Reserve Bank of New Zealand (Economic Objective) Amendment Bill

I move, That the Reserve Bank of New Zealand (Economic Objective) Amendment Bill be now read a second time.

Well, members opposite need to make up their minds; is the bill bad or does it do nothing? Because it can’t be both and the confusion apparent on the opposite benches is, I think, indicative of the kind of Government we had over the past six years—it couldn’t really decide if it was coming or going or what it was doing from one day to the next.

So some questions have been asked and I am prepared to educate the members opposite. So the first is this: are we a Government that cares deeply about jobs and well-paying jobs? Yes, we are. But are we also a Government that understands that the foundation for good jobs is a strong economy? Yes, we are. And are we also a Government that is economically literate enough to know that price stability is the essential foundation on which maximum and sustainable employment can be built? Yes, we are.

And so members opposite have asked, “Why do this Act? Why make these changes to the Act?” Well, let me spell it out clearly: without amending the Act, the monetary policy committee would still be required to have regard to two separate objectives. As well as price stability they would also be having to weigh maximum sustainable employment. And as the regulatory impact statement notes, there is value in amending the Act to signal a greater focus on price stability than that which could be achieved through mere tweaks to the remit alone. We are a Government that is making our intentions crystal clear. We know that without low inflation, without price stability, we will not achieve the economic objectives that New Zealanders share with us.

So then we’ve had this second set of questions about whether or not there is any benefit in doing it this way. Well, actually, it provides benefits in clarifying how the monetary policy committee is expected to operate, because there are potentially rare circumstances in which the two objectives could be misaligned, and we wish it to be clear that price stability is the objective. We had a comment from the member Chlöe Swarbrick that the remit would still have reference to having regard to employment, and I want to clarify for that member that that is incorrect. We will have one operational objective in the remit, and, as has been the case in previous remits, it will be in pursuing that objective that will have regard to financial stability and other matters.

There have been questions about the timing. Well, actually, I thought this was most amusingly digressed on by the member Grant Robertson—the Hon Grant Robertson—because actually we want to make this simple, clear change as soon as possible so as not to create more confusion in the market about what we are doing or what our intentions are. And as my colleagues have so eloquently expressed, we have been making it clear for several months our intentions in relation to the Reserve Bank of New Zealand Act. And actually quite a few New Zealanders voted not only just in the knowledge but in the expectation that we would be making this change, and we are going to be a Government that delivers on those commitments and meets the expectations of our voters.

Finally, I do want to make the point with reference to the regulatory impact statement that members opposite are wrong to dismiss perception when it comes to the way we manage inflation. Perception does matter. And as the regulatory impact statement acknowledges, the dual mandate has impacted the perceptions of the effectiveness of monetary policy. And I read for the members point No. 7 in the regulatory impact statement: “Expectations can have a significant impact on inflation outcomes. When the dual mandate was introduced”—the failed dual mandate was introduced—“the 2018 Regulatory Impact Statement noted that ‘the risk that market participants … interpret the Reserve Bank’s new employment objective as weakening its focus on inflation.’ ” And I point to the data and the data shows that it was on the watch of the members opposite with their new experiment that we have had 2½ years of inflation outside the band. And I would put to you that the market has priced in its expectation that inflation would remain out of control.

So, onward, we have further advice here that clearly explaining and justifying monetary policy decisions is imperative in retaining credibility. We also note that there has always been this issue that there is a real question about how you measure full employment, and policy errors from measurement issues associated with targeting less well measured objectives can be problematic.

Which is all to say, we had a lot of hot air over here about their sudden new-found concern with regulatory impacts statements and their concern with process and urgency and a whole bunch of arguments, but actually the official advice here that we have shared with the House is clear: there are benefits to being crystal clear in your objectives when it comes to monetary policy. The regime of the former Government has failed and I know it hurts for them but this is the change New Zealanders voted for. And inflation, we’re coming after you and the Reserve Bank’s on our side.

