Hansard and Journals
International Finance Agreements Amendment Bill — First Reading
[Sitting date: 08 May 2012. Volume:679;Page:2000. Text is incorporated into the Bound Volume.]
International Finance Agreements Amendment Bill
Hon BILL ENGLISH (Minister of Finance) : I move, That the International Finance Agreements Amendment Bill be now read a first time. This bill will amend the International Finance Agreements Act 1961. This Act allows the Government of New Zealand to meet its obligations as a member of various financial institutions, including the International Monetary Fund and the International Bank for Reconstruction and Development. The amendment bill updates the Act to give effect to the changes to the articles of agreement of the IMF, which were agreed to by the governors in 2008 and 2010.
I just want to talk briefly about the role of the IMF in the current context of global volatility. The risks of another global financial crisis are real. Whichever region a crisis might stem from, we will all face negative economic consequences, given the interconnectedness of the global economy. It is organisations like the IMF that can help steer countries through turbulent times. IMF member countries such as New Zealand play a shareholding contribution to the IMF, so that the organisation can loan money to countries that are experiencing a balance of payments crisis and cannot find sufficient financing on affordable terms. This helps prevent the situation where a country has to default on paying debt due to insufficient capital, and therefore prevents adverse shocks occurring in the global economy. The IMF also provides advice to Governments and central banks based on analysis of economic trends and cross-country experiences, in addition to research and statistics based on its tracking of global, regional, and individual economies and markets.
For these reasons New Zealand takes its membership of the IMF seriously. We believe it is important to be an active participant in the international system, whether it is by being an active member of multilateral organisations such as the UN, regional organisations such as the Pacific Islands Forum, or an economic organisation such as the IMF. As a small, open economy we benefit considerably from a stable and prosperous global economy—
The ASSISTANT SPEAKER (Lindsay Tisch): Order! Could I ask members, please—there is too much noise, and I cannot hear. Can I refer the Minister to Standing Order 283(1): the Minister should, at the commencement of his speech, indicate to the House the committee he nominates should consider the bill. That is Standing Order 283(1). So I ask the Minister, before he continues, to actually do that now.
Hon BILL ENGLISH: I intend to move that the bill be referred to the Finance and Expenditure Committee. Our commitments to the IMF are effectively premiums to an insurance policy against damage to our economy from an unstable world. Contributing to the IMF and global financial stability are also part of our international reputation.
The changes to the articles of agreement are integral parts of an overall package designed to bolster the resources available to the IMF and enhance its legitimacy and effectiveness, by ensuring that members’ voting shares and voice appropriately reflect their changing relative economic weight in the global economy. The amendment to the articles will assist in facilitating the agreed change in the composition of the IMF’s executive board and its future evolution, by removing the right of the five largest fund members to appoint an executive director and allowing instead for an all-elected board. Consequently, passing this bill will signal New Zealand’s support for reform, additional resourcing, and better legitimacy in an important financial institution. This is in the context, particularly, of the push by emerging economies to have a say in multilateral institutions, which reflects their growing economic weight.
Financially, this bill will mean an increase to New Zealand’s quota commitment to the IMF. However, members of the New Arrangements to Borrow programme, of which New Zealand is a member, have agreed that they will undertake a corresponding decrease in their commitment to that programme. Overall, this means that our commitment to the IMF remains relatively constant, moving from 1,580 million standard drawing rights to 1,592 million standard drawing rights, or approximately, in New Zealand dollars, from $2.9 billion to $3 billion. New Zealand has already agreed to these changes, and adopting the International Finance Agreements Amendment Bill simply puts that agreement into practice.
The bill also creates a regulation-making power in the principal Act so that further updates to the articles can be made by regulation. This power will simplify the process by which New Zealand meets its obligations. Once changes to the articles are agreed to by the requisite majority of members of the international financial institutions, New Zealand will be bound by the amendments, which means that we are required to bring our domestic legislation into line with our international obligations. The decision to approve changes to the articles of agreement of the IMF is effectively made at the time, but the Minister of Finance votes on the matter as a governor of the institution. Furthermore, the regulation-making power would not be unique. The Legislation Advisory Committee guidelines note that a number of Acts have futureproofing clauses that allow the executive, rather than the Parliament, to update the text of a treaty. In the context of the IMF there is likely in the future to be further changes in its processes, reflecting the changing economic significance of different members. These changes do not mean we will change the way in which we consult on important IMF policy changes. Rather, this bill is about demonstrating our commitment to multilateral action, as well as simplifying the processes needed to update our own legislation to reflect what has already been agreed to with the IMF. I commend the bill to the House.
Hon DAVID PARKER (Labour) : I rise to speak to this bill, the International Finance Agreements Amendment Bill, on behalf of the Labour Party. The Labour Party will be supporting this bill to the Finance and Expenditure Committee. The Labour Party supports the function of the International Monetary Fund and the International Bank for Reconstruction and Development, and broadly agrees with the Minister of Finance that these are good institutions that assist the conduct of international economic affairs in a way that benefits New Zealand as well as other countries. We do think that the regulation-making power that is conferred by this piece of legislation ought not to proceed, and we will be seeking to amend that at the select committee. That is something that I will come back to a little later.
This bill amends the International Finance Agreements Act 1961, and, as the Minister says, that includes our obligations to the International Monetary Fund and the International Bank for Reconstruction and Development. The changes that are afoot in this bill are giving effect to changes to the treaty, which have been agreed in principle by the New Zealand Government but are not effective in New Zealand law until this Act is passed. I am aware that the changes that are promoted here are quite separate from the increases in commitments that were made to the $430 billion IMF fund, which was backed by the G20 in recent months.
I think that the underlying occurrence here is that the legislation is reflecting an update to the international agreement, which changes the share of different countries in the world in terms of how much they have to contribute to the pool that the IMF maintains. Because there has been significant growth in other countries that is higher than New Zealand’s growth rate, our relative share of that pool is decreasing. The effect on New Zealand’s contribution overall is not large. It goes from a NZ$2.9 billion to a NZ$3 billion share of the pool, because the call that is being made on individual members per unit, if you like, is decreasing as the size of the pool increases through other countries that are growing faster than New Zealand increasing their share of the pool.
I do not have a problem with that. I would point out that it shows that the underlying drive of wealth—or, at least, monetary wealth—does depend upon the relative size of your economy. We are not doing very well in that regard, as evidenced by the fact that just today we have had an announcement from the Government to show that its growth forecast is not coming true, tax revenue is down, and the deficit is worse than was predicted at the time of the last election. But that does not mean that it is not wise for us to do our bit in respect of these international institutions. Although there may be some who say that New Zealand should be isolationist in our approach to these matters and just look after our own interests internally, the Labour Party does not think that is right, and, indeed, we think that New Zealand is one of the countries that benefit from international organisations such as the IMF.
