International Finance Agreements Amendment Bill

I would just point out that there are no parts. This will be a clause by clause debate, and the debate will be held specifically to the clause.

My understanding is that the title debate—is this clause 1, the title debate?

The CHAIRPERSON (Eric Roy): Correct.

Thank you, Mr Chairman. This is our opportunity to make some more general comments, which I will come back to also.

This International Finance Agreements Amendment Bill comes about because there have been changes in the relative economic weight of different nations in the world. The International Monetary Fund bails out countries when they get into difficulty, but because of those changed economic circumstances of some countries that have grown more rapidly than New Zealand in recent times—the likes of China—they can be brought into the international fold and can contribute in a way that they were not able to in yesteryear, and accordingly the percentage that New Zealand contributes to the International Monetary Fund decreases as a percentage of that greater pool. At the same time, the amount that is being drawn in respect of each percent is increasing, because the International Monetary Fund has needed to draw upon more funds than it did previously. So the overall effect for New Zealand is that while the percentage of the total pool that we contribute to goes down, because the overall pool is larger, the overall effect is actually not that much for New Zealand, in that the total amount that we contribute to that larger pool is not greatly affected.

This points to a number of things. Firstly, it shows that relative to growth rates in the rest of the world, New Zealand has not done as well as the average has been in the rest of the world, including developing countries in recent decades. In my opinion, that is largely because our settings have not allowed our export economy to prosper. Indeed, I think that the Minister of Finance was on record at the time he came to power as saying that this was one of New Zealand’s problems: that the economy was too weighted towards consumption in New Zealand and not enough towards either savings or the export of our goods to the rest of the world, which enabled us to pay for our imports and interest. Of course, when a country does not cover the cost of its imports and interest from its exports, it suffers a current account deficit, which means that effectively we are drawing down on the balance sheet of New Zealand, except to the extent that that current account deficit relates to capital expenditure, which improves the net wealth of our country. For decades our current account deficit has not been related purely to capital improvements in New Zealand. It has been a diminution in our balance sheet, and that is effectively one of the reasons why our relative share of the world contribution to the IMF is going down.

The Labour Opposition is voting in favour of this bill, but there is one area where we would prefer it was differently structured, and that relates to the ability to change schedules in the future by Order in Council. The effect of these measures can have a significant fiscal effect on New Zealand, because the amount that can be required pursuant to the international agreement under which the IMF operates—changes to the percentages—can change the amount that New Zealand taxpayers are either liable to guarantee or liable to pony up with in real money. In the Labour Party, we would have said that those changes are better made by way of a parliamentary change to this framework, so that we bring parliamentary attention to this change in the amount that New Zealand has to contribute to the IMF. It does not happen very often that these percentages change, and we do not think that that should be able to be done by Order in Council.

I know that the countervailing argument, which is well covered in the report back from the Finance and Expenditure Committee, is that under the agreement we are effectively bound as an international citizen to go along with changes that are proposed once a certain percentage of the countries that belong to the IMF agree to the changes, because you will never get absolute unanimity amongst all countries in the IMF that the IMF percentages or total amount should change. We agree that that is an appropriate process for the IMF because it is unrealistic to expect unanimity, and we also agree that as a general rule New Zealand should go along with those international agreements, because we benefit from a world that is made better by international cooperation through the likes of the International Monetary Fund.

But that to us is a different question as to whether those changes should come back to Parliament and that we have the opportunity to discuss them. If, for example, New Zealand was suffering the consequences of bullying behaviour in respect of the large economies as a consequence of manipulating their exchange rates, to the detriment of our exchange rates, and this was a serious and long-term problem, there may come a point at which Governments in New Zealand, or Opposition parties, or this Parliament want to express their displeasure at some of those international behaviours by actually taking the chance when we have something like an IMF amendment to the rules to actually say: “Well, if you want us to go along with these international treaties, there has to be a bit of fairness coming the other way.”, in respect of issues that affect the New Zealand economy in an unfair way.

