Third Readings

I move, That the Securities Amendment Bill, the Securities Markets Amendment Bill, the Takeovers Amendment Bill, and the Fair Trading Amendment Bill be now read a third time. These bills are designed to encourage investment in New Zealand’s financial markets. They address three principal deficiencies in our securities markets laws.

First, parts of our law are not as effective as they should be. Our insider trading rules have been overly complex. The Investment Advisers (Disclosure) Act fails to deliver meaningful information to consumers, and disclosures made by substantial securities holders are confusing. Second, other aspects of our law are out of step with international norms. This Government recognises that given the small size of our capital markets in global terms, there is a real investment cost if our regulation does not look like that expected around the world. Third, the regulators of our financial markets must have the tools to enforce the law effectively.

This legislation tackles each of these issues. Its objective is to improve the confidence of investors, both here and overseas, in the integrity of New Zealand’s capital markets. The bills do this by strengthening the regulatory framework in our securities, securities trading, and takeovers law.

The main provisions of the bills include a new insider trading regime focused on the damage such conduct poses to the efficiency of, and confidence of investors in, financial markets; comprehensive prohibitions, for the first time in our law and consistent with international practice, against market manipulation and conduct creating a false impression of securities trading activity, price movement, or market information; simplification of the substantial security holder regime by requiring disclosure of relevant interests by class and for listed voting securities only; improvements to investment adviser and broker disclosure law by requiring important additional information to be disclosed to clients before giving advice and by making all disclosures mandatory—also, the Securities Commission is given a public enforcement role in this area—and, finally, a complete overhaul of the size and range of penalties and remedies available under securities and takeovers law aimed at deterring illegal behaviour and encouraging compliance.

I tabled further changes to the Securities Legislation Bill by way of a Supplementary Order Paper in the Committee of the whole House stage, in response to issues raised by business after the bill was reported back from the Commerce Committee. Those changes picked up a number of minor amendments necessary to better target some provisions, ensure the efficacy of others, and correct minor errors in the bill. For example, amendments were made to ensure that capital market advisers are not caught by some of the insider trading or continuous disclosure provisions of the bill where they are legitimately advising their clients on their own activities.

I would like again to thank the Commerce Committee for its work on the legislation, and those who made submissions on it. I also thank all the officials, who worked extremely hard to get the legislation to this point, and it is a great credit to them that we now see the passage of this legislation. I would especially like to thank Kirstie Hewlett; I know it is unusual to name an official in the House, but Kirstie has gone beyond what would be expected of any official in her role as manager of the financial sector team at the Ministry of Economic Development. She coordinated the work programme that led to this legislation. She has incredibly high standing out there amongst the stakeholders, and I wish her well in her forthcoming work, which will be even more difficult than the work she has done for us. There is still a large amount of work being done by officials in that team, and they have done an excellent job on this legislation, under considerable pressure.

This legislation is an important part of the Government’s wider securities law reform programme. It creates the regulatory conditions for boosting investor confidence in participation, enhancing the integrity of our financial markets, and ultimately assisting economic development and economic transformation by increasing investment in New Zealand. I recommend the bills to the House.

On behalf of the National Party I rise to support this omnibus legislation—the Securities Amendment Bill, the Securities Markets Amendment Bill, the Takeovers Amendment Bill, and the Fair Trading Amendment Bill. I start by saying that I spent the better part of 20 years in the financial markets, so I feel I have at least some capacity to comment on some of these issues. Some of the things the Government is trying to achieve here have a degree of merit. There is no doubt that New Zealand requires very strong capital markets if we are to develop and grow as a country, and deliver the prosperity that I think all New Zealanders would want to enjoy.

In a sense, the legislation is an important milestone in terms of taking New Zealand forward in this area, and that is because in the late 1980s New Zealand had a reputation—maybe not necessarily warranted—as being like the Wild West, and we relied very heavily on offshore capital markets. Yesterday the Government announced an $11.5 billion surplus. I think the public of New Zealand know that some of that money should be returned in the form of tax cuts. But what was really interesting was the scenario that the Government was really hogging the cash of hard-working New Zealanders. On the back of that, New Zealanders have borrowed an additional $60 billion in the last 6 years alone—$40 billion in the last 3 years. That capital has come from offshore. We are the most indebted nation in the OECD in terms of our offshore borrowings. We are hugely reliant on them, and that is one of the very concerning matters about our 9.7 percent current account deficit.

