Financial Markets (Conduct of Institutions) Amendment Bill

Members, when the debate was interrupted, Stuart Smith had the call, and he had three minutes and 35 seconds exactly remaining.

Thank you, Mr Speaker, and it was actually a great pleasure to give way to the Hon Kris Faafoi for his valedictory speech when I was so quickly cut down—

Hon Todd McClay: See if there’s anybody else who wants you to give way over there.

STUART SMITH: Well, that’s right. There’s a few potential valedictories over there, if they get the opportunity to give them. So it is a great pleasure to speak on this particular bill, because, actually, I don’t like the bill. I think the bill’s terrible.

There’s a bit of a theme here across a lot of these bills that this particular Minister brings to the House: he has a lot of solutions looking for problems. I don’t begrudge the Minister and his enthusiasm, but, actually, what he’s doing with his misguided attempts to bring some legislative rigour to the commercial world—all he is doing is adding costs needlessly and a lot of red tape. Now, I know Labour love red tape—they do that—but, actually, it’s really slowing down the economy. It takes all the confidence out of the business sector and makes everything more expensive for Kiwis, as we know, who are living in the midst of a cost of living crisis.

The Credit Contract and Consumer Finance Act legislation is a good example, which is very similar to this particular bill. I think, at that time, they said it was only really going to go after the unscrupulous operators, and yet it ended up impacting on all the mums and dads trying to get a mortgage, who had to go in there and then they had all of their financial transactions in the last little while looked into, and it became absolutely ridiculous. It was intrusive and it was completely unfair, and it completely missed the whole purpose of the bill. I wonder what went on in the policy development of this particular bill, because I do note that the Reserve Bank and the Financial Markets Authority (FMA) said they did not find major systemic misconduct like in Australia, which is where this bill had its genesis. They’re trying to copy what was going on in Australia.

So the Minister is well-meaning. I think he’s trying very hard, but, actually, we’d be all a lot better off if he didn’t try so hard, and what he should be doing is looking right into every policy that comes his way. Whether he suggests them or whether they are from officials, I don’t know, but given what the Reserve Bank and the FMA have said, I doubt very much that the officials were the source of this policy’s birth; I think it was probably the Minister. He’s actually going to only bring in a lot more red tape and slow things down for the financial markets. He actually gave an example, in his opening speech in this reading, of an insurance salesman—how dare they actually try to sell something for a bonus? He thought that was a bad thing, and he’s going to stop that.

He doesn’t understand that, actually, sales are about selling things. They don’t hire salespeople to not go out and sell. What is wrong with giving someone an incentive to sell something? If they’re acting inappropriately or if they are committing fraud, there are laws to deal with that. Those things don’t need this stupid bill, which I condemn to the House.

I want to address the point made by the last speaker, Stuart Smith, because I couldn’t more strongly disagree. What we have here is a culture which has actually caused, again, great harm to people.

I’d like to take the example that Mr Smith took of a scheme where you pay your employees—you incentivise them to sell a product. In something like banking, there is a power imbalance. People go along and they trust the person who is giving them that advice. There is a conflict of interest here, because the person giving them the advice may actually need the money that comes from the incentive, especially if it’s a sales target where they are actually being required to sell a certain number before it clicks over. On that last sale, how much pressure do you think is on that worker? How much likelihood is there that, in fact, it really hurts the person; it doesn’t help them?

So banking is in a very important position: it actually holds a position of trust—and that’s good, long term. This bill helps to actually change the culture to a good one. This is a problem, this has been a problem, and it was recognised as a problem by the institutions of the Reserve Bank and the Financial Markets Authority. We’re plugging that gap and we’re doing it for the consumers of New Zealand and that, yes, will help with the cost of living.

Oh, Mr Speaker, I hate to be a Negative Nelly on this, but this is a stupid bill. There’s no reason to have it. I mean, the speaker who’s just resumed her seat, Ms White—a really nice person. Pleasant. Travelled on a trip with us recently in Europe—

Dr Duncan Webb: That’s what her colleagues say about her.

