Hansard and Journals
International Finance Agreements Amendment Bill — Third Reading
[Sitting date: 21 February 2013. Volume:687;Page:8123. Text is incorporated into the Bound Volume.]
International Finance Agreements Amendment Bill
Hon AMY ADAMS (Minister for the Environment) on behalf of the Minister of Finance: I move, That the International Finance Agreements Amendment Bill be now read a third time. Following the first reading the bill was examined by the Finance and Expenditure Committee, which recommended that it be passed with no amendments. The bill amends the International Finance Agreements Act 1961. That Act allows the Government of New Zealand to meet its obligations as a member of various financial institutions, including the International Monetary Fund, the World Bank, and the Asian Development Bank. This bill updates the principal Act so that New Zealand legislation takes account of changes the IMF has made to its articles of agreement. These changes were agreed to by the IMF governors in 2008 and 2010.
New Zealand sees clear value in being a contributing member of the IMF. As a small, open economy we benefit heavily from a stable and prosperous global economy. The IMF supports this by providing a global safety net that can mitigate the effects of financial crises and help support trade and economic activity. The financial commitments that we have made to the IMF are effectively premiums to an insurance policy against damage to our economy from an unstable world. Contributing to the IMF and global financial stability is also important for New Zealand’s international reputation. Supporting the IMF and the work it does places New Zealand alongside countries that we often benchmark ourselves with internationally.
The changes to the articles of agreement reflected in this bill are part of a series of governance reforms the IMF has been undertaking over the past few years. The reforms are designed to enhance the IMF’s legitimacy and effectiveness by ensuring that members’ voting shares and representation reflect their relative economic weight in the global economy. In addition, the IMF has linked the reforms that are incorporated in this bill to quota changes to improve the representation of emerging markets at the IMF, taking account of their increased role in the world economy. The governance reforms also facilitate an agreed change in the membership of the IMF’s executive board. Once these new rules come into effect the five largest IMF members will no longer be able to appoint an executive director, meaning that there will now be an all-elected board.
In addition to updating the principal Act to take account of the IMF reforms, this bill also updates New Zealand’s legislation by repealing some now redundant legislation. The bill also creates a regulation-making power in the principal Act so that future updates to the articles can be made by regulation.
This bill will simplify the process by which New Zealand meets its international obligations. Overall, passing this bill will signal New Zealand’s support for reform, additional resourcing, and better legitimacy in an important international financial institution. I commend the bill to the House.
Hon DAVID PARKER (Labour) : The Labour Party will be supporting the International Finance Agreements Amendment Bill, as it has done in prior stages. As the Minister has ably described, New Zealand is proud to be part of the International Monetary Fund and to contribute to the World Bank and the Asian Development Bank. All of these institutions and their forerunners were an outcome of international cooperation following World War II, after which the world came together and said that we need to ensure that we do not make the mistakes that led to World War II and to the rise of fascism and communism, where countries that suffered economic collapse did not have a way of getting out of the downward spiral that they found themselves in. So countries of the world decided that they needed to provide international institutions that could help reconstruct some of the countries that had been so damaged by World War II, and also to provide support for countries that get into terrible trouble in peacetime. It was one of the outcomes of international cooperation that has served the world very well overall since then and has seen a decreasing number of wars, a decreasing proportion of the world living in poverty, and the international community being able to come to the aid of economies that are in dire trouble following collapse.
We have seen the IMF over the years bail out countries as disparate as Asian countries, African countries, European countries, and South American countries, including the likes of Argentina. Were it not for the support that other countries are able to provide through the International Monetary Fund, the troubles that we have seen in those countries would have been more likely to result in civil war within those countries and political instability—the rise of more extreme forms of government, including fascism and communism—not just to the detriment of those populations but to the detriment of world peace and to the detriment of world trade, which we benefit from.
Although this piece of legislation is not the most important that will pass through this House this year, it is appropriate to note the importance of these institutions. The Labour Party is a party that believes in an outward-looking interaction with the rest of the world. We think that it is even more important for small countries than for larger countries that we have these multilateral institutions, and it is important that the Labour Party supports them.
I am surprised that at the prior reading of this bill, the Green Party was opposing it. I do not know whether it is continuing to oppose this legislation, but if it is, I think that is unwise. I think that the IMF provides very important support to the world. It is true that some of the advice function of the IMF has, at times, been contentious. The IMF has been dominated by an American view of economics, which has lots to offer but is not always perfect. The IMF gave advice to emerging nations, and included in that were nations that were moving from controlled economies to open economies, such as we saw during the late 1980s and the 1990s in the Soviet Union and the former Soviet bloc.
Some of the advice that was given to emerging nations to move quickly to smaller forms of government and to privatise previously publicly owned institutions was extreme and resulted in outcomes in those countries that were less than perfect. It has seen the rise of oligarchs in Russia, in no small part facilitated because of the regime that was recommended by the International Monetary Fund.
But that is not to say that the International Monetary Fund and its advice are fundamentally flawed. I think, overall, they are a force for good. So I am disturbed to see that our colleagues in the Greens are voting against this bill, which serves to update the arrangements with the International Monetary Fund.
Hon Simon Bridges: What are you thinking, Steffan?
Hon DAVID PARKER: What is that?
Hon Simon Bridges: What’s Steffan thinking?
Hon DAVID PARKER: Oh, sorry. In terms of the legislation itself, the Labour Party is on record as saying that we think these things are sufficiently important that they should attract the attention of Parliament rather than allowing future amendments to the International Monetary Fund articles that control how it operates to be delegated to statutory regulation, and we have opposed that part of the bill. We have lost that debate. We think this legislation is worse for that. We think that having every decade or so an amendment to the articles through Parliament enables us to reflect on the importance of international linkages and advice from the IMF. It enables parties like the Opposition, whoever they may be at the time—currently us—to reflect on parts of the IMF advice that are being ignored. At the moment the IMF is saying to New Zealand that one of the most important things to improve the New Zealand economy is to have a neutral investment signal into the economy through a capital gains tax.