One of the reasons why we really need confidence in our capital markets is that we rely very heavily on that capital. Interestingly enough, one slightly unique feature of our current account deficit is that it is heavily made up of an equity portion, as opposed to a debt portion. So in other words it sometimes reflects, as it has with the widening of the current account deficit recently, that returns in New Zealand have been greater. It shows just how reliant New Zealand is on foreign capital markets. So in that regard we kind of support this legislation.

The second point I want to make, if I may, is in relation to insider trading. New Zealand is dominated by a number of fairly large domestic financial services players. They are often owned offshore. For the sake of the House I will not bother naming those firms, but I can tell members that they already adopt global standards. I spent quite a large period of my time with Merrill Lynch. When Merrill Lynch operated in New Zealand, for instance, it adopted the global standard and that is the case today. I think the New Zealand public can take quite a high degree of confidence that, even without this legislation, there is already embedded in our systems some pretty strong stuff around the declaration of people who are trading, around directors’ disclosure, and around the onus on advisers not to prejudice their firm. So I think we can take quite a lot of good faith from that.

The interesting thing about this legislation, though—and the point that I want to spend the rest of my time discussing—is that when one looks to try to build confidence into the market, one sees it is incumbent on a number of players. It is incumbent on financial advisers, if one likes—those who are out there giving financial advice—that they do not interrupt or prejudice the New Zealand financial markets by somehow using information that is inappropriate and therefore give the market a bad name. It is hugely reliant on directors of companies who do have inside information that they do not act in a way that will obviously be not only outside the law but give New Zealand a bad name. It is also important that the Government plays its role.

One might ask why that is important. Well, the Labour Government that was elected in 1999 has done tremendous damage to confidence in the New Zealand financial markets. It started with a Prime Minister who did not understand the issues of insider trading herself. The Government owns 82 percent of Air New Zealand, and the Prime Minister was so ignorant of the legislation that operates around this area that she did not know, when she told the people of New Zealand “don’t sell your shares”, that that was a form of insider information and a form of tipping. She was ticked off for that. That was the first of a number of examples we saw where this Government was completely clueless when it came to securities legislation in New Zealand.

A few months ago we saw an extension of that cumbersome and quite inappropriate behaviour when David Cunliffe, the Minister of Communications, went on to a Bloomberg newswire—a wholesale news service—and started giving a directive about what Telecom’s dividend profile should be. This is the same man who was responsible for legislation that was being introduced to the House that could have involved the physical separation of Telecom. He went on to say that if Telecom did not act in the way that the Government liked, then he would deem that to be a pretty negative position.

That was a completely inappropriate action by a Minister of the Crown. But, maybe most interestingly of all, the Government decided for purely political reasons it would turn the largest company on the New Zealand stock market—Telecom—into its little political plaything. We are not arguing on this side of the House about whether local loop unbundling should occur. But the Prime Minister of this country took a very unusual step in giving Telecom, the largest company in New Zealand, a public kicking because she thought it might be a reasonably good way to shore up a couple of votes. Unfortunately, when she did that she wiped $3 billion worth of market capitalisation off that company—$3 billion! It was a bit like: “How do you make a large company into a small company? Give it to Helen Clark to look after for a while.” She wiped $3 billion off that company, and every New Zealander in the country paid for it. Every single New Zealander knows that Helen Clark cost them money. The reason is that one of the largest shareholders in Telecom, of course, is the New Zealand Superannuation Fund—the people who are managing money on behalf of the taxpayers of New Zealand. So Helen Clark, for purely political gain, decided she would put the boot into Telecom because that made her feel good and she might win a few votes, and on the back of that it cost that company’s market capitalisation $3 billion. It cost the hard-working taxpayers of New Zealand who have been saving for their retirement a whole lot of money.