So for those reasons and also because these things are pretty rare, we think that these sorts of amendments ought to be by way of Parliament amending the primary legislation, rather than leaving it to the Government by Order in Council to change the provisions that apply to our contribution through the International Finance Agreements Act 1961, which, as I understand it, has been changed in this way only every decade or so since it was originally enacted. I do not think that is too onerous for this Parliament. I do not think it is so regular as to fall within the formulaic sort of action that should be by way of regulation, rather than parliamentary enactment.

Just on one point, there is an amendment that Brendan Horan has been proposing. Thank you for that amendment on Supplementary Order Paper 175, Mr Horan. We did consider it and you might find it somewhat inconsistent that I argue against the regulation-making power and then not support Mr Horan’s amendment, which is to put some limit on the date on which the relevant section can come into effect, which currently is open-ended and comes into effect when the Order in Council is passed. Although we oppose this being done by regulation, we recognise that if it is to be done by regulation, it is difficult in practice to have an end date to the date on which that regulation will take effect because the Government through no fault of its own does not know when it is that a sufficient number of member countries in the IMF will have ratified the changes in order for them to come into effect. So although we would prefer this to not be done by regulation, if it is to be done by regulation, then it is impractical, in our view, to have a date such as was proposed in good faith by Mr Horan, because it really depends on the actions of other countries to ratify the changes that are being proposed. It would apply once ratified by 85 percent of the countries by value, which effectively means the United States—I think it is the standout country that has to ratify—and we really cannot control when the US does or does not ratify. If that date is delayed because of events that we cannot currently predict, we would still want New Zealand to be able to give effect to the changes that have been agreed at the IMF because we think they are wise and necessary. Thank you.

I will just follow up on some of the comments that my colleague David Parker made. I note that there is a bit of a trend in this Parliament—and I will not digress on to other legislation, apart from a passing mention—where this Government tends to kick critical decisions, as the saying goes, “to kick the can down the road to others”. I agree with my colleague David Parker that although we support the International Finance Agreements Amendment Bill, these are critical decisions that should be dealt with by Parliament, not by simply allowing a delegation to the executive by regulation.

It is interesting that the executive wants to empower itself through regulation to take this decision, yet a week ago we dealt with covered bonds legislation where the Government felt that it was appropriate to kick that can down the road to the Governor of the Reserve Bank, and to allow the Governor of the Reserve Bank to deal with issues in respect of an increase or decrease in the proposed 10 percent covered bond limit. So in that case there was another critical decision the Government was happy to take out of the hands not only of this Parliament but also of the executive—the decision makers, or Cabinet as the executive. Now we find that in respect of this legislation the Government wants to take it out of the hands of Parliament and wants to have it done by the executive, again not allowing parliamentary scrutiny through this Chamber.

We think this is a trend that is not appropriate. Normally, decisions are wrapped up, as in the case of covered bonds, with the need to provide flexibility. Given that that issue would be dealt with infrequently, and a decision-making body such as Cabinet could make decisions at any time, that argument does not stack up. Equally, given the fact that this happens, as my colleague said, very infrequently—in fact, the last time was many years ago, or every 10 years, I think my parliamentary colleague said—I would have thought that there would not be a strong motivation to take that ratification out of the hands of Parliament and to simply do it by regulation.

As I understand it, from my memory as a Minister, regulation is for when things are required quite frequently and also quite rapidly, are of a pretty benign and generic nature, and implement legislation—

💬 Hon David Parker: These proposed changes were agreed in 2008, so there’s no rush.

As my colleague has just pointed out in my ear, these proposals were agreed to in 2008, and it has taken almost 4 years for this Government to bring this legislation to Parliament to ratify it, so that proves there is not a great rush. You know, the horse is not bolting out of the paddock. There is not a great urgency on this, especially when, I think, equivalent legislation was passed in Australia in 2009 and 2010. It sort of shows the priorities in the management of legislation through the House. So you cannot make an argument that suddenly we need to do this by regulation because we have to do it rapidly.