The Minister made reference to the advice-giving role of the International Monetary Fund. I think that is an important role. I think it is interesting to reflect on the fact that one of the most important pieces of advice that the IMF gave to New Zealand in recent years has been ignored. That advice was that we should be changing our tax system so that we have a neutral investment signal, so that we have people investing for the growth of the New Zealand economy based on the profitability and the productivity of their business rather than the tax effectiveness of their investment. The International Monetary Fund, along with the OECD, our own Treasury, and the Reserve Bank, all favour New Zealand adopting a capital gains tax. So I would use this opportunity to note that if we are going to pay for these institutions, we should heed their advice. On this occasion it has got it right, and it is the National Government that has got it wrong. Of course, that is one of the reasons why New Zealand misdirects its precious investment capital into wrong parts of the economy, and we are not growing as well as we should, which is the underlying cause of our Budget deficit not improving as fast as it ought to.
The issue as to whether, in future, amendments to the International Finance Agreements Act should be made by way of statutory regulation is, in my view, an important one. At the moment the executive is required to come before Parliament and explain a change to these international agreements. That is the effect of the legislation as it currently sits; indeed, the Minister of Finance has done that today. That is as it should be, because these things have financial implications for New Zealand that are important, and I do not agree that we should be creating a regulation-making power so that this is something that is done by the executive without further recourse to Parliament.
Of course, the executive has to authorise the Minister of Finance or his delegate to go along to International Monetary Fund meetings and make provisional agreements in respect of changes to the IMF rules. The IMF rules do not take effect immediately, because the IMF rules contemplate that Ministers like our Minister of Finance have to come back and get approval from their legislatures. And that is actually why it is that this change to the International Monetary Fund rules did not take place immediately upon those meetings back in 2008 and 2010, because there had to be a sufficient number of countries that had ratified the agreement in principle that had been reached at those IMF meetings. The fact that we are one of the last countries in the world to do that—they are already up over 85 percent, so these changes are already being given effect to at the International Monetary Fund—is because the Government has been slow in putting this bill on the Order Paper, which does not mean to say that it ought not to be on the Order Paper.
I think New Zealanders will have more confidence in our participation in these international fora if they think that Governments are being transparent about changes to those international agreements and the effect of those changes on New Zealand. There is already enough suspicion out there as to the effect of international agreements. We breed further suspicion if we are not open and transparent about changes to those rules.
For those reasons, amongst others, the Labour Party opposes future changes to this legislation by way of the statutory regulation-making power that this amendment Act creates. We believe that future amendments ought to come back to this Parliament. If we look back in the history, it has not been an onerous task for New Zealand to amend this legislation through annual amendments or anything like that. It is relatively rare that we have amendments to this International Finance Agreements Act, which dates back to 1975.
The Labour Party approves of the change that decreases the percentage of New Zealand’s share in this greater pool, increases the size of the pool overall, but then says that the individual contributions are pro rata decreased so that the overall effective cost to the country is about the same. We think it is a wise change.
I would also note that I do not want to think that people should overstate some of the changes that have been made to IMF voting rights. I am informed that for amendments 85 percent of the votes of members are required, or votes plus ratification by those members subsequently. The US still effectively holds a veto right because it has 16 percent of the votes. So we should not overstate the changes in that regard.
We oppose the future changes being made by way of regulation but support this bill to select committee.
TODD McCLAY (National—Rotorua) : It gives me pleasure to rise to speak on this bill, the International Finance Agreements Amendment Bill, sponsored by our Deputy Prime Minister, the Minister of Finance—and can I thank the Minister for his speech earlier. At a time when the global economy faces such great challenges, the role of the IMF is all the more important. One needs only look at a newspaper or reflect back on newspaper reports over the last few years to see the important role the IMF has played as the world has moved through the global financial crisis.
Indeed, long before that happened there were countries in the world that needed to seek support from the IMF, and in so doing were able to help reform their economies, take some of the sharper edges off the recessions that were hitting, and help move their countries back on to a stronger footing—on to growth, and so on. It is a reflection, actually, of the work the Government, this National Government, has done over the last 3½ years, as New Zealand was faced by the steepest recession of 60 years. As countries around the world were finding they were having to default, were laying people off everywhere, and their economies were getting much worse, we as a Government took the sharper edges off that recession and made important decisions for New Zealanders to help them get through that. And as we heard our Prime Minister say earlier today, we have seen growth over 10 of the last 11 quarters, albeit modest in some cases. But compared with the rest of the world, at least we have some semblance of positive and straightforward and effective Government.
Can I say that New Zealand takes its obligations extremely seriously when it comes to our international commitments to the IMF, the World Bank, and many other organisations that help countries in their time of need. But more than that, they help countries to develop, and therefore it is important that this bill is brought before us.
Contrary to what the last speaker, David Parker, said, this measure is timely in coming to the House. It needs to be ratified and put in place here in domestic law. That is always the case with pieces of legislation like this. I do not remember a time, at least on looking at my research, that this Parliament has not ratified changes such as this. So I look forward to the discussion and debate when it comes to our committee, but I think that as this Parliament has never said that one of these changes should be not put in place, there may be a more effective way that we can do so. That will be interesting when we look at the regulation-setting powers and streamlining the work of this Parliament, but also at keeping accountability here. My colleagues who sit on the Regulations Review Committee would argue strongly that they play an important role in making sure that democracy is done and that there is transparency. So we will have an opportunity to canvass and to talk about it at the committee, but I do think in this instance that, in as far as changes like this with the IMF are concerned, a more streamlined procedure will not necessarily take away from what we have at this time.
I will just briefly say that the changes to the articles of the IMF do a couple of things: improve the representation of fast-growing, emerging market countries at the IMF, and double the quota, which is the IMF’s main means of raising funds. The 2010 reforms doubled the IMF’s total quota resources to about $970 billion, and this bill will provide for regulation-making powers so that future updates to the articles can be made by way of regulation.
This bill will come to the Finance and Expenditure Committee, and as the newly appointed chair I look forward to it being there. We will consult widely on it, and we will have a genuine, honest, and open debate with New Zealanders and the Opposition. But I think we should deal with this in a timely fashion and refer it back to the House once we have listened to all those concerns. It is a pleasure to speak on this, and I commend the bill to the House.
Hon CLAYTON COSGROVE (Labour) : As my colleague David Parker has said, Labour will support the International Finance Agreements Amendment Bill. We, like most other parties in Parliament, believe in the worth of international institutions. The IMF, World Bank, World Trade Organization, ILO, and others are critical now in a globalised community and in globalised economies.
