Westpac New Zealand Bill

I rise to speak in the Committee stage of the Westpac New Zealand Bill. First of all, I would like to note that the National Party is supporting this bill. It has supported the bill at its first reading, through the Finance and Expenditure Committee, and at its second reading. We are happy to help the progress of this bill through Parliament. The bill comes with a couple of small amendments that came from the select committee process, and, again, we endorse those amendments. We are quite happy with the bill in its current form. I thank the honourable member Marian Hobbs for her work in steering this bill, in its various stages, through the Parliament, and for the way in which she has been more than open to consideration and discussion around the bill.

It is an interesting reflection to get up now and speak in the Committee stage of a bill like this, given the behaviour we have seen in the Chamber over the last 3 or 4 hours. It is a nice change, I think. I guess people listening out there can now turn down the volume on their radios. It is certainly a pleasure not to have to listen to some of the diatribes and the gutter politics that we have heard here today. Mud has been thrown around, and, believe me, if people are worried about where politicians stand in various trust surveys, I think they will find that today they just went down again.

On 1 November 2006 the largest New Zealand transaction in history will take place. It is a transaction of about NZ$35 billion, affecting 1.3 million – odd customers. Some are individuals and many are corporates. Interestingly, and I will come to this point later, Westpac in its current form is the Government’s banker, and, of course, the incorporated Westpac New Zealand will also be the Government’s banker. That raises interesting questions over who wrote and signed various cheques, and about the cash flows going through Government accounts, particularly in relation to last September.

This bill incorporates Westpac New Zealand Ltd. It is a coming of age for Westpac. This argument and discussion has been going on for a long time in financial circles in New Zealand, and between the Reserve Bank and Westpac. Interestingly, of what are known as the four pillars of Australian banks—the ANZ, National Australia Bank, the Commonwealth Bank of Australia, and Westpac—Westpac is the last one to be incorporated here. I congratulate members, officials, and Reserve Bank members on working their way through the ramifications of this. If we look at the share price of the two different companies, we see that they have converged somewhat, as the incorporation has come closer.

I am a member of the Finance and Expenditure Committee that considered this bill, heard submissions on it, and reported it back to Parliament. I must say that it is a very good committee to be on. There is a very strong standing of National Party members on that committee—myself, Mr John Key, Dr the Hon Lockwood Smith, and Chris Tremain. We bring a lot of gravitas to that committee. Currently, the Finance and Expenditure Committee is also considering the Taxation (Annual Rates, Savings Investment, and Miscellaneous Provisions) Bill. That bill will affect Westpac and the new Westpac New Zealand. It will hammer those who have provided for their retirement savings by putting a capital gains tax on their unrealised earnings in countries outside New Zealand and Australia, and in what is, under that other bill, almost effectively a country, the Guinness Peat Group. Some of the submissions that have been heard so far on the taxation bill—and many of those submitters are customers of Westpac, and will be customers of the new Westpac New Zealand—are almost unanimous in their opposition to the bill in its current form, which will create huge anomalies. Quite frankly, I do not know how Westpac New Zealand will be able to address and manage those problems in its back office.

The new Westpac New Zealand will be affected by the taxation bill because the bill affects migrants who are thinking about coming to New Zealand. Of those migrants who have already arrived in New Zealand, many are thinking about leaving. Goodness, gracious! We have a capital deficit in New Zealand. We have a higher taxpayer deficit, although inflation has dealt to that. Twenty percent of people are on the 39c tax rate now. Many people are feeling sold out, let down, and deceived by the Labour Government. The Government has said to those people over the last 6 or 7 years: “Come to New Zealand, invest your money here.”, and once they have landed here, suddenly they have been whacked with a capital gains tax that was not even on the horizon when they first talked about coming here.

Westpac New Zealand is the Government banker. It is responsible for managing the cash flows in and out of various accounts. It will be interesting, once various reports come out from the Auditor-General, etc., to see who signed what authorisations, and what prudential requirements were adhered to when the cheque for $446,000 was signed by someone in the Beehive for the pledge card—or perhaps it was signed by the Parliamentary Service, but with the authorisation of someone in the Beehive. We are yet to find that out, but we look forward to that. It will come out in time.

This Westpac New Zealand Bill is one amongst a few other bills going through Parliament at the moment. We have recently seen the KiwiSaver Bill go through. That legislation made fundamental changes to the savings industry of New Zealand, particularly in terms of the last-minute changes that were rammed through 4 hours before the second reading, the scope of which even Labour members were totally oblivious to at the time. The Reserve Bank of New Zealand Amendment Bill and the taxation bill are also currently before the Finance and Expenditure Committee. All these bills contain quite fundamental changes and, taken as a whole, they are a giant lurch backwards for New Zealand and for investment in New Zealand.

Coming back to the Westpac New Zealand Bill, I say again that National supports it, given the integrity of the Reserve Bank, the submitters who came before the Finance and Expenditure Committee, the Australian officials who were also involved in this bill, and the officials from the various New Zealand Government departments. I thank those people very much. National looks forward to this legislation, and we look forward to everything going very well and very smoothly from 1 November.