Hon JUDITH COLLINS: —as did the current chief whip. Yeah, lovely—lovely. Very nice person. Anyway, it’s not the point.

I’m here to talk about this bill. What a dumb bill. Really dumb. OK, so she gave an example of a bank person, a bank manager, a bank’s, you know, manager of some form, saying that you might like to buy this insurance. OK, all right, imbalance of power—maybe. How about this: you also have to disclose that you’re getting paid a commission. And that’s the thing: the bank manager still has to say that, because we’ve had an Act part of our laws since, I think, from memory, just around about the time of the First World War. I mean, even longer than Winston Peters has been alive. It’s called the Secret Commissions Act, and I would have thought that she, as a lawyer, would have known that. So that’s already there, so you’re not actually allowed to take commissions without disclosing it to the person who’s paying the bills. So I think it’s pretty much covered.

The other thing is: it’s just more regulation, isn’t it? We’ve got people here: “You have to act like this, you have to act like that.” Right at the moment, this country is full of Kiwis who are wondering how they’re going to pay their mortgage, but it’s great to know that they’re going to be protected by this Government! Well, it’s not going to protect them. The costs of actually being a financial institution have gone through the roof. They’re increasing. We’ve seen it, as Mr Stuart Smith alluded to—we’ve seen it with ill-thought-through—actually, not thought through, but well-intentioned legislation that actually meant that a whole lot of New Zealanders missed out on getting loans when they could for their first home.

So we have a situation where, yet again, this Government thinks it knows best. It thinks it knows best about financial markets. It knows best about what institutions should be doing. These are actually the institutions who are currently taking in money, lending money, helping people through their business situations, helping them to buy a house, helping them to retain their home as they’re stretched and trying to pay for their increased mortgages. And this Government wants to add more cost to them and to say to them, “We don’t trust you; you’re bad. You lend money. You lend money for profit.” Well, I can’t think of anybody except volunteers who go to work except for profit. It’s called a salary, a wage, or else it’s a profit. And the member who resumed her seat, she was an employment lawyer, she says. I presume she went to work and she made some profit. What, made profit off the unions or the poor people who paid the union fees? The fact is, is that profit means taxes as well. It means there’s a reason to go to work other than the joy and the bliss that we get from it. There is some point. It means that there is some profit to buy the groceries, there’s some profit to pay the mortgage, there’s some profit to do so. Banks are not just evil because they make a profit.

Without banks, what is there? What do we go back to? Bartering? Are we going to barter a parsnip for a carrot? I mean, is this where we’re going to end up in this Government, if it gets its way? It already seems to be focused on banning tobacco but allowing cannabis. So the whole country must be looking at this, wondering.

Right at the moment, there’s a whole lot of New Zealanders in a financial bind. There’s a whole lot of Kiwis who finally got their first home, and now they’ve got a mortgage rate that they can’t afford. And the value of their home has gone down, not up, around 80 percent of what it was, 88 percent of what it was, when they bought their home earlier this year. And this Government’s answer is to put more cost on to their mortgage lender. So they’re going to end up with higher interest rates, more chances of mortgagee sales, and more earning New Zealanders moving to Australia.

The last time we saw the exodus, the brain drain, from New Zealand to this extent was under the Clark Labour Government, when we had exactly the same, 2008. We had interest rates at 11 percent higher than they are now—and I think my prediction is they’ll probably end up there, if this keeps going down this way—and we ended up with a brain drain. And we will have it again. It’s already happening. One of the reasons it’s so hard to even get a flight out of New Zealand is because so many people are going one way.