I just want to touch on a couple of things, and I note Mr McClay’s final comment that we should pass this in a timely fashion, and I agree, but I would just make this point. The question arises as to why it has taken so long for this bill to appear in Parliament. The advice I have is that Australia passed equivalent legislation in September 2009 and November 2010, and this is just, I think, another example of where the Government has to get its priorities right. This is a very important piece of legislation. Our involvement in the IMF, especially during the global financial crisis, is critical. We have responsibilities and obligations, and I would have thought that this piece of legislation, given its importance, would be brought to this Parliament in due time.
Putting that aside, our involvement in the IMF is critical. I remember a former Cabinet Minister in the 1984 Labour Government who made a point to me many years later, reflecting on the history of the turbulent economic times that were inherited in 1984, when the then Prime Minister—whom I am sure you know of, Mr Assistant Speaker Tisch—refused to deregulate and we lost $600 million, I think, in those days, offshore. The former Labour Cabinet Minister said to me that had we not been an English-speaking country back then, the IMF would have moved in and said “She’s all over.”, because we were, I believe, at that stage 6 or 7 days away, quite literally, from going broke as a country. That is how bad it was.
Then if you fast forward to the various economic meltdowns we have had in various countries around the world, and now the global financial crisis, you can see the worth of these global institutions. In the financial crises of the 1920s and 1930s, Governments, heads of central banks, such that they were, politicians, and critical institutions did not communicate. People and countries acted almost in silos. Now we have a situation where Finance Ministers, central bankers, and global institutions like the IMF and the World Bank act in concert to try to stabilise the world economy and assist those in greatest need, so that you do not get into a situation—touch wood as we go through this—where the world economy implodes to the extent that it is almost unrecoverable.
This is an important piece of legislation. It will maintain, if you like, New Zealand’s quota commitment to the IMF at around $3 billion—the former amount was about $2.9 billion—so it is basically a steady state. I think my colleague David Parker makes a valid point in respect of the changes to allow future updates of the articles to be made by regulation. When we have had major agreements in the trade area, for instance, they are generally brought back to this Parliament and examined, and they are examined at the select committees. They are looked at quite carefully because that is the appropriate thing to do. To date, generally, at least within the major political parties, there has been a bipartisan approach to that, which reflects our joint view on New Zealand’s interests. That process is valid for a number of reasons. It is democratically valid, but also it allows folk in the community to have their say on those agreements. It also allows—and I think this is a good thing—for various myths, especially in the free-trade area, for instance, created by those who linger in the shadows and create myths about what may be positive or negative about free trade, to be stripped away. It allows public scrutiny not only of the agreements but also of those myths and legends.
Where we have difficulty, I think, in the communities is when there is a vacuum, when things pop out of nowhere, especially with international obligations such as this, and when there is not appropriate scrutiny by Parliament and thereby the community. I just say to the Minister of Finance as he is going through and considering this piece of legislation that it may well—and I do not make a political point—be worth reconsidering the mechanism by which those future updates are made, in terms of whether it is, as proposed in here, by regulation that can happen at the snap of a finger and an Order in Council or whether it would be profitable to bring those back, at least in a cursory way, to Parliament, thereby providing scrutiny of Parliament and thereby providing, to some extent, a level—I see Mr Hayes shaking his head. I am not sure whether he is shaking his head at you, Mr Assistant Speaker, or me, or whether he has just got the shakes; it may have been a hard night. We could look at whether it would be worth bringing back those regulations to Parliament to allow parliamentary scrutiny and to allow the community, even in a cursory way, to have some input, thereby providing some confidence for those who may have concerns about the nature of global institutions, and also exposing those who create myth and legend about them, because sunlight, as they say, is the best disinfectant. So I say to the Minister of Finance that it may well be that he may wish to look at the mechanism again. I think it is also appropriate when we are signing up to obligations like this that Parliament at least gets to scrutinise those—not after the event but as they go through. Again, I think that that provides some confidence, at least as people can say that the representatives of this House have given it the once-over, but also, if necessary, to question and inquire as to why, if there are questions, the Government has signed up to regulations and supported regulations as it has.
The IMF is often criticised, of course, for getting there a day late and a dollar short, as someone once said, but one has to ask, especially in the global financial crisis that we currently go through, what would have been the nature and impact of events had the IMF and other global institutions not been there. One has to ask that, and I think any student of history would argue that these are extremely necessary institutions.
New Zealand’s contribution and, of course, New Zealand’s votes are pretty minimal on this. There are some, I have heard—even some of the folks in my patch—who have asked: “Why do we bother contributing to this. What’s in it for us?”. Well, what was in it for us, if you go back to 1984, was some serious support. But also we have an international obligation to do our bit, to assist others, and to contribute to those international institutions like the IMF. So, in turn, the IMF can play a role, as it has done in Greece and Portugal and other economies as they wobble around. Of course, what happens in Europe or what happens in Asia—what happens to economies when they are destabilised by whatever force economically—is that, ultimately, for a small economy, country, and community like ourselves, that has a knock-on effect. We know that if China’s growth rate dips—if, for instance, it was to go to 7 percent rather than 8 percent—that will have a knock-on effect on Australia, and that will have an economic impact, ultimately, on us. We are a price-taker, we sort of have to ride the wave of economic instability, and we have very little international influence in terms of that.
So we support this piece of legislation. It is important. There is very little politics in this, but I just conclude by going back to my former point and that of David Parker. I would ask the Minister, as he moves this through the process, to consider the appropriateness of simply regulating commitments, changes, and amendments to IMF agreements without due parliamentary scrutiny. Again, because there is very little politics in this, I reiterate the point. Where there is some parliamentary scrutiny and some community input, that, in itself, creates a degree of confidence in those agreements, and that, in itself, acts as a barrier to those who would nefariously create myth and legend around those organisations and be nefarious in their motives. It exposes the arguments, and it allows us to have a debate. It would be rather unthinkable, I think, if this Parliament did not support its Minister of Finance in supporting those amendments, unless they did something completely crazy. I think it is appropriate that there is a level of parliamentary scrutiny.
Dr RUSSEL NORMAN (Co-Leader—Green) : I rise to speak on the International Finance Agreements Amendment Bill on behalf of the Green Party. This bill essentially does a couple of things. Firstly, it implements some changes to the articles of the IMF, which are votes and voting changes. They are very minor changes in voting proportions in the International Monetary Fund. Much more important, it changes the way that future changes in the articles of the IMF are approved or not by the New Zealand Government. Previously, any changes in the articles of the IMF had to be agreed by the legislature, by this House, before they could be fully implemented by the New Zealand Government. Even though the New Zealand Government might agree to them at the IMF, they actually had to pass through and be legislated before they took full effect. This bill gives the executive—the Cabinet, effectively—the power to implement changes to the IMF articles, or rather to agree to changes to IMF articles, without consulting the Parliament, and without getting the approval of the Parliament.