It might be helpful for the House to go back to where the provision that’s being repealed tonight came from. It really began for me in 2014 when the then Governor of the Reserve Bank, Graeme Wheeler, began hiking the official cash rate (OCR) even though at that point in time inflation was actually only running at 1.5 percent and unemployment was 5.6 percent. And I remember sitting on the Finance and Expenditure Committee and trying to understand why Graeme Wheeler would actually do that. He ended up increasing over that period of time the OCR from 2.5 to 3.5 percent and in doing so, given how low inflation was, all he actually achieved was unemployment going up. And, actually, we almost got to deflation towards the end of 2015.

So if members opposite want to know where this conversation came from, it’s that actually, yes, of course, we must keep inflation under control and of course that is an important role for the Reserve Bank, but if we leave that completely unfettered, we then run the risk that we end up going in completely the opposite direction. And so the process began from then to say, “Well, is there another way to do this?” It’s not as if New Zealand was some kind of outlier in picking this up. The United States Federal Reserve has had a dual mandate for many, many years. The Reserve Bank of Australia has had a mandate that includes employment, and, in fact, the Australian Government just last week updated that—

Nicola Willis: Tell the full story, now. They had to water it down, you know that. They had to water it down—

Hon GRANT ROBERTSON: —to reaffirm employment as part of their mandate. Now, the member opposite says, “They had to water it down.” The member opposite needs to remember: she’s getting rid of it. She’s getting rid of it completely. The Reserve Bank of Australia, the Federal Reserve are both completely able to manage these two things together. So that is the reason why we began this process. Of course, we want inflation to be kept under control, but we also think that the Reserve Bank has a role in the real economy of making sure that we do keep New Zealanders in work.

Now, I’ve heard from members opposite that this is a particularly dangerous thing to have these two objectives, that somehow or other, the perfectly capable people that we employ at Reserve Bank and on the monetary policy committee couldn’t possibly handle two thoughts in their head at one time. Consistently, over the period of time since this dual mandate has been in place, the Governor of the Reserve Bank and those involved in the Reserve Bank making these decisions have said that it did not alter one iota their focus on inflation.

Now, I’ve given the House an example of a time where I think the dual mandate would have come in handy to make some different decisions. But in the period of time we’re talking about, the Reserve Bank have been absolutely clear: they knew that their focus needed to be on inflation as it spiralled out of control around the world. When we look at the countries that have a single mandate, they all saw inflation go up. So the member opposite cannot have it both ways. Inflation was rising in those single-mandate countries well beyond the bands and the target bands that they have, because that was a global trend. Rightly, the Reserve Bank said our job has got to be to make sure we bring inflation down. You know what? It is not inconsistent with also making sure that we look after Kiwis and keep them in jobs. So this bill that the Government has bought to the House is a solution in search of a problem. It is not evidence based. There is no relationship between the speed at which central banks have responded to rising inflation and their monetary policy mandate.

Also, long-term inflation expectations, which the member opposite, Nicola Willis, mentioned just before she sat down, haven’t actually changed significantly since the dual mandate came in. Five- and 10-year inflation expectations are in fact almost exactly where they were before we went into the dual mandate process. That’s because people understand that it is possible to keep these two thoughts in our head at the same time. What might trigger concern, if I quote the regulatory impact statement, is that changes to the statutory framework “may trigger market concern”. Stability is important in the way that we go about monetary policy. That’s why at this point in a normal process of a bill, we would be talking about what had happened at the Finance and Expenditure Committee. We would be talking about the submissions that had come forward. I think when we come to later stages of the debate, we will be bearing in mind the fact that we haven’t had the chance for New Zealanders to come forward and say why this mattered. When we made the change, we heard from representatives from working people in particular, just how important it was that there was now a conversation about employment and keeping people in jobs, alongside the important conversation we have about making sure that we keep inflation under control and we keep price stability.

As we went through COVID, one of the things that I am the most proud of is that we kept New Zealanders in work; that when we were faced with forecasts of unemployment up into the double digits, we worked hard across Government, across all the parts of Government, in making sure we did the things we needed to to keep them in work—the fiscal measures like the wage subsidy scheme and so on—but also what was done in terms of the monetary policy response.

