go into the detail, but that is about how banks are allowed to re-lend the stuff they borrow, what capital adequacy ratios for different classes of assets there are, and how that changes across the business cycle. To be really crude about it, when a market is running hot, we tighten up the lending constraints so that the banks cannot lend as much so easily, and when the market is down, we loosen them off so that the banks can lend more, providing a buffer for the real economy. The best part is that the buffer also acts against the carry trade—the hot money that provides that complex interaction that kind of makes it really hard in an open, small economy to run a sensible monetary policy.

Why is it that the currency of little old New Zealand, the kiwi dollar, is the second most highly traded currency per capita anywhere in the world? Is it because we are so intelligent? No. Is it because we are so good-looking? No. Is it because we have such a well-run economy? No. It is because we are a speculator’s dream, and it is killing us. We are a speculator’s dream, because we have a Government that is so pure, so hands-off, that our currency is a one-way bet for speculators.

Here is the irony: the last time the Reserve Bank actually played in foreign exchange markets, it made a profit of $600 million, and the cheque could not have come at a better time for Bill English. Here is the ultimate irony: the Reserve Bank is moving, the Opposition is moving, and Treasury is moving. It made nearly $1 billion from the last time it intervened, but the Minister of Finance is wedded to an old orthodoxy that no longer exists. Would someone shake Bill English and tell him it is the 21st century.

• Motion agreed to.