I will make a couple of other points. We support this legislation. There are those in this Chamber who believe that we should be almost isolationist in our international obligations. I, for one, and the Labour Party disagree with that. We have obligations through the IMF. The IMF has proved, I think, to be relatively effective, with some deficiencies, but we sign up to that collective international responsibility as a global player—one that is not insignificant but one that is not a major global dominator given our size—and we should meet our obligations and our responsibilities and be part of a global village.

I do not subscribe to some sort of ancient theory that we should put a bubble over New Zealand—whether it be for trade, whether it be for foreign affairs, or whether it be for international economic policy—and say to hell with the rest of the world. We have obligations and we have responsibilities. Goodness gracious, the way this Government is going, it may be that we require the assistance of the IMF, as we almost did, I think, 6 days after Muldoon lost the 1984 election. Someone in Treasury said that had we not been English speaking, and given the fact that we had lost $600 million through Muldoon not devaluing, the IMF would have come in and taken over to assist us. So it may be that given the economy that this crowd over the aisle is running, we may indeed need the IMF to help us out.

As evidence of that, it is noteworthy to point out that our contribution to the IMF has been sort of static or decreasing over many years—over the last 4 years—and that is a reflection of the state of our economy, given that it has been contracting to the point where, as we know, our current account deficit is second to Greece’s. Mr English has the silver medal and is about to take the gold medal, because his own department—Treasury—the Reserve Bank, and the IMF, funnily enough, predict that we will be No. 1 sometime this year in terms of the worst current account deficit on this God’s Earth, in the developed world. That will be an interesting achievement. At least Mr English will be able to point to one achievement: the worst economic record in the developed world, according to the IMF, in terms of the current account deficit. We will not go into unemployment, $380 million per week in borrowing at its peak, or any of that stuff. We will just leave it at the economic Olympics. Mr English will be able to mount the dais and collect the gold medal for the worst current account deficit in the developed global community.

It may well be—I hope it never comes to it—that we require, as I say, the IMF’s assistance to help us out, given the economic mismanagement of this crowd. We will support this legislation. It is appropriate that we do continue to meet our international economic obligations. But I agree with Mr Parker when he says that given the lack of urgency this Government has put on this legislation—4 years of dragging the chain to have it ratified—there is no excuse for future changes in these articles not to be ratified by the New Zealand Parliament, and for the proposal that is on the table now, which is that the executive will just flick them through, through regulation, without due parliamentary scrutiny. After all, we may well be called upon as a guarantor or to provide real money. That is a taxpayer obligation and taxpayers’ money, and the taxpayers’ representatives through this parliamentary Chamber have an obligation and a right to scrutinise those decisions prior to ratification.

It is my pleasure to speak on the International Finance Agreements Amendment Bill, and to follow the former Minister. I was pleased to hear that Labour continues to support this bill. This bill allows for the Government to meet its obligations as a member of the world’s financial institutions, including the IMF. This Government believes that it is important to be an active participant in the international system, whether it is being a member of international organisations such as the UN, regional groups such as the Pacific Island forums, or economic organisations such as the IMF.

New Zealand is a small, isolated economy in the middle of the Pacific, all on our own. We do not have the heft, the numbers, and the size to boss the rest of the world around. We benefit enormously from effective international agreements and organisations, as a global trading nation. We have the most to lose if those understandings begin to unravel.

Of course it has been very concerning over the last few months and years when we have had a lot of concern about currency manipulation by various countries or the way that has been going. That is a very topical issue today, and has been over the past few months. I am pleased that Labour is basically maintaining an orthodox stance when it comes to the IMF and our role there.