She did one other very interesting thing when she did that, and it was done in a purely politically driven way. We have seen an exodus of offshore fund managers come to New Zealand with one simple message: “We are getting out of New Zealand. We are withdrawing our capital from New Zealand. The reason we are doing that is we don’t understand the rules of the game out here anymore. We don’t understand the regulatory environment and the way that’s interpreted. We don’t understand the situation where, on a Monday, the Government can give a policy directive as to what it wants to occur in terms of investment in lines companies, such as Vector—something that sent the stock price of Vector up 10 percent—and on the Wednesday it could be sent down 10 percent because the Commerce Commission then put it under price control.” They do not understand why the Prime Minister of New Zealand thinks it is really good to wipe $3 billion worth of market capitalisation off the value of that company. They do not understand why the political process is one where the Prime Minister of New Zealand thinks the way to win votes is to get inside this kind of information.

This legislation goes some way to improving the private sector and its involvement in this country. It will give more surety and confidence to the financial markets. But I predict that the confidence of the financial markets will never return under a Labour Government led by Helen Clark. It will never return under a woman who, herself, was an insider trader—in my opinion—when it came to the pledge card and the inappropriate use of $760,000 worth of taxpayers’ money. It will never return under the standards set by a Labour Government. The only way confidence will come back into the financial markets is not with the changes National is supporting here today, but when a decent Government is elected by the people of New Zealand. That, I can assure you, Mr Speaker, will be happening sooner as opposed to later.

I rise to speak to this legislation—unlike the previous speaker, John Key—and wish to make a couple of comments in response. First of all, this omnibus legislation is intended to encourage investment in New Zealand’s financial markets by strengthening the regulatory framework in our securities, securities trading, and takeovers laws. As a member of the Commerce Committee, which attended to this legislation, I have pleasure in bringing it back with amendments that have been unanimously supported by the parties around the select committee table. For all the previous speaker’s opportunism and barely related cant, the legislation is an important part of the Government’s securities law reform programme.

In addition to the comments made by the Minister, the Hon Lianne Dalziel, in her third reading speech, I say it is designed to ensure that regulation encourages an efficient and effective market for securities trading. It reduces transaction costs for trans-Tasman companies by aligning parts of our law more closely with Australia. It also enhances the integrity of New Zealand’s financial markets by providing domestic and international investors with the assurance that our regulation in this area is consistent with international norms.

The main provisions of this legislation are to do with insider trading definitions, prohibitions against market manipulation, substantial security holder disclosure, and declaration of contravention mechanisms. The amendments that the Commerce Committee has, as I have said, unanimously put forward in the report attached to this legislation are, in large measure, amendments that simply allow for consistency and for comprehensiveness of these provisions.

This is good and modern omnibus legislation. It has been well served by the officials who have advised the select committee. I also congratulate the chair of the select committee, Katherine Rich, for her guidance of this legislation through the process. So, far from scoring cheap shots of dubious worth and even more dubious accuracy, I would rather stick to the content of this legislation and commend it to the House for passage.

It is worth reiterating, in the interests of accuracy, that this afternoon we are debating the third readings of, in fact, four bills: the Securities Amendment Bill, the Securities Markets Amendment Bill, the Takeovers Amendment Bill, and the Fair Trading Amendment Bill.

One of the interesting things in this third reading debate is that both sides of this House agree with the purpose of this legislation. The aim of the legislation—as I understand it from the work of the Commerce Committee—is to inspire confidence in New Zealand’s capital markets. When the Minister, the Hon Lianne Dalziel, spoke to the third reading just now, she said that the aim of the legislation is to encourage investment in New Zealand’s financial markets. Naturally, National supports those objectives and there are a number of measures in these four bills that National supports, including issues relating to insider trading, disclosure requirements for advisers and brokers, enforcement procedures, and the penalties associated with insider trading. National naturally supports those measures in this legislation.

I take up from where my very, very experienced colleague John Key left off. We in this Parliament have to understand—and members of the Government need to understand—that it is not just legislation that affects our capital markets and investment in this country. The legislation can be improved significantly and I believe this legislation we are debating this afternoon does improve our securities legislation. But the behaviour of the Government can have just as great an effect as the legislation, if not greater. My colleague John Key mentioned the Government’s absolutely inept handling of the Telecom decisions—the decisions surrounding its decision to unbundle the local loop—and the profound impact that had on capital markets in New Zealand. Why would offshore investors look at investing in this country when they see a country where a Government is so ignorant of the realities of business investment that it does things that wipe $3 billion off one company? That company would obviously have had foreign shareholders in it. What are they going to do when they see a Government in New Zealand behave in that kind of way and just wipe $3 billion?