That, actually, has now served us well as we’ve entered into a time of higher inflation and pressures on the cost of living. Because, and I think Liam Dann wrote about this in the New Zealand Herald recently, if you really wanted to see what would go wrong in a period of high inflation and high interest rates, it would be if people didn’t have jobs. Because if they didn’t have jobs, you’d be seeing those mortgagee sales more and more and more. And so when we’re talking about what we want from the economy, we want all the parts of the economic apparatus working towards the overall wellbeing of New Zealanders. That’s why, when we made this change, we also changed the purposes of the Reserve Bank of New Zealand (Monetary Policy) Amendment Act 2018 to make sure it was actually about the overall economic wellbeing of New Zealanders. I notice that’s not being changed, and I don’t actually think the objectives of the Act now fit the purposes that we’ve changed them to, but we recognise that there was an important role for monetary policy in making sure that we did look after New Zealanders and their overall wellbeing.

We need to remember: jobs and stable prices are two of the essential elements of making sure that people can live their lives well. As I said before, this Act passed in 1989—the original Reserve Bank Act. In communities across New Zealand in the 1980s it was the twin evils of high inflation and high unemployment that really drove New Zealand—

Nicola Willis: He’s living in the past.

Hon GRANT ROBERTSON: —and in the 1990s—I’m living in the past? She’s the one taking us back to 1989. We modernised this legislation to put it right up there with what was going on around the rest of the world in modern monetary policy, and this is the Government that wants to take it backwards.

There is another possibility that occurs here, and that is actually now returning to the single mandate—and Lord forbid if the National Party actually take up the ACT Party’s idea of getting rid of the concept of the medium term, because I can tell you what will happen then: you will see interest rates rise rapidly and often. That actually will be the consequence of this legislation. It’ll all be about making sure that we respond instantly to a change in prices, and then you’ll see interest rates rise, and they’ll rise often and they’ll rise regularly. So members opposite might want to think very, very carefully about what they’re actually doing today. Because what they’re actually doing today is taking away the focus on jobs—on one of the critical things that we often hear from the Government about what they think is important—and putting us back in the position as we were back in 2013 and 2014, when Graeme Wheeler decided that it was a good idea to ratchet up the official cash rate even though inflation was down around that 1.5 percent. This is about getting a balance right. It’s about making sure we give a focus to all parts of the economic apparatus on looking after people, looking after their jobs, and keeping them in work.

The Minister of Finance said that we needed to make up our mind about what the bill was. I can tell her this: it’s wrong, and it also won’t do what they say it will do. The last speaker in the first reading from the Government, Katie Nimon, said this needs to be passed before Christmas so it can make a difference to the cost of living for people. It won’t do a thing before Christmas, and actually, the main thing it is likely to do is cause damage over the long run in terms of how monetary policy operates. This bill is wrong, and we will be opposing it at all stages.

E te Māngai, tēnā koe. Tēnā koutou e te Whare. Madam Speaker, just wanted to say I’m grateful to the Minister for tabling that letter from the Reserve Bank and the Reserve Bank Governor. It has largely just referred us back to the monetary policy remit review from June 2023, which spoke to the kind of thoughts from the Reserve Bank after a number of public submissions in a process which then ended up in a memorandum to the former Minister.

I just want to quote here from paragraph 22, because I think it’s a really important and salient point. Ultimately, the Reserve Bank of New Zealand (RBNZ) recommended to the Minister that there was some form of hierarchical nature in which the Minister through the remit could say that the monetary policy committee (MPC) was to take account of maximum sustainable employment, but to do that subsequent to a focus on price stability. And here they say at paragraph 22, “The Reserve Bank views that introducing a hierarchical ordering of objectives is unlikely to materially affect monetary policy strategy – it clarifies the strategy that the MPC would most likely undertake when the dual mandate objectives come into conflict, particularly for when inflation expectations are at risk of becoming unanchored. Furthermore, the Reserve Bank has undertaken considerable work in better understanding labour market dynamics, and [the] MSE”—that being the maximum sustainable employment—“will remain an important concept in the future whether the Remit has a hierarchical ordering or not.”