I am a little bit more concerned about where Labour is heading on some of the monetary policy side of things. I still do not quite understand what the leader—Mr Shearer, I think his name is—Mr Shearer was talking about when he was going on about the change in monetary policy and about how he was going to change monetary policy, which is what he said in this conference last year, to target the exchange rates. I am not quite sure what he means by that. Does that mean that we are going to move away entirely from focusing on long-run price stability, which just about every economist in the world signs up to as the thing that reserve banks can do? Or is he going to somehow shift the goalposts entirely and undermine the independence of the Reserve Bank and start to put political pressure on the Reserve Bank? If that is the direction that Labour is going, I am concerned on that score, but on this bill that we are talking about today at least we are maintaining a measure of bipartisanship and a measure of general economic orthodoxy.

Just in one or two little details, this bill here changes the articles of agreement in relation to the integral parts of the overall package, as has been heard, reflecting the changing relative economic weight in the global economy, and that is no great source for depression. It is a source of optimism and excitement that over the past decade we have had this magnificent flowering, particularly, of the Chinese and Indian economies—rebalancing that. I am pleased that the IMF is responding to that, and this bill gives the Government the flexibility to be part of a system that effectively recognises the shifts in the global economy. On that basis, I commend this bill to the Committee. Thank you.

I take a call on behalf of New Zealand First on the International Finance Agreements Amendment Bill. Likewise, New Zealand First will be supporting this bill, but we, similarly, do have some concerns about the aspect that this bill will go straight through to the Executive Council for future approvals, rather than coming back to Parliament. That is somewhat concerning and we would like to see that changed, because we feel that the people of New Zealand deserve to see any international agreements of this nature at least brought back to the people’s House for confirmation, rather than it being done behind closed doors in the Executive Council.

However, having said that, New Zealand First does appreciate the fact that we have to play our part with the International Monetary Fund, and changing the International Finance Agreements Act 1961 to provide for us to become a member of the Multilateral Investment Guarantee Agency, which this bill is putting forward, does make sure that we are part of the club, that we are part of the worldwide global team, that is overseeing the international monetary situation.

In this bill it is noticeable that it has taken quite a number of years to get to this point. The IMF governors first considered this back in 2008 and 2010. We are now in 2013, so it has taken a considerable amount of time to get to this point. As we have heard from other speakers, it does require the ratification of 85 percent of the members for this to go forward, and we do certainly hope that that is forthcoming in the relatively near future amongst all the member countries so that this can be enacted.

In terms of this, we realise that this also has a big impact on developing countries and helping to balance the world scene in terms of assistance from the IMF through developing countries. New Zealand, of course, wants to play its part as a developed country and as part of the OECD in terms of what that assistance and that support provided through the IMF means for the development of the global economy. New Zealand has always been an international player and abides by its international obligations.

These are uncertain times globally, and many of our major markets and many of our major allies and trading partners are going through difficult times. There are problems financially and politically in areas like Europe, the United States, parts of Asia, and other areas where we trade, so it is even more important that a body such as the IMF is able to step in and assist in the different economies where stability is required, where the world economy does depend on there being a level playing field and an ability for all countries to participate in a reasonable manner for the betterment of their individual countries and their peoples.

It is interesting to note, however, that the National Government is supporting this bill and putting this bill forward while, on the other hand, dismissing other recommendations of the IMF. It would seem that it would like to hunt with the hare and go with the hounds, as they say, in terms of the IMF also suggesting to New Zealand that the New Zealand dollar is overvalued by some 10 to 15 percent. I think, Mr Chairperson, you were in the Chair last time when you picked me up on the same point and said that I was getting off the point of the bill. My point last time when I spoke on this bill was the same, which was to say that while New Zealand is participating with the IMF, it should be a two-way street. We should also listen to some of the advice from the IMF in respect of the New Zealand dollar being overvalued, and perhaps next time the IMF does visit New Zealand—and it does regularly send its representatives here—we would hope the Reserve Bank, Treasury, and the Minister of Finance would take heed of some of its suggestions—

The CHAIRPERSON (Eric Roy): Come back to the bill.