John Hayes: Shane Jones doesn’t believe that.
Hon DAVID PARKER: Shane Jones most certainly does believe that. Having a neutral investment signal into the economy is fundamentally important so that people are investing in our economy based on the profitability of a business rather than a tax bias. Too much money is invested in New Zealand in land-related transactions because there is a tax advantage to doing so. The IMF, the OECD, Treasury in its own way, the Reserve Bank, and just about every economist in New Zealand say that we will have a stronger economy through introducing a capital gains tax, which in the case of the Labour Party proposal would exclude the family home.
It is interesting that the Government believes in the IMF but rejects that important piece of advice. Labour hopes to remedy that in the future, when re-elected, which will act to the benefit of New Zealanders and will result in a fairer tax system, more employment opportunities, a lower current account deficit, and growing wealth in New Zealand.
This is a good piece of legislation. The IMF, as I have said, provides leadership in the world. One of the other areas where it is looking again at what are good settings lies around exchange rate policy. The IMF has moved away from the idea that inflation targeting should be given primacy ahead of other important aspects of economic management like current account deficits and the exchange rate. It is another area where the Labour Party has moved on but the National Government has yet to see the light. I think one day it will, but in the meantime, of course, our non-primary exporters are suffering an exchange rate that would be different if the Reserve Bank had a different mandate.
We have heard the Minister of Finance, Bill English, say that nothing would change if there was a different mandate. It is true that if the mandate of the Reserve Bank was different not everything would change, but it is axiomatic that if the mandate of the Reserve Bank was broader and included a more balanced reference to other important matters of economic management its decisions at different times would be different and we would have a different economic outcome, which, in the view of the Labour Party, would improve the New Zealand economy. It would mean that some of our non-primary export manufacturers who could survive—well, Mr Bennett shakes his head, but the truth is that manufacturing outside of the primary sector is continuing to shrink, including in areas where it has survived for decades.
Some of these companies are world leading and they are increasingly moving their production to countries that have a better exchange rate regime and a better monetary policy regime. They are not companies with high labour input. They are selling high-value products. They are the sorts of exporters you would think should be able to survive in a country like New Zealand if we have the right economic settings, but they are not investing in New Zealand. They are shedding jobs in New Zealand, and they are increasingly outsourcing their production to other countries.
It is not that they are going broke; it is just that they cannot make a living in New Zealand. So they are forced to relocate elsewhere, with the loss of jobs and incomes, and, as a consequence, too many New Zealanders decide that they cannot make a living here and they depart to Australia or elsewhere. Too many of our young people do not have job opportunities here, and we lose the benefit of that economic activity in New Zealand, which we are instead transferring to the rest of the world.
This is a good bill. It provides us with an opportunity to debate matters relating to the advice function of the IMF, and I think on that front the Government is being too selective in the advice it is taking.
JOHN HAYES (National—Wairarapa) : I greatly respect the previous speaker, David Parker, but I have to say to him that the thought that you can increase tax and jobs in the same breath is best described as an oxymoron. The point that he makes about jobs disappearing all over the countryside is actually not backed up, and I note an ANZ Bank survey in the last week that points out that in all regions of New Zealand economic growth is strengthening.
The Government believes it is really important to be an active participant in the international system, whether it is being an active member of multilateral organisations such as the United Nations, such as regional organisations like the Pacific Islands Forum, or of an economic organisation such as the IMF. I would agree with the previous speaker that it is astonishing that the Green Party cannot support this very sensible piece of legislation before the House this afternoon.
As a small, open economy we benefit considerably from a stable and prosperous global economy. Our commitments to the IMF are effectively premiums like an insurance policy against damage to our economy from an unstable world. Contributing to the IMF and the global financial stability are both part of our international obligations. The net effect of this bill, the International Finance Agreements Amendment Bill, will be to move New Zealand’s contributions to the IMF from about $2.9 billion to about $3 billion. The financial commitment associated with this quota was agreed at the time of the Budget in 2011, and is in the Budget forecast to be paid out in the 2012-13 financial year.
For the benefit of listeners I would like to make the point that when New Zealand is asked to make a loan to the IMF to help fund its country programmes, these loans, which receive interest and have definite payback periods, are therefore debt-neutral. Under the current quota system China is the 10th largest shareholder of the IMF, despite being the second-largest economy in terms of GDP. A practical effect of the package of quota and governance reforms is that it will lift China’s quota to be the third-largest in the IMF. Korea’s quota share is half that of Australia’s, even though it is about the same size economically. Korea’s quota will double under the reforms to be above that of Australia. There will be four emerging markets—Brazil, China, India, and Russia—amongst the 10 largest shareholders in the IMF. New Zealand’s constituency in the IMF will enable us to take on a second alternate executive director, and New Zealand has a strong case to make for upgrading its current senior adviser’s secondment role to the IMF to this new position.
This is an excellent bill. It has been considered by the Finance and Expenditure Committee without any form of modification, and I commend it to the House. Thank you.
John Hayes: A man who supports a capital gains tax. Ha, ha!
Hon SHANE JONES: Actually, I must elaborate on what my colleague David Parker was saying. He is actually not talking about excessively increasing taxes. He is talking about distributing in a more even-handed fashion the sources in the economy out of which a Government draws the revenue to meet the current appetites that we are seeing from that side of the House. I mistakenly thought that this would be a Government that actually would put into practice a lot of the rhetoric it spouted earlier, in the time I was in Government as a Minister, but in actual fact it has been tardy, it has been profligate, and it is slowly being caught out. But that is another matter.