When I was recently leaving New Zealand, on the Speaker’s tour, I was standing by a young couple who seemed to have almost all their worldly goods with them at the check-in. And they told me—because I said, “Oh, where are you going?” And the chap said to me they were going to the US. They were going to some place in one of those states like Arkansas or something. And I thought, how can Arkansas be more attractive than New Zealand? I mean, seriously. I’m sure in Arkansas—I don’t want to upset anyone in Arkansas; I don’t know if they are “Arkansasians”, or what. I don’t want to upset them, but I can’t think that that would be more attractive than New Zealand. But they told me it was, because, they said, they could buy a house; they can’t buy a house in New Zealand.

The costs of more regulation on top of more regulation for banks is going to mean not one extra New Zealander is going to be able to borrow money for a house, because of this legislation. Not one extra. It is not going to bring down the cost of borrowing. It will put up the cost of borrowing. It will end up with more bank staff being more nervous about approving people’s loans, in case they’ve got something wrong. You know the stories that we’ve all heard of, of people having to explain their coffee purchases to a bank manager, to show that they can afford a mortgage—well, what sort of strange world is that? That is the world wrought by Dr David Clark and his Government. It’s the nanny State writ large. It’s the people who cannot trust adults—adults, who can have their own children, who can, apparently, buy a property, have a car, have a driver’s licence, and even have a gun licence. We cannot trust them to do a deal with the evil bank!

Well, I actually think we’ve got to move past this. Best way to bring about best behaviours in banking is to have more competition. There’s nothing like competition to get everybody to sharpen their pencils and be better at what they’re doing. But all this legislation against banks and financial institutions, all it ever seems to do is put up the costs that young New Zealanders, older New Zealanders, any New Zealander gets to pay for the privilege of borrowing money and paying it back. And that all comes down to this Government’s lack of trust in adult New Zealanders to make their own decisions. And that is, I think, a real indictment on this Government—that everything that Dr David Clark, despite him being a very pleasant person, has tried to do in a well-meaning way, has led to a complete turnaround and a total mess. And we’ll all have to come back to Parliament to talk about it and try and fix things for him. And this is going to be another one.

So we’ve got the Financial Markets Authority—that was set up under a National Government; from memory, I think one of my predecessors did that. But we’ve also—they say there’s no particular problem, they’re not the ones pushing for this. So where is it coming from? Is it that most of the banks in New Zealand are Australian? Is that it? Do you think it’s that?

Stuart Smith: Could be—could be.

Hon JUDITH COLLINS: I think it could be that. I think it could be. Mr Smith, you agree it’s possibly that.

Stuart Smith: Yes.

Hon JUDITH COLLINS: Well, thank goodness that they were strong enough to help get us through the global financial crisis. Thank goodness that they were strong enough to help get us through the COVID period. The last thing that as a country we should wish is for our banking to be so small, so tiny, so incapable of withstanding world shocks or economic shocks—the last thing we want to see is our mum and dad Kiwis, and even those who are not mums and dads, losing their homes or losing their businesses because their bank has just lost their business.

And so I’d say this is not going to cause that, but what it will do is it will simply add more cost—more cost with worse outcomes, and nobody’s going to benefit except those who are paid to regulate and those who are paid to advise on regulation. That’s who’ll benefit from it. My legal colleagues who are in private practice will no doubt find this very interesting and they will no doubt be able to make some money off it, but they’re pretty much the only ones. It is one of those silly pieces of legislation that we should be saving the million dollars it apparently costs every hour for this Parliament to sit and actually just kick it to touch.

Thank you, Mr Speaker. I’m very surprised at the attitude of the Opposition to this bill. This is a good bill. The idea that incentives are in some way always all right just beggars belief. We’ve seen that incentives in the finance sector—particularly around complex products, such as those in life insurance and mortgage products—lead to pressured selling and selling products which aren’t needed and aren’t appropriate. We’ve got to be absolutely alert to the concept of conflicts of interest in sales frameworks, such as incentives. That’s just one small part of this bill. It’s a good bill. It makes a much more robust, honest, and transparent banking sector. I absolutely commend this bill to the House.