Hansard and Journals
International Finance Agreements Amendment Bill — In Committee
[Sitting date: 19 February 2013. Volume:687;Page:7948. Text is incorporated into the Bound Volume.]
International Finance Agreements Amendment Bill
Clause 1 Title
The CHAIRPERSON (Eric Roy): Correct.
Hon DAVID PARKER: Thank you, Mr Chairman. This is our opportunity to make some more general comments, which I will come back to also.
This International Finance Agreements Amendment Bill comes about because there have been changes in the relative economic weight of different nations in the world. The International Monetary Fund bails out countries when they get into difficulty, but because of those changed economic circumstances of some countries that have grown more rapidly than New Zealand in recent times—the likes of China—they can be brought into the international fold and can contribute in a way that they were not able to in yesteryear, and accordingly the percentage that New Zealand contributes to the International Monetary Fund decreases as a percentage of that greater pool. At the same time, the amount that is being drawn in respect of each percent is increasing, because the International Monetary Fund has needed to draw upon more funds than it did previously. So the overall effect for New Zealand is that while the percentage of the total pool that we contribute to goes down, because the overall pool is larger, the overall effect is actually not that much for New Zealand, in that the total amount that we contribute to that larger pool is not greatly affected.
This points to a number of things. Firstly, it shows that relative to growth rates in the rest of the world, New Zealand has not done as well as the average has been in the rest of the world, including developing countries in recent decades. In my opinion, that is largely because our settings have not allowed our export economy to prosper. Indeed, I think that the Minister of Finance was on record at the time he came to power as saying that this was one of New Zealand’s problems: that the economy was too weighted towards consumption in New Zealand and not enough towards either savings or the export of our goods to the rest of the world, which enabled us to pay for our imports and interest. Of course, when a country does not cover the cost of its imports and interest from its exports, it suffers a current account deficit, which means that effectively we are drawing down on the balance sheet of New Zealand, except to the extent that that current account deficit relates to capital expenditure, which improves the net wealth of our country. For decades our current account deficit has not been related purely to capital improvements in New Zealand. It has been a diminution in our balance sheet, and that is effectively one of the reasons why our relative share of the world contribution to the IMF is going down.
The Labour Opposition is voting in favour of this bill, but there is one area where we would prefer it was differently structured, and that relates to the ability to change schedules in the future by Order in Council. The effect of these measures can have a significant fiscal effect on New Zealand, because the amount that can be required pursuant to the international agreement under which the IMF operates—changes to the percentages—can change the amount that New Zealand taxpayers are either liable to guarantee or liable to pony up with in real money. In the Labour Party, we would have said that those changes are better made by way of a parliamentary change to this framework, so that we bring parliamentary attention to this change in the amount that New Zealand has to contribute to the IMF. It does not happen very often that these percentages change, and we do not think that that should be able to be done by Order in Council.
I know that the countervailing argument, which is well covered in the report back from the Finance and Expenditure Committee, is that under the agreement we are effectively bound as an international citizen to go along with changes that are proposed once a certain percentage of the countries that belong to the IMF agree to the changes, because you will never get absolute unanimity amongst all countries in the IMF that the IMF percentages or total amount should change. We agree that that is an appropriate process for the IMF because it is unrealistic to expect unanimity, and we also agree that as a general rule New Zealand should go along with those international agreements, because we benefit from a world that is made better by international cooperation through the likes of the International Monetary Fund.
But that to us is a different question as to whether those changes should come back to Parliament and that we have the opportunity to discuss them. If, for example, New Zealand was suffering the consequences of bullying behaviour in respect of the large economies as a consequence of manipulating their exchange rates, to the detriment of our exchange rates, and this was a serious and long-term problem, there may come a point at which Governments in New Zealand, or Opposition parties, or this Parliament want to express their displeasure at some of those international behaviours by actually taking the chance when we have something like an IMF amendment to the rules to actually say: “Well, if you want us to go along with these international treaties, there has to be a bit of fairness coming the other way.”, in respect of issues that affect the New Zealand economy in an unfair way.
So for those reasons and also because these things are pretty rare, we think that these sorts of amendments ought to be by way of Parliament amending the primary legislation, rather than leaving it to the Government by Order in Council to change the provisions that apply to our contribution through the International Finance Agreements Act 1961, which, as I understand it, has been changed in this way only every decade or so since it was originally enacted. I do not think that is too onerous for this Parliament. I do not think it is so regular as to fall within the formulaic sort of action that should be by way of regulation, rather than parliamentary enactment.
Just on one point, there is an amendment that Brendan Horan has been proposing. Thank you for that amendment on Supplementary Order Paper 175, Mr Horan. We did consider it and you might find it somewhat inconsistent that I argue against the regulation-making power and then not support Mr Horan’s amendment, which is to put some limit on the date on which the relevant section can come into effect, which currently is open-ended and comes into effect when the Order in Council is passed. Although we oppose this being done by regulation, we recognise that if it is to be done by regulation, it is difficult in practice to have an end date to the date on which that regulation will take effect because the Government through no fault of its own does not know when it is that a sufficient number of member countries in the IMF will have ratified the changes in order for them to come into effect. So although we would prefer this to not be done by regulation, if it is to be done by regulation, then it is impractical, in our view, to have a date such as was proposed in good faith by Mr Horan, because it really depends on the actions of other countries to ratify the changes that are being proposed. It would apply once ratified by 85 percent of the countries by value, which effectively means the United States—I think it is the standout country that has to ratify—and we really cannot control when the US does or does not ratify. If that date is delayed because of events that we cannot currently predict, we would still want New Zealand to be able to give effect to the changes that have been agreed at the IMF because we think they are wise and necessary. Thank you.
Hon CLAYTON COSGROVE (Labour) : I will just follow up on some of the comments that my colleague David Parker made. I note that there is a bit of a trend in this Parliament—and I will not digress on to other legislation, apart from a passing mention—where this Government tends to kick critical decisions, as the saying goes, “to kick the can down the road to others”. I agree with my colleague David Parker that although we support the International Finance Agreements Amendment Bill, these are critical decisions that should be dealt with by Parliament, not by simply allowing a delegation to the executive by regulation.
It is interesting that the executive wants to empower itself through regulation to take this decision, yet a week ago we dealt with covered bonds legislation where the Government felt that it was appropriate to kick that can down the road to the Governor of the Reserve Bank, and to allow the Governor of the Reserve Bank to deal with issues in respect of an increase or decrease in the proposed 10 percent covered bond limit. So in that case there was another critical decision the Government was happy to take out of the hands not only of this Parliament but also of the executive—the decision makers, or Cabinet as the executive. Now we find that in respect of this legislation the Government wants to take it out of the hands of Parliament and wants to have it done by the executive, again not allowing parliamentary scrutiny through this Chamber.
We think this is a trend that is not appropriate. Normally, decisions are wrapped up, as in the case of covered bonds, with the need to provide flexibility. Given that that issue would be dealt with infrequently, and a decision-making body such as Cabinet could make decisions at any time, that argument does not stack up. Equally, given the fact that this happens, as my colleague said, very infrequently—in fact, the last time was many years ago, or every 10 years, I think my parliamentary colleague said—I would have thought that there would not be a strong motivation to take that ratification out of the hands of Parliament and to simply do it by regulation.
As I understand it, from my memory as a Minister, regulation is for when things are required quite frequently and also quite rapidly, are of a pretty benign and generic nature, and implement legislation—
Hon David Parker: These proposed changes were agreed in 2008, so there’s no rush.
Hon CLAYTON COSGROVE: As my colleague has just pointed out in my ear, these proposals were agreed to in 2008, and it has taken almost 4 years for this Government to bring this legislation to Parliament to ratify it, so that proves there is not a great rush. You know, the horse is not bolting out of the paddock. There is not a great urgency on this, especially when, I think, equivalent legislation was passed in Australia in 2009 and 2010. It sort of shows the priorities in the management of legislation through the House. So you cannot make an argument that suddenly we need to do this by regulation because we have to do it rapidly.
I will make a couple of other points. We support this legislation. There are those in this Chamber who believe that we should be almost isolationist in our international obligations. I, for one, and the Labour Party disagree with that. We have obligations through the IMF. The IMF has proved, I think, to be relatively effective, with some deficiencies, but we sign up to that collective international responsibility as a global player—one that is not insignificant but one that is not a major global dominator given our size—and we should meet our obligations and our responsibilities and be part of a global village.
I do not subscribe to some sort of ancient theory that we should put a bubble over New Zealand—whether it be for trade, whether it be for foreign affairs, or whether it be for international economic policy—and say to hell with the rest of the world. We have obligations and we have responsibilities. Goodness gracious, the way this Government is going, it may be that we require the assistance of the IMF, as we almost did, I think, 6 days after Muldoon lost the 1984 election. Someone in Treasury said that had we not been English speaking, and given the fact that we had lost $600 million through Muldoon not devaluing, the IMF would have come in and taken over to assist us. So it may be that given the economy that this crowd over the aisle is running, we may indeed need the IMF to help us out.
As evidence of that, it is noteworthy to point out that our contribution to the IMF has been sort of static or decreasing over many years—over the last 4 years—and that is a reflection of the state of our economy, given that it has been contracting to the point where, as we know, our current account deficit is second to Greece’s. Mr English has the silver medal and is about to take the gold medal, because his own department—Treasury—the Reserve Bank, and the IMF, funnily enough, predict that we will be No. 1 sometime this year in terms of the worst current account deficit on this God’s Earth, in the developed world. That will be an interesting achievement. At least Mr English will be able to point to one achievement: the worst economic record in the developed world, according to the IMF, in terms of the current account deficit. We will not go into unemployment, $380 million per week in borrowing at its peak, or any of that stuff. We will just leave it at the economic Olympics. Mr English will be able to mount the dais and collect the gold medal for the worst current account deficit in the developed global community.
It may well be—I hope it never comes to it—that we require, as I say, the IMF’s assistance to help us out, given the economic mismanagement of this crowd. We will support this legislation. It is appropriate that we do continue to meet our international economic obligations. But I agree with Mr Parker when he says that given the lack of urgency this Government has put on this legislation—4 years of dragging the chain to have it ratified—there is no excuse for future changes in these articles not to be ratified by the New Zealand Parliament, and for the proposal that is on the table now, which is that the executive will just flick them through, through regulation, without due parliamentary scrutiny. After all, we may well be called upon as a guarantor or to provide real money. That is a taxpayer obligation and taxpayers’ money, and the taxpayers’ representatives through this parliamentary Chamber have an obligation and a right to scrutinise those decisions prior to ratification.
PAUL GOLDSMITH (National) : It is my pleasure to speak on the International Finance Agreements Amendment Bill, and to follow the former Minister. I was pleased to hear that Labour continues to support this bill. This bill allows for the Government to meet its obligations as a member of the world’s financial institutions, including the IMF. This Government believes that it is important to be an active participant in the international system, whether it is being a member of international organisations such as the UN, regional groups such as the Pacific Island forums, or economic organisations such as the IMF.
New Zealand is a small, isolated economy in the middle of the Pacific, all on our own. We do not have the heft, the numbers, and the size to boss the rest of the world around. We benefit enormously from effective international agreements and organisations, as a global trading nation. We have the most to lose if those understandings begin to unravel.
Of course it has been very concerning over the last few months and years when we have had a lot of concern about currency manipulation by various countries or the way that has been going. That is a very topical issue today, and has been over the past few months. I am pleased that Labour is basically maintaining an orthodox stance when it comes to the IMF and our role there.
I am a little bit more concerned about where Labour is heading on some of the monetary policy side of things. I still do not quite understand what the leader—Mr Shearer, I think his name is—Mr Shearer was talking about when he was going on about the change in monetary policy and about how he was going to change monetary policy, which is what he said in this conference last year, to target the exchange rates. I am not quite sure what he means by that. Does that mean that we are going to move away entirely from focusing on long-run price stability, which just about every economist in the world signs up to as the thing that reserve banks can do? Or is he going to somehow shift the goalposts entirely and undermine the independence of the Reserve Bank and start to put political pressure on the Reserve Bank? If that is the direction that Labour is going, I am concerned on that score, but on this bill that we are talking about today at least we are maintaining a measure of bipartisanship and a measure of general economic orthodoxy.
Just in one or two little details, this bill here changes the articles of agreement in relation to the integral parts of the overall package, as has been heard, reflecting the changing relative economic weight in the global economy, and that is no great source for depression. It is a source of optimism and excitement that over the past decade we have had this magnificent flowering, particularly, of the Chinese and Indian economies—rebalancing that. I am pleased that the IMF is responding to that, and this bill gives the Government the flexibility to be part of a system that effectively recognises the shifts in the global economy. On that basis, I commend this bill to the Committee. Thank you.
ANDREW WILLIAMS (NZ First) : I take a call on behalf of New Zealand First on the International Finance Agreements Amendment Bill. Likewise, New Zealand First will be supporting this bill, but we, similarly, do have some concerns about the aspect that this bill will go straight through to the Executive Council for future approvals, rather than coming back to Parliament. That is somewhat concerning and we would like to see that changed, because we feel that the people of New Zealand deserve to see any international agreements of this nature at least brought back to the people’s House for confirmation, rather than it being done behind closed doors in the Executive Council.