I am disappointed, and I really do want to hear from my colleagues in the Green Party as to why they could not possibly support this piece of legislation, the International Finance Agreements Amendment Bill. I recently went to Sri Lanka as a parliamentarian. I encountered there the guy from the IMF. No one should underestimate the work. I cannot account for why they did not send a National parliamentarian, but I was prepared to bear the burden and go over there on our behalf. However, it was a timely reminder of the work that the IMF managers, analysts, etc., do on the ground as they are working in Sri Lanka with a country that has had a dreadful civil war. Also, it depends on the actual capital that the IMF has access to.
What does the IMF actually do? What it does is—generally using very complicated models of multiple regression, etc., and using econometric models—it tries to rebalance and refoot the economy. I do not want to get too dense and technical, because I know on that side of the House there is an audience with limited capacity to follow such narratives, unlike Mr Mallard. For my colleagues in the Green Party, I respect the fact that they are very strong on social development and very strong on equity, and if ever there is a case where we should stand staunch to ensure that the ills of a civil war and ethnic strife do not re-emerge, given that we have got so many Sri Lankans coming to New Zealand in the medical profession, etc., Sri Lanka represents an example of where the IMF is delivering very practical work. So it is beyond cavil that we should support this bill.
My colleague has delivered to the House that we are disappointed that this will not actually come to the legislature but will disappear down into the corridors of the executive—not unlike, I suspect, that story that is untold about the Skycity casino. But, given I have got my own report coming out in a week or two, I shall just taihoa on saying much more about that report until such time as my report comes out. And no doubt I will be, for a very ephemeral moment, in the firing gun, but we will cross that bridge when we get to it—when we get to it. It is highly unlikely that I will get many missiles from members over there, given that I remember what was actually happening when they were bringing me their applications when I was the Minister, but that is in the past.
The bill does not immediately require New Zealand to step up with further capital—no. What it does is it provides an opportunity to reform the way in which participants exercise their influence. Do we actually believe in the role of the IMF? Of course we do. As I said, from the Sri Lankan experience more recently, I have seen personally how the IMF is doing a difficult task. Wherever it goes, the elected Governments are cross with it. But that is a healthy level of tension. We, the donors to such an organisation, have every right to require it, when it moves into these countries where the transparency is not flash and where the economy is in a state of gross imbalance, to ensure that we can rely upon the professionalism of such an organisation that has our support. It is only 18 months until there may very well be a Government comprising some minority parties and us. I have no doubt in my mind that the stance that we take into the future will see New Zealand continuing to support such an institution, so I am actually interested to learn why our friends from the Green Party—whether or not it is because Mr Kennedy Graham got sort of hōhā with Labour, and forgot to elaborate the reasons. These things happen. I have been known to get hōhā with Labour myself, but that is another matter. I have actually had the Greens hōhā with me.
Hon Trevor Mallard: Oh, no!
Hon SHANE JONES: Well, actually, I will say “members of Labour”. Often the kaumātua for Wainuiōmata has taken a dim view of certain things I have said. Enough said—it is lost in translation.
Hon Trevor Mallard: Hang on, hang on. Mid-point of career, not kaumātua.
Hon SHANE JONES: He said the man is not a kaumātua and he will challenge anyone to a bike race, etc. Well, I kind of know what bike races do to sensitive parts of the anatomy, so I will taihoa on that. I will stay with golden oldie—
Hon Trevor Mallard: Oh, harden up. Harden up.
Hon SHANE JONES: I will taihoa on that. I will go to golden oldie rugby.
The other thing that I would like to say is that the IMF has over the years attracted a great deal of negative attention. It has been attacked and in some cases demonised for going into difficult areas. One has only to look at the experience of Latin America, and I am sure the member for Wairarapa could have gone on at length in a flatulent manner and regaled us with tales—regaled us with tales—about how he has played a role in saving those countries from themselves. But the IMF is an institution that a number of New Zealanders have continued to work in. Very, very significantly placed bureaucrats from our own country have gone on and have indeed taken a representative role on the executive board. So we should not quibble, and we should not shirk from ensuring that our overall commitment to the IMF is adequately covered, and, more important, that, as one of the key OECD countries, we show ongoing support.
We know that the Americans, with their 16, 17, or 18 percent voting rights, still have virtually a veto right. But we have also seen the fashions change in that great economy. It is only 10 years ago that so many of its legislators themselves seemed to be locked into a pattern of demonising and stigmatising such international bodies. But for us in New Zealand it comes as part of the obligation to be a good global citizen. We do not have the breadth of defence capacity. We do not have—partly through the errors of the current Government—the depth of capital. We rely on international markets. We rely on international agreements. A small country of 4.5 million people with aspirations to maintain a high-quality OECD lifestyle has no option but to stand as a key participant in such institutions. This particular bill does not commit us to anything that we are not already comfortable with. Indeed, it is just an iteration of what we did several years ago.
But it is a timely reminder, at a time when New Zealand is seeking to secure other internationally recognised positions. Indeed, the Minister of Trade is hoping to follow the footsteps of Mike Moore. Well, I would encourage him to develop physical robustness if he is going to emulate the full deeds of Mike Moore. That shows that if we are seen as being dependable and robust contributors to something such as the IMF, then the credentials that other personalities will wear on our behalf as we seek to secure positions, not for them personally but for our nation State through their person, are clear. That is a very fine thing, and it is a very aspirational goal, which I am sure the majority of parliamentarians are committed to. I am pretty sure that the Green Party itself shares that level of commitment, although it probably has a less charitable view than I do about the virtues of free trade.