It is easy to say the words. It is easy to say “$3 billion”. I invite members to reflect on how much money that is—$3 billion is $3,000 million. For every New Zealander, that is many, many, dollars just wiped off our capital markets through the inept handling of a Government policy decision. This legislation does not save people from that kind of inept Government behaviour, wiping billions off New Zealand’s capital markets.

If that was an isolated incident, maybe one could say that these things happen from time to time. But it was not. The way in which the Labour Government handled the Air New Zealand fiasco was an absolute disaster, and showed the absolute incompetence of the Minister of Finance when it came to dealing with capital markets and major business in this country. It seemed to me to be Dr Michael Cullen’s personal decision not to accept the Singapore Airlines deal on Air New Zealand. He thought a better deal was out there somewhere, and he kept Singapore Airlines at bay for weeks as the capital value of Air New Zealand plummeted. A lot of foreign investors had shareholdings in Ansett as part of the joint Air New Zealand - Ansett operation. I happened to be in Australia not long after that, and I heard comments by Australian investors in Ansett asking what kind of mickey mouse markets and Government we had in New Zealand that would allow that kind of thing to happen. A tremendous, highly respected international investor wanted to buy a greater shareholding in the Air New Zealand - Ansett conglomerate, which would have saved the capital market value of that airline. Instead, Dr Cullen said: “No, no, we don’t want that.”, and caused massive loss of capital value. So there are two examples—the Telecom fiasco and the Air New Zealand fiasco—that just destroyed confidence in New Zealand’s capital markets. It has nothing to do with this legislation; it is the inept behaviour of this Government.

Another example is the recent sacking of the electricity commissioner. The Government did not like the fact that the electricity commissioner had sufficient integrity not to be manipulated by this Government. We saw that happen to a former Commissioner of Police when Helen Clark first came to power. Helen Clark, the new Prime Minister of New Zealand, knew she could not manipulate Commissioner Peter Doone, so she knifed him the back. And, my word, since then the performance of the New Zealand Police, at least at a high level, has caused many concerns around New Zealand in terms of some of the decision making in respect of the breaches of the law by this Labour Government. So we have that example too of when the Government’s behaviour has, again, lost confidence in our markets. Obviously the electricity market is hugely important, but the Government just sacked the commissioner because it found that it could not manipulate him.

Another very interesting case currently before this Parliament is the Government’s decisions on the taxation of international shares—international equities—by investors in New Zealand. That legislation will have a profound effect on our markets in this country. The select committee has already heard evidence in public—so I am not breaching any confidence—from major fund managers in New Zealand, saying that if Labour not only goes ahead not just with the Taxation (Annual Rates, Savings Investment, and Miscellaneous Provisions) Bill as introduced into Parliament but also backs down on the international provisions and goes with the new provisions put in front of the select committee by way of a letter and a press statement from the Ministers, then even with those changed provisions, investment funds in New Zealand will go offshore to Australia. We have been told that already investment funds are going offshore to Australia. So even the good provisions in these bills cannot stop the lack of confidence in New Zealand’s investment and capital markets because of the ignorance and inept behaviour of this Labour Government.

I want to come to another couple of matters. One of the bills that we are debating the third reading of this afternoon is the Fair Trading Amendment Bill. Where was the fair trading by the Labour Party when Helen Clark took taxpayers’ money to the tune of over half a million dollars to pay for its electioneering? That was a trading issue. Where was the fair trading? What is the use of having this kind of legislation in New Zealand when the Government sets an example by taking—I guess we are not allowed to use the word “stealing”, but that is what it was—taxpayers’ money to pay for its election pledge card?

Labour members say that it is OK because they did it at previous elections. I have been involved in this Parliament for 22 years. I do not know how many elections that is—about eight, I think. It never entered my head during the 2002 election, or the one before, that Labour’s pledge card, which was so central to its election campaigning, was paid for by taxpayers. That thought never entered my head, but on the day when the pledge card arrived in my letterbox at home last year I glanced at it and saw there was the parliamentary crest. Because the rules had changed to make matters more transparent, Labour could not hide its spending, and I saw that the New Zealand taxpayers had paid for that electioneering. My God! I was stunned. We are debating the Fair Trading Amendment Bill this afternoon, but nothing about that theft of taxpayers’ money was fair trading.