However, having said that, New Zealand First does appreciate the fact that we have to play our part with the International Monetary Fund, and changing the International Finance Agreements Act 1961 to provide for us to become a member of the Multilateral Investment Guarantee Agency, which this bill is putting forward, does make sure that we are part of the club, that we are part of the worldwide global team, that is overseeing the international monetary situation.
In this bill it is noticeable that it has taken quite a number of years to get to this point. The IMF governors first considered this back in 2008 and 2010. We are now in 2013, so it has taken a considerable amount of time to get to this point. As we have heard from other speakers, it does require the ratification of 85 percent of the members for this to go forward, and we do certainly hope that that is forthcoming in the relatively near future amongst all the member countries so that this can be enacted.
In terms of this, we realise that this also has a big impact on developing countries and helping to balance the world scene in terms of assistance from the IMF through developing countries. New Zealand, of course, wants to play its part as a developed country and as part of the OECD in terms of what that assistance and that support provided through the IMF means for the development of the global economy. New Zealand has always been an international player and abides by its international obligations.
These are uncertain times globally, and many of our major markets and many of our major allies and trading partners are going through difficult times. There are problems financially and politically in areas like Europe, the United States, parts of Asia, and other areas where we trade, so it is even more important that a body such as the IMF is able to step in and assist in the different economies where stability is required, where the world economy does depend on there being a level playing field and an ability for all countries to participate in a reasonable manner for the betterment of their individual countries and their peoples.
It is interesting to note, however, that the National Government is supporting this bill and putting this bill forward while, on the other hand, dismissing other recommendations of the IMF. It would seem that it would like to hunt with the hare and go with the hounds, as they say, in terms of the IMF also suggesting to New Zealand that the New Zealand dollar is overvalued by some 10 to 15 percent. I think, Mr Chairperson, you were in the Chair last time when you picked me up on the same point and said that I was getting off the point of the bill. My point last time when I spoke on this bill was the same, which was to say that while New Zealand is participating with the IMF, it should be a two-way street. We should also listen to some of the advice from the IMF in respect of the New Zealand dollar being overvalued, and perhaps next time the IMF does visit New Zealand—and it does regularly send its representatives here—we would hope the Reserve Bank, Treasury, and the Minister of Finance would take heed of some of its suggestions—
The CHAIRPERSON (Eric Roy): Come back to the bill.
ANDREW WILLIAMS: —in that area. Getting back to the bill, as—
The CHAIRPERSON (Eric Roy): Please do.
ANDREW WILLIAMS: —I said, we hope that the New Zealand Government, in putting this bill through, when it finally does come on board, will also recognise the fact that the Parliament of this country is the ultimate determiner of legislation. It is the representative place of the people of New Zealand. We certainly hope that we do not see in future years any back-door arrangements going through in respect of this legislation and in relation to New Zealand’s commitments to the IMF that we could not put hand on heart in this Chamber and say that this was in the interests of New Zealand. We must always put New Zealand first—[Bell rung] As we—
The CHAIRPERSON (Eric Roy): Order! The member has got to call for another call.
Dr DAVID CLARK (Labour—Dunedin North) : Thank you for the opportunity to speak to this bill, and to speak about the international nature of the International Finance Agreements Amendment Bill, in particular, which is where I want to put my attention. Indeed, in the earlier stages of this bill I raised the issue of international reputation and the way in which Māui’s dolphins were not being protected by New Zealand. This Government was the only one in the world that did not propose greater protections for the Māui’s dolphin.
It is difficult to discuss this widely here, obviously, Mr Chair—and I do not intend to because that would be far too wide ranging and you would draw me back into the substance of the bill—but suffice it to say that international reputation matters, and that is one of the reasons why this legislation is very important.
This legislation was debated earlier by Mr Goldsmith, who confessed to being a little confused. His contribution attempted to debate some of the Labour positions on monetary policy, and I am happy to set the record straight but perhaps a little further into my speech, because to start with I actually want to outline some of the important things that Labour supports in this bill.
Economic stability is really the aim of the IMF. It is an important organisation and it is important that New Zealand contributes to that aim for the good of the whole world, for the good of world trade, and for the betterment of all of the citizens of the world. If Parliament did nothing or if it disagreed with the proposed changes to the articles, the changes would, nevertheless, come into force for New Zealand, with effect from the date that they entered into force for all IMF members. The result would be a confusing gap, essentially, between New Zealand legislation and our Treaty obligations.
We want to line up here deliberately, in order to say that we support this legislation. Labour is a responsible internationalist party that believes we should honour the international obligations and agreements that we have entered into. What we do oppose, though, are the changes that allow future updates to the articles to be made by regulation. We think that subverting the normal parliamentary process is a tragedy. We think that this is the kind of thing that ought to come before this Parliament, so that we can debate the merits of changing articles like this in the future. We should not delegate this down to Orders in Council.
Andrew Little: We have to maintain scrutiny.
Dr DAVID CLARK: We need proper scrutiny, as my colleague Andrew Little says from behind, and he is right. Mr Andrew Little is right—absolutely right. We need proper parliamentary scrutiny on these important measures. So although we have no difficulty with the actual substance of this particular change, we do feel uncomfortable with the change to process that allows that regulation-making power essentially to go into the hands of the executive, in a power grab that bypasses the sovereignty of this Parliament and hides things in the background.
Hon David Parker: Unlike this process.
Dr DAVID CLARK: This process that we are going through now is a transparent process. We are all debating it. We are debating the merits, and that is precisely what we lose when we do away with this process.
I guess the Government is embarrassed when it hears scrutiny being poured over many things, and I could go into Skycity deals, which are talked of today, and the report that has come out that suggests that indeed there was a lack of transparency and some unusual process. But we will hear more of that, I am sure, in the media. Or I could go into the way in which the Government opposed asset sale changes in select committee—the way in which it tried to shut down debate because the scrutiny was uncomfortable.
But parliamentary scrutiny is very, very important. It is a basic part of our job here as members of Parliament to make sure that laws are made well and are debated properly, and are made with full information. How can anyone, I ask, oppose that? Why is the Government opposing this scrutiny in future? It does not feel right to me.
I want to ask also why this bill has taken so long to appear in Parliament. Australia passed equivalent legislation in September 2009 and November 2010. This is another example of a Government incapable of managing the parliamentary agenda, and perhaps—
Hon Trevor Mallard: Incapable.
Dr DAVID CLARK: Incapable—incapable, Mr Mallard corrects me. And perhaps this is why we see the Government wishing to push this away from Parliament in future so it has less to manage. I do not think that is a legitimate reason for pushing this out of scrutiny, out of the eyes of the scrutiny of this Parliament.
One begins to wonder whether this is important to the Government, because it is concerned that we may need IMF intervention here. Look, when we see the books we do not think seriously that this is the case, but you do start to wonder—you might not wonder, Mr Chair, but I certainly do—as to whether things are worse behind the scenes than we are really seeing.
What we see clearly, though, is that under the last Labour Government we had 25 percent growth in real GDP. That was a great performance. Under this Government real wages have dropped, and that is concerning. So what is going on when the IMF is projecting for New Zealand the worst current account deficit in the developed world this year? What is going on there with New Zealand? I have a real concern that this Government, behind the scenes, is saying that we need to line up and we need to tick all the boxes with the IMF because one day soon we might need them.
If what we saw from Mr Goldsmith—the confusion around economic policy—is anything to go by, that need might come sooner rather than later, since he is understood to be one of the promising economic minds. He said in his contribution that he did not understand the need for macro-prudential powers to be given to the Reserve Bank so that it might look at issues other than simply inflation when it goes about its business.
To that I could add a range of other things that could be done, were the Government a little more focused on the economy. You know, we need pro-growth tax reform, we need a capital gains tax to neutralise the investment signal, we need research and development tax credits, we need greater KiwiSaver, universal KiwiSaver, so that we have actually got savings to invest in business, and we need procurement policies that are pro - New Zealand rather than in favour of multinationals that are avoiding tax in New Zealand.
We know that the purposes of the IMF in supplying its loans are to help member countries tackle balance of payments problems. Well, we wonder. If that is its first objective, maybe that is why the Government is cosying up to it. New Zealand certainly has a balance of payments problem that this Government has not even started to address. The IMF loans are meant to help member countries stabilise their economies. Well, we have seen an economy that is not performing here in New Zealand; in fact, this Government has the worst economic record of any Government in New Zealand in the last 50 years. That is amazing. It is not good; it is outrageous. So stabilising economies is something the IMF does. The IMF loans are also meant to help restore sustainable economic growth.
All of these things are things that this Government is failing on, so perhaps the real reason that this Government is cosying up to the IMF—that is, agreeing to pass things outside the normal parliamentary process for future changes—is that it is wanting to get cosy with the IMF in case one day Paul Goldsmith becomes the finance Minister.
Andrew Little: Oh, it’ll never happen.
Dr DAVID CLARK: Members behind me say it will never happen. We thought this Government promised a brighter future, and we have seen 17,000 jobs go last year in the manufacturing sector. So we are seeing promises on the one hand and, on the other, a Government that is failing to address the balance of payments problems, failing to stabilise the economy, and failing to restore sustainable economic growth—those very objectives that the IMF loans are meant to help member countries tackle.
Brendan Horan: Mr Speaker—
The CHAIRPERSON (Eric Roy): Just before the member speaks, I note that the member has an amendment to clause 2. We are in debate on clause 1, which permits a slightly wider scope than just the title—some more general comments. The member, of course, is entitled to a call. I am trying to assist him. If you want to make some substantial comments about your Supplementary Order Paper, debate on clause 2 is the place to make them. I call Brendan Horan.
Hon Trevor Mallard: Take two calls. Take one now and one later.
The CHAIRPERSON (Eric Roy): Yes, you are quite entitled to take—
Brendan Horan: I will take the clause 2 call, Mr Chairperson.
The CHAIRPERSON (Eric Roy): Sorry?
Brendan Horan: I will take the clause 2 call.
The CHAIRPERSON (Eric Roy): Away you go. You can take a call now if you wish.
Brendan Horan: No, I will take the call later.
The CHAIRPERSON (Eric Roy): I was not trying to close the member down; I was just trying to assist.
Brendan Horan: Well, Mr Chair, I will take the call.
The CHAIRPERSON (Eric Roy): Brendan Horan, I have given you the call.
I rise to speak to the International Finance Agreements Amendment Bill, and I may just mention a little bit about Supplementary Order Paper 175 standing in my name. As this bill has been written by the Government, the commencement date is entirely open. The bill would come into force on a date set by an Order in Council. That sounds good enough, but will it still be relevant in 10 or 20 years? This is not a hypothetical problem. The Parliamentary Counsel Office annually publishes—
The CHAIRPERSON (Eric Roy): Order! The member has started straight on to clause 2, and this debate is for more general comments. So I suggest he does that or takes another call at the—
BRENDAN HORAN: I will take another call later. Thank you.
ANDREW LITTLE (Labour) : I just want to take the opportunity to talk on this International Finance Agreements Amendment Bill because it is an important piece of legislation and it is one of the expressions of our role and our place as an international player, as a member of the international community, and, indeed, in the operations of the international finance community. That places us in a very important position. We have had a long and august history in the operations of the IMF, including former Ministers of Finance and, indeed, a Prime Minister playing an active role at the very senior levels of it. But it is important with the international institutions of which we are a part that we maintain our currency and that our laws reflect the commitments and the obligations that we enter into when we are part of that international community.
This legislation brings us up to speed. But as colleagues of mine have also raised and questioned, the issue is why now. Why so long after these changes were agreed to by the IMF are we only now getting round to passing the legislation that enables us to support the practical changes? It does raise a very serious question about the efficacy of the management of the legislation and the way this Government addresses these important issues. We should never devalue or deride the international organisations that we are a part of and in which we play an important part. So it is reasonable to expect that when the Government of the day is making commitments or entering into commitments on our behalf that we will update and upgrade the rules that we have to participate in those organisations, that it does so with some sort of political and parliamentary alacrity. But that is not what we have seen on this occasion.
The other issue is the issue about the extent to which this Parliament, as with any Parliament of any member organisation of the IMF, gets to play the role of scrutinising what happens in those institutions in the name of the citizens—in this case, of New Zealand. So to the extent that it is suggested that future changes to the rules of the IMF might be agreed to, or ratified, or done by Order in Council by the Government, the executive, that is something that I think every member of the House discharging their responsibilities as a member of this House would be deeply uncomfortable with. When it comes to playing our role in international fora, although we must be responsible and although we must discharge our obligations, it is not a reason to then take away the proper scrutiny of this House, in discharging its role and its responsibilities towards the citizens of New Zealand, to ensure that the commitments that we enter into are ones that we ought properly to put our names to, that fit our view and our version of democracy and democratic principles, and that are consistent with what we think ought to be contributed to a stable international finance system.
With those notes I simply underscore those two issues: the one of our playing our role, and, secondly, ensuring that this House continues to play its role of providing scrutiny when the Government of the day acts with its representative international hat on in the name of all citizens and in the name of this House, and that this House continues to provide effective scrutiny for it. So, notwithstanding our support of the bill, it is important to draw attention to those important points.