Once again, we have there in black and white—as myself and the Minister, when she was previously a member of the Finance and Expenditure Committee, heard elucidated time and time again from the Reserve Bank Governor—that, ultimately, there was not all too much difference that was coming out of the monetary policy committee as a result of the dual mandate. It largely was a means by which they interrogated and reflected on the decisions that they were making, but it did not materially affect them.

So look, all of us in here can pontificate about what inflation is and what inflation does, but, frankly, this bill does not do anything to tame that issue of inflation. But I do think it’s worthwhile spending some time reflecting on the point from the Minister about why perceptions do matter, because I think that’s a really important and salient point, and, actually, it goes some way to some broader reflections that some members may like to make on the fact that so much of this stuff that we do inside of the economy is largely driven by perception and, therefore, is kind of made up, and that maybe talking down our economy or certain industries has real-world impacts.

To that effect, we also heard from the Minister the question to members of the Opposition about whether this is bad or whether it is unnecessary. So to answer that question—is it bad?—what I’d say to the Minister in response is: is a focus on employment, a focus on maximum sustainable employment, bad? I don’t think that it is, and what I heard from the Minister whilst saying that it’s not going to be within the remit was that it may be one of the considerations in the formulation of monetary policy. So, again, I don’t think that anybody here is saying that a focus on maximum sustainable employment is a bad thing, but what we are hearing is that it largely, to this point, has not impacted the way that the monetary policy committee has come up with monetary policy.

Then there was the question of whether it is necessary. Well, again, as we’ve heard and as is laid out in the regulatory impact statement, this bill is not necessary. These means are not necessary to achieve the ends as stated—that is, for the hierarchical consideration of financial stability and of maximum sustainable employment—whether that is achieved by virtue of the remit change or consideration or otherwise. The other point of whether it is necessary or not is about the fact that this simply has not changed the Reserve Bank’s approach. Again, we have this in hearing after hearing but also in black and white from the remit review from the RBNZ, which, again, is tabled and out there in the public arena.

Just given that we’ve got a little bit more time here in this second reading and before we get to the committee of the whole House stage, where I’m looking forward to putting some questions to the Minister, it might be worthwhile to reflect on what it is that the Reserve Bank actually does, because we have been through an unprecedented period of time, and I wanted to acknowledge members from the Finance and Expenditure Committee in the last term, who really did our best to hold the RBNZ and Treasury and the Minister to account on that. So monetary policy is the stuff that the Reserve Bank does, and, as we’ve all been talking about, at present that is largely mandated through the dual mandate of a focus on price stability but also on maximum sustainable employment. The main ways that they have to achieve those outcomes are through, largely, the official cash rate, which then has flow-on effects to mortgages.

Outside of that, it can engage in what is typically known as unconventional monetary policy, and throughout the period of COVID-19 we saw that in full effect, with large-scale asset purchases and otherwise. We knew, because we ended up with an Official Information Act request back from the Government with advice both from the RBNZ and Treasury, that if those unconventional monetary policy means were pursued, we would end up with what they called distributional impacts—that is, an increase in or an exacerbation of inequality. And they advised that the way to mitigate against those distributional impacts—i.e., that increase in inequality—was through the utilisation of something called fiscal policy. That’s the stuff that the Government does.

The stuff that the Government does is tax and spend. Spending—as we all should, hopefully, know in this place—does have inflationary impacts, but when it comes to taxation, this is a point that I think that we largely diverge on, because we’ve heard a lot in this House today and over the last week or so about the notion of productivity, and we’ve also heard about how inflation is the thief, and all of those different things. But we also know that taxation is a deflationary measure that Governments can undertake. We also know that right now, we are the only country in the OECD that does not have a capital gains tax, a stamp duty, an inheritance tax, a ghost house tax, or any other form of taxation which is explicitly focused on addressing those inequities. But also, as a result, we end up by virtue of multiple reports from the likes of the Productivity Commission and from the likes of Treasury and the RBNZ with ramifications which rob us of our productivity, which rob us of that capital and that investment in the productive market, and end up with a disproportionate influence on capital and inflation, particularly house price inflation.