Tēnā koe, Mr Assistant Speaker, tēnā tātou katoa i te Whare. I was telling a group of friends recently that one knows one is a Māori when one’s people want one to be in Parliament and all one wants to do is to go home. But I also add that one knows one is in Parliament when one has to do research and give speeches on mind-numbing topics like this one, which uses such sexy language as “takeovers”, “fair trading”, “management banning orders”, “pecuniary penalties for civil liability events”, “market manipulation laws”, “collapses of finance companies”, “structurally weak capital markets”, “disclosure”, and “deceptive conduct”. But that is the job, and we are here to do it as best we can.

The purpose of the Securities Amendment Bill is to reform our country’s securities laws, and, with language like that, it will take a lot to fix a dictionary of double-talk. On top of that, this bill is supposed to be read in conjunction with the Securities Markets Amendment Bill, the Takeovers Amendment Bill, and the Fair Trading Amendment Bill, so it is supposed to change the way that business is done with the Commerce Commission, the Securities Commission, and the Takeovers Panel.

This group of bills also brings in what is called a standard of civil liability to deal with breaches of rules about contributory mortgages and the putting out of ads that include untrue statements. We have to laugh when we think that this particular legislation is coming up today, on the very same day that the Auditor-General’s report comes to Parliament. Of course, we would also have to ask whether the distribution of Labour’s 2005, and even its 2002, pledge card would breach those standards of civil liability. Would the fact that taxpayer money was spent on election advertising, without including the appropriate details, be considered an untrue statement? If so, who would be expected to own up to the civil liability and, again, who would be expected to cough up the $450,000 to repay the unlawful spending of taxpayer funds on a dodgy pledge card of party political promises?

Another key principle in this legislation assumes that investors can have greater confidence in our securities markets, with these new, more effective laws. That is OK, except that the legislation is making changes in order to attract foreign investment to our shores. That can be a worry, because no matter how we dress it up, this country has a stink reputation in all the important places overseas at the moment. This Government has already been taken to task by the United Nations committee on the Convention on the Elimination of All Forms of Racial Discrimination. In fact, the New Zealand Government’s response to the Draft Declaration on the Rights of Indigenous Peoples did not once mention the words “indigenous”, “Māori”, “whānau”, “hapū”, “iwi”, or “tangata whenua”. It is as though we are not even here.

So when we consider this legislation today, we have to consider also that this Government has said that it will not support the Draft Declaration on the Rights of Indigenous Peoples when it comes before the United Nations General Assembly next month. The whole world will be there to see that happen and the great myth of New Zealand’s racial harmony will go straight down the toilet. Again, in respect of this legislation, the Government has insisted that the Draft Declaration on the Rights of Indigenous Peoples must be consistent with international and New Zealand law—I guess the Government forgot about the Foreshore and Seabed Act—and that the declaration must protect the rights of all citizens. I have to ask, how dumb is that? The Government wants a declaration on indigenous peoples that has to protect the rights of all citizens. We recognise the United Nations Convention on the Rights of the Child, which does not have a requirement to protect the rights of all citizens, and we recognise statements on the rights of women that do not include protection of the rights of all citizens, but when it comes to indigenous people, all of a sudden we have to include that protection. Responses like that weaken the text and diminish the rights of indigenous peoples—and the world has noticed.

I refer to those issues because they impact on New Zealand’s credibility in the international community. Respected international organisations like Amnesty International have condemned those activities as shameful, and it is a joke to think that we can repair that damage to our reputation by simply tinkering with the securities legislation.

All the fans of free markets reckon that opening up the country to unrestricted foreign investment will lead to enhanced economic growth, more jobs, and better living standards for all. That is a load of bulldust. I can remember, some years back, that Harley Davidson was being hammered in the market place in the US, losing out in motorbike sales to Honda, Suzuki, and Kawasaki. And what did Ronald Reagan do? Did he leave Harley Davidson to face the music in the free and open marketplace? Like hell he did! He whacked a massive tariff on Japanese bikes, so that Harley Davidson could survive. So when I hear all the rubbish that is said about free markets, I chuckle to myself.