I look forward to learning more as to when the proposed multiparty trade agreement drawing close with the United States of America, us, and our Asian neighbours comes to pass, but that is a debate that, no doubt, we will fully resolve after the 2014 election. And by that time we will be over there on the Government benches, and my occasional fellow travellers in the rugby team, etc., will be over here. That is just the ebb and flow of democracy, and a number of those members, I am sure, will go. I am not suggesting that we should be casual about how we regard our roles and our contributions of a fiscal nature to such organisations, but we should be regarded as solid citizens, and that is why this side of the House supports in an unfettered fashion the passage of this bill.
Dr RUSSEL NORMAN (Co-Leader—Green) : I rise to speak on the International Finance Agreements Amendment Bill. Essentially, what this bill does is bring New Zealand legislation into line with the Articles of Agreement of the International Monetary Fund. The articles of agreement are essentially the agreement as to who gets how many votes at the IMF. From time to time there are changes in the allocation of votes at the IMF, though the United States always retains a veto, effectively. So this piece of legislation is to bring, essentially, New Zealand legislation into line with those changes in votes in the Articles of Agreement of the International Monetary Fund.
However, it does something else, and it is a “something else” that the Greens disagree with. The something else that it does is that it means that future changes can be done by regulation rather than by legislation. That is the fundamental change in this piece of law. These changes in relative votes in the Articles of Agreement of the International Monetary Fund do not happen very often. We think that it is a good principle to uphold that, wherever possible, Parliament should be the one to change the law, rather than the executive.
This bill, as it is in front of us now, will enable the executive to make secondary law, or regulations. That essentially means that Parliament has derogated its decision making to the executive, in terms of signing up to the changes in the Articles of Agreement of the International Monetary Fund. But those articles do not change very often, so it seems to us that there is no need to derogate responsibility from Parliament to the executive.
This was a position that the Labour Party argued quite strongly, but the Labour Party has decided—which is fair enough—that although it has concerns about this aspect of the bill it will support the bill overall because it supports the broader purpose. It was then with some sadness that I heard the ridiculous attacks from the Labour Party on the Green Party because we take a principled position whereby we understand the bill but we disagree with one section of it and have decided to vote against the bill for that reason.
The Labour Party—and I respect its decision—has said that it disagrees with this particular section of the bill but has decided to support the bill as a whole. I think that is a perfectly rational decision. People of good mind and of similar beliefs can disagree about things. That is just the nature of politics, and so it should be.
In terms of the IMF, I am probably one of those people who have been critical of the International Monetary Fund over many years. Those of you who know your history will know that after the Bretton Woods agreements we had the three major financial institutions that were set up: the International Bank for Reconstruction and Development, or the World Bank; the International Monetary Fund; and the International Trade Organization. Of course, the International Trade Organization never appeared, because it was vetoed by the US Congress, so we were left with two. It was not until 1995, with the establishment of the World Trade Organization, that the third part of the international structure was established.
The thing about the IMF and the World Bank, or the International Bank for Reconstruction and Development, is that, essentially, they became captured by what became known as the Washington Consensus. That was a hard right consensus about a series of policies that should be implemented. Those policies were heavily discredited during the 1997 Asian financial crisis—or rather, just the Asian crisis, I guess—where, particularly, a number of South-east Asian countries got into real trouble. The International Monetary Fund came in and applied the usual Washington Consensus formula, which caused those economies to get into more trouble. Many people who were associated with that—and who have since spoken out against it very directly—have said that the application of the Washington Consensus model in the case of the East Asian crisis in 1997 was a catastrophe for those countries. One of the most famous, of course, is Joseph Stiglitz, who was the chief economist at the World Bank, who then became a dissenter.
What has happened in terms of the evolution of thinking in the IMF, and, of course, at the World Bank in particular, is that there has been a radical move away from the Washington Consensus, which I think is a great thing. For someone like me, who has been highly critical of the International Monetary Fund and what it has done to developing countries over many years, and the terrible poverty and dislocation that the IMF and the World Bank have caused, I, for one, have celebrated the change in direction of the IMF. So now I find myself quoting often from IMF documents, because the IMF has become much more progressive and interesting, particularly on monetary policy.
Those of you who read IMF documents will know that there is, of course, a very famous one at the moment by Michael Kumhof, who is one of the IMF researchers, called The Chicago Plan Revisited, which is all about looking at monetary policy. It offers quite a radical proposal around reforming fractional reserve banking—essentially eliminating fractional reserve banking. It is quite a radical proposal that has come out of some of the researchers of the IMF. It is not actually an IMF paper in the sense that it is fully endorsed by the IMF, but these researchers—and Michael Kumhof in particular—have been going around promoting alternative ways to deal with the current global financial crisis that involve putting a lot more constraints on banks’ ability to print money.
The other thing that comes out of, I think, the IMF that surprises a lot of people is when the IMF says things like most of the money that is generated is generated by the private banks. Most of us, I think—and I was certainly one of these people, until reading IMF papers—always assume that the Government created the money. That is just because I actually did not follow it closely enough, whereas the IMF is very clear that it is the private banks that create most of the money. What the IMF—or, at least, some of the researchers within the IMF—is now saying is that the Government should use its ability to create money, so that there is some publicly created money as well as the privately created money, most of which is created by the private banks.
This, of course, is a pretty radical proposition, and the IMF, in putting forward this proposition, has certainly been shaking the policy debates around monetary policy all over the world, except in New Zealand, of course, where we are kind of locked into some weird backwater where the Government does not want to have a debate around any of this kind of stuff. But if you read the international literature, it is pretty good.
Lord Turner—the head of the United Kingdom Financial Services Authority, the regulator of the banks in the United Kingdom—has been proposing very similar things to the IMF in many respects. He has been talking about using the public creation of money to fund Budget deficits. It is quite a radical proposition. It is very similar to the proposition that was put forward by Milton Friedman, when he talked about helicopter money.