—in that area. Getting back to the bill, as—

The CHAIRPERSON (Eric Roy): Please do.

—I said, we hope that the New Zealand Government, in putting this bill through, when it finally does come on board, will also recognise the fact that the Parliament of this country is the ultimate determiner of legislation. It is the representative place of the people of New Zealand. We certainly hope that we do not see in future years any back-door arrangements going through in respect of this legislation and in relation to New Zealand’s commitments to the IMF that we could not put hand on heart in this Chamber and say that this was in the interests of New Zealand. We must always put New Zealand first—[Bell rung] As we—

The CHAIRPERSON (Eric Roy): Order! The member has got to call for another call.

Thank you for the opportunity to speak to this bill, and to speak about the international nature of the International Finance Agreements Amendment Bill, in particular, which is where I want to put my attention. Indeed, in the earlier stages of this bill I raised the issue of international reputation and the way in which Māui’s dolphins were not being protected by New Zealand. This Government was the only one in the world that did not propose greater protections for the Māui’s dolphin.

It is difficult to discuss this widely here, obviously, Mr Chair—and I do not intend to because that would be far too wide ranging and you would draw me back into the substance of the bill—but suffice it to say that international reputation matters, and that is one of the reasons why this legislation is very important.

This legislation was debated earlier by Mr Goldsmith, who confessed to being a little confused. His contribution attempted to debate some of the Labour positions on monetary policy, and I am happy to set the record straight but perhaps a little further into my speech, because to start with I actually want to outline some of the important things that Labour supports in this bill.

Economic stability is really the aim of the IMF. It is an important organisation and it is important that New Zealand contributes to that aim for the good of the whole world, for the good of world trade, and for the betterment of all of the citizens of the world. If Parliament did nothing or if it disagreed with the proposed changes to the articles, the changes would, nevertheless, come into force for New Zealand, with effect from the date that they entered into force for all IMF members. The result would be a confusing gap, essentially, between New Zealand legislation and our Treaty obligations.

We want to line up here deliberately, in order to say that we support this legislation. Labour is a responsible internationalist party that believes we should honour the international obligations and agreements that we have entered into. What we do oppose, though, are the changes that allow future updates to the articles to be made by regulation. We think that subverting the normal parliamentary process is a tragedy. We think that this is the kind of thing that ought to come before this Parliament, so that we can debate the merits of changing articles like this in the future. We should not delegate this down to Orders in Council.

💬 Andrew Little: We have to maintain scrutiny.

We need proper scrutiny, as my colleague Andrew Little says from behind, and he is right. Mr Andrew Little is right—absolutely right. We need proper parliamentary scrutiny on these important measures. So although we have no difficulty with the actual substance of this particular change, we do feel uncomfortable with the change to process that allows that regulation-making power essentially to go into the hands of the executive, in a power grab that bypasses the sovereignty of this Parliament and hides things in the background.

💬 Hon David Parker: Unlike this process.

This process that we are going through now is a transparent process. We are all debating it. We are debating the merits, and that is precisely what we lose when we do away with this process.

I guess the Government is embarrassed when it hears scrutiny being poured over many things, and I could go into Skycity deals, which are talked of today, and the report that has come out that suggests that indeed there was a lack of transparency and some unusual process. But we will hear more of that, I am sure, in the media. Or I could go into the way in which the Government opposed asset sale changes in select committee—the way in which it tried to shut down debate because the scrutiny was uncomfortable.

But parliamentary scrutiny is very, very important. It is a basic part of our job here as members of Parliament to make sure that laws are made well and are debated properly, and are made with full information. How can anyone, I ask, oppose that? Why is the Government opposing this scrutiny in future? It does not feel right to me.

I want to ask also why this bill has taken so long to appear in Parliament. Australia passed equivalent legislation in September 2009 and November 2010. This is another example of a Government incapable of managing the parliamentary agenda, and perhaps—

💬 Hon Trevor Mallard: Incapable.