That is quite a significant change. That is the fundamental reason why we are not going to be supporting this bill. We think it is important that if the New Zealand Government is to agree to changes in voting rights at the IMF, that should come back to the New Zealand Parliament. This is not a particularly onerous job. From what we could tell, there have been half a dozen changes to the IMF articles that have needed approval from the New Zealand Parliament in the space of 40 or 50 years. So it is not like the Government of the day would have to be coming back to the Parliament every year, even, or every week, but very infrequently, in order to get changes approved that the New Zealand Government could agree to changes in the articles to the IMF. So we think it is important that the Parliament retains that right.
This is part of a general trend in legislation that has been going on for some years now whereby there is delegated decision-making, or secondary legislation or regulations—basically, there is a lot of movement of rule-making or lawmaking into regulations and away from primary legislation. What we are seeing here with this bill is another part of that broader pattern of taking away the right of Parliament to make the rules or the law, and Parliament through the Government’s majority delegating that to the Government of the day in the form of regulations, and that is what is happening here.
It is quite important because the IMF is pretty critical. In the post-war period there were three great institutions that were established, or not established. The first, of course, was the International Monetary Fund, the second was the International Bank for Reconstruction and Development, or the World Bank, and the third was what was then called the International Trade Organization. The third institution was never established, of course, because the US Congress refused to support the establishment of an international trade organisation, and it was only much later, in 1995, with the establishment of the World Trade Organization that the third global institution came into being.
The IMF has played a constructive role over many years. However, in the 1980s and 1990s it got taken over, as did much of the English-speaking Western World, by the new-right crazies. So the IMF started to introduce a series of ridiculous proposals, which have been enormously destructive. It adopted the Washington consensus around deregulation and privatisation, monetarism, and all of the rest—the full catastrophe. That has been enormously destructive. The IMF became enormously unpopular internationally during that period. The former chief economist of the World Bank, Joseph Stiglitz, who was the vice-president of the World Bank, was highly critical of the IMF and the role of the IMF, particularly during the Asian financial crisis in 1997. The IMF played a particularly destructive role in making the Asian financial crisis much, much worse. Not only Stiglitz but a series of very mainstream and important economists have been highly critical of the role of the IMF through the 1980s and 1990s. Neocolonialism was a term that was used quite a lot about the role of the IMF.
For those reasons, democratic reform of the IMF has been high on the agenda of progressives internationally, and the Greens have been advocates for democratic reform of the voting rights in the IMF. As has been stated earlier, the basic situation at the moment is the United States retains a veto over decision making at the IMF because it holds 16 percent of the voting rights and essentially you need more than 85 percent to get a decision through. So the United States has retained its veto rights.
The voting reforms that are being proposed, which date back to 2008—this is not a recent event; this Parliament has taken a long time to getting around to approving this—make very minor changes to the voting rights. About 6 percent of the voting rights are moving towards the big new developing economies. Of that, about 2.5 percent is actually coming from other developed countries. So it is not like it is a big reform coming from the United States, which obviously should be giving up some voting rights, but rather it is a very minor reform, some of which is actually at the expense of other developing countries. So while in terms of democratic reform one might say that it gives something, it is a very minor reform.
Of course the other thing that is interesting about these reforms is essentially they predate the global financial crisis. So what has happened post the global financial crisis is that, of course, the role of the United States, as the world’s global superpower economically speaking, has declined dramatically. Of course, the debasement of the US dollar has been one of the most obvious examples of that through massive quantitative easing. But perhaps what is really apposite in this situation is that when the IMF asked for more funds, most recently, and asked New Zealand to contribute and asked other countries it was, of course, the United States—the biggest single vote share in the IMF—that refused to make a contribution to the global bail-out fund effectively, which Christine Lagarde, the head of the IMF, was trying to build up in order to save the global economy, if there was another crisis.
So it is a paradox that this voting reform does not deal with the fact that it is the United States that effectively maintains veto within the IMF voting system, but it was the United States that failed to come up with any money to help out with the global bail-out fund. For that reason, if you were one of the big emerging economies you would be pretty annoyed by this very, very tepid reform of the voting system at the IMF. Really, it does not make the kinds of changes that we need to make.
For those reasons we think that the democratic reform of the IMF has a long way to go, and it still is, in some ways, enshrined in the post - World War II order, and does not represent the modern world. So we would like the democratic reforms—that this bill implements and which are very, very minor—to go much, much further so that the IMF represents the world much better. Even if it were just to represent the economic world, it would be progress. But it certainly does not represent the world populations in any respect whatsoever. So these are very minor reforms. We also think that if you are going to make these kinds of changes, what is the problem with bringing it back to the Parliament? But anyway!
The other thing I just wanted to say was that the IMF does a lot of useful work. For those of you who read the IMF website, there are a lot of great research papers come out of the IMF. Of course, David Parker talked earlier about the IMF being like every international institution in arguing that New Zealand should be adopting a capital gains tax in order to even up the tax system, because our tax system currently gives great advantage to property investment. The IMF has been a very strong advocate for that. I think the latest IMF report on New Zealand, which came out in April, is quite interesting as well, because the IMF basically agreed with the Government’s strategy, and the Minister of Finance rightly said: “Look, the IMF is agreeing with us.”, but that was before the Government’s fiscal position really started to fall apart. So as the Government’s fiscal position has gotten worse, it is actually going to make it harder. It will be very interesting to see what the IMF thinks of that position when it comes to have another look at New Zealand.
What was interesting about what the IMF said was that it is the high currency—the New Zealand dollar—that is a real problem in rebalancing the New Zealand economy. The IMF is absolutely on the money on that question. It is in this context worth mentioning that the IMF’s report on Switzerland, which was done about the same time, whereby the Swiss were doing very unconventional monetary policy—that is, they basically said they were capping the level of the Swiss franc and would print endless Swiss francs to stop the Swiss franc becoming too high, which is a very, very unconventional monetary policy. The IMF’s view was that that was an entirely appropriate response to deal with a currency that is becoming too high and is destroying the tradable sector in Switzerland. Now, I think that New Zealand would want to read that report from the IMF, and although it is very unconventional, and I give you that, it does suggest that we need to think a little bit outside the square in the way that we manage our currency in New Zealand. If we read reports from the IMF a little more closely, we might think a little bit more outside the square. Anyway, Mr Deputy Speaker is telling me to wind up, so thank you very much.
PAUL GOLDSMITH (National) : I was finding the previous member’s speech a little difficult to follow. He talked first about the US debasing its currency, and then seemed to conclude his speech by suggesting that New Zealand should also debase its currency in order to get in on the act. Maybe we should start watering the milk; that might be the solution to all our problems. I hope that was not what he was trying to say.