So there is a very lively international debate, which the IMF is in many respects leading, around what we should be doing about monetary policy, and should we leave the entire creation of the money supply in the control of the private banks. The IMF has been leading this debate and I think it is a good debate for us to have, particularly in light of the global financial crisis. What we saw with the global financial crisis was that the private banks created vast quantities of money—or credit; call it what you like—and we are now trying to deal with the hangover from that, if you like. This vast amount of debt in money was created, which we are now trying to get rid of.
So the challenge for all of us is that having seen the private sector do that when it was deregulated and it was allowed to create as much money as it wanted, how do we put the genie back in the bottle for the private sector? Then the question is what the role for publicly created credit is. I think the IMF has been leading the debate around what is the role for publicly created credit. All credit to the IMF that it has led that debate.
The other debate I think the IMF has been very instrumental in has been around green economics. It has kind of been doing it in combination with the OECD and the World Bank and the United Nations, I guess. All the international institutions are very engaged in the green economics debate. What they have been asking is how we make the transition towards sustainability while still maintaining prosperity. That is the kind of global debate we have. We are trying to make this transition to sustainability, which is quite a radical change in our economy, at the same time as we are dealing with essentially a financial crisis, which has become a crisis of the real economy as well because of the impacts of the financial system.
So in the midst of this financially created crisis, we are also trying to deal with the ecological crisis, if you like. So we have got these two parallel problems. The IMF has been leading some of the work on how we can deal with the environmental crisis by trying to build the green economy and make sure that we make the transition to sustainability, but also deal with the crisis in the real economy by making sure we have jobs in sustainable industries and making sure that people have sustainable work. Getting both of those things right is, I think, the great challenge of our epoch. I have certainly appreciated the IMF’s contribution on that, so I look forward to further rational debate on these issues in our Parliament.
DAVID BENNETT (National—Hamilton East) : I hope that New Zealanders were listening to that last speech, because that is the radical plan of the Green Party, from somebody who has no idea of economics but has read one book by some extreme person and thinks that he is going to change and be the saviour of world economics. That is completely inappropriate for New Zealand going forward.
The other good thing about what you just heard before is that the Labour Party and the Green Party cannot agree. These are the people who want to work together to form a Government. What did Russel Norman say about the Labour Party? He said that it made ridiculous attacks on the Green Party. Remember that—ridiculous attacks. In Opposition they cannot work together. Imagine what they would do to the livelihoods of New Zealanders. Imagine what they would do to New Zealand’s interest rates. Imagine what they would do to New Zealanders’ jobs. They will kill this country. They will kill this economy. Never trust them—never trust them. That is the thing that should have come out of the debate today.
The Labour Party also talked about some of the issues around what it wants to do around the exchange rate. This is great policy. We have had the Governor of the Reserve Bank come in and tell us that you would be doing last resort economics to have to change this. I ask you this question, and I want New Zealanders out there to think about this: what does Australia do around its exchange rate that is different from us?
Hon Members: Nothing.
DAVID BENNETT: Nothing. What does Australia do that is different from us? Nothing. We have got the saviour of world economics reading one article from somebody who is not even IMF-approved and telling us that we should take a radical approach to economics and put everything in New Zealand at risk. Imagine what this would do to the relationship between us and our biggest trading partner, Australia. If we take a different approach from the Australians—
Aaron Gilmore: Not good.
DAVID BENNETT: That is not good—it is not good. It is going to hurt our banking sector, it is going to hurt interest rates, and it will hurt New Zealanders. New Zealanders should be listening to this debate, hearing the wacky ideas of the Green Party and Labour Party, and understanding that that would put their livelihoods at risk. They should remember that we have their best interests at stake and they should follow that. Thank you.
ANDREW WILLIAMS (NZ First) : What a great relief it is to stand on behalf of New Zealand First and not be implicated in any part of that previous debate. Obviously, our financial ideas must have a bit of weight and a bit of substance, so thank you very much, Mr Bennett, for that glowing endorsement of New Zealand First’s financial policies. In that regard, can I speak to the final reading of this International Finance Agreements Amendment Bill, and bring members back to the focus of this bill, which is basically to sort of rearrange the deckchairs on the world global stage with the IMF—the International Monetary Fund—and the World Bank.
Over recent decades, of course, many economies have changed significantly, but in terms of their percentages in the overall IMF scheme of things, the positions of emerging countries, particularly the likes of China, India, Brazil, and others, have not been rebalanced. Changes were adopted by the IMF governors in 2008 and 2010 to readjust things on the economic scales in relation to all those economies, and New Zealand is one of those countries required to rebalance its position. In terms of this, my understanding from reading the bill is that New Zealand’s commitment, or underwriting of the IMF, is something in the order of $1.9 billion or thereabouts, and our contribution to the greater scheme of things of the IMF will be readjusted by the order of $100 million. That is a valuable contribution in terms of our underwriting of what the IMF does to ensure that there is some balance within world economies, and particularly in the developing countries, which need support and some backing from the IMF to ensure that their economies remain relatively stable.
In this regard, it is also interesting that Australia passed legislation a couple of years ago, in about 2010, so we are lagging behind a little bit. It would have been good if we could have put this legislation through Parliament earlier than this, and it is somewhat disappointing that it has taken some time for it to get through. It basically does have the full support of National, Labour, and New Zealand First, and it is somewhat disappointing that the Greens are out on a limb on this one, once again.