Hon TREVOR MALLARD (Labour—Hutt South) : Labour is supporting this bill, the International Finance Agreements Amendment Bill, although, Mr Chairman, as you will have heard, there is a discussion to go on as to whether the particular part that deals with the matter of regulation is to be supported or not. This bill amends the International Finance Agreements Act of 1961, and it does allow the Government to meet its obligations as a member of various financial institutions, including both the International Monetary Fund and the International Bank for Reconstruction and Development.
The amendment bill provides for New Zealand to recognise the changes to the articles of agreement of the International Monetary Fund, which were agreed to by the IMF governors in 2008 and 2010. I think that in 2008—and I am subject to correction here—one of the governors was the Hon Dr—now Sir—Michael Cullen, and I think that the Hon Bill English has continued that role. New Zealand has quite properly played an active role in the IMF and, unlike a number of the other international financial organisations where Associate Ministers have been delegated to do the representation, New Zealand Ministers of Finance have seen the IMF as a very important organisation and one that has senior representation at the governor level. I think, in fact, that in the history of the previous Government there was only one occasion when the Minister of Finance himself was not able to make it.
The 2008 and 2010 agreements doubled IMF quotas and shifted voting power towards the dynamic, emerging market in developing countries, and effectively did a shift from countries that were overrepresented to those that were under-represented. It was not a massive shift; it was about a 6 percent shift in the balance of power. What results from that is a more representative IMF executive board with advanced European countries reducing their representation in a way that I think it is fair to say is an indication of changes that have occurred certainly from a period well before the IMF and the relative power of Europe and the rest of the world in financial matters. The 2008 and 2010 agreements are separate from the discussions on the G20-backed, US$430 billion, IMF firewall, which has been proposed in recent months. So this is something that predates that sort of arrangement. This legislation will increase New Zealand’s quota commitment to the IMF. However, members of the new arrangements-to-borrow programme, including New Zealand, have agreed that they will take a corresponding decrease in their commitment to that programme. Overall, this means that our commitment to the IMF remains relatively constant, moving only from 1,518 million of the drawing rights to 1,592 million. So it is a change from approximately NZ$2.9 billion to NZ$3 billion.
One of the issues that we have with this bill is the regulation-making power so that, in future, updates can be made by regulation. This power simplifies the process, but in doing so takes away from the Parliament something that has been a traditional right, and that is, where there is potential expenditure, the right of parliamentary control, in this case not through a Budget process but through a treaty-making process. What we want to make sure is that as the IMF goes through its quota formula it is also scheduled to complete the 15th general review of quotas by 2013. These changes are not expected to be accompanied by any changes to the articles of agreement. Governance reviews, which do imply changes to the articles of agreement, are usually completed every 8 years, although we have seen with the 2008 and 2010 changes that on occasion this sort of legislation is called for on a more frequent basis. And, of course, there is no secret to the fact that the global financial crisis contributed to the need for the pretty rapid reaction—or very rapid reaction for the IMF—in 2010, well in advance of the expected 2016 review.
Since the International Finance Agreements Act 1961 came into force in that year, when Keith Holyoake would have been the Prime Minister of New Zealand, it has been amended seven times—in 1966, 1968, 1975, 1976, 1992, 1998, and 2007. Of the seven amendment Acts, four amended the articles of the IMF—those in 1968, 1976, 1992, and 1998—and the three other amendment Acts gave effect to New Zealand’s membership in other financial institutions. It is important to note that once the requisite majority of members have accepted any amendments to the articles, these changes are applied to us whether or not we have passed our legislation. So we are in a relatively unusual situation where there is the possibility of our having an obligation that has not been recognised in New Zealand law. Members on this side of the Committee think that it is important, if we can, to as far as possible align New Zealand law with the obligations that are put on us.
There are additional reasons here, because leading up to the 2008 reforms and then again for the 2010 reforms—and the 2008 reforms are already in effect—we supported both those sets of reforms. Therefore, unless there is a very good reason for the Parliament not doing it, I think it is appropriate for Parliament to ensure that the reforms that we have supported internationally are then reflected in New Zealand law. It is a matter, I think, of keeping our word and honouring our international obligations. Of course there are a lot of countries around that do not do that. In fact, probably the lead country with international obligations in this area, the United States, is the country that is one of the worst at fulfilling its obligations in other areas—the United Nations, for example. But New Zealand is a country where I think there is a—probably multipartisan but certainly—bipartisan approach that where you give your word to an international organisation, or where you are a member of an international organisation and there are obligations, you meet them. Of course, if Parliament did nothing, or if it disagreed with these changes, then the changes would nevertheless come into force for New Zealand with effect from the date that they come into force for all IMF members.
The point that a number of members have made and we will get to—I just want to do an overview of it—is that we are very, very concerned about the suggestion that future updates will be done by regulation. There is a matter of balance in this.
|Ayes 64||New Zealand National 59; Māori Party 3; ACT New Zealand 1; United Future 1.|
|Noes 57||New Zealand Labour 34; Green Party 14; New Zealand First 7; Mana 1; Independent: Horan.|
|Motion agreed to.|
|Ayes 105||New Zealand National 59; New Zealand Labour 34; New Zealand First 7; Māori Party 3; ACT New Zealand 1; United Future 1.|
|Noes 16||Green Party 14; Mana 1; Independent: Horan.|
|Clause 1 agreed to.|
Clause 2 Commencement
BRENDAN HORAN (Independent) : I rise to speak to the International Finance Agreements Amendment Bill and to Supplementary Order Paper 175, standing in my name. As the bill has been written by the Government, the commencement date is entirely open. The bill would come into force on a date set by an Order in Council. That sounds good enough, but the bill lacks the default specified commencement date that is now the usual drafting practice. That means that the bill, when enacted, could wait 10 years or 20 years or even longer before coming into force. Will it still be relevant then?
It is not a hypothetical problem. The Parliamentary Counsel Office annually publishes a list of Acts not yet in force that do not have a specified default commencement date. On the latest list there are 38 such Acts that, in whole or in part, are not in force. The oldest is the Summary Proceedings Amendment Act 1976. So Parliament passed a law 37 years ago, and part of that law is still in limbo. Is that acceptable?
This International Finance Agreements Amendment Bill should not be another of those blank cheque bills. When Parliament passes legislation, the resulting Acts should be brought into force within a reasonable and definite period of time. The Order in Council process allows the Government of the day some flexibility to ensure that the implementation can be conducted to deliver a good public policy process, but surely that flexibility must be backstopped by a default specified commencement date.
I am aware that there are issues around treaty-making powers of Government, the desire to avoid a vote in Parliament, and recent developments since 1996 to provide some opportunities for scrutiny by our Parliament’s select committees. The principal Act is unusual in that it enshrines in New Zealand legislation the nuts and bolts structure of an overseas body—in this case the International Monetary Fund—but that is an argument for another day. Today I am focusing on the issue at hand, and that is if Parliament passes a law—considering the time it takes for Parliament to pass that law, and the work and energy that have gone into it by many groups and parliamentarians—then surely the Government is obliged to reasonably bring it into force.
It is not necessarily an academic debate. Amongst the 38 Acts not brought into force are two domestic violence Acts and two Acts regarding Family Courts. This is a real issue because too many children in New Zealand are children who do not choose to be victims of neglect. These children do not choose to be absent of a loving home. These children do not choose to be victims of violence. This Government continues to leave the legislative solution in limbo, not being brought into force. Ministers are not allocating public funding and are not taking policy decisions.
I draw the House’s attention to the Ministry of Justice’s Care of Children Amendment Act 2008. If we look at the departmental comment around sections 5 to 8, 10 to 13, and 18 to 21 it reads as such: “Relates to agreements between parents and guardians, duty of lawyers and courts with regard to reconciliation and conciliation, disputes between guardians that lead to mediation or counselling, the mediation and counselling process, and appeals to the High Court and Court of Appeal. Will come into force on a date to be appointed by an Order in Council. Needs operational policy development and additional funding to bring it into force.” If we go to the Family Courts Amendment Act 2008, the departmental comment on it is: “Relates to the appointment and powers of Senior Family Court Registrars, and amendments to s 8 inserting ‘mediator’ after ‘counsellor’. Will come into force on a date to be appointed by an Order in Council. Needs operational policy development and additional funding to bring it into force.” One more that I draw the House’s attention to is the Family Proceedings Amendment Act 2008, which “Relates to the counselling and mediation process and rules under the Act,”—and at the end there—“Needs operational policy development and additional funding to bring it into force.”
The National Government is taking advantage of this blank cheque written by previous Parliaments in the form of an open-ended commencement date. I take into account the comments from the Hon David Parker. However, we cannot have open-ended start dates for any Act. Therefore, I commend this amendment to the House.
Dr DAVID CLARK (Labour—Dunedin North) : I rise to speak to clause 2 of the International Finance Agreements Amendment Bill in respect of the commencement, and I also want to speak to Brendan Horan’s Supplementary Order Paper 175, which tries to tackle the challenge that is presented with an international organisation making decisions about when things come into force, and tries to align New Zealand’s decision making with that.
I wish to speak in favour of the current arrangement in the legislation, on the strength that it permits the Government to bring legislation into line as the process naturally runs its course. I think Mr Horan raises a valid point, so I am not suggesting that he is not raising a point worthy of debate, because I think it is worthy of debate. But I think, on balance, it is important to give the Government that flexibility. Our real beef is with removing from the legislation the further consideration of important issues, and those are updates to the articles that will in future be made by regulation.
I would be very interested to hear the Government take a call on why it is not interested in having proper parliamentary scrutiny over those articles. I am sure the Minister in the chair, the Minister for the Environment, will leap to her feet shortly and engage passionately in this debate, because I have seen her following the issues closely and nodding as the points have been made by the Opposition, so I think she is considering those issues, and I do look forward to her response. It is a serious issue that has been raised, and parliamentary scrutiny is something that we should not let go of lightly.
What we are talking about here is legislation that relates to approximately NZ$1.8 billion. This is legislation that we are debating in the House and we are giving it the proper parliamentary scrutiny, but I think it pays to remind ourselves that this is actually a considerable sum of money and a considerable investment that New Zealand makes in its relationship with the IMF. We should not forget and we should not trivialise this, because we largely agree on the principle of supporting the IMF, and we certainly, as Labour and National parties, have agreed by and large that the IMF should exist in order to promote economic growth that is sustainable. I took the Government to task in my earlier address about whether it is really meeting those obligations; whether it really is addressing the balance of payments problem that we have as a country. The IMF projects it to be the worst in the developed world in the current year. This Government as yet has shown no leadership on addressing that problem, so those concerns remain.
When we are talking about NZ$1.8 billion, I think it is worth asking when this should come into effect. What is the proper process for this legislation to come into effect? It seems to me that the provision in this part of the legislation is, in fact, adequate. The subclause that says the Act comes into force after the date on which it receives the Royal assent, “except as provided in subsection (2)”, is an attempt to ensure that those things that need to come in immediately can come into play. The second subclause, which comes into force at a date appointed by the Governor-General by Order in Council, is an attempt to deal with those things that do not need to come into effect immediately but can come into effect later, as and when needed, to line up with the international decision-making process.
On the surface this seems like a very sensible commencement clause, notwithstanding the issues that Mr Horan raised. So Labour will be supporting this clause, as indeed it is supporting the whole bill, because it does support the purposes of the IMF around economic stability, around meeting that balance of trade issue, and around making sure that there is sustainable economic growth in countries—something New Zealand unfortunately is not modelling at present, but which we believe would be of value to all countries. All growing countries can provide the necessary services to their citizens that make them able to maximise their potential.
So Labour will be supporting this bill. We question the Government’s record on some of these issues, but we support the intent of this legislation, which is to meet our international obligations on this matter.
Hon DAVID PARKER (Labour) : I just want to reiterate why it is that we will not be supporting Brendan Horan’s proposed amendment set out on Supplementary Order Paper 175 to clause 2, which changes the open-ended nature of clause 2(2). The main provisions, the substantive provisions, of this bill, the International Finance Agreements Amendment Bill, are contained in clauses 5 and 6, which refer to amendments to the existing schedule 1 of the International Finance Agreements Act, and that schedule sets out New Zealand’s current obligations vis-à-vis the IMF. This bill changes those provisions in the way that is set out in schedule 1 to this amendment bill and schedule 2 to this amendment bill. Schedule 1 of this amendment bill gives effect to the 2008 reforms to the IMF, which were agreed then but which have yet to be implemented in New Zealand law, even though we have agreed to them at the international forum. The date on which the 2008 reforms can and should come into effect is when this legislation is given effect through receiving the Royal assent, and that is what the effect is of clause 2(1). It says that the Act will come into force on the day on which it receives the Royal assent, except to the extent provided in subclause (2), and that subclause (2) then takes out of that general proposition the provisions in clause 6 so that clause 6 does not come into effect on the date when the legislation receives the Royal assent but, rather, comes into effect on such later date as is given effect by Order in Council.
For the Labour Party, that is appropriate in the circumstances because the clause 6 provisions are the 2010 reforms, and we are not ready to have them brought into effect yet, and so it is appropriate that Parliament authorises them being brought into effect at a later date. This is slightly different from the concern that we have about future changes to these provisions in the governing Act, which set out New Zealand’s obligations to the IMF. We think they should not be able to be changed by statutory regulation. We are happy that the current changes, which are agreed through this legislation, through a proper process, do not come into effect in part until the Government passes an Order in Council pursuant to clause 2(2). Therefore, we will be supporting this clause.