Although the legislation makes securities and takeovers law less complicated, easier to enforce, and harder to avoid—and that is all good—we still have to be careful of foreign investment that compromises our security, our sovereignty, and our rangatiratanga. Foreign investment keeps going up every year, including the buying up of land in Aotearoa, which is a policy the Māori Party does not support. We also have to consider the security of our mātauranga—our cultural and intellectual property—and the need to protect that from the multinational rape and pillage brigade. I raise those issues in respect of the Securities Amendment Bill because the most important tool for the security and protection of such vital assets to our nation is, of course, the Draft Declaration on the Rights of Indigenous Peoples. Along with that, we have the Wai 262 claim, which aims to protect Māori cultural and intellectual property rights in exactly the same way that indigenous peoples all around the world are using intellectual property rights, laws, and international agreements.

The whole notion of free trade and the exploitation of indigenous knowledge that the Wai 262 claim is addressing also raises issues in relation to the Fair Trading Amendment Bill. The new bill deals with what is called “misleading and deceptive conduct”, “false representations”, “unfair practices”, and “the importation of goods bearing false trade descriptions”. As we head towards Halloween, I will highlight a case of misleading conduct impacting on Māori. The website for Halloween Town, a “one stop Halloween and horror headquarters”, was advertising Māori tattoo kits online, with a picture of a full-face moko, but after complaints from people like Ngāhihi O Te Rā Bidois from the Waiariki Institute of Technology, the fake moko was pulled. We hope that this bill will make it even harder for Halloween freak shows to exploit Māori knowledge and taonga.

This legislation is also supposed to strengthen the laws on investment advisers, who will have to be more open to their clients—again, a good idea. It is a bit like kaitiakitanga: accepting responsibility for those for whom we are guardians. Disclosure will help to protect people’s interests.

One of the things I have heard from the Federation of Māori Authorities is that investment advice is a skill, and that financial education should be a key aspect of our learning. The need to understand savings and budgeting was also raised by Kathy Loveday of the Budget Advisory Service in relation to the KiwiSaver Bill. It is not a new idea, but it is certainly an idea worth promoting. Financial literacy is also something I have talked about earlier in this House. Ngāi Tahu have an initiative called Whai Rawa to improve their people’s financial management skills and enhance their financial security and independence. If whānau had those financial literacy skills, then things like market integrity and market confidence might actually mean something to them, and we might see that knowledge translated into diversified investments beyond housing, properties, and land into other areas of the economy. In today’s market a lot of people do not invest, not just because they do not have a lot of money but also because they just do not know how to invest.

The Māori Party supports the transparency and accountability of foreign investment, and it supports proper regulation and protecting the interests of New Zealand investors. In the interests of integrity and fair trade, and as a matter of principle, we will support this bill. Kia ora tātaou.

I rise to speak on the third readings of the legislation. This legislation is designed to help build confidence in New Zealand’s financial markets and, as a result, to encourage investment in New Zealand’s financial markets by strengthening the regulatory framework that is embodied in securities and securities trading. The legislation first saw light on 14 December 2004—some 2 years ago—when the Hon Judith Tizard, who was then the Associate Minister of Commerce and is now the Minister with responsibility for Auckland Issues, addressed this Chamber with a sterling first reading speech.

The Securities Amendment Bill tightens the regulatory framework with the likes of clauses such as 3A, containing new section 17B, which allows the sharing of information between the Commerce Commission and the Securities Commission, and new section 55F, proposed to be inserted by clause 8, which increases the amount of pecuniary penalty under the Securities Act to $500,000 for an individual and up to $5 million for a body corporate. New sections 60A, 60B, and 60C, proposed to be inserted by clause 11, also tighten the regulatory framework. New section 60A allows the court to make management banning orders, new section 60B allows the management banning orders to be for a period of 10 years, and new section 60C allows the contravention of a management banning order to result in imprisonment for 3 years. So the bill brings some real teeth to securities legislation.

Today, however, I wish to argue that although the changes proposed to this legislation may strengthen the regulatory framework, this will do little to promote economic growth, and that recent announcements by this Government have done far more to create damage to investor confidence in our markets than this legislation will ever do to build confidence.