In terms of the IMF, it is interesting that the Government fully endorses it and fully supports the IMF and what it does, but, as I have mentioned in this House before, the Government conveniently forgets other recommendations of the IMF, such as the fact that it has commented that the New Zealand dollar is somewhat overvalued and that there should be some adjustment of the New Zealand dollar. So it is all very well for the Government to accept what the IMF does on the one hand when it is convenient to it, but when it is not convenient to the Government, such as recommendations that perhaps the New Zealand dollar should be eased a little bit, that is ignored. In that respect—Mr Speaker, I know you will probably pull me back to the bill that I am talking about; I can see you nodding already and suggesting that in that manner—but can I just say, just as other members have talked about bicycles, kaumātua from Wainuiōmata, and other long bows, can I just suggest, as part of my long bow on this subject, that it is perhaps time that the member’s bill of the Rt Hon Winston Peters in regard to the Reserve Bank of New Zealand Act was pulled from the ballot—as it was last year, but pulled again. It is back in the ballot—
Hon Simon Bridges: Hey, you keep the long bow away from the lemon trees.
ANDREW WILLIAMS: It is back in the ballot, the Hon Simon Bridges, and we hope that the Government this time—because it lost by only 61 votes to 60, which is pretty close—touch-and-go. We were waiting for a couple of Government members to cross the House and come with us, and we could see that they were chomping at the bit to do that. We could see, and a lot of those members could see, because they knew too that after 26 years maybe it is time to review the Reserve Bank. It maybe is, after 26 years. You know, most things get reviewed a little bit more often than that, so the Hon Simon Bridges—I can see you nodding. I can see you nodding in agreement. Come on, I can see you nodding. I am absolutely confident that when that bill is pulled again, there will be sound thought around it, and it will refer back to what the IMF has said in relation to New Zealand’s dollar and New Zealand’s Reserve Bank—that maybe we need to be a little bit more creative in how the Reserve Bank operates, to ensure that our economy works more effectively. Part of that, of course, is for the benefit of exporters and manufacturers and our trading economy, to ensure that New Zealand can play its full role in the world economy in terms of what we are potentially capable of doing. At the moment, the potential of New Zealand is certainly being limited by where the dollar is. Just imagine where New Zealand could be today if we had just a little bit of easing of that and could help those exporters and those manufacturers that, sadly, are finding it pretty grim times at the moment, with where the dollar is.
New Zealand First supports New Zealand’s commitment to international organisations. We strongly believe that we have to be a good global player, that we have to play our part—as we do—in many areas around the world, in many theatres around the world, where we do play our part where things are required of us. We are known as being a good contributor on the world scale, a good contributor to the United Nations. We have contributed even more people to the United Nations this week, which is a good sign, and so we are playing our part there. New Zealand First endorses this bill, and trusts that it will go through expeditiously.
CHRIS AUCHINVOLE (National) : I would like to speak very briefly in favour and support of the International Finance Agreements Amendment Bill. This is a bill that will allow the Government to meet its obligations as a member of various financial institutions, including the International Monetary Fund and, indeed, the International Bank for Reconstruction and Development. It is of great interest to me to hear the various views that are being expressed. It is always a pleasure to follow Mr Williams in a debate. But, other than providing support at this stage, I will leave my contribution at that. Thank you.
Dr DAVID CLARK (Labour—Dunedin North) : We have had some very brief contributions from National members in this debate, and one hopes that that does not reflect a view that this is not something that should be worthy of a full debate. It certainly suggests that it may be the way they lean, and, certainly, with the changes in the International Finance Agreements Amendment Bill aiming to take similar debates out of Parliament in future and to limit them to the executive, one fears that may be the case. I am sure that that will not be a decision that Mr Auchinvole has led, for he is a member who is very keen to contribute to the debates in an appropriate and full way, but I would be very, very saddened if I heard he had been instructed to keep the debate short on this matter because his—
Hon Trevor Mallard: Well, that’d be a breach of Standing Orders.
Dr DAVID CLARK: —party does not want this matter openly debated in the House too often. As Mr Mallard points out, that would be a breach of the Standing Orders, so we certainly hope that is not the case.
We have covered a wide range of things in this third reading. The Hon Shane Jones managed to get us on to bike riding and we have covered a debate about the IMF with Mr Norman, and we have had some interesting contributions, with Mr Bennett trying to suggest that we needed to take the same approach as Australia in respect of the implementation of macro-prudential tools—something of an own goal, given that its purposes are, indeed, broader than ours, I understand, in its equivalent legislation for the Reserve Bank. It has had a more successful export sector, and so Mr Bennett’s gesture and his advice that we should follow the Australian model and keep ours the same sits in an odd way, because those two things are different—very different.
In earlier readings I have placed on record my thanks to the officials who advised the Finance and Expenditure Committee, because they certainly did do a sterling job. They answered the members’ many questions. Certainly, on the Opposition side of the debate we had some questions that were penetrating and interesting, and they came back with fulsome records about when decisions were taken around the rules and the way in which they had been debated in previous Parliaments. The National members of the committee were less fulsome in their questions, but they allowed us to pursue those questions, and I am grateful to them for that. We certainly did get some excellent advice and a full picture of how decisions around changes at the IMF have worked over the decades.
One of the interesting things about the changes that have been made to New Zealand’s IMF rules is that they have not happened very often. The last time we had a debate about these matters in this Parliament was actually 15 years ago, and I suspect that many members were not here then. Some were—Mr Deputy Speaker, you, I think, would have been contributing to debates fully in that time, and other members sitting in close proximity to me also will have contributed to those debates—but there are other members here who are newer and who will have brought different ideas and new ideas, and I hazard to suggest that some of the older members may have changed their minds, too. So it is good to have this debate. It seems wrong and a shame that much of this debate will now be transferred to the executive, and the executive will in future be able to change the way in which New Zealand relates to the IMF, so we will not have this debate here in the House. We in the Labour Party think that means that it is not subject to full parliamentary scrutiny, and we think that is a loss to New Zealand over time. We are, in a way, limiting future Parliaments’ ability to contribute to decision making around New Zealand’s contribution to, and relationship with, the IMF.