- The question was put that the amendment set out on Supplementary Order Paper 175 in the name of Brendan Horan to clause 2 be agreed to.
- Amendment not agreed to.
|Ayes 106||New Zealand National 59; New Zealand Labour 34; New Zealand First 7; Māori Party 3; ACT New Zealand 1; United Future 1; Independent: Horan.|
|Noes 15||Green Party 14; Mana 1.|
|Clause 2 agreed to.|
Clause 3 Principal Act amended
Hon DAVID PARKER (Labour) : The Labour Party will be supporting clause 3 of this bill, which amends the International Finance Agreements Act 1961. We are not, in the Labour Party, selective in the advice that we take from the International Monetary Fund. I think it is appropriate at this point to record that although the current Government is giving effect to the changes that are recommended by the IMF Board of Governors to the amounts to be contributed to the IMF by different countries, it seems to be rejecting advice that it is getting from the IMF on other quarters. The International Monetary Fund has moved on considerably in relation to settings that are important for an open, small economy such as New Zealand’s. It has noted that countries like New Zealand are suffering the vicissitudes of changing practice around the world arising from currency manipulation and changing monetary policy settings in other countries in the world. Indeed, Mr Olivier Blanchard, the chief economist at the International Monetary Fund, is on record as saying that countries that are performing better than New Zealand in respect of their external balance—that is, their balance with the rest of the world—are using more than one instrument to target more than one objective, rather than as New Zealand does, which is to effectively use the official cash rate to control inflationary pressures in the economy to the exclusion of virtually everything else, pursuant to legislation that requires the Reserve Bank to give primacy to the targeting of inflation ahead of other important aspects of economic management like the exchange rate. Rather than the New Zealand regime, other countries are pursuing an alternative path.
Even if the path that originally was taken by New Zealand was necessary to stamp out inflation, which was so entrenched in the 1970s and early 1980s, the primacy that is still given in New Zealand to targeting inflation ahead of other matters of economic management is now causing more harm than good. So, although the theoretical objectives of inflation targeting were right for their day, their time has passed. Even if they were right—if everyone in the world was still pursuing that same course—when other countries in the world, as has been noted by the International Monetary Fund, are pursuing a different course, then the effects on a country like New Zealand are that we suffer the consequences of their policy until and unless we change our own. At the moment, because New Zealand does not change the settings under this Government, and just puts up with what we had previously, we are seeing a narrowing of our export base.
Members will recall that Bill English, and the National Government at the time it was elected, said that the primary objective was to rebalance the economy away from consumption towards savings in export growth.
Dr David Clark: How’re we doing?
Hon DAVID PARKER: Not well, Dr Clark, not well. New Zealand this year is predicted to have the worst current account deficit in the Western World. The National Government jumps up and says “Well, the current account deficit is not as bad as it was for 2 years under the prior Labour Government”—
John Hayes: Stick to the bill.
Hon DAVID PARKER: I beg your pardon?
John Hayes: Stick to the bill.
Hon DAVID PARKER: I am, actually. I am saying that the Government is a bit inconsistent in its acceptance of the help and advice that comes from the International Monetary Fund. The Government says that because the current account deficit has been higher, it has somehow fixed the problem. The problem for the Government is that it has not. The current account deficit is getting worse—
John Hayes: Look at unemployment.
Hon DAVID PARKER: I beg your pardon? Unemployment? Unemployment has got worse as well, actually.
John Hayes: Why’s the exchange rate so high?
Hon DAVID PARKER: The exchange rate is—
John Hayes: The economy’s being managed well.
Hon DAVID PARKER: The exchange rate is so high, in part, Mr Hayes, because New Zealand refuses to react to the change in world practice, where other countries are actively intervening in their economies so as to maintain a competitive exchange rate for the benefit of their exporters. New Zealand is not doing that. As a consequence, we hear them say “Oh, well, look, manufacturing is OK.” Actually, manufacturing is OK in the primary sector—there are still as many litres of milk to be processed and still as many livestock to be processed—but outside of our primary sector our exporters are not thriving. Construction manufacturing is coming again in New Zealand on the back of the Christchurch rebuild, but our rebalance towards exports—
Dr DAVID CLARK (Labour—Dunedin North) : I want to build on what my colleague Mr Parker was saying, because I think he makes the valid point that the IMF advice is generally pretty good. What we have here is a Government that picks and chooses which advice it chooses to implement and which it does not. A good example is a capital gains tax. This Government has, I am sure, heard or read from the IMF that it suggests that a capital gains tax is a sensible way forward.
John Hayes: No, it’s not.
Dr DAVID CLARK: New Zealand is one of only three OECD countries that do not currently have a capital gains tax—Mr Hayes knows that—and we know that one of those three, Switzerland, is a tax haven, in effect. Another is Turkey, and then there is little old New Zealand. Those are the three countries in the Western World that do not have a capital gains tax. The unfortunate thing with the absence of a capital gains tax in New Zealand at the moment is that it distorts investment decisions. It is part of the picture as to why our manufacturing sector is losing jobs. The primary sector is fine, because, indeed, the investment bias is towards land and capital assets. We have farmers who are farming for capital gain, which, unfortunately, they can realise only at the end of their careers, and that is an unfortunate incentive.
John Hayes: It’s not a bad time to realise it.
Dr DAVID CLARK: There are lot of farmers whom I have spoken to who say it would be better—it would be better—to be farming on the basis of a competitive environment, where the farmers who farmed best made the best profits, not those who amassed the most capital gain over their lifetimes; rather, those who adopted the farm practices here and now that generated returns and that participated in international strategies that saw New Zealand’s product rise up the value chain. But, instead, we have a lot of farmers who are resigned to the fact that this Government is condemning them to farming for capital gains that they will not realise until they retire, or, if they are old and tired and they die on the job, that they will never see. Their families might get some benefit through the capital gains. So there are a lot of farmers who see that the current situation is not ideal and who would actually welcome a capital gains tax, because they understand the importance of growing our economy and having an economy that rewards those who engage in effective business practices here and now.
Of course, with a more neutral investment signal we will also see people weighing up decisions as to whether they take what is, effectively, a tax break, in investing in residential property, or whether they choose instead to use their expertise in the business sector, to invest in good manufacturing industries and in other good, innovative business ideas. We in the Labour Party want more export jobs.
This National Government seems to have its hands off the wheel when it comes to the economy, and we see the results of that: the worst economic growth record of any Government in the last 50 years. This Government has a shocking—a shocking—record on economic growth, and I contend in the context of this debate that that is precisely because it chooses what advice from the IMF it will put into practice, what it will sign up to, and what it will not sign up to. By cherry-picking according to immediate political considerations, it misses the wider objective of economic growth for the benefit of all of New Zealand’s citizens. A capital gains tax is illustrative of this approach by the Government and the costs on New Zealand. We see real wages dropping in New Zealand. We see manufacturing jobs going. We see unemployment as high as it was in the 1990s, when we last had a National Government, and we see a shocking balance of trade that is projected to be the worst in the developed world next year, all because of decisions—
Hon David Parker: Balance of payments.
Dr DAVID CLARK: Balance of payments, Mr Parker corrects me, and he is right. It is projected to be the worst balance of payments in the Western World. And it is because Mr Hayes and others like him are not comfortable with entertaining the solutions from the IMF that do not suit their current political narrative. At least, I have got to assume that. I have got to assume there is good intention in there somewhere, but it is not immediately obvious why the National Party seems to be against business, seems to be against manufacturing, and seems to be against growing the economy. This Government talks about business, but it seems to do nothing that supports New Zealand businesses, and New Zealand businesses, as we know, are crying out.
|Ayes 106||New Zealand National 59; New Zealand Labour 34; New Zealand First 7; Māori Party 3; ACT New Zealand 1; United Future 1; Independent: Horan.|
|Noes 15||Green Party 14; Mana 1.|
|Clause 3 agreed to.|
Clause 4 New section 10 inserted
Eugenie Sage: Yes.
Hon DAVID PARKER: You know, in an international world, where we rely upon international organisations like the IMF to make the world a better place, I am surprised that the Greens are voting against this legislation, the International Finance Agreements Amendment Bill. In fact, I have to say that I regard that as fringe behaviour. I really do. I am surprised that the Greens are not supporting what is a key international institution. Not all of the advice that the IMF has given over the years to developing countries as to how they should conduct their affairs has been correct—I am not saying that. I can see why the Greens would be critical of some of the advice that was given to developing countries, you know, for a Government to move out of all provision, etc., and some of the advice that was given to Russia, for example, as it came out of Communism was terrible advice and led to the rise of oligarchs in a way that would have been avoided had the transition to democracy been better. But to say that the IMF should not be able to change its percentage contributions in respect of these important funds that are increasingly coming from developing countries, like China, which have emerged as economic powerhouses, and not to update the IMF legislation to reflect that change, I think, is wrong and fringe.
Having said that, I shall deal with clause 4. I have an amendment before the Committee to delete this clause, and I want to explain why. The legislation that this bill updates was originally passed in 1961. Since then, there have been a number of amendments to the International Finance Agreements Act when the articles of the IMF have changed, but they are not so onerous as to not have been within the ability of this Parliament to consider and debate on their merits. Since the Act originally came into force in 1961, articles of the IMF have been changed on only four occasions before this. That was in 1968, 1976, 1992, and 1998, plus there is this change. Those changes can have significant long-term effects. I understand that even if the legislation does not come before Parliament, the effect of the Government, which has authority to represent us at IMF meetings, agreeing to a change in quota—or even if it disagreed and the requisite number of members did agree to a change—is that New Zealand is bound to go along with it, unless it pulls out of the IMF. I understand that. But I do not think that means that these changes, when they are coming about, should not be debated by this Parliament. I think one of the reasons that is important is that—for the very reasons that we have heard in this debate—Governments can be selective about the advice that they take from the IMF, and we actually do not get all that many occasions to debate the inconsistency of positions taken and why it is that a Government might be taking this bit of advice but not pursuing a capital gains tax or not pursuing changes to monetary policy, etc. So I think that these sorts of debates are useful and important in Parliament.
That is why we in the Labour Party think that when our arrangements with the IMF are changed in this fashion, they should be debated in Parliament. They are not normally urgent. It is not like we have to disrupt urgent business and go into consideration of the IMF changes; we can put it on the Order Paper and consider it when the Government has a bit of time. That is evidenced by the fact that these changes—sorry, there are two sets of changes here, one of which relates to an agreement in 2008 at the IMF and the other to one in 2010. Here we are 5 years later just putting those into effect in legislation, or getting close to finalising it. It is not like this has to be done in a rush, which disrupts normal parliamentary business. But it should have parliamentary scrutiny and it should, in accordance with due process, come before us.
Clause 4 says that in the future it does not have to come before us. We are going to abandon the practice that we have had since 1961, which is, whenever there is a significant change to our arrangements with the IMF, Parliament gets a chance to debate it. Well, all of a sudden the Government says: “Well, we don’t need to do that in the future. The Government will just give effect to that by way of Order in Council.” So the scrutiny that we have at the select committee and the discussions that we have in this Parliament will not be necessary in the future; the Government will just do it all by Order in Council, and we will not have the opportunity to debate it. I think that is wrong. The Labour Party thinks that is wrong. We do not think that schedules 1, 2, 3 and 7 of the principal Act, schedules 1 and 2 of the International Finance Agreements Amendment Act 1966, or schedule 2 of the amendment Act—none of those schedules—ought to be able to be amended by way of Order in Council.
Just to put that into perspective as to what the financial consequences of these changes can be, currently New Zealand has to pay up 25 percent of its commitment to the IMF in paid-up capital to the IMF, and the IMF uses that for various things. In addition, we can have capital called up from us, up to the total of our quota, and there are other related lending arrangements, where, when the IMF calls on us to make good on our promise to help other countries by lending direct to countries that need a hand for a while, we have to do that within a set period. If that amount changes dramatically, that does have dollar consequences for our country. Indeed, when changes are made to increase the amount in the IMF fund but New Zealand’s total commitment does not go up, that causes us to reflect on the fact that, relative to the size of the world economy, we have not been growing; we have actually been getting a smaller share of the total world economy, rather than a greater one. That in itself is something that should cause us in New Zealand to reflect on whether we have our economic settings right.
For those reasons, the Labour Party is proposing an amendment to this clause. We are actually proposing that this clause not proceed. The provisions of the amendment bill set out in the schedules would still have effect, so we are not frustrating the intent of the legislation. We are just saying that if it needs to be changed again in the future, it should come to Parliament to do that, rather than it being done by statutory regulation.
The CHAIRPERSON (Lindsay Tisch): Three Davids.
Hon DAVID CUNLIFFE: Almost certainly—in triplicate. I rise to support the amendment proposed by my honourable colleague David Parker to remove the right for the executive by Order in Council to pass amendments to our contribution. One has only to go to the total liabilities, which total NZ$1.8 billion, in terms of New Zealand’s liabilities to the IMF to understand that this is a serious matter that requires proper parliamentary scrutiny. There has been a tendency for the Government to dispose of little matters like parliamentary scrutiny—to shuffle things through the Cabinet process—as is proposed in clause 4 of this International Finance Agreements Amendment Bill. This clause is fundamentally unnecessary. It is inappropriate given the size of our liabilities and it is inappropriate given the international importance of the institution that we are talking about, the International Monetary Fund.