Incapable—incapable, Mr Mallard corrects me. And perhaps this is why we see the Government wishing to push this away from Parliament in future so it has less to manage. I do not think that is a legitimate reason for pushing this out of scrutiny, out of the eyes of the scrutiny of this Parliament.

One begins to wonder whether this is important to the Government, because it is concerned that we may need IMF intervention here. Look, when we see the books we do not think seriously that this is the case, but you do start to wonder—you might not wonder, Mr Chair, but I certainly do—as to whether things are worse behind the scenes than we are really seeing.

What we see clearly, though, is that under the last Labour Government we had 25 percent growth in real GDP. That was a great performance. Under this Government real wages have dropped, and that is concerning. So what is going on when the IMF is projecting for New Zealand the worst current account deficit in the developed world this year? What is going on there with New Zealand? I have a real concern that this Government, behind the scenes, is saying that we need to line up and we need to tick all the boxes with the IMF because one day soon we might need them.

If what we saw from Mr Goldsmith—the confusion around economic policy—is anything to go by, that need might come sooner rather than later, since he is understood to be one of the promising economic minds. He said in his contribution that he did not understand the need for macro-prudential powers to be given to the Reserve Bank so that it might look at issues other than simply inflation when it goes about its business.

To that I could add a range of other things that could be done, were the Government a little more focused on the economy. You know, we need pro-growth tax reform, we need a capital gains tax to neutralise the investment signal, we need research and development tax credits, we need greater KiwiSaver, universal KiwiSaver, so that we have actually got savings to invest in business, and we need procurement policies that are pro - New Zealand rather than in favour of multinationals that are avoiding tax in New Zealand.

We know that the purposes of the IMF in supplying its loans are to help member countries tackle balance of payments problems. Well, we wonder. If that is its first objective, maybe that is why the Government is cosying up to it. New Zealand certainly has a balance of payments problem that this Government has not even started to address. The IMF loans are meant to help member countries stabilise their economies. Well, we have seen an economy that is not performing here in New Zealand; in fact, this Government has the worst economic record of any Government in New Zealand in the last 50 years. That is amazing. It is not good; it is outrageous. So stabilising economies is something the IMF does. The IMF loans are also meant to help restore sustainable economic growth.

All of these things are things that this Government is failing on, so perhaps the real reason that this Government is cosying up to the IMF—that is, agreeing to pass things outside the normal parliamentary process for future changes—is that it is wanting to get cosy with the IMF in case one day Paul Goldsmith becomes the finance Minister.

💬 Andrew Little: Oh, it’ll never happen.

Members behind me say it will never happen. We thought this Government promised a brighter future, and we have seen 17,000 jobs go last year in the manufacturing sector. So we are seeing promises on the one hand and, on the other, a Government that is failing to address the balance of payments problems, failing to stabilise the economy, and failing to restore sustainable economic growth—those very objectives that the IMF loans are meant to help member countries tackle.

💬 Brendan Horan: Mr Speaker—

Just before the member speaks, I note that the member has an amendment to clause 2. We are in debate on clause 1, which permits a slightly wider scope than just the title—some more general comments. The member, of course, is entitled to a call. I am trying to assist him. If you want to make some substantial comments about your Supplementary Order Paper, debate on clause 2 is the place to make them. I call Brendan Horan.

💬 Hon Trevor Mallard: Take two calls. Take one now and one later.

The CHAIRPERSON (Eric Roy): Yes, you are quite entitled to take—

💬 Brendan Horan: I will take the clause 2 call, Mr Chairperson.

The CHAIRPERSON (Eric Roy): Sorry?

💬 Brendan Horan: I will take the clause 2 call.

The CHAIRPERSON (Eric Roy): Away you go. You can take a call now if you wish.

💬 Brendan Horan: No, I will take the call later.

The CHAIRPERSON (Eric Roy): I was not trying to close the member down; I was just trying to assist.

💬 Brendan Horan: Well, Mr Chair, I will take the call.