If I can provide the wider context for this bill, over time the shareholding—the quota share—of many IMF members has not kept pace with the members’ relative positions in the world economy, and many fast-growing emerging market countries have substantially become under-represented. For this reason, the IMF has introduced reforms to realign members’ quota share with their relative economic weight in the world and enhance the voting power and representation of low-income countries. This is what this legislation actually achieves here and now, and I want to place on record that the Labour Party thinks that is a good thing. We think it is a good thing that there is representation by those countries and that that representation is updated. We agree with the general thrust of what is happening now, and that is why we will be supporting the legislation, but we are disappointed at the future lack of transparency that the Government is achieving at the same time. That is why in the Committee stage we argued for the removal of clause 4 of the legislation. That argument was defeated in this Chamber, as the Government members decided that they would indeed prefer such decisions to in future be taken in the executive. We as an internationalist party, I guess—the Labour Party—do believe that it is important to honour the international obligations and agreements we have entered into, and we believe in a multi-country approach to issues of world development. That is why the overall picture for us is of something that we want to support.
I wanted also to just comment on a suggestion of a colleague from the Greens that the Labour Party had attacked the Green Party for its particular stance on this bill. I think our main quibble was the way in which the Green Party had not entered the debate, so it was impossible to know what its stance was, given that the last time this debate happened was 15 years ago and the Green Party members in Parliament then were newly defected from another party. We did not really know whether that was its established position or whether there was going to be a future position. It was outlined much more clearly today by Russel Norman. The Green Party indeed agrees with us that decisions should not be taken by the executive, but it feels so strongly about it, we were told, that it is not going to support the international development efforts that this bill promotes. We obviously take a different position to that.
But the point of principle on the issue of transparency is one that we will stick with and we will argue over again in this House, as we have today around the Skycity deal. We certainly heard questions in the House today asked of Mr Joyce that he looked distinctly uncomfortable answering. That is what the Labour Party believes is important. We need to hold this Government to account for decisions that are taken behind closed doors, or in ways in which the normal scrutiny of Parliament might be avoided or seem to be avoided. That is something we want to challenge. We want to make sure that the normal approaches in this Parliament, the normal processes, are adhered to, so that the public of New Zealand can be confident that things are being done transparently, that they are being done properly.
I personally also have raised concerns about the way in which the Inland Revenue Department is letting its contracts in respect of its business transformation project, and the way in which that has been done. I myself have put in some Official Information Act requests and requests for information about the process, which have been turned down in the first instance. I think it is important for the public that we can see that transparent processes are operating in the Inland Revenue Department, when it is letting out a contract that may be worth $1 billion; in terms of Skycity, when we know that that may affect problem gamblers, and also goes to the heart of whether the Prime Minister believes in fair process; and here, where we are talking about our relationship with the IMF and the way Parliament takes decisions around it. That is why we have argued in this legislation for greater transparency. Transparency is an important thing for Parliament. It is important that we have transparent processes. It is important that we have these debates, that we see that we have an up-to-date position in Parliament, and that we make the best decisions on behalf of New Zealanders.
The IMF—it has been briefly touched on in the debate—has many recommendations for us. We have also seen in the debate the irony of the fact that this Government chooses when it will comply and when it will not, and that its arguments—for example, against pro-growth tax policies in the form of a capital gains tax or a research and development tax credit—are looking like pretty thin arguments now. In light of world evidence and in light of all OECD countries having a capital gains tax except for Switzerland—something of a tax haven—Turkey, and New Zealand, we are certainly dragging the chain there. The Labour Party believes it is high time we took that piece of IMF advice to heart, introduced a capital gains tax in New Zealand, and began to actually make sure that the wealthiest New Zealanders are paying their fair share of tax, rather than avoiding paying their fair share.
IAN McKELVIE (National—Rangitīkei) : It gives me pleasure to rise to speak to the International Finance Agreements Amendment Bill, and for the life of me I have not been able to find any evidence of the issue of problem gamblers in this bill! This bill allows and enables New Zealand to contribute to the world financial institutions, to continue on a mildly altered pathway, and we are doing our thing as a country. To the people of Rangitīkei this may mean very little. However, Rangitīkei, like the rest of us, relies heavily on the world’s economic stability, and the changes this bill provides will assist that cause for us. So I have great pleasure in supporting this bill and the third reading of this bill as it passes through the House.
David Bennett: Friends?
Hon TREVOR MALLARD: Well, very good friends, Mr Bennett, and like all good friends we have differences occasionally. That is why we are in different parties, as opposed to the National Party, where you have sitting next to each other a bright, intelligent, young man from Tauranga and Aaron Gilmore. Things just could not be more different within the Labour Party. We have a range of views. But it is fair to say that there is a wider range of views, and we have discussions and we have differences, and one of the differences we have with the Greens is whether or not to vote for this International Finance Agreements Amendment Bill.
We absolutely agree on the fact that the National Party taking to Ministers something that should be in Parliament is wrong. I think the difference we have is over the other things about this bill, which are fairly good. Most of the changes that occurred in the 2008 and 2010 revisions are good things and therefore should be supported. They certainly are good, and the Labour Party wants to support them. We have decided to vote for the bill and the Greens have decided to vote against it, and there is not that much in it.
What I want to share with members opposite is that actually it does not make too much difference at all. Whether or not we pass this legislation, our obligations are there. This clarifies on the New Zealand statute book the fact of the reflection of the constitution of the IMF, but, actually, even if we did not pass it, we would still have to have the changes in arrangements anyway.
And other interesting things occur. You know, with some of these organisations when you are in them you are in them for ever. But it is relatively simple to jump out of the IMF if anyone was ever foolish enough to want to. All you do is stop paying your money. You stop paying your money and you are automatically out. It does not happen that way with the UN, as the United States has discovered over many, many years.