In that regard, may I provide some context, which I am sure my colleagues will have noted in their earlier contributions, but, as this is my first opportunity, I wish to raise it now. That is to note that the IMF has fulfilled its role not only as a lender of last resort to developing and distressed economies but also as a contributor of record to international economic debate. What has been remarkable is the way the nature of the IMF’s advice has changed during the last decade in the run-up to, during, and in the wake of the global financial crisis. I can do no better than to point to this book—which has been provided by my colleague David Parker—In the Wake of the Crisis, which is edited by Olivier Blanchard, the chief economist of the IMF. I refer also to two IMF working papers, which I will later seek leave to table—one on growth forecasts and fiscal multipliers and one on the basic mechanisms and appropriate policies for dealing with the global financial crisis.
What is remarkable about these papers is that the IMF has shifted its views. The IMF is now saying that too much austerity prolongs recession and will inhibit the global recovery from the global financial crisis. In other words, its traditional mantra of “Cut costs, run surpluses” has been rescinded. And what it explicitly recognises is that fiscal parameters must be seen in relation to what economists call the output gap. Is there sufficient spending power, sufficient demand in the economy, from mums and dads, from private businesses, and from the Government to keep everybody working and paying taxes and to keep the ball rolling, as it were? What the IMF argues cogently in this paper is that if there is insufficient demand because Governments retrench too quickly, that can become a self-fulfilling prophecy. Governments get less tax revenue, because there is less economic activity, and they then run bigger deficits and fail to make their fiscal targets. They chase their own cuts down a fiscal drainpipe, and that is—
John Hayes: It’s not happening here. It’s not happening here, David.
Hon DAVID CUNLIFFE: The financial genius in the back row is saying that it is not happening here, but, in fact, it is, because the Government’s revenue targets have reduced over the last year and it has had to increase revenue through a new fuel tax, a fuel excise. Even so, the Government is only just, if at all, going to meet its surplus target for 2014-15. And you will notice that both Mr English and Mr Key are backing off their earlier categorical language about that. They are finding out, if you like, the hard way what the IMF has been saying to the world in these papers: do not cut your own throat. The job of a Government is not just to balance its own books; the job of a modern Government is to balance its country’s books, to provide jobs, and to provide turnover to ensure that the economy is healthy, that it can balance its external accounts, and that it has an appropriate monetary policy.
If I might turn to this contribution by the IMF chief economist, he has said: “We have moved from a one-target, one-instrument world to one where there are many targets and many instruments.” Well, why has nobody told the Governor of the New Zealand Reserve Bank? Mr Wheeler’s early comments, much as we respect the independence of his office, I have to say, sound like he is going back to Reaganomics. We need a modern monetary policy, and the IMF is telling us that a multi-policy, multi-target, multi-instrument framework is best practice, not the single focus on inflation with the single tool of the official cash rate.
Finally, in that regard, I would note that history is repeating itself all over again. We have flagging productivity growth, high unemployment, and a runaway property market. And what is the Government’s monetary policy response? One day we will do nothing; another day we might raise the official cash rate. But there is nothing that is sector specific, no use of macro-prudential tools like loan-to-value ratios or reserve asset ratios, nothing that shows that it is learning the lessons published by the IMF, but it is happy to rescind the right of this Parliament to comment on a billion dollars plus in financial liability to the same organisation. How is that right?
Support Mr Parker’s amendment, remove clause 4, maintain the right of this Parliament to oversight on our liabilities to the IMF, give the people of New Zealand the opportunity to hear why we do it in the first place, and make sure that we are a proper global citizen. We are fortunate that the IMF has changed its tune, that it is playing a role in fundamentally shifting the international economic debate from 1980s monetarist orthodoxy—high-class neo-liberalism, if you like—to something that is a little more balanced. That is not to say that the IMF has gone to finishing school with Karl Marx—that ain’t gonna happen—but at least it is more moderate than it was. So, in conclusion, support Mr Parker’s amendment, strike clause 4, maintain oversight of our contributions to the IMF, and take seriously the billion-dollar liability—it is almost as big as the Government has spent on South Canterbury Finance.
Dr DAVID CLARK (Labour—Dunedin North) : Thank you for the opportunity to speak on clause 4 of the International Finance Agreements Amendment Bill. I wish to speak, of course, to Mr Parker’s amendment and to take up his position—or his concern, at least—on the Greens’ position on this. I want really to just raise the question and invite a contribution from the Green Party, because this is an important issue. The debate we are having, it seems to me, is about some really big economic issues that are affecting the world. The way in which the IMF provides advice and who takes it is stuff that has been canvassed in the Committee stage, as well as how we as a country respond to that advice. We talked about whether a capital gains tax is useful or not; I did in a previous contribution. Mr Hayes interjected that he thought it was not. And the debate has gone on. The National Party, notably, has not contributed much to this debate either, and I find that concerning.
I am enjoying, I guess, at the same time, the contributions of my colleagues. David Cunliffe and David Parker have both explained why this legislation is important, but also why clause 4 should be taken out of the legislation, because it fails to allow in the future for proper parliamentary scrutiny of changes. David Parker briefly covered those times when the Articles of Agreement of the International Monetary Fund have been amended. I actually have in front of me the schedule of all of the significant changes in the history of the IMF that might fall under that. In 1968 we see that the articles of agreement were repealed. It was not then until 1976 that the articles of agreement were updated again. That is an 8-year gap. Only once in 8 years did our Parliament get to debate the Articles of Agreement of the International Monetary Fund.
Those articles of agreement stayed in place from 1976 to 1992, and it was not then until 1992, I imagine, that this Parliament debated again whether they should be changed, where New Zealand stood on international aid and development aid, how the world’s economy should be encouraged or not in line with IMF advice, where New Zealand stood, what New Zealand’s contribution should be, and whether we were in agreement with the expectations on us for contributions for helping stressed or developing countries to improve their economies, to stabilise them, and to make sure they were growing in a sustainable fashion. And then after 1992 the next time the articles of agreement came up was in 1998. So there was a 6-year gap. That is two terms of Parliament—and for some of these it is longer—where these issues have not been debated. So, once again, from 1998 we are now through to 2013. That is a huge gap. That is a huge period of time that has elapsed when we did not have the opportunity to discuss these articles of agreement and how Parliament should handle them, and now we are proposing to not have this debate at all. It certainly cannot be said that this debate happens too often, so I am concerned that parties in this Parliament are not taking the opportunity, when the last time they had it was in 1998.
We are talking about $1.8 billion of New Zealand funds, and it seems to me that when the National Party contribution to this debate is limited to Mr Hayes’ insights around the capital gains tax, that is not a full debate on the issue—with all due respect to Mr Hayes. And when we do not hear anything from the Greens about international economic issues in a debate that we have not had since 1998—in fact, if I am right, that presumably means the Greens have not contributed to this debate ever—we do not know where they stand on this, other than that they oppose it in general. Perhaps, if they were uncomfortable with the removal of this parliamentary scrutiny, they could have moved an amendment, the same as my colleague Mr Parker has moved, to say that they think these issues should be debated in Parliament, because they are important issues, which affect significant amounts of money, but also because this is a matter of principle.
This is a matter of principle as to whether New Zealand chooses to participate in the economic efforts to underpin the world economy, and whether it chooses to do that in a timely fashion—this legislation, I will remind the Committee, is being rushed through now because it was not looking like being ready in time, and suddenly it has come back on the Order Paper to get it pushed through Parliament—or whether New Zealand is going to drag its heels. Where New Zealand sits in the international community, it seems to me, is an important point to be debating. I hope that the challenge that I have issued will be taken up by members opposite and hopefully also by the Green Party, to outline their positions in respect of this bill, in respect of taxpayers’ money—the $1.8 billion that New Zealand commits to world development—and whether, for the Green Party, it thinks that supporting developed countries out of poverty is a priority or not. Is that the point of principle that is being debated here? The National Party, it seems to me, does generally support these things. We have supported it in a bilateral fashion, but we differ here, of course, on whether these things should be passed by Order in Council or whether they should receive the full parliamentary scrutiny.
So Mr Parker’s amendment would make sure that Parliament did debate these issues when they come up every 13 years, or every 20 years, or every 6 years—I think that is the shortest gap. It would make sure that we do have that debate. I think that it, therefore, is a very important amendment, and I would urge all members of this Committee to support it. I urge those members of the National Party opposite to examine their consciences, to see whether they really believe that parliamentary scrutiny should be applied to this legislation, or whether they are comfortable with a backroom deal being done on economic matters where the world is concerned. I suspect that if members opposite do examine their consciences, they may realise that the way this legislation is worded could be improved by simply adopting Mr Parker’s amendment that we remove clause 4 from the legislation, and simply bring this debate back to the House when it next comes up. That may be in 10 years’ time; it may be in 15 years’ time. Then we will see what spread we have in Parliament and what the different parties represented here think on these issues. As I made the point, the Greens were not here to have a debate the last time these issues were debated. They did not exist as a political party in the parliamentary realm—
Holly Walker: Jeanette and Rod were here.
Dr DAVID CLARK: Elected in what year?
Holly Walker: 1997.
Dr DAVID CLARK: In 1997 the Greens were first represented?
Holly Walker: Jeanette and Rod were both in here.
Dr DAVID CLARK: We shall examine the Hansard to see what the contributions were there and whether the Greens have updated their thinking since then. I think it is an important thing to be debating in this Chamber. This is a huge commitment from New Zealand. It is a matter of principle and it is a large amount of money, so it is worthy of the time of this House, even if we, by and large, agree on the principles, and even if across the House we agree on the principles of engaging in the IMF’s business and the principle of supporting and stabilising the world’s economy.
So with that, I recommend Mr Parker’s amendment to the Committee and urge all members to examine their consciences, to participate in this debate, and to make sure that we have some robust legislation that enables the proper scrutiny of these matters in our House in years to come.
ANDREW LITTLE (Labour) : This typescript amendment lodged by my colleague Mr Parker is a very important one. We do not often debate constitutional principles in this Chamber, and certainly outside of it. We understand, most of us who are here, our role as parliamentarians, which is to pass laws and provide some scrutiny and oversight of the Government of the day when it is putting up laws, and, to some extent, to initiate laws ourselves. But when we are faced with a proposed law such as this, which takes away the scrutiny of Parliament, then we have to tread and approach it extraordinarily cautiously, more so when it is about the international obligations that we enter into. All of the international agreements that we enter into, if they have any force either internationally or locally, must come to this House for ratification. That is standard international law. So it defies explanation when we see in this legislation an agreement that, admittedly, we all already have entered into, but an agreement that, if the Government of the day wishes to amend it or wishes to agree to amend it in the international forum in which it operates, should not come back to this House. There is no explanation, nor could there be, for that course of action. So Mr Parker’s amendment is absolutely crucial when it comes to constitutional principles and the way we operate.
We do not have the checks and balances that many other countries—many other members of the IMF—have. We do not have a second House to keep the executive in check. We do not have court oversight—Supreme Court or Court of Appeal or High Court oversight—of the law-making functions of this Parliament. That is the Westminster way. That is the Westminster system, and, subject to what the current lengthy constitutional review might come up with, it is unlikely that that would change. So the only check and balance that we have on the power of the executive and what it does in the name of all New Zealanders, whether locally or on the international stage, is what happens in this Parliament. It is the ability for parliamentarians of whatever colour, of whatever origin, of whatever part of the country to come together, whether in this House or in the select committees, to provide oversight and scrutiny of what the executive or any member of it has done, or is doing, or has agreed to—in this case, in the very important international forum of the IMF.
When the legislation says that the Government of the day, can by Order in Council, agree to, register, and record amendments to the important documents that make up our membership of the IMF—the fund agreement, the bank agreement, the text of the corporation agreement, and the text of the convention—when you start getting down to that end, where things in any other context and in any other forum would require ratification or validation by this Parliament, then it is time to stop where we are and take a step back. For that reason, Labour is saying that this is a step too far by the executive. When it comes to putting in the hands of the executive the power to make these changes—without the scrutiny and oversight of Parliament, without the ability for this Parliament and members of it to debate it, to come up with alternatives, and to challenge unwise steps—then that is bordering on, if not indeed usurping, the power of this Parliament, and certainly the members in it.