It is my pleasure to be speaking in favour of this bill, the International Finance Agreements Amendment Bill, which is set down for its first reading. It amends the International Finance Agreements Act 1961, which allows the Government to meet its obligations as a member of the various financial institutions, including the IMF and the International Bank for Reconstruction and Development, and it provides for New Zealand to recognise changes to the articles of agreement of the International Monetary Fund.
The basic dynamic here is that the IMF members provide commitments to fund lending, and are eligible to take out a loan in times of economic difficulty. The quota of each member country is intended to reflect its economic size and is denominated by special drawing rights. The changes to the articles of agreement of the IMF that the bill provides for include improving the representation of the faster-growing emerging market economies at the IMF. It is doubling the quota, which is the IMF’s main means of raising funds; it basically doubles that quota. The bill also provides for regulation-making powers so that the future updates of the articles can be made to the Act by regulation.
The changes to the articles of agreement are integral parts of an overall package designed to bolster the resources available to the IMF and enhance its legitimacy and effectiveness by ensuring that members’ voting shares and voice appropriately reflect changing relative economic weight in the global economy. Because of that shift in weight, New Zealand’s share of the overall pie falls, but the net effect, once it has taken into account the near doubling of the overall total quota, is that New Zealand’s commitments remain relatively constant—moving from about $2.9 billion to $3 billion.
I think this bill provides an opportunity for us to pause and reflect, I suppose, on the shifting currents of the global economy. The old developed world when the IMF was set up is in the process of being caught up and, indeed, overtaken by a lot of countries that were once regarded as developing countries. We had Mr Parker here before saying that that was a terrible indictment on New Zealand. I do not look upon it in such a negative way. I think it actually is a good thing in many respects that hundreds of millions of people around the world, in China, in India, in Korea, and in many other countries—in Africa, indeed—have been pulled out of poverty over the last couple of decades by this unprecedented period of rapid economic growth. The fact that those economies are growing and New Zealand’s overall share of the global wealth is diminishing is not in itself a negative thing. Indeed, the fact that China and India are shaking the dead weight of very unfortunate policies—socialist policies, really—of decades past and are now facing up to and welcoming the energy of the market economies has been a great thing for humanity across the board and is something that we should celebrate more than lament.
But it does, of course, raise the issue of where New Zealand fits in all this, and the lesson that I draw from it all is that New Zealand’s wealth and position in the world is not written in stone, and we have to work for it each decade and each year. We need to create wealth, and it is not going to be created for us, and the most important thing a Government can be doing in that area is creating an environment that is consistent and a set of policies that are consistent. I think it is one of the signal achievements of this Government in the last 4 years that we have been following a set of policies: getting the Government’s finances back in order, building a more productive and competitive economy, delivering those better public services within tight financial constraints, and, since the earthquake, rebuilding Christchurch. The fact that we have gone on about those four priorities ad nauseam for a long time so that people know them inside out is exactly what we need in these difficult international times, so that New Zealand businesses and individuals can have the confidence to know where the Government is going, what it is trying to do, that it has a clear plan, and that you can make those long-term judgments knowing that this Government will be sticking to its basic plan. Given that broader context, I support this bill’s referral to the Finance and Expenditure Committee. Thank you.
ANDREW WILLIAMS (NZ First) : I rise on behalf of New Zealand First to support the International Finance Agreements Amendment Bill. This bill, which amends the International Finance Agreements Act 1961, provides for New Zealand to become a member of the Multilateral Investment Guarantee Agency. That agency is one of the five agencies that make up the World Bank Group, and its core mission is to enhance the flow of capital and technology to developing countries for productive purposes, by providing investment insurance for member countries against both sovereign and political risk. This bill provides for New Zealand to recognise changes to the articles of agreement of the International Monetary Fund, which are the governing documents of the IMF. These changes were agreed to by the IMF governors in 2008 and 2010, and they focus on improving the representation of fast-growing, emerging markets in countries involved with the IMF. The IMF’s main source of lending resources, the quota, will also be doubled in so doing.
The bill also creates a regulation-making power in the principal Act, so that future updates of the articles can be made by regulation. This power will simplify the process by which New Zealand meets its international obligations, taking into account the fact that once changes to the articles are agreed to by the requisite majority of IMF members, New Zealand is bound by those amendments, whether or not they have been incorporated into New Zealand legislation. This does have concerns for us, in that we would also concur with other speakers that that should come back to this Parliament for ratification and not go solely to the executive or to the Minister of Finance. We do believe that the New Zealand Parliament should be ratifying any amendments that are put through the IMF.
New Zealand depends on global trade. We depend on stable economies on all the continents where we trade, to enable us to sell our goods and services on those world markets. The International Finance Agreements Amendment Bill is an additional tool in the armoury of the IMF to help ensure greater oversight of the global economy. New Zealand has an international obligation to play its part in maintaining economic stability. Even though we are a small economy and a small country, we help to set a good example globally for other like-minded countries that similarly wish to see a level of control over the world economy.
New Zealand First will support this bill’s referral to the select committee, but we note that it will result in New Zealand’s contribution going from NZ$2.9 billion to NZ$3 billion, an increase of $100 million. However, we know that this Government is not concerned about a figure such as that, because only last week the Hon Maurice Williamson said that $100 million was petty cash. Therefore, if the Hon Maurice Williamson can call $100 million petty cash, obviously this Government has no concerns about this contribution going up by $100 million. However, we will be raising that particular issue in the select committee, also.
These are uncertain times globally in terms of many of our major markets and many of our major allies and trading partners. There are problems financially and politically in areas of Europe, in the United States, in parts of Asia, and on other continents where we trade. It is important that we do have financial and political stability around the world, and this particular bill, and in terms of our working with the IMF, will help assist with some of that stability in the global economy. The world economy needs the ability to provide stability, so that the highs and lows on these economies are less of a risk. New Zealand First does have some concerns about the bill. We are concerned that it is giving, perhaps, too long a leash in some respects to the executive in dealing with the IMF. We would like to see some aspects of this brought back to this House for future clarification and ratification. This bill will go forward to the select committee, and we do intend to discuss that. So New Zealand First in the meantime sees merit in this bill going forward, and we will be supporting it.
Hon Dr NICK SMITH (National—Nelson) : It is good to hear the sensible contributions that have been made in this debate about amendments to the International Finance Agreements Act, because one of the biggest challenges that New Zealand currently faces is how we protect our citizens and our country in incredibly challenging financial times. So often in the debates in this Parliament there are all sorts of sideshows going on, but actually that is the core challenge for New Zealand.