The CHAIRPERSON (Eric Roy): Brendan Horan, I have given you the call.

We might pull a little bit of that amendment in, but only a little.

I rise to speak to the International Finance Agreements Amendment Bill, and I may just mention a little bit about Supplementary Order Paper 175 standing in my name. As this bill has been written by the Government, the commencement date is entirely open. The bill would come into force on a date set by an Order in Council. That sounds good enough, but will it still be relevant in 10 or 20 years? This is not a hypothetical problem. The Parliamentary Counsel Office annually publishes—

The CHAIRPERSON (Eric Roy): Order! The member has started straight on to clause 2, and this debate is for more general comments. So I suggest he does that or takes another call at the—

I will take another call later. Thank you.

I just want to take the opportunity to talk on this International Finance Agreements Amendment Bill because it is an important piece of legislation and it is one of the expressions of our role and our place as an international player, as a member of the international community, and, indeed, in the operations of the international finance community. That places us in a very important position. We have had a long and august history in the operations of the IMF, including former Ministers of Finance and, indeed, a Prime Minister playing an active role at the very senior levels of it. But it is important with the international institutions of which we are a part that we maintain our currency and that our laws reflect the commitments and the obligations that we enter into when we are part of that international community.

This legislation brings us up to speed. But as colleagues of mine have also raised and questioned, the issue is why now. Why so long after these changes were agreed to by the IMF are we only now getting round to passing the legislation that enables us to support the practical changes? It does raise a very serious question about the efficacy of the management of the legislation and the way this Government addresses these important issues. We should never devalue or deride the international organisations that we are a part of and in which we play an important part. So it is reasonable to expect that when the Government of the day is making commitments or entering into commitments on our behalf that we will update and upgrade the rules that we have to participate in those organisations, that it does so with some sort of political and parliamentary alacrity. But that is not what we have seen on this occasion.

The other issue is the issue about the extent to which this Parliament, as with any Parliament of any member organisation of the IMF, gets to play the role of scrutinising what happens in those institutions in the name of the citizens—in this case, of New Zealand. So to the extent that it is suggested that future changes to the rules of the IMF might be agreed to, or ratified, or done by Order in Council by the Government, the executive, that is something that I think every member of the House discharging their responsibilities as a member of this House would be deeply uncomfortable with. When it comes to playing our role in international fora, although we must be responsible and although we must discharge our obligations, it is not a reason to then take away the proper scrutiny of this House, in discharging its role and its responsibilities towards the citizens of New Zealand, to ensure that the commitments that we enter into are ones that we ought properly to put our names to, that fit our view and our version of democracy and democratic principles, and that are consistent with what we think ought to be contributed to a stable international finance system.

With those notes I simply underscore those two issues: the one of our playing our role, and, secondly, ensuring that this House continues to play its role of providing scrutiny when the Government of the day acts with its representative international hat on in the name of all citizens and in the name of this House, and that this House continues to provide effective scrutiny for it. So, notwithstanding our support of the bill, it is important to draw attention to those important points.

Labour is supporting this bill, the International Finance Agreements Amendment Bill, although, Mr Chairman, as you will have heard, there is a discussion to go on as to whether the particular part that deals with the matter of regulation is to be supported or not. This bill amends the International Finance Agreements Act of 1961, and it does allow the Government to meet its obligations as a member of various financial institutions, including both the International Monetary Fund and the International Bank for Reconstruction and Development.

The amendment bill provides for New Zealand to recognise the changes to the articles of agreement of the International Monetary Fund, which were agreed to by the IMF governors in 2008 and 2010. I think that in 2008—and I am subject to correction here—one of the governors was the Hon Dr—now Sir—Michael Cullen, and I think that the Hon Bill English has continued that role. New Zealand has quite properly played an active role in the IMF and, unlike a number of the other international financial organisations where Associate Ministers have been delegated to do the representation, New Zealand Ministers of Finance have seen the IMF as a very important organisation and one that has senior representation at the governor level. I think, in fact, that in the history of the previous Government there was only one occasion when the Minister of Finance himself was not able to make it.