In July 1999 Helen Clark, in an address to the New Zealand Trade Centre, said: “In my lifetime our living standards have slipped from the third highest in the world to 25th today. We are in danger of slipping into the next range of nations like Estonia and Latvia in the sub-OECD grouping, which have never reached European living standards. We’ve had those living standards, but we are losing them, and we will continue to unless we can keep our talent at home and create the conditions for rapid growth of new industries.”

Prior to that speech, in another speech, delivered to the New Zealand Employers Federation conference, Helen Clark said: “Labour knows the economy now is more competitive, innovative, and dynamic than the economy of 10 years ago.” In fact, she said: “We would go so far as to suggest that a large part of that is due to the changes made by the last Labour Government.” She was, in fact, referring to the introduction of GST, the reduction of top marginal tax rates, and the privatisation of a number of New Zealand companies, including Telecom—which I will speak about later. She must also have been referring to the labour liberalisation laws that had created a dynamic, competitive, and innovative economy that set the benchmark for solid growth through the late part of last century and the early part of this century. Michael Cullen agreed with the Prime Minister at that point. In his Budget 2001 speech he went so far as to say: “We need to set ourselves a goal of being back in the top half of the developed world in terms of per capita GDP—a position we have not occupied since 1970.”

Unfortunately, the Clark-Cullen Government has given up on that objective. In the face of the results of the recent October Monthly Economic Review from the Parliamentary Library, the only news of any merit is that unemployment has remained steady at 3.6 percent of the workforce. Of course, this overlooks the huge numbers that are now permanently registered on the sickness benefit and the invalids benefit. It ignores the fact that our workforce works the second-longest hours in the OECD, yet has productivity rates at the bottom of the scale.

The rest of the results are far less motivating. Economic growth is down from 3.1 percent to 1.9 percent. Inflation is up from 2.8 percent to 4 percent. The current account deficit is a whopping $3.1 billion above the $12.1 billion of last year, at $15.2 billion. Lastly, of those key statistics, interest rates are heading north, from 7.09 percent to 7.56 percent.

With that backdrop, one can understand why we do not hear Michael Cullen getting too fired up about his 2001 speech. I quote again. He said: “We need to set ourselves a goal of being back in the top half of the developed world in terms of per capita GDP—a position we have not occupied since 1970.” No, the Government has moved from the semantics about being in the top half of the OECD, to those of economic transformation, which is an inane description for an approach of “Box on, keep our mates happy, and do nothing that will actually grow the economy.”

One of the items that conveniently falls into the economic transformation agenda—one that will not really add one point of economic growth or ruffle too many feathers—is the changes that are proposed in this new securities legislation. The objectives of the legislation are all about promoting confidence in the New Zealand sharemarket. The National Party agrees that promoting confidence in the New Zealand sharemarket is important, and it supports the legislation on that basis. However, the announcement of yesterday’s $11.5 billion surplus must surely signal that the economy has the ability to handle tax cuts as one legislative item that will promote economic growth.

Promoting confidence in the New Zealand sharemarket involves increasing the certainty for market participants in relation to the integrity of the market, and the mechanisms for implementing law. A number of factors can influence the level of confidence both in domestic and international investors. Strengthening the insider-trading regulatory regime is only one activity geared at achieving this aim.

In saying that, I comment that we have experienced the unique situation in recent months of one of the biggest examples of market uncertainty in the history of the New Zealand sharemarket. The announcement of the unbundling of the local loop, and the messy way in which the announcement was leaked to the market, saw billions wiped off Telecom’s share value and confidence in the New Zealand sharemarket go out of the window. On the one hand it is all very well bringing in new legislation such as this, which has the potential to improve the law around insider trading, to amend the disclosure regime required of substantial security holders, and to increase the disclosure requirements of investment advisers and brokers; but, on the other hand, it is not acceptable that foreign investors lose total confidence in the market because of this bumbling Government’s handling of the Telecom announcement.