As other members have noted, the International Finance Agreements Amendment Bill puts into place a number of agreements that were made in 2008 and 2010 by the governors of the International Monetary Fund and allows the New Zealand Parliament to effectively ratify those and modernise those IMF structures. Some of the major changes are the recognition that economies like China and Korea have become so much bigger global players, and that they need to step up both in the governance and in the financial contributions to international institutions like the IMF to match their contribution globally in 2012, rather than from when the IMF structures were put together in the late 1950s and the early 1960s.
The part that is a bit missing, though, from the debate, and the contradiction, is that I hear Opposition members recognising the need for an international monetary fund, recognising the challenges that there are globally, and recognising the changes that have occurred globally around the growth of Korea and China, and yet in so many of the policy positions that they adopt, they take an introverted, anti - global trade perspective, which actually contradicts—
Tracey Martin: That would be pro - New Zealand.
Hon Dr NICK SMITH: —the very reality that goes with this bill. Now I hear this interjection that somehow that is being pro - New Zealand. Members on this side of the House would say that for a small trading nation, being pro-trade is being pro - New Zealand, and that is where we find that some of the very insular, almost North Korean perspective that we get from a party like New Zealand First is actually quite a risk to jobs and prosperity for New Zealand.
I also find it interesting that in debating this International Finance Agreements Amendment Bill there is a recognition that countries have got themselves in a very serious financial pickle by spending money they do not have. In fact, the IMF and the provisions that we are putting forward in the Parliament are actually to try to protect the world economy from some of those reckless policies, and it is proper for us to provide those protections. The contradiction, though, is that in every single week that has occurred this year we have seen new spending commitments coming from parties opposite, at a time when New Zealand is running substantial deficits.
I hear the New Zealand First members interjecting, and I would simply say to them, well, it is promises like those over the last adjournment, when they promised superannuitants a 10 percent reduction on their power bills, a policy that over a period of 5 years would cost $450 million. I say that that is just financially reckless when we are debating a bill of this sort, and it would actually just add to the financial instability. That recklessness is equally so in the contributions I have heard from Labour. In every single debate that comes up, Labour members want to spend more. They are being financially reckless, and actually that reinforces the need for New Zealand to be part of the stabilising mechanisms that are provided by the International Monetary Fund. I simply hope that New Zealand adopts responsible fiscal policies of the sort that are promoted by this Key Government, so that we do not have to call on the resources of the IMF one day to bail us out from the sorts of policies that I see being promoted by members opposite.
I think this debate is a healthy debate. It reminds New Zealand of the need for sound international trading mechanisms and institutions, and of the importance of New Zealand taking a rational, conservative, and responsible fiscal policy, because that is the very best hope of being able to secure the bright future that this Government has campaigned on and continues to work towards with legislation such as this bill.
Hon DAVID CUNLIFFE (Labour—New Lynn) : Embedded in the last sentence from the member who has just resumed his seat, the Hon Nick Smith, were the words “rational” and “conservative” sitting alongside each other. The central tenet of the Labour Party’s view is that those words do not belong in the same sentence, because there is nothing rational about economic conservatism when you are already in a recession, but I will come on to that in the second half of my remarks today.
Let us first consider what is the purpose of this International Finance Agreements Amendment Bill. I will repeat at the outset that Labour will be supporting the bill going to the Finance and Expenditure Committee, but we will assess then our final position. The reason for that is that on the one hand we support the need to increase contributions to the International Monetary Fund, first, because it is our responsibility as a member country, and, second, because international events have proven, as if there was ever any doubt, that we are one interdependent global economy, and that confidence in that economy requires countries to be able to join together to stand behind its core institutions. However, we oppose the power grab by the executive opposite that says that any future changes can be made by regulation-making power and do not require reference to Parliament. When the total cost of this subvention is $3 billion, you had better believe that taxpayers think their representatives ought to be able to debate it. So our position is, yes, we do want to be responsible members of the global community; no, we do not want to write a blank cheque to the current executive, or any executive—even us in 2 years—because we think that this is a matter of significant substance, and it deserves Parliament’s time.
Let us just quickly recall what this bill is about. In substance, it will amend the International Finance Agreements Act of 1961. That is the Act that allows the Government of New Zealand to meet its obligations to the International Monetary Fund. This particular bill increases our contribution to that from $1,518 million special drawing rights to $1,592 million. That is approximately $2.9 billion to $3 billion, and that is a lot of money.
The first question that must be asked is why New Zealand is contributing, besides the fact that we are obligated to. The answer to that is very, very clear. If it was ever in doubt that the global economy is interdependent, one need only look at the events of 2008-09 and subsequently, with the collapse of many global finance and derivative markets and many merchant investment banks, and the near freezing of global credit. We missed by a whisker a rerun of the Great Depression, and it was only because of the concerted intervention of central banks and of global financial institutions like the International Monetary Fund and the European Central Bank that we avoided catastrophe. Near catastrophe has not been that great, because we face a decade of deleveraging—the so-called new normal. I guess the good news is that it put the lie to the Washington consensus that we are all neo-liberals now, because we are not, and this side of the House clearly is not, as I look around. That was never the fact, but the myth has been busted.
However, international cooperation is now more needed than ever. One need only look at the current crisis in Europe, which has caused enormous volatility in international equity markets—up about half a percent today, down 2 percent just on Friday—and enormous change from day to day and week to week. The issue that we have seen in the last week in Europe has been really important. Greece has had an election. It has not been able to form a new centre-right Government, because the Greek Parliament overwhelmingly is opposed to the European austerity plan. In France the neo-liberal conservative president has been thrown out and the first socialist president elected in two decades, and with that there is a clear message that France no longer accepts the tenets of austerity economics. Today on Stuff’s website there is an excellent article by Nobel laureate economist Joseph Stiglitz, who says: “seldom is it explained how to square the circle. How can confidence be restored as the crisis economies plunge into recession? How can growth be revived when austerity will almost surely mean a further decrease in aggregate demand, sending output and employment even lower? This we should know by now: markets on their own are not stable. Not only do they repeatedly generate destabilising asset bubbles, but, when demand weakens, forces that exacerbate the downturn come into play.” How right he is. No wonder he got that Nobel Prize. But, of course, this is not a foreign issue. We know we have to contribute to provide strength to the European Central Bank and the IMF, in this case. We know that collective action to head off the consequences of that burst financial bubble are essential, and that is why we are putting in $3 billion of New Zealand taxpayers’ money. It is our underwrite.
But the lessons also come closer to home, and here I want to refer again to the Hon Dr Nick Smith thinking that conservatism was rational. What is rational about chasing your fiscal tail down a long dark tunnel, where every move you make reduces tax revenue, and you have to come back to the country to reduce expenditure, making unemployment worse, taxes worse, and growth worse? You know, it takes a long time to work one’s way out of that long dark tunnel, and New Zealand has been down there before. It was called the Forbes-Coates coalition in the 1930s, and it ended in the election of Michael Joseph Savage, just like in the US the Humphrey experiment ended with Franklin Delano Roosevelt and the New Deal—and he did not muck around. That was a crisis. He came in and said: “We’ve got to put people back to work. Let’s plant some trees.”, and they had the Civilian Conservation Corps. They froze banking transactions because they were in the middle of a crisis, they underwrote the banks, and they got moving from there.