So the changes in this bill are generally positive. The fact that it is legislation passing in 2013 is somewhat of an embarrassment. The Australians managed to do the 2008 changes in 2009, and actually managed to get the 2010 changes through in that year. That is possibly an indication that the Australian Government is much more efficient than the New Zealand Government, that there is a priority around making sure that the treaties it is involved in are properly aligned. Or maybe it is just as simple as the fact that it does not rely on Bill English to get busy and to get the priorities there.
The 2010 review is something that was brought forward as a result of the global financial crisis. There is another upcoming review in 2013, and what is happening is that this will mean that there will be three over 5 years instead of one over 8 years. That is a reflection of the changes that are happening in the world, the need to update, and the change in the balance of power. [Bell rung] Can I have an indication? Was that a 1-minute bell? Thank you.
There have been, as members know, quite a few previous amendments to this legislation, which originally came in—sponsored, we think, by Harry Lake—in 1961. There have been a series of amendments since that time. The major part of the amendments here, the principal part as opposed to the emergency part, was, in fact, part of a package that Michael Cullen was involved in negotiating. That is the 2008 set of arrangements. We all know that he clearly works in New Zealand’s interests. I think it is probably fair to say that his knighthood did not quite come for the work that he did in relation to the IMF, but he is a person of integrity who has recommended this. We are therefore very happy to support it.
Dr KENNEDY GRAHAM (Green) : I do not intend to take up too much of the time of the House, because the Green Party has, in fact, made its views quite clear. I do appreciate the constructive tone and spirit that my predecessor here, Trevor Mallard, has just offered in his intervention. He was concerned earlier in the course of the debate, during the Committee stage, about Green policy, and he was quite in order to challenge the Green Party to advance its views as to why it is voting against this bill, the International Finance Agreements Amendment Bill. Just to correct his colleague to his left, David Clark, who, with respect—
Hon Trevor Mallard: Well, he’s actually on my right, but—
Dr KENNEDY GRAHAM: Ha, ha! He took it upon himself to suggest that the Green Party had not engaged in debate on the passage of this bill. That is factually incorrect. We have taken every call that we have been allotted—Russel Norman and I have both had two in the first reading and two in the second reading—and also in the Committee stage as well. So we have, indeed—
Hon Member: Very late call in the Committee stage.
Dr KENNEDY GRAHAM: Well, the Green Party chooses not to engage in excessive repetition, unlike a few others. We make our points. We respectfully listen to others. We point out, with courtesy, where we think they are incorrect. We then wind up with a conclusion, and the conclusion is that National and Labour are both wrong in voting for this bill. We have already made the reasons clear—on 8 May last year, in the first reading; on 25 September last year, in the second reading; and on 18 February this year.
Just for those who are still struggling to understand it, Russel Norman did say at the time the reasons we think the democratic reform of the IMF has a long way to go. It still is, in some ways, enshrined in the post - World War II order and does not represent the modern world—something, incidentally, that Shane Jones had pretty much touched on. Dr Norman said we would like the democratic reforms that this bill implements, which are very, very minor, to go much further—much further—so that the IMF represents the world much better. Even if we adjust to represent the economic world, it would be progress, but it certainly does not represent the world populations in any respect whatsoever, so those are very minor reforms. It is because of those minor reforms that we have taken the decision to vote against the bill, both in terms of the limited nature of the changes to the voting power and because of the regulatory provision that Dr Norman spoke about, and so did I, earlier.
In the second reading I offered the political reason, or the political reasoning, by which the Green Party came to decide to oppose the bill. Where there is inadequate reform of an organisation, a political party has a choice. You can support the bill while criticising it because it does not go far enough, and then vote for it, as Labour is doing, or you can take a different approach and say: “The bill does not go far enough in reforming it, and because of that we will oppose it.” We have chosen that latter path.
I think it is good, open season when one party takes a stand on its own and votes against a bill. This is essentially a political Chamber, it is a political process, and there is political criticism. But it is nothing more than political criticism, because the politics can, at times, overwhelm the true economic argumentation. I think there is scope for understanding the arguments both for and against this, and I think there is a certain amount of respect for arguments for and against.
We have listened to both National MPs and Labour MPs advancing their views as to why they are voting for the bill, and we have actually consciously reflected on it, as we have heard that. We have discussed it at some length, and we have found no reason—no convincing reason—in the argumentation put forward to change our view. If we were prepared to agree that there is a sufficient reason, we would change our vote. We have changed our vote in the past, we are quite capable of doing it again, and we would do it today. That is not the case. The argumentation put forward has not been convincing, gentlemen and ladies—it is only gentlemen, I think, in the Chamber at the moment. So, colleagues, with respect, we have listened to you, we have reflected, we are not convinced, we think our position is right, and we are voting against the bill.
TIM MACINDOE (National—Hamilton West) : That speech was indeed a very courteous contradiction of Dr Graham’s indication that he would not be using his full time allocation. But, as always, it was delivered in a very thoughtful way, and it is good to have one blonde following another in the House.
I want to just assure Dr Clark that, far from wanting to avoid debate, the brevity of Government speakers’ contributions this afternoon reflects our enthusiasm to see this bill, the International Finance Agreements Amendment Bill, passed into law. As the Minister for the Environment noted when she moved the third reading of this debate earlier this afternoon, the passage of this bill will demonstrate New Zealand’s support for reform of the International Monetary Fund. We have always seen value, as a country, in being a contributing member of the IMF, and the reforms that we are supporting will enhance the organisation’s legitimacy and effectiveness. I have great pleasure in supporting the bill.
|Ayes 100||New Zealand National 59; New Zealand Labour 30; New Zealand First 7; Māori Party 2; ACT New Zealand 1; United Future 1.|
|Noes 15||Green Party 14; Mana 1.|
|Bill read a third time.|