As stated in an article in the Dominion Post of 19 August: “The regulators can’t be allowed to think their actions are somehow detached from what goes on in the financial markets. Comments alone are capable of huge wealth creation—and destruction.”, as was the case with the Telecom announcement. “In May, the Government’s announcement that it was to regulate Telecom pared $1 billion off the value of New Zealand’s largest listed company in one day. Commerce Minister David Cunliffe’s remarks to a journalist later that month that Telecom might need to cut its dividend lopped off another $275 million. And then there was Vector. On Monday, August 7, the Government made encouraging noises about how regulators needed to give greater consideration to incentives for infrastructure investment. Vector stock added $240 million in value on the Tuesday. A day later the Commerce Commission announced its intention to declare control of the electricity distribution services supplied by Vector. This knocked $300 million off the stock.” As the Dominion Post quite rightly points out, this is “Ridiculous.”

The biggest concern about all this was the comments around the international investment community—and I quote the Dominion Post again, which stated that New Zealand is almost now “ ‘finished’ as a destination for international investors. The big overseas funds don’t like uncertainty. Any market that delivers the kind of shocks seen in the Telecom and Vector share prices could be seen as too big a risk.”

The point I make is that it is all very well to have this legislation coming through as part of the economic transformation agenda, but, to be honest, international markets will take very little notice of the legislation, compared with announcements such as that made by the good Minister of Telecommunications. It is all about reputation, security of investment, and a discount rate applied to investments in the New Zealand market.

David Cunliffe was reviewed by the Securities Commission over the way he handled the Telecom announcement. However, the commission was clear in pointing out: “Ministers need to exercise caution when commenting on matters that might affect share prices.” So in one breath, although legislation will improve the infrastructure around securities legislation, we, as a country, need to be very careful about the announcements we make to the financial markets, because if we are going to continue economic growth in this country, those kinds of announcements are particularly important.

This is important legislation, and in the first reading, second reading, and Committee stage, National has had a major input. The legislation has now been divided into four bills. It started as the Securities Legislation Bill—

💬 Hon Lianne Dalziel: He can read them out. That will take 3 minutes!

I hear the Minister in charge of the legislation interjecting. I would have thought she might be prepared to take a call on the third readings of these important bills.

💬 Hon Lianne Dalziel: I did!

Oh, did you! It was so vague that I do not recall anything the Minister said. Maybe she would like to take another call, as other Labour members have not been prepared to take a call.

💬 Hon Member: They never do.

They never do, even though these are important bills. The Securities Amendment Bill, the Securities Markets Amendment Bill, the Takeovers Amendment Bill, and the Fair Trading Amendment Bill have been split from the original legislation. I want to take a short call to—

💬 Hon Lianne Dalziel: You can’t do anything else!

The Minister says I cannot think of anything else. I tell her that this legislation is about building confidence in the capital markets. It is about the mum and dad investors, and small investors, along with the institutional investors, who need to have confidence in the process and confidence in the capital markets. But this Government has been caught short, and in a number of areas.

As my colleagues John Key, Lockwood Smith, and Chris Tremain said in their speeches, if we look at what happened with Telecom and the unbundling of the local loop, we see that $1 billion was wiped off the shares in 1 day! When the Minister of Communications tried to fudge things the following day, another $2 billion was wiped off the capital of Telecom. As John Key said, that affects every New Zealander, because many superannuation funds—and, in fact, the New Zealand Superannuation Fund—invest in Telecom. So when we are talking about confidence, reputation, and integrity in the market, we see a Government that has fallen short. Air New Zealand was mentioned by Dr Lockwood Smith and the opportunity for offshore investment—an opportunity that was lost.

I spoke about this legislation in the Committee stage. It was interesting that on the day we were talking about confidence in the markets, reputation, integrity of the process, what did the Government do? It fired the chair of the Electricity Commission, Mr Hemmingway. If the Government does not like something, it interferes in the process. That is what it does.

Although we are talking about and supporting the breakdown of this legislation into four bills, at the end of the day it is a matter of the public and its perception of whether there is confidence in the Government and whether the reputation of the markets can be sustained. National members would hope so. We have supported this legislation right through, and our speakers have crystallised and articulated those arguments that we believe are important for the markets in New Zealand. With that in mind, National will be supporting the third reading of this legislation. We want to make sure that the purpose of the legislation, to inspire confidence and to encourage investments, is its primary purpose. We are happy to support that process because it is important that New Zealand, as a trading country, has investments, that there is some integrity in the market, and that there is that transparency so that small investors—be they mums and dads; be they the small investor or the institutional investor—can have confidence in our capital markets.

Bills read a third time.