So we say boldly and unequivocally that clause 4, which is amending section 10 of the International Finance Agreements Act 1961, is simply a step too far. It should not proceed at all, and doing that does not compromise the real objective of this bill, which is to allow the changes that have been agreed to so far to proceed and to have the approval of this Committee. But the idea that upon approving recently—when I say recently, I mean in the last 5 years, of course—agreed changes to the IMF statutes and the IMF texts, to say that having agreed on that we should then give carte blanche power to the executive to agree to changes—
|Ayes 64||New Zealand National 59; Māori Party 3; ACT New Zealand 1; United Future 1.|
|Noes 57||New Zealand Labour 34; Green Party 14; New Zealand First 7; Mana 1; Independent: Horan.|
|Motion agreed to.|
The CHAIRPERSON (Lindsay Tisch): We have a typescript amendment in the name of the Hon David Parker to delete clause 4. This is out of order as a direct negative of the question, and the proper course of action in this case is for the party to vote against clause 4. This is covered by McGee on page 217 and Speakers’ rulings 59/6 and 115/6.
|Ayes 64||New Zealand National 59; Māori Party 3; ACT New Zealand 1; United Future 1.|
|Noes 57||New Zealand Labour 34; Green Party 14; New Zealand First 7; Mana 1; Independent: Horan.|
|Clause 4 agreed to.|
Clause 5 Schedule 1 amended (implementing 2008 reforms)
Hon DAVID PARKER (Labour) : I am pleased to take a call in favour of clause 5. Clause 5 is one of the operative parts of the International Finance Agreements Amendment Bill in that it gives effect to changes to the first schedule of the International Finance Agreements Act 1961. That first schedule is amended in the manner that is set out in schedule 1 of this amendment bill. It is interesting to go back to the 1961 Act and see that what we are dealing with here is, effectively, the constitution of the IMF, the International Monetary Fund.
The IMF, of course, in case we forget, is one of the institutions that was formed as a consequence of the rise in Fascism, the rise in Communism, and World War II that resulted from the economic policies of the world, particularly in the 1920s and the 1930s, when the downward spiral that various countries were in could not be recovered under the economic management of the time and the injustice and deprivation that was suffered by so many peoples around the world led to war. At the end of World War II there was a meeting of the United Nations called the United Nations Monetary and Financial Conference, which was held in July 1944, towards the end of the war. Someone else might be able to tell me whether this is correct—I think it might have been either there or at the subsequent conference at Bretton Woods, in the United States, that not only did the international community agree that it needed to reform some of the matters relating to international monetary policy but also the conference led to the formation of some of the financial institutions that were intended to both pursue reconstruction after the war and rebuild the economies in Europe and Asia that had been particularly decimated by the war, and also to form the International Monetary Fund, with functions that are set out in this first schedule that we are amending.
It is interesting to see that the purposes of the International Monetary Fund are set out in the first article of this schedule that we are amending. They include: “To promote international monetary cooperation through a permanent institution which provides the machinery for consultation and collaboration on international monetary problems … To facilitate the expansion and balanced growth of international trade, and to contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy.”, and “To promote exchange stability, to maintain orderly exchange arrangements among members, and to avoid competitive exchange depreciation.” I am going to emphasise that last matter. One of the purposes of the IMF was and is “to avoid competitive exchange depreciation.” In that regard, it falls on me to again remind the Committee that whilst we are considering amendments to parts of this schedule, we have a Government that is ignoring other lines of advice that are coming out of the IMF that show that existing monetary policy is no longer working for New Zealand’s best interests. We are not avoiding the deleterious effect of competitive devaluation abroad, and it is time for New Zealand to move beyond giving primacy to inflation targeting and to manage other important aspects of management.
Of course, this legislation does not touch on this, because the advice function of the IMF is unaffected by these provisions, except to the extent of the funding of the IMF, which I presume is in terms of its advice function. This is funded from the same pool of money that is provided by Governments, and that money will be invested. I suspect it lives off some of the income that it generates from that money. I am sure that if another member has information to the contrary, they will leap to their feet and say so. When quotas are set as to the funding of the IMF, that funding funds not just some of the loan functions that we have talked about, loans of money to countries that are in trouble; it also funds the IMF itself, which has this advice function that is so important. Although it is never always right, if you like—no one is always right, and the IMF has made some mistakes over the years—it nonetheless has been a force for good in the world and the Labour Party is happy—
Hon TREVOR MALLARD (Labour—Hutt South) : The clause we are speaking to at the moment is clause 5 of the International Finance Agreements Amendment Bill, which brings in schedule 1 implementing the 2008 reforms. That is the area that I want to speak to, and, as my colleague David Parker has done, I want to also refer to the International Finance Agreements Act 1961. It is from a period slightly before my experience in Parliament, but I think many of us have—
Hon Ruth Dyson: 1971? You were hardly born, Trevor.
Hon TREVOR MALLARD: 1961.
Hon Ruth Dyson: 1961? You weren’t born.
Hon TREVOR MALLARD: Well, I give that member an assurance I was. I am trying to work out—was it Harry Lake? I am trying to work out who the Minister of Finance was. Was it Lake—John, you will remember—in the Holyoake Government?
Hon John Banks: Lake.
Hon TREVOR MALLARD: Lake, yes. Subsequently Muldoon was a Parliamentary Under-Secretary later on, and then a Minister. But I am assuming Mr Lake was involved in these discussions, although, given some of the history, I would not have been at all surprised if Walter Nash, my predecessor in the Hutt South area—
Hon Lianne Dalziel: Have you been here that long?
Darien Fenton: Predecessor?
Hon TREVOR MALLARD: Well, not my immediate predecessor. There were one or two in between us. But I think it is fair to say—and I think Mr Banks remembers Mr Nash as well—Mr Nash was 86 when he left Parliament, so he was a person of considerable experience. He was someone who was involved in the first Labour ministry, and involved in a lot of international discussions in the—
Hon John Banks: Not 86.
Hon TREVOR MALLARD: Sorry?
Hon John Banks: Which Nash was this, leaving Parliament in 86?
Hon TREVOR MALLARD: Nash was a member of Parliament into the 1960s—into the 1960s—but he was first a member of Parliament in the 1930s. He was 86 years old—86—and was succeeded by Trevor Young, whom the member will know well. I know it is not quite strictly within—
The CHAIRPERSON (Eric Roy): No, it is not. Would you come to the point. I am fascinated, but would you come to the point.
Hon TREVOR MALLARD: That is right. I am sure I can work the fact that they were both temperance members of Parliament into the debate—they were; they both were. I think it is fair to say that Trevor Young was the last of the temperance movement members of Parliament.
Hon Ruth Dyson: John Carter, originally.
Hon TREVOR MALLARD: Sorry?
Hon Ruth Dyson: John Carter, originally.
Hon TREVOR MALLARD: Oh, I do not think John Carter was. I think John Carter may have been a temperance member off and on—normally the morning after.
But, getting back to the IMF and the fact that it was first brought into our legislation in 1961—in fact, it was part of the first schedule to the then, I presume, the International Finance Agreements Bill that subsequently became the Act—there is pretty substantial reform occurring in this schedule and in these changes. The first area of reform that I would like to refer to is that which is part of article 5 of the substantive legislation being amended here. In that article, section 12(h) is repealed and substituted, and it goes to “Pending uses specified under (f) above,”—and I will just get to paragraph (f), which I am just having a little bit of trouble finding. I will come back to that in a subsequent call. But the new paragraph (h) states: “Pending uses specified under (f) [in section 12]”—I will actually be able to find it, as it is not too far away from here as part of the first schedule—“the Fund may use a member’s currency held in the Special Disbursement Account for investment as it may determine, in accordance with rules and regulations adopted by the Fund by a seventy percent majority of the total voting power.” One of the things that I would be interested in hearing from the Minister in the chair, the Hon Michael Woodhouse, is an explanation, which I think is part of this and the next part, of the changes in the voting power as a result of the rebalancing, which I understand is about a 5 percent rebalancing, and whether that affects the position of the United States, which has had almost effectively a veto. With the Asian Development Bank it is sort of like where Japan goes, the Asian Development Bank goes, but with the IMF it is where the United States goes, the IMF goes. I think I would be interested in the Government’s opinion as to whether the rebalancing by about 5 to 6 percent of the balance of the ordinary capital does, in fact, give a change in effective control of the IMF. But, clearly, if we go back to new section 12(h), the income of the investment and interest received has to be put into a special disbursement account.
Then there is a new, additional paragraph (k) that is added to article V. That is a relatively important area, because it has to do with the use of gold and, effectively, the gold standard used by the IMF. It goes to when it “sells gold acquired by it after the date of the second amendment of this Agreement,”—because I think we know that there are two parts to this particular 2008 amendment, or, well, there are more than two parts to this 2008 amendment—“an amount of the proceeds equivalent to the acquisition price of the gold shall be placed in the General Resources Account,”. If there is any excess or profit, it goes into the investment account for use pursuant to article XII in schedule 1 of the International Finance Agreements Act 1961. But, of course, what we are talking about is effectively the constitution of the IMF.
I will move to article XII, which is relatively important, and which goes to the appointment of alternates. There has been, I think, quite a lot of debate within the IMF and some of the other institutions around the use of alternates and whether they have full powers in the absence of the primary executive directors, because they have a number of executive directors in this area. In fact, they are relatively well-paid executive directors. But what this amendment does is put a requirement on each of the executive directors to “appoint an Alternate with full power to act for him …”. I just want to ask the Minister in the chair whether it is just an old-fashioned approach from our current Minister of Finance that he did not accept the possibility that an executive director of the IMF could, in fact, be a woman, and—
Darien Fenton: Ha, ha!
Hon TREVOR MALLARD: Well, you know, one might laugh, but, given the fact that it is Bill English who is involved in this, it just might—you know, he still has recurring nightmares about Jenny Shipley. But the possibility that either an executive or an alternate director of the IMF could be a woman does not appear to be contemplated in this legislative change to the IMF’s constitution.
What it also does for some of the executive directors who are appointed by more than a specified number of members—that is, people who have effectively multi-member constituencies in their position as an executive director—is that it allows them to appoint two alternate directors, so that is getting to be a pretty unusual situation. That person then has to do a designation as to which alternate should act when the person is absent—who should exercise the powers—and what effectively happens as a result of that is an ordering of the positions of the alternate directors.
Also within article XII is really the operative clause as far as the rebalancing of the power of the IMF is concerned. Section 5(a) is repealed and a new section (5)(a) is put in, which indicates that “The total votes of each member shall be equal to the sum of its basic votes and its quota-based votes.” That is a pretty standard arrangement, and it has been like that for some time. But what is happening here is a rebalancing, and section 5(a)(i) states: “The basic votes of each member shall be the number of votes that results from the equal distribution among all the members of 5.502 percent of the aggregate sum of the total voting power of all the members, provided that there shall be no fractional basic votes.”, and if one thinks about it, it gets pretty hard to start exercising part of a vote. Either you have got a vote or you do not have a vote, and having something passed by a fraction of a vote within the IMF is probably not the most logical way. Section 5(a)(ii) states: “The quota-based votes of each member shall be the number of votes that results from the allocation of one vote for each part of its quota equivalent to one hundred thousand special drawing rights.” So what that effectively does is give to the IMF a lot of power—to the people who put in the drawing rights. You know, I suppose it is a bit like the taxation and representation - type story, and that is something where the United States has for a very long period been the primary organisation to fund the IMF. I think, as we know, there is some rebalancing occurring.
Within article XII, section 6(f)(iii) is changed, and that has to do with the use of particular currencies. Again, this is a sensible sort of thing, because it means that there is not the same sort of currency risk to individual currencies. New section 6(f)(iii) states: “The Fund may use a member’s currency held in the Investment Account for investment as it may determine, in accordance with rules and regulations adopted by the Fund by a seventy percent majority of the total voting power.” I think the fact that the 70 percent majority is sitting there was something that—and I am not sure whether my colleague the Hon David Cunliffe was involved in the discussions here, but I am pretty sure it is something that the Hon Dr Michael Cullen was relatively keen on at the time when he was a governor of the IMF, because what that meant was that things could not be sort of tipped over or pushed through by a very small group of countries, given the imbalance of the funding in that area.
Clearly there is a wind-up clause to do with the investment account. I think it is—[Interruption] Well, no, there is a possibility at some stage that the IMF’s role could change. It may choose to focus—I note the scorn on the face of the member for Hamilton East or West. Which one is it?
Hon Member: West.
Hon TREVOR MALLARD: West.
Tim Macindoe: You should remember. You lived there once.
Hon TREVOR MALLARD: No, I just forget which of them comes from where.
Tim Macindoe: Same initials, same electorate.
Hon TREVOR MALLARD: Well, maybe I am just blocking it out. The member is a disgrace! He is an embarrassment to Hamilton West—an embarrassment to Hamilton West!
But going back to the point, it may be that the work that the IMF is meant to do in the advice, especially around currency—
|Ayes 71||New Zealand National 59; New Zealand First 7; Māori Party 3; ACT New Zealand 1; United Future 1.|
|Noes 49||New Zealand Labour 34; Green Party 14; Mana 1.|
|Motion agreed to.|
|Ayes 105||New Zealand National 59; New Zealand Labour 34; New Zealand First 7; Māori Party 3; ACT New Zealand 1; United Future 1.|
|Noes 15||Green Party 14; Mana 1.|
|Clause 5 agreed to.|
Clause 6 Schedule 1 amended (implementing 2010 reforms)
Hon Trevor Mallard: 15 minutes?
Hon DAVID CUNLIFFE: —25 or 30 minutes, a short call—International Finance Agreements Amendment Bill. Labour supports the bill, and in particular it supports this clause, which brings into effect the amendments to the schedule proposed in 2010 by the—
Hon Lianne Dalziel: Which schedule?