Tēnā koe, Mr Chairperson. Last night, while we were discussing the Insolvency Law Reform Bill, it seems that we forgot some really important statistics. So being ever-helpful, as we are, the Māori Party humbly brings the following information before the Committee to help us better understand the Westpac New Zealand Bill, as well.

In 2002, 47 percent of bankrupts had more than one credit card, 53 percent had two to four of them, and only 17 percent of bankrupts were Māori—thank heaven! These are big issues that we face—issues that banks like Westpac and other important banks in Aotearoa must address in order to protect their clients’ finances. Yet, as the cash registers were ringing last Christmas, the Banking Ombudsman was condemning banks like Westpac for encouraging their customers to take on debt they could not afford, for extending credit to clients that could not make the repayments, and for giving credit cards to people who had not even asked for them.

There is an old saying about a weka escaping a snare and not going back to it. In this case, though, it was precisely because of the way Westpac snared its customers and dragged them back into debt that, along with BNZ, it jointly won the 2005 Roger Award for the worst transnational corporation operating in Aotearoa—the first banks ever to win the Roger Award for being corporate criminals. The award described how both banks pressured their staff to sell credit cards to people rather than to provide things that the customers had actually asked for. It is the McDonald’s philosophy. Instead of fries with one’s meal, the banks are serving up debt with one’s credit—and they are making their staff serve it up by forcing them to meet targets based on increasing customer debt or losing their jobs.

Westpac staff are required to meet a specific target of 8,575 points a year and, although every new account opened attracts 10 points, selling a credit card gets the staff member an extra 25 points. Union spokesperson Karen Skinner said that these targets are putting increasing stress on bank workers and customers alike, and they also place stress on the New Zealand economy. Why are staff paid incentives to put customers into more debt, and why is it that if the staff do not sell enough, their jobs can be under threat?

The Māori Party will support this bill because it will enable the Reserve Bank to ensure that Westpac and all big banks operating in Aotearoa are incorporated here. We support the view of New Zealand Trade and Enterprise that because banks are vital and strategic players in our economy, they should come under the control of this country’s laws, and local incorporation offers that greater level of domestic security.

But protecting assets and savings must also recognise the huge levels of bankruptcy, insolvency, and credit card debt this country has. I tell members to think about this: New Zealanders are the worst savers in the OECD, bar none. For every $1 we earn, we are spending $1.13. This time last year we owed more than $4 billion on credit cards—up a full $217 million on the previous year. It is hard even to contemplate what this year’s credit card debt level might be. We cannot just ignore these facts and forget to mention them here, or just say tut-tut and condemn people for not being thrifty enough, and hope that it all goes away. We all have a responsibility to talk about this and to deal with it.

Westpac, when lending credit to customers, must be bound by the code of banking practice to act fairly and reasonably towards the customer in a consistent and an ethical way. The explosion in numbers of credit cards and the greater use of credit cards instead of cash, and the growth of e-commerce and the use of performance targets, are forcing Westpac staff to sell more and more debt to Kiwi customers. Incorporating Westpac here is expected to protect Kiwi depositors if Westpac goes belly up, because current Australian law gives Aussies first call on the funds and limits overseas claims. It means that when incorporation is complete, it will be Kiwi customers at the front of the line, and we welcome that.

The bill is also supposed to make the New Zealand banking system more resilient in times of stress, make Westpac subject to the same rules for capital and insolvency as all the other banks in Aotearoa, make Westpac answerable to the Reserve Bank for regulation, monitoring, and discipline, and enable the Reserve Bank to better manage any potential bank failure. Hopefully, that will mean New Zealand does not have to deal with the wider costs of bank failure, like a collapse in investor and consumer confidence, higher borrowing costs, and low economic growth.

But the questions we keep coming back to are, what about Westpac customers trapped in credit dependency? What about those customers who are overspending and plunging into bankruptcy? Last night I reminded the House of the dream of Martin Luther King—that, hopefully, we might never open an account in the bank of justice only to find it bankrupt. In Westpac will we find a bank that dispenses justice to its customers and treats its employees fairly, justly, and with accountability and integrity? When I think of its staff targets and its drive for profit at any cost, I harbour deep concerns about Westpac’s moral bankruptcy, ethical insolvency, and lack of social responsibility. This bill also states that current staff who become employees of Westpac New Zealand should have their contract of employment protected, so we will be watching carefully to see that this does indeed happen and to see that Westpac employees’ rights are upheld in this process.

The Māori Party will support the third reading of this bill, in order to support initiatives that protect our nation’s economy, as well as the finances of its clients. But we will also hold Westpac to account for its investment in social responsibility and efforts to promote a genuine progress index. We will be watching carefully to see whether the growing of its assets is matched by the growth in well-being and security of its staff and clients. Kia ora, Mr Chairperson.

Preamble and clauses 1 to 24 agreed to.

Bill reported without amendment.

Report adopted.

Third Reading