We are not in quite that world now, but the point remains that if reliance had been placed on free markets acting on their own in 1932-34, the US would not have stabilised and been ready to fight World War II. Also, in New Zealand we would have had a longer, darker recession had Michael Joseph Savage and the first Labour Government not restored hope, restored growth, restored direction, and, in modern terms, restored strategy for the New Zealand economy.
That is what is lacking today: a clear plan. Even the business community is expressing its disappointment about the current Government’s lack of direction and plan, and its tendency to become mired in one-off deals for favoured mates. It is now getting its head around the fact that there is likely to be a change in Government in 2½ years’ time. So business is now once again talking to the Labour Opposition in the most serious terms about what our alternative programme will look to. In other words—
David Bennett: No, they’re not.
Hon DAVID CUNLIFFE: In other words, Mr Bennett, the smart money has already moved. The member from Remuera sitting behind you knows what that means. He knows what the smart money moving means. That means a vote of no confidence in this Government, and that vote of no confidence is well and richly deserved.
But this is an international bill and it is about our contribution to a very important international institution, the International Monetary Fund, which is not known as a hotbed of socialism. Yet the International Monetary Fund over the last 5 years has reminded all member Governments that austerity economics will make the crisis worse and it has advised them to invest for growth and jobs. That is what we need to do in New Zealand: invest for growth and jobs. We need a systematic partnership between Government and business that will lift employment, lift output, lift tax revenues, and therefore lift our Budget balance. We cannot continue to chase our economic tail down a long, dark tunnel of austerity economics. It will not work, it does not work, and, as the voters of France have just shown, it will not last.
JOHN HAYES (National—Wairarapa) : It is really unfortunate that after a drubbing in the last election the last speaker, the Hon David Cunliffe, has not worked out that the community does not share that member’s view that money grows on trees, and believes that the Labour Party and its members know better than our communities how to spend their money, how to create jobs, and how to invest in business. I would say to the last speaker that if the business community is talking to the Labour Party, it is probably for the reason of risk mitigation, but there is about 0.1 percent of an opportunity for a Labour Government to take over the Treasury benches in 2 years’ time. Most people in New Zealand can see the benefit of the policies being espoused by John Key and Bill English. They can see that the financial crisis has heightened concerns about sovereign debt sustainability, and they can see that that has happened across many advanced economies. It has reinforced, I think, in many people’s minds the notion that no asset can be viewed as truly safe.
I agree with Mr Cunliffe that recent downgrades of sovereign debt, or of sovereigns previously considered to be virtually riskless, have reaffirmed that even highly valued assets are subject to risk. If we look across the horizon, we can see that sovereign spreads have declined, we have seen that bank funding markets have reopened, and we see also that equity prices have recovered. But the pressure on European banks remains, including from sovereign risk. The weak euro area of growth and the need to strengthen capital cushions to regain investor trust are still very important. I think that some bank deleveraging is still required, but in a way that avoids serious damage to asset prices or credit supply and economic activity. Mr Cunliffe’s formula will cause negative consequences in each of those three areas.
It is very important that we avoid fresh setbacks, because we have got a very difficult and critical path forward that is going to be fraught with political and implementation risk. What is going on here, and a point that no speaker has made yet, is that in this International Finance Agreements Amendment Bill we are adjusting the law in a way that will help New Zealand contribute to the IMF’s efforts to bolster the global firewall against catastrophe. I therefore support this bill, because it will promote stability and it will help move the global economy to a path that inspires confidence. That is critically important for New Zealand and all New Zealanders.
Hon PHIL GOFF (Labour—Mt Roskill) : Labour is supporting this legislation, the International Finance Agreements Amendment Bill. It is supporting it because we are a member of the International Monetary Fund and we are therefore obliged to meet the obligations that we have in that regard. The importance of this fund is such that this bill slightly increases our commitment to underwrite an amount, effectively to around about $3 billion. It is a significant underwriting for a country of our size.
We are not so happy about the changes that allow future updates to the articles to be made by regulation. We do not think that is appropriate, because it means decisions will then be made by the Minister without reference to a debate in this Chamber.
I want to go back to a couple of points that are absolutely incorrect that were made by the Hon Nick Smith. To the accusation that the Opposition parties, including Labour, are anti-global, I want to say to the Hon Nick Smith that it was this Labour Government that negotiated a free-trade agreement with China. I want to say, quite proudly, that after I signed that agreement in the Great Hall of the People in April 2008, in 4 years our trade with China has doubled, and that trade has moved more into balance, with our exports to China going up faster than our imports from that country. This National Government would be in real trouble if we did not have a free-trade agreement with China that enabled us to have as our second-biggest trading partner today a country that is enjoying 10 percent growth a year.
I want to say, additionally, that it was that Labour Government that negotiated the free-trade agreement with Australia and ASEAN, which is one of the fastest-growing economic regions of the world. It was that Labour Government that started the free-trade negotiations for the Trans-Pacific Partnership. So Nick Smith needs to look at his conscience when he makes rubbish statements like “The Labour Party Opposition is anti-global.” This is a party that in Government expanded our horizons and opened up our markets.
I want to say this as well. He talks about reckless policies; I want to tell you what was reckless. Reckless was John Key and Bill English in Opposition, who kept telling us in Government to spend the surplus. During the good years they would have had us spend the surplus on tax cuts for the best-off people. But, no, the Labour Government was smart. The Labour Government actually used those surpluses to pay down the debt to the extent that when the National Government took office the Government accounts were not in the red; they were in the black. We had a net surplus in the Government accounts. It was Bill English who stood up on 12 December and said that we were in a good position to take on the global financial crisis because the Government had prepared for the rainy day. He was not talking about the National Government—it had been in office 4 days. It was the Labour Government that used the money responsibly, and if there is any reason why New Zealand is in a better shape than the Europeans and so many other countries in the world, it is that the Labour Government had said we needed to prepare for the rainy day and that we needed to get our books into shape. The fact that this National Government has been able to borrow up to $300 million a week is because of the sound fiscal position that the Labour Government left National in when it assumed office.
Finally, in the last minute that is left I want to comment on John Hayes’ remark: “no asset can be viewed as truly safe.” We know that. We know that the answer to getting out of the economic position that New Zealand is in is not to sell off our best-performing assets—the power companies that returned, in 2010, $700 million to the New Zealand taxpayer. We will keep those assets and we will use growth to get this country back to the living standards and back to the sound economic position that the Labour Government left it in when National came into office.