The 2008 and 2010 agreements doubled IMF quotas and shifted voting power towards the dynamic, emerging market in developing countries, and effectively did a shift from countries that were overrepresented to those that were under-represented. It was not a massive shift; it was about a 6 percent shift in the balance of power. What results from that is a more representative IMF executive board with advanced European countries reducing their representation in a way that I think it is fair to say is an indication of changes that have occurred certainly from a period well before the IMF and the relative power of Europe and the rest of the world in financial matters. The 2008 and 2010 agreements are separate from the discussions on the G20-backed, US$430 billion, IMF firewall, which has been proposed in recent months. So this is something that predates that sort of arrangement. This legislation will increase New Zealand’s quota commitment to the IMF. However, members of the new arrangements-to-borrow programme, including New Zealand, have agreed that they will take a corresponding decrease in their commitment to that programme. Overall, this means that our commitment to the IMF remains relatively constant, moving only from 1,518 million of the drawing rights to 1,592 million. So it is a change from approximately NZ$2.9 billion to NZ$3 billion.

One of the issues that we have with this bill is the regulation-making power so that, in future, updates can be made by regulation. This power simplifies the process, but in doing so takes away from the Parliament something that has been a traditional right, and that is, where there is potential expenditure, the right of parliamentary control, in this case not through a Budget process but through a treaty-making process. What we want to make sure is that as the IMF goes through its quota formula it is also scheduled to complete the 15th general review of quotas by 2013. These changes are not expected to be accompanied by any changes to the articles of agreement. Governance reviews, which do imply changes to the articles of agreement, are usually completed every 8 years, although we have seen with the 2008 and 2010 changes that on occasion this sort of legislation is called for on a more frequent basis. And, of course, there is no secret to the fact that the global financial crisis contributed to the need for the pretty rapid reaction—or very rapid reaction for the IMF—in 2010, well in advance of the expected 2016 review.

Since the International Finance Agreements Act 1961 came into force in that year, when Keith Holyoake would have been the Prime Minister of New Zealand, it has been amended seven times—in 1966, 1968, 1975, 1976, 1992, 1998, and 2007. Of the seven amendment Acts, four amended the articles of the IMF—those in 1968, 1976, 1992, and 1998—and the three other amendment Acts gave effect to New Zealand’s membership in other financial institutions. It is important to note that once the requisite majority of members have accepted any amendments to the articles, these changes are applied to us whether or not we have passed our legislation. So we are in a relatively unusual situation where there is the possibility of our having an obligation that has not been recognised in New Zealand law. Members on this side of the Committee think that it is important, if we can, to as far as possible align New Zealand law with the obligations that are put on us.

There are additional reasons here, because leading up to the 2008 reforms and then again for the 2010 reforms—and the 2008 reforms are already in effect—we supported both those sets of reforms. Therefore, unless there is a very good reason for the Parliament not doing it, I think it is appropriate for Parliament to ensure that the reforms that we have supported internationally are then reflected in New Zealand law. It is a matter, I think, of keeping our word and honouring our international obligations. Of course there are a lot of countries around that do not do that. In fact, probably the lead country with international obligations in this area, the United States, is the country that is one of the worst at fulfilling its obligations in other areas—the United Nations, for example. But New Zealand is a country where I think there is a—probably multipartisan but certainly—bipartisan approach that where you give your word to an international organisation, or where you are a member of an international organisation and there are obligations, you meet them. Of course, if Parliament did nothing, or if it disagreed with these changes, then the changes would nevertheless come into force for New Zealand with effect from the date that they come into force for all IMF members.

The point that a number of members have made and we will get to—I just want to do an overview of it—is that we are very, very concerned about the suggestion that future updates will be done by regulation. There is a matter of balance in this.

I move, That the question be now put.