So if the Government actually wants to do something meaningful on inflation, particularly house price inflation and those drivers of Consumers Price Index inflation, then it could fix the tax system—I don’t know. That’s an idea you can take for free from the Greens as we all sit in here to midnight tomorrow and till 10 p.m. tonight.

But, again, the point remains—three key points here from the Greens—that this makes no difference and we’re wasting all of our time in debating it; secondarily, it is unnecessary to do this in law; and, thirdly, the Government is still saying that they want the RBNZ to have some kind of mind paid to the impacts on employment. So they still believe that this is somehow important. With all of that information, I just think we’ve got better things to do, and if the Government wants to introduce a bill focusing on taxation and betters ways to equitably achieve outcomes and get a more productive economy, we’re on board.

Todd Stephenson: Mr Speaker.

Todd Stephenson—if you seek the call, then I’ll call you.

Todd Stephenson: Oh, thank you, Mr Speaker.

ASSISTANT SPEAKER (Greg O’Connor): So that’s right.

Thank you, Mr Speaker. I rise to speak in favour of this bill, which ACT will be supporting. We do need to return the single economic objective to the Reserve Bank’s mandate.

While it’s existed since 1934, it was the passing of the Reserve Bank of New Zealand Act in 1989 which actually made this primary objective of price stability, and it was great to hear Mr Robertson actually talking about a bit of history, because there’s actually nothing wrong with going back to 1989, when this was put in place and it worked. This same Act also established the operational independence of the Reserve Bank.

You’re right: it was in the 1988 Budget that the then Minister of Finance and ACT co-founder, Sir Roger Douglas, announced his intentions to reform the Reserve Bank in a way that would actually set this single mandate. When that Act came into force in 1989—in fact, in February of 1990—New Zealand was the first country to have this formally adopted inflation target as we know it, and it worked. Providing the Reserve Bank with a single objective rather than a laundry list, which was actually discussed at the time in the 1980s, actually meant that the bank could achieve its mandate by contributing and focusing on one thing and getting that objective right.

At the time, it was clear that the primary function of the Reserve Bank was to formulate and implement monetary policy directed to the economic objective of maintaining price stability, and that’s what we want to see returned. It was acknowledged that general price stability was the greatest contribution that monetary policy could make to New Zealand’s economic wellbeing, and that is what this Government is focused on. It recognises the limitation of monetary policy over the medium term and, by having a clear objective on price stability, we want to make sure that the Reserve Bank continues to focus on that single objective. It’s part of this Government’s economic plan.

I would note, actually, that when the first policy targets agreement was signed by the Government in 1990, inflation was running at 7 percent. That’s not too dissimilar to the circumstances we find ourselves in today, and that target did actually deliver the reduction in inflation that we’re looking for.

The previous Government has muddied the waters by providing the Reserve Bank with a dual mandate, and we want to stop that. Now, if that wasn’t bad enough, by muddying the waters, the previous Government also went on to grow the size of Government, spending over 70 percent more, and this large increase in Government spending has had consequences.

Let’s have another famous Milton Friedman quote tonight—you can never get enough of Milton Friedman on this side of the House. Milton Friedman said, “Inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.” The last Government’s output certainly didn’t match the amount it was spending. We had hundreds of millions of dollars wasted on unproductive projects. What we’ve seen is a huge increase in inflation and—as the honourable member on this side talked about—that’s affecting households with increases in mortgages and petrol prices and grocery prices. So ordinary Kiwis like the people of Southland are worse off in real terms.

This new Government, which ACT is a part of, is determined to get inflation under control as quickly as possible, and what we are doing here tonight, in moving this amendment, is to do that. We’re also going to tackle Government spending and ensure that the Reserve Bank once again has a sole focus. By returning to the sole focus, we can make sure that the Reserve Bank continues to be a world-leading institution and to play its part appropriately in turning around this economy. That’s why ACT will be supporting this, and we commend it to the House.