We support this bill, but I have got to say that from the last two National speakers I have heard absolutely unadulterated nonsense about the shape of the economy they found and the commitment of this Labour Party, which in Government has been a truly internationalist party that has played its role in the world and has met its obligations.
Dr KENNEDY GRAHAM (Green) : The International Finance Agreements Amendment Bill seeks to do three things. It seeks to amend the articles of agreement of the IMF to do two substantive things: to improve the representation of fast-growing emerging-market countries of the IMF—that is to say, with a view, presumably, to making it more democratic—and, secondly, to double the quota, which is the IMF’s main means of raising funds. In addition, within New Zealand’s parliamentary procedural terms, the bill also seeks to provide for regulation-making power so that future updates can be made by regulation. It has been an interesting debate today. I think we have actually heard some insights from experienced and seasoned colleagues from all sides of the House, although I do suggest that Labour, in the form of David Cunliffe and no doubt all his colleagues, cease and desist from ensuring or insisting that the debate is cast in “bipartisan terms”. It is for over 15 years that we have had an MMP system. It is not a bipartisan issue—foreign policy, defence, trade, and international finance—it is a multiplicity of ideas from a multiplicity of parties. It is about time that National and Labour recognised that and actually paid respect to it.
Following the debate, it seems to me that there has emerged a theme that essentially divides the House on this bill. The Green Party, as my colleague Russel Norman has indicated, will oppose the bill, and therefore there are two views to be brought to bear on this. If you follow the path of reasoning, so to speak, between National, Labour, and New Zealand First on the one side, and the Green Party on the other side, it is interesting to see what we have in common and where we actually diverge. It seems to me there are three propositions, you might say, and I think we are agreed on the first two. The difference is that the Green Party diverges on the third. So let us look at that.
I think we are all agreed on the first proposition, which is that the IMF, along with other major global institutions such as, obviously, the United Nations and the Bretton Woods international financial institutions, is necessary. Nobody is disputing that. Those who claim the other party is anti-global are engaging in shallow rhetoric. We are all recognising the need for sound and legitimate global institutions. Secondly—we are all agreed on this, I think—the IMF, along with those other institutions, has done good work in the past. The Green Party agrees with that too; I think Russel Norman made that clear. So where do we diverge? We diverge on the third point. And what is that? Let me look at National, Labour, and the Greens separately.
National has the following idea: that the IMF still does totally good and sound work, that it is therefore still adequately legitimate, and that the neo-liberal agenda that was brought in during the 1980s and since is sound. There is therefore nothing to dispute, and therefore National will continue to support any changes to it. Look at Labour. It goes down the same critical path, it seems to me—pretty much. It says the IMF still does good work and that it is still legitimate. David Cunliffe denies that the Labour Party adopts a neo-liberal agenda. But when in Government, Labour effectively indicated to the IMF that it agreed with pretty much all its policies through the 1980s and 2000s. It opposes the Order in Council—and David Parker talked about a lack of transparency—but none the less, Labour will support the bill.
The Green Party takes a different turn. It believes that in the 1980s and since—in the 1990s—the IMF took a wrong turn with its neo-liberal agenda, that although it still does good analytical work it is losing its democratic legitimacy now in terms of 21st century global democratic expectations, and that the proposed changes are inadequate to the purpose of democratic reform. Therefore, the Green Party will oppose the bill. If you go back to the 1940s—it depends on your frame of reference—in the mid-1940s it was adequately democratic. In the early 21st century it is not sufficiently democratic. The democratic reforms do not go far enough, ergo the Green Party will oppose the bill. Thank you.
DAVID BENNETT (National—Hamilton East) : In that last speech from the Green Party member Kennedy Graham, I am sure he would have preferred to have 10 minutes so that we could actually hear his reasoning behind why the Green Party has such a problem with the IMF. But I think what it does indicate is that the Green Party just does not have any concept of economic reality. It does not understand what is required in a modern economy. It lives in a cocoon of some world of economic legitimacy that it believes in.
Really, it needs to wake up and smell the roses and work out that you actually need to earn money these days, that a country needs to go out there and pay its way in the world, and that a country can do that and be environmentally friendly as well. The Green Party does not have to revert to communism and to put everybody at one level and think that the world will change for it. That is the Green Party philosophy. I would like to see the Green Party show us an example of where that Green Party philosophy has worked in the world at any point in time in world history, let alone now. I am sure there are many examples where it has been tried, and they are riddled with failure, because it is not the way that the world works and it is not the way that human nature works. The Green Party says that National and Labour are essentially the same and have a neo-liberal agenda, to term it in the way that the Green Party does. Well, that is just—
Paul Goldsmith: You’re not neo-liberal.
DAVID BENNETT: I am certainly not liberal, so to term it in that way is completely inappropriate.
What we do see is that the world needs to wake up, and the message that is coming out of what you are seeing in elections in places like France and through Europe at the moment is still, I think, a failure to recognise that the world has changed and that the modern economies of the world that are stronger are those that are based on core economic fundamentals of growing their economies, earning revenue, and not borrowing too much. Those strong economies like India and China that are coming through, as proposed in their commitments to the IMF, certainly will indicate that, and the numbers speak for themselves. The rhetoric and idealism of the Green Party certainly do not favour that. This is—
Tracey Martin: China’s a communist nation still, isn’t it?
DAVID BENNETT: What was that from New Zealand First?
Tracey Martin: China’s a communist nation still, isn’t it?
DAVID BENNETT: China is a communist nation. That is what the New Zealand First Party says. It is a party that likes dictatorships, anyway. It is quite interesting that that comes from the New Zealand First Party. China is a very successful economy, and it has a very open market on the ground. You would find that if you had a look at the Chinese economy.
This bill, the International Finance Agreements Amendment Bill, is something that is important for New Zealand going forward. It is something that as a Parliament we have wide-ranging support for, which is good. The IMF is not the silver arrow that is going to save the world. The IMF is a body that is part of the integral nature of our world economy. It has a role to play. It will not be big enough or strong enough to save this world, though. What we need, to avoid any economic issues, is good, sound economic management in each country. The New Zealand National Government, along with our political supporting parties, has delivered that good, sound economic management, and that is what will be the success of countries going forward. It will be the factor that will determine the successful economies of the next decade or so, and countries that do not undertake that successful reform of their economy and good, solid management will pay the price in time to come. The environmental prospects of those countries are much worse than those of countries that actually take the right steps at this time. Thank you.
|Ayes 103||New Zealand National 59; New Zealand Labour 34; New Zealand First 8; ACT New Zealand 1; United Future 1.|
|Noes 18||Green Party 14; Māori Party 3; Mana 1.|
|Bill read a first time.|
- Bill referred to the Finance and Expenditure Committee.