Hon DAVID CUNLIFFE: It is schedule 1, the Hon Lianne Dalziel. The important matter here is to first put it in context by rephrasing the role of the IMF. The international financial institutions are structured around the following general roles: the World Bank is tasked primarily with providing development advice and some co-funding to important development projects; the International Monetary Fund is tasked with providing backup financial resources to assist developing and emerging economies, and to help to underpin the stability of the international financial system. Its developed member countries provide special drawing rights as liabilities against each country’s national accounts, and in New Zealand’s case those liabilities add up to something over $1 billion.
Earlier in this debate we had debate over the one clause of this bill that Labour opposes, which was the removal of the right to parliamentary scrutiny, in clause 4. Labour proposed an amendment to that, which was defeated, and the bill has carried that clause. None the less, because the IMF board has already agreed and ratified the changes here, Labour believes it is important that this Parliament play its part by sealing that within New Zealand law by passing this bill and thereby enacting the amendments to the articles of the IMF that are contained in schedule 1 and schedule 2. Schedule 2 of this bill amends schedule 1 of the Act, implementing the 2010 reforms. In particular, I would like to draw the Committee’s attention to article 12, sections 3(b) to (d). It reaffirms: firstly, in (b), that “the Executive Board shall consist of twenty Executive Directors elected by the members, with the Managing Director as chairman.”; and, in (c), that “For the purpose of each regular election of Executive Directors, the Board of Governors, by an eighty-five percent majority of the total voting power, may increase or decrease the number of the Executive Directors …”.
That figure of 85 percent is a very important number because one country, the United States, holds 16 percent of the voting power, and the astute, like Andrew Williams MP, will note that 85 plus 16 is 101. Thus the United States has an effective veto over the enlargement or contraction of the voting board. That has been historically justified in terms of the United States’ pre-eminent role in funding the IMF. It is, of course, based in Washington, DC. It was part of the post-war UN and global institutional reconstruction. But, none the less, others would say that it has conferred upon the United States a very important tool of influence and leverage on the international economy. That is reflected in article 12, sections 3(d) and (c), which in a sense entrench the current United States veto over the composition of the board.
The IMF is going through several very important transitions, and in an earlier contribution in the Committee stage of this debate I noted the shift in thinking that has gone on at the IMF. It has been led by the current and previous managing directors, Christine Lagarde and Dominique Strauss-Kahn, and it has been embodied in particular in the writing of the chief economist of the IMF, the renowned Olivier Blanchard. He has led quite an effort in revisionist economic thinking, which, for example, has contradicted earlier IMF doctrine that running budget surpluses leads you to the best of all possible worlds. Recent work by the IMF has reaffirmed the importance of the Government spending multiplier, and warned Governments around the world that excessive austerity when they are recovering from a global financial crisis might be the worst thing that they could do. That is a pretty important shift for the IMF. There is another shift that is going on that is directly related to schedule 2, and that is a shift in the membership and the relative voting weights, contributions, and potential contributions of members. It really relates to the shift in geopolitical power due to the rise of South Asia and East Asia, the rise of China and India and the nations of South-east Asia. [Bell rung] I am just warming up, Mr Chairman—just warming up. There is another 15 minutes to go.
Tim Macindoe: This is your idea of a short call.
Hon DAVID CUNLIFFE: That is right—that is right. The rise of economic power in East and South Asia has had the impact, some would argue, of restoring the globe to its long-run historical shares of global GDP, where East and South Asia took about a quarter each, Europe took about a quarter, and the so-called New World took about a quarter. Of course, in the early part of this century that has not been the case, and the trends are now being reflected in discussions at the IMF board level about voting rights and membership. In that respect it is very interesting that these articles reaffirm the veto power of the United States over the expansion or contraction of the board, and thereby decision-making rights.
One could argue that there is a little bit of tension between the article that we are passing now, which is entrenching the historical pre-eminence of the United States and its power over the IMF, and the global mega-trend that is seeing the rise of East and South Asia, and potentially—China is already the world’s second-biggest economy—its relevant influence over the global economic institutions. That is a drama that will no doubt play out over the next decade or so as the world enters a very interesting time in the shift of the balance of global strategic power towards the east.
Moving on through section 3, we are repealing and substituting various entitlements of executive directors to cast a vote, whether they should be cast as units or individually, the ability to substitute executive directors for alternates, and the various abilities to appoint or not appoint an executive director.
If we move on to schedule D, we go further into the ability to cast as alternates, and in schedule E, the transitional provisions in respect of the change of executive directors. In short, the 2010 reforms are all about fine-tuning the rights and responsibilities of the executive directors of the board. Whether New Zealand assents in its Parliament or not, those matters will pass into global practice, because they have already been ratified by the IMF. Labour has some mixed feelings about it. We support the bill, we support the clause, but we recognise that the IMF will need to continue to modernise if it is to continue to be relevant to the most important debates in the global economy, and that its internal power structure, the structure of its board, will need to adapt over time to bring the rising powers of Asia more to the centre of global institutional decision-making, because that is in the interests of all of us. We want the rising powers of Asia to feel that they have a good seat at the table. We want them to feel that they are actively participating, that they have skin in the global economic game, rather than standing outside it. That will mean that they have an incentive to play by global trade and macroeconomic rules, and that we will get past the relatively sterile debate about the artificial lowering of Chinese exchange rates and the accumulation of trade surpluses, because a lot of those debates will be held around the table of the economic institutions that matter.
So Labour believes that although we support this bill to ratify and recognise our role as a participant in the IMF, it is important that our region’s executive directors continue to urge the IMF to move in the direction of modernisation. That is part of several important trends that are going on within this institution that are making it more relevant to the modern world. As I said before, the evolution in macroeconomic thinking away from the old Washington consensus, the old neo-liberal orthodoxy, and towards a more multifaceted, broad-based approach to economics that takes on board the impact of behavioural economics, that looks at the global financial crisis and its aftermath, that has a multi-tool, multi-target approach to monetary policy, that rejects extreme austerity in favour of a more balanced fiscal approach—those are all the hallmarks of an institution that is in a very important transition and a world that is in an important transition to a new era of economic management.
Hon Trevor Mallard: Mr Chairman—
The CHAIRPERSON (Eric Roy): Are you seeking a call?
Hon Trevor Mallard: I am. That is why I stood up and said “Mr Chairman”.
The CHAIRPERSON (Eric Roy): I did not hear “Mr Chairman”. It must have been very dulcet. I will accept that the member said it, and I will give him the call.
Hon TREVOR MALLARD (Labour—Hutt South) : Thank you, Mr Chairman. It is not that I am a polite old gentleman, but I thought Lianne Dalziel was going to take the call before me, but apparently she wants to listen to her learned colleague first.
Hon Ruth Dyson: And if she can’t, she’ll listen to you.
Hon TREVOR MALLARD: Thank you. I think I will be voting with my colleagues opposite at the Government Administration Committee tomorrow to get a decent chair.
Hon Lianne Dalziel: We’ve got the best chair we’ve ever had on that committee.
Hon TREVOR MALLARD: Oh, that is not true. I used to chair it years ago.
I would just like to make a point in relation to the overall approach to the International Finance Agreements Amendment Bill before I drive down into the detail of schedule 2, which, of course, amends schedule 1—not schedule 1 of this bill but schedule 1 of the 1961 legislation, the International Finance Agreements Act. I would just like to ask a question of my Green colleagues. Why are they opposed to making an international financial organisation more transparent and more accountable? I cannot see why having an organisation that is shifting the balance of power away from the domination of the United States and into Asia, and being fairer on countries around the world, is getting opposition from the Green Party. To me it just does not seem logical. If Green members really believe that the IMF should be abolished, then it is relatively easy to draft an amendment to this bill that would take out the entire schedule of the 1961 Act and would thereby take out our membership of the IMF.
Mr Chair, I have been listening carefully—you know, I think members are allowed to say that they have not always been in the Chamber themselves. I have not always been in the Chamber for this debate. I have been here for a reasonable proportion—too much, you might say—but I have been listening to it and I am yet to hear a call from a Green member to explain why they are opposed to the IMF becoming more democratic. As I say, if they are totally opposed to the IMF, then they should move an amendment to the legislation that makes their position clear. It is not hard to do. It could be drafted in 10 seconds to make it work, but it appears that we are having silence on the substance but votes being cast without any sort of reasoning, and I would genuinely like to understand from people I want to work with in the future—
Hon John Banks: They don’t understand.
Hon TREVOR MALLARD: Well, no, people just about always have a reason for doing something, and I would like to try to understand what that reason is. But, I think, for that to occur there has to be a call.
I go back to schedule 2, and with a tiny bit of criticism of my colleague the Hon David Cunliffe. I think he did not focus on the fact that schedule 2 amends schedule 1—and that is schedule 1 of the International Finance Agreements Act 1961. What we see, actually, in looking at it, is a difference in parliamentary drafting style since 1961. In 1961 it was called the First Schedule, and now it is called schedule 1. I would like an assurance from the Minister in the chair, the Minister of Immigration, that notwithstanding that difference in drafting style, we are talking about amendments to the First Schedule, even though we are calling it schedule 1, because the naming is different. Even if there was a debate about it, I do not think it would get to the Supreme Court. I think that most of us know what we are talking about, but to use the wonderful language of Hekia Parata, the Minister of Education, I would like a “belt and braces” approach to this and to get an assurance that our trousers are not going to fall down because we say “schedule 1” and not the “First Schedule”. So we would like to be getting an assurance in the preliminary part of this particular clause in the legislation—and we are referring, of course, to clause 6, which brings in schedule 1, amended in the manner set out in schedule 2.
What happens here is that it sets up the fact that “the Executive Board shall consist of twenty Executive Directors [who are] elected by the members, with the Managing Director as chairman.” There is not a high level of understanding in the Committee, and I am trying to assist the new member for Hamilton West with his understanding in this particular area, because what we do have here are executive directors who represent either a country or a group of countries. But when they vote they have an uneven number of votes. It is not like they are on a board and they all stick their hands up and you count the votes and, you know, the group with the most hands up wins. In this particular case—Darien Fenton will remember this approach—it is a card vote. It is effectively a card vote, and it would probably remind me of a Labour Party conference, where some people stick their—
Hon Lianne Dalziel: In the old days.
Hon TREVOR MALLARD: No, no, we still have cards at the Labour Party conference. If you are representing the Labour electorate committee you have two on there, or each of the MPs gets one. Darien Fenton always had 50 on her card and about 75 more in her pocket when she was exercising the votes. That is the sort of approach that you have on the Executive Board of the IMF, where people do not carry equal votes. It is not democratic in the sense of one man or one woman a vote. Just looking in here, it appears that as far as the executive directors in this particular section, there is the possibility contemplated of there being a woman executive director.
Hon Lianne Dalziel: How many are there currently?
Hon TREVOR MALLARD: I have no idea.
Hon Lianne Dalziel: Have a guess.
Hon TREVOR MALLARD: I have my doubts whether there are any, but I must say that there are some pretty competent people who have gone from the New Zealand Treasury, including women, to work in this area. I think it is fair to say that there are not currently women, in my understanding, at the executive director level.
The executive directors are to be elected every 2 years. I think it is fair to say that there has been over a period of time a degree of dissatisfaction with the performance of some of the executive directors. Some of them have worked very hard, but others have regarded it as a bit of a sinecure. What having the 2-yearly elections, I think, is designed to do is ensure that there is less of sinecure in those arrangements. What it does do is give the board of governors, which, for those people who missed my earlier contribution, is generally a group of the Finance Ministers or Treasurers or their equivalents from—
Hon John Banks: I wonder what the US really thinks about this, Trevor.
Hon TREVOR MALLARD: Sorry?
Hon John Banks: I wonder what the US really think about these changes.
Hon TREVOR MALLARD: I think the US is probably accepting of the changes. If it were not—in reply to the interjection of the Hon John Banks—accepting of the changes, they almost certainly would not be happening. But I think it is also fair to say that the United States has not been in the forefront of the promotion of the modernisation and the shift of power from itself to Asia, as far as this venerable institution is concerned. I think it is fair to say that it has probably, over a period of time, been relatively cautious in the area. As I say, it will lose some of its power.
I think in new section 3(i) we do get to the point that my colleague the member for Christchurch Central has been interjecting about for—
Hon Lianne Dalziel: I used to be the member for Christchurch Central.
Hon TREVOR MALLARD: Oh, Christchurch East.
Hon Lianne Dalziel: I probably will be again, as a result of the boundary changes, but you know, never mind.
Hon TREVOR MALLARD: Well, the member—do they have a member? Oh, Nicky Wagner. Is Nicky Wagner the member for—
The CHAIRPERSON (Eric Roy): Order!
Hon Lianne Dalziel: Yes, but she is going to lose it because of the schools.
The CHAIRPERSON (Eric Roy): Clause 6.
Hon TREVOR MALLARD: OK, the member who is the member for Christchurch East but will probably beat Nicky Wagner interjected.
Hon Lianne Dalziel: No, no. The boundary changes will—
Hon TREVOR MALLARD: No, well, just leave it at “the member for Christchurch East who will probably beat Nicky Wagner”. What is wrong with saying that? Is that accurate? Is that accurate?
Hon Lianne Dalziel: Absolutely.
Hon TREVOR MALLARD: That is accurate. That member interjected and asked: “What about the possibility of a woman being an executive director?”. I think it is fair to say that in new section 3(b) to new section 3(d) of Article XII that is expressed, I think, in gender-neutral terms. But when we get down to new section 3(i)—
Hon Lianne Dalziel: Oh: “his”.