Thank you, Mr Speaker, and may I commend you on retaining your seat in the Chair; very good stuff.

I think we’ve heard some fine contributions on the theory of inflation and Milton Friedman and the like. But essentially what we’re dealing with here is a real-world issue that, as Mr Stephenson just pointed out, families are hurting, cost of living is hurting, our business community and our farmers are hurting with record-high interest rates that’s driven as a result of the record-high inflation. So we do need to get our arms around this. We as a Government have decided to cut out the fluff and the nonsense to get down to tin tacks.

We have been convinced by a very persuasive argument from the Minister of Finance to support this bill. So we commend it to the House. Thank you.

Thank you, Mr Speaker. What we know—

ASSISTANT SPEAKER (Greg O’Connor): Sorry, this is a split call shared with the Greens. Rawiri Waititi—five minutes.

RAWIRI WAITITI: What we know is that this Government is rushing through legislation before Christmas that will see people lose their jobs. It will cut people’s wages and working conditions. This is all being done to further enrich their already rich mates. It’s heartless, it’s disgraceful, and a Merry Christmas to you all! Shame on you—shame on you—and closing monetary policy should be making holistic decisions that consider everything that is relevant and not so easily sacrifice human lives at the altar of economic orthodoxy. Creating stable monetary policy conditions that balance inflationary pressures with employment is in the best interests of current and future generations.

Monetary policy, I heard from the finance Minister, needs mates. It needs compassion. It needs heart. By removing the dual mandate, will this Government push the official cash rate to an unachievable rate that the Governor can’t achieve, creating a forced recession? That’s a question that should be asked. Is this setting the Governor up to fail? Is this the Government’s way of getting rid of him? Will the removal of the dual mandates harm tangata whenua, and I ask that of the Minister for Māori Development, and what will he do to protect his people? Will it harm Pasifika finance? Because they are the people—we are the people who work in precarious, temporary, and seasonal work. This government is prioritising capitalism over workers. And like the great quotes of Morgan Freeman, “These walls are funny. First you hate them, then you get used to them. Enough time passes; you get so dependent on them. That’s institutionalisation.”

Te Pāti Māori oppose this bill and we call on the Government to rethink their priorities. Now is the time for compassionate economic policies that support our people through tough times. Kia ora tātou.

Tēnā koe, Mr Speaker. Tēnā koutou e te Whare. As my colleague Chlöe Swarbrick laid out, the Green Party will not be supporting this bill and we have serious questions about the relevance of the bill to the situation we find ourselves in.

Now, I know it is a common habit of the National Party and your colleagues in the ACT Party—I haven’t really heard from New Zealand First on this—to blame decisions that were made in the last two terms on the global economic circumstances that affected New Zealand following the global pandemic. So I do think it’s important to inject some facts. I like a little visual aid. I’m going to hold it up so members can see. [Holds up graph] So Consumers Price Index (CPI) inflation comparisons right across the world—you can’t really make out the New Zealand line, because it follows the shape of the United States, Denmark, Ireland, Australia. Now, if it were the case that the economic circumstances and CPI inflation that we experienced here in Aotearoa was entirely down to the fact that there was a dual mandate, how does that explain all of these other countries experiencing the same CPI inflation? If the inflation we experienced here in Aotearoa was a result only of Government spending as a result of the last Labour Government, why is it that the United States, Denmark, Australia, and virtually every other economy in the world experienced the same shape of inflation? Why is that? Do members opposite have any curiosity about what it is that is causing the situation? Or do you blindly repeat the talking points handed down to you from the party elite? Ask yourselves that question, because we’ve got the data right here that shows us New Zealand’s inflation did not go as high as many other countries in the world. Here it is under many other countries, and it didn’t fall as fast as in some places.