Hon TREVOR MALLARD: That is right. As with the previous section, we do not appear to contemplate the possibility of a woman being an executive director. Or are we saying that if there is a woman executive director they cannot have an alternate? Again, I would be interested in the view of the Minister in the chair, the Minister of Immigration, on this, because it appears to give only male executive directors the power to appoint alternates—whether, in fact, that is the case, or whether there is an overriding clause hidden away somewhere in the legislation. Although, I think it is pretty unusual in 1961 legislation. I do not think it would say in all cases “his” means “her”—and remembering that this is not for interpretation, in the end, by the New Zealand system; it is for interpretation within the IMF. I think there is a definite issue to be sorted out.
I would be interested in the Greens’ position on that. Would Green members like to take a call and tell us whether a woman executive director should have rights equal to the men? I think they should, but if people are opposed to—and maybe that is the reason. Maybe I have stumbled on the reason why the Greens are opposed to this. It is because, hidden away in it, there are some sexist clauses. If that was the reason for voting against it, it would be a not totally unreasonable reason for doing it. But I would just like to hear them say it rather than—
Holly Walker: Carry on. More. More.
Hon TREVOR MALLARD: You are prepared to take a call and tell us? That is very good. I think I have got about another 7 minutes and you can have it.
It is slightly unusual here, because schedule 2, which is amending schedule 1, does go over quite a number of areas and does pretty substantive updating. But, on the basis that the Greens have indicated that they want to clarify their position, I am happy to sit down, and, if necessary, to follow them afterwards.
Maggie Barry: Mr Chair.
The CHAIRPERSON (Eric Roy): Maggie Barry.
Hon Trevor Mallard: I raise a point of order, Mr Chairperson. Maggie Barry sat. She was not standing when you called her and therefore you are not entitled to give her the call.
The CHAIRPERSON (Eric Roy): Well, it is my judgment where I give the call. She stood first and called first. I started to put the question. I reverted to the first person who called.
|Ayes 64||New Zealand National 59; Māori Party 3; ACT New Zealand 1; United Future 1.|
|Noes 56||New Zealand Labour 34; Green Party 14; New Zealand First 7; Mana 1.|
|Motion agreed to.|
|Ayes 105||New Zealand National 59; New Zealand Labour 34; New Zealand First 7; Māori Party 3; ACT New Zealand 1; United Future 1.|
|Noes 15||Green Party 14; Mana 1.|
|Clause 6 agreed to.|
Clause 7 Repeal of International Finance Agreements Amendment Act 1975
Hon TREVOR MALLARD (Labour—Hutt South) : This sort of looks like a relatively minor clause, but clause 7 does in fact repeal the entire International Finance Agreements Amendment Act, which is quite extensive and runs through—I am just looking at this relatively carefully—about 20 pages of statute. So, although this is a tiny couple of lines, it is something that takes out an entire Act, and I want a level of assurance that this is necessary and that the financing and commitment arrangements that are in the 1975 Act have, in fact, been picked up somewhere else in the International Finance Agreements Amendment Bill.
I have had a quick look through this bill. I cannot see the financing commitments that are in article 7 of the schedule of the 1975 legislation that we are currently repealing where the fund can use calls on members “to provide individual commitment in the form, at their option, of … direct financing; or … an individual undertaking for borrowing by the Fund; and calls on all members to provide a collective undertaking for borrowing by the Fund.” I cannot see where that core method of financing methodology is picked up and replicated elsewhere in the bill. Of course, I did not sit on the Finance and Expenditure Committee, and I am not entirely familiar with it. I am pretty sure that members opposite did, and I would be happy for them to explain where in the legislation that we are currently contemplating that, in fact, does occur.
The next question goes to the issue of prepayments, which were previously in section 4 of article 5 of the 1975 legislation. The question I have of the Minister of Finance—and colleagues can continue to ask it—is how prepayments are treated now in the legislation. Are they treated differently? Are they treated the same as they were in the 1975 legislation, and, if there is a change, where are prepayments picked up in this area? I am unable to see it. It might be that there has been a decision not to have prepayments any more. It might be that everyone is so cash-strapped that they pay on the due date and there is not a prepayment arrangement or an allowance for that. But if there is a system change, then I think it is important.
Section 2 of article 5 of the 1975 legislation also goes to the eligibility for loans. A member who requests a loan from the IMF has to make it clear “to the Governing Committee that it: … is encountering serious external financial difficulties;”—that is many countries in the world at the moment—“has made the fullest appropriate use of its reserves and has made its best efforts to obtain capital, on reasonable terms, from other sources; and … has made the fullest use of other multilateral facilities.” That is a pretty important set of conditions. Again, as with the question of prepayments, I ask the Minister, and he can clear it up pretty quickly, to indicate where these 1975 rules are replicated, or whether we are, in fact, transferring to the IMF itself—to the governing board or to the executive board—a set of powers that it does not currently have, and having something that is less regulated.
Again, if that is the case, I would like to know. That could be a very good reason for my colleagues voting against the legislation. I see eyebrows going up and someone else shaking their head, so I cannot quite work out amongst my Green colleagues what the story is and what the reason is for them voting against it.
I am sure my colleague the Hon Lianne Dalziel will want to look even more carefully at the 1975 legislation that is being repealed. My understanding is that this was legislation that was put through the House by the Rt Hon Bob Tizard, one of the longer-serving members of Parliament, although not necessarily the longest-serving Minister. In fact, he was a member of Parliament during quite an unfortunate period, from our perspective. He was not quite as unfortunate as Bill Rowling, who, I think, was a member for 24 years, of which he was in Government for only 3 years.
That was not a good time for the Labour Party—[Interruption] I am sorry?
David Bennett: A good Labour Party member.
Hon TREVOR MALLARD: Bill Rowling was a good member of Parliament. In fact, he launched a very good campaign in Hamilton West—a successful campaign—against Mike Minogue, who at that stage was running, I think, at 4 percent for preferred Prime Minister, and he lost. It was one of the indications that personal popularity, especially under a first-past-the-post system, did not guarantee very much at all.
But the point I am making is that this is legislation that appears to have stood the test of time for the last 38 years. What I would ask of the Government is whether the 1975 amendment Act is being replicated elsewhere by this legislation or whether this is just a gross and irresponsible transfer of power within the IMF.
Hon LIANNE DALZIEL (Labour—Christchurch East) : My colleague the Hon Trevor Mallard has raised a number of points, but he made a point earlier on about his absence from the Chamber, which, of course, one would not normally refer to. But I wanted to explain why I too had been absent from the Chamber at the commencement of this debate when the House resumed at 7.30 p.m. The reason was that I wanted to see the end of the John Campbell programme that was on television because it related to some matters affecting my electorate and that of the Hon Ruth Dyson, with regard to a financial matter. So I think it is relevant to some extent, because the issues that were being raised actually transgress international financial understandings and, actually, obligations around property ownership—that if a Government is compulsorily acquiring property there is an obligation to pay fair compensation. In this particular instance, we have examples of the owners of land being offered, by the Government—
The CHAIRPERSON (Eric Roy): Order! The member should come back to clause 7.
Hon LIANNE DALZIEL: —a mere 50 percent of their rating valuation. It was a really important issue for both my electorate and Ruth Dyson’s electorate, so I thought it was important to tell the Committee why I was not here on the dot of 7.30 p.m.
The concern that I have got about the repeal of the International Finance Agreements Amendment Act 1975 follows on a lot from what my colleague had to say. I have not heard an explanation from the Minister in the chair, the Minister of Immigration, as to why this particular amendment Act is being repealed, because, of course, the legislation itself actually sets out in legislation the financial support fund of the Organization for Economic Cooperation and Development—the OECD, to which we would refer. When I look at the objectives of the fund, they are: “(a) to encourage and assist members to: (i) avoid unilateral measures which would restrict international trade or other current account transactions, or which would artificially stimulate visible and current invisible exports, and (ii) follow appropriate domestic and international economic policies, including adequate balance-of-payments policies and co-operative policies to promote increased production and conservation of energy; (b) to serve for a limited period, in view of current economic conditions, to supplement, in exceptional cases, other sources of credit to which members encountering serious economic difficulties have had recourse; and (c) to ensure that the risks on loans by the Fund to members are shared equitably among all members, in proportion to their quotas and subject to the limits of their quotas, however the loans are financed.” It states: “All decisions under this Agreement shall be guided by these objectives.”
What is not clear to me is whether this still stands with the repeal of the entire International Finance Agreement Amendment Act, and I think that may have been one of the points that my colleague the Hon Trevor Mallard was traversing in his contribution to this. If it is not the case, then what is the case? I mean how has this been dealt with—in another way? It does seem to me that the two questions are inextricably linked, because if we are to pass the legislation tonight—and, of course, we do actually have to pass this legislation. We do not really have any particular issue with not passing it, because, you know, the reality is that the amendments that we have passed already through this Committee stage do not empower developing countries as much as some have claimed. The 85 percent rule, which we have already addressed, is required now, and all we are doing is updating the relevant legislation. But that does not seem to be clear on the face of it when we come to the repeal of the International Finance Agreements Amendment Act 1975. In fact, the issue seems to be quite unclear, and I think it would assist the Committee if the Minister could, in fact, address that particular issue.
Obviously, because this fund has been an important element of the relationship that we have had with a number of other jurisdictions, with whom we have a relationship in establishing and supporting this fund, I would like to know how the Government has addressed this particular issue in order for us to feel confident that the Minister is able to address all these issues.
Dr KENNEDY GRAHAM (Green) : I rise to address the issue of clause 7 of the International Finance Agreements Amendment Bill, which repeals the International Finance Agreements Amendment Act 1975. I do so because I was interested in listening to the comments from the Hon Trevor Mallard about this particular clause, that he could not see where the financing methodology would be in the bill if this clause goes ahead and the 1975 Act is repealed. He mentioned the issue of prepayments, whether people would be treated differently or the same, and whether this was picked up in the current draft legislation. We agree. We often agree with the Hon Trevor Mallard.
His other point was, I think, pertaining to the loans issue, that it needed to be made clear as to whether there would be a set of conditions and whether it would be a transfer of decision making to the board of the IMF. We agree with that too. So there is a lot—a lot—in addressing clause 7 that we would no doubt agree with the Hon Trevor Mallard on. There is a lot that we generally agree with the Hon Trevor Mallard and the Labour Party on, but not on the overall nature of the bill.
I am sorry, Mr Chairman, that I was unable to be here earlier, as well. I was not watching Campbell Live; I was actually discussing this issue and broader issues with the Governor of the Reserve Bank. So I come reinforced with new ammunition on this, in opposing this bill.
Let me explain why we do oppose the bill. Mr Mallard mentioned at one stage that the bill is generally in favour of greater international transparency on economic and financial issues—that is true and we agree with that too—and he could not quite work out, I think he said, the reasons why the Greens will vote against it. Let me explain. It was his own close colleague the Hon Shane Jones who actually did note, or offer his own view, that the debate on this bill is actually a debate over Thatcherism and Reaganomics that has come to influence the IMF—[Interruption] I am quoting—I am quoting. I am quoting a member of the Labour Party. He said that the debate is over Thatcherism and Reaganomics, that it has come to influence the IMF, and that it is essentially revolving around monetarism. I am not sure whether Mr Mallard agrees with that or not, but that is what Mr Jones said. That is the nub of this issue, as we see it, so we do agree with yet another colleague in the Labour Party. The debate is over the nature of the IMF.
Where we diverge—where we diverge—from the Labour Party on this is that having agreed that the debate is about monetarism we would seek to engage the world in reforming the IMF from that theory, in various ways, whereas Labour is disposed to support the bill notwithstanding. We have for some time called for the fundamental democratic reform of the IMF, and this bill essentially invites us to comment on the requirements for the reform of the IMF. Let me give you three examples, Mr Chairman, if I may, and, through you, my colleagues. The first is the stated intent of the reforms: to move towards a more democratic and equal representation model. There is some critique of the reforms that they are not fulfilling that goal in terms of the number of directors who are on the board. The US would hold 16.5 percent of total votes, and the group of 77 would account for 41 percent—120 nations having 41 percent. Secondly, the agreement would also change the voting allocation. There is a 6 percent increase shift in the vote for the dynamic emerging economies like Brazil, Russia, India, and China—2.4 percent of this shift comes from the other developing nations losing their voting share. What kind of reform is that? The question can be attributed not just to the Government members but to the members of the Labour Party as well. Thirdly, where there is inadequate reform of an organisation, a party has a choice to make. You can support the bill while criticising the bill because it does not go far enough and then support it, or you can say that the bill does not go far enough in reforming the organisation and that because of that you will oppose the bill. The Green Party is taking the latter approach.
We will continue to oppose the bill, notwithstanding the report back from the Finance and Expenditure Committee, notwithstanding the debate on the second reading, and notwithstanding anything that has been said in this Committee stage as well. A young, emerging party stands by its principles. Those apprehensive of and facing the imminent onslaught of sclerosis fail to do so.
- Clause 7 agreed to.
|Noes 15||Green Party 14; Mana 1.|
|Schedule 1 agreed to.|
Schedule 2 agreed to.
- Bill to be reported without amendment presently.