Another consideration is whether or not the Reserve Bank’s decision to engage in funding for lending in December 2020 was a good idea, and I would say it was a terrible idea. It was a mistake. Was it the result of the dual mandate? We have zero evidence that it was, but most central banks in most countries made similar mistakes because they overestimated the impacts of the COVID pandemic, particularly here in New Zealand, where we had a lockdown which meant that we lived without COVID for 18 months longer than most parts of the world, and our economy immediately bounced back. Why is that? Because the economy is not a machine. The economy is not something that is separate to us. What we call the economy just describes some of human activities, just some of them, just the ones where we trade goods and services for money. There’s a whole lot of other things we do in the world that are the foundation for our wellbeing and how it is that we’re able to succeed, how it is that we’re able to thrive. And all of that depends upon a healthy environment. Without water, without healthy air, without sunshine, without soil, we’ve got nothing.

So the Green Party will continue to stand here and offer a constructive critique of the Government’s approach to economic and fiscal policy. And I would say that we have a much better understanding of the economic context and the factors that are driving inflation here in Aotearoa. Now, it is the case that many prices are starting to drop. A lot of the inflation we experienced here in New Zealand was a result of global inflation and global oil prices. Oil prices are starting to drop back down. But if we truly want to support people to achieve their aspirations, which for most people is to have enough healthy kai; to have a warm, healthy home; to have some secure activity, whether that is a job in paid work or an unpaid job that is equally important, like raising children or looking after sick relatives or volunteering in the community—if we want to achieve all of that for our people, we cannot go back to the 1980s, as the ACT Party would love us to.

I think we all know that the economic reforms of the 1980s did not lead to a giant increase in productivity. They did enrich a tiny number of people, many of whom donate now to the ACT Party and to the National Party. But if we want a truly equitable society that gives people equality of opportunity, then we need a much more holistic approach to the economy, one that respects our people—that looks after the dignity of people, and supports people and the essential need that we have for a healthy planet.

Thank you, Mr Speaker. I speak in support of the Reserve Bank of New Zealand (Economic Objective) Amendment Bill. It’s time to focus on strengthening our economy. It’s time we focus on hard-working New Zealanders and reducing the cost of living. This will be achieved through getting on top of inflation. Kiwis are struggling because the economy is damaged. The price of food, rents, and mortgages are at record highs, while wages have struggled to keep up, creating a cost of living crisis. Homeowners are scrambling to find the extra hundreds of dollars they need to pay their mortgage payment each fortnight. Across New Zealand, families are feeling hardship in a way they have never experienced before. Christmas is just around the corner, and we need to bring some light and cheer for people this Christmas, and that is reducing the cost of living crisis, getting on top of inflation, and giving New Zealanders a brighter future. Interest rates have risen so fast that hard-working Kiwis can’t keep up, businesses can’t keep up. Our economy has been going backwards; we need to drive it forward.

The other side of the House might keep blaming COVID and international circumstances, but on this side of the House, we aren’t blaming; we are acting. We are all about action—all about action, getting things back on track. On this side of the House, we aren’t wasting any time in our fight to put the lid on inflation. We need price stability and low inflation. This is what will drive our economy forward. This will help improve the lives of New Zealanders who are currently wondering how they’re going to pay their bills. This will help improve business, farmer, and grower confidence, helping grow our economy.

The member on the other side of the House spoke about productivity and creating jobs. The way to drive productivity is to support our businesses and our growers and our farmers by lowering inflation. Farm inflation is at all-time highs. Confidence is low. We need to enable businesses to get ahead, enable businesses to create jobs, enable families to get ahead. Inflation is eroding profitability. Businesses are tightening their belts. We need to get the wheels moving in the right direction now. The commitment to beating inflation starts with ensuring the Reserve Bank is returning to a single mandate of keeping down inflation. I commend this bill to the House.

Kia ora, Mr Speaker. I thought that we should give a Māori perspective on this. That’s why it was good hearing Rawiri Waititi having a bit of a kōrero about it, because I think it brings it back to where a lot of people saw things. I think what we did as a Government is we normalised things for people on the street, you see. National doesn’t do that; they make it all complicated. [Interruption] No, no, they make it all complicated, and that’s where we had a visionary finance Minister, Grant Robertson, who just didn’t see things in one sort of box or one perspective. The dual mandate gave us that opportunity for all New Zealanders to understand what the Reserve Bank was about, because they didn’t understand that before because it was all National Party speak. So I want to compliment the former Minister of Finance in terms of what he did in terms of this dual mandate, because he brought kōrero like wellbeing into play. He brought kaupapa like wellbeing into play, and he got Māori to understand that the Reserve Bank could be more than just this little box that these useless National Party and ACT people want to focus on because their whole world is just tied up in one pathetic area.

As we all know, you know, the National Party’s economic record is in tatters, trashed by Nicola Willis, as the whole world knows, repealing our beautiful smoke-free legislation. We’re as embarrassed as the world is shocked to fund their dirty, rotten, filthy tax cuts—disgraceful. Nicola Willis is risking people’s lives because Winston made her look silly. Let’s be clear on that. So whether it’s repealing smoke-free rules to fund tax cuts, that tragic backtrack on the flawed tax plan, I mean, it’s just shot.

Hon Chris Bishop: Come back to the bill, Willie.

Hon WILLIE JACKSON: Well, what it’s got to do with—it just shows you how mean the finance Minister is. It shows how mean the finance—

ASSISTANT SPEAKER (Greg O’Connor): Mr Jackson, you’ve had four minutes now—the bill.

Hon WILLIE JACKSON: No, I have seven minutes.

ASSISTANT SPEAKER (Greg O’Connor): No, you’ve had four; you haven’t mentioned the bill, so about time you did.

Hon WILLIE JACKSON: Well, I am mentioning the bill, Mr Speaker, because this bill—we’re shocked that they would repeal what we did to focus just on the material side of things for people in this country. If they’re really concerned about the cost of living, then they would follow what Grant Robertson has done.

Can I just say I was just giving a Māori perspective because we had one of our kaumātua who died this morning, Bill Kaua, and he was a big follower of this, and he never would’ve supported this sort of kaupapa. His only flaw was I think he was a big supporter of the Māori Party, but that aside, he was certainly a supporter of what we were doing, and what we were doing was creating jobs.

I want to just come back to this bill, the bill that they’re getting rid of. Grant Robertson’s focus meant that we had record-low unemployment in this country in 2018—3.9 percent we’re talking about, in terms of unemployment in 2018, 3.9 percent. I’m just looking at my figures here, and we had a record employment rate in November of 2018 of 68.3 percent. That’s what these types of strategies of broadening the mandate in terms of the Reserve Bank did for New Zealanders—broadened the mandate so we saw firsthand the benefits of Labour’s Government strategy. And now we’re seeing firsthand what this bill will do to New Zealanders.

So I’m just so proud of the economic management that Labour was able to roll out and that was confirmed in the Pre-election Economic and Fiscal Update and Stats New Zealand June quarter figures: the economy had begun to turn the corner then, and so this Government is inheriting so much of our great work—the economy’s growing again, wages were ahead of inflation while people were in work, and inflation was expected to return to the 1 to 3 percent target band in 2024. Why? Because of the wonderful work done by the former Minister of Finance, Grant Robertson—the former Minister who had a plan and a strategy that was about being inclusive and keeping communities in check. As a former employment Minister, I saw firsthand with programmes like Mana in Mahi, Poutama Rangatahi, Māori Trade training—these were all the type of benefits that our communities got out of this brilliant strategy that our Government was running.

But I just want to read something—I was looking at the third reading of the Reserve Bank of New Zealand (Monetary Policy) Amendment Bill, and a very learned man that everyone respects—well, sometimes. You know, I was looking at what he was saying about this very kōrero, and he talked about monetary policy, and he said this: “The changes that this Labour Government are bringing in are not to be feared. They bring us into an international best-practice area.” This is not a journey into the unknown; this is to link up a progressive, far-sighted Government passing legislation—that was us—that shows a great similarity to other reserve banks and their mandates, and, as we know, around the world it’s very, very common to have a broad mandate. What he was saying was, “Similarity in data of Reserve Banks and their mandates, which have moved away from this bare, sparse, barren approach reflective of Don Brash”—and I’ll just add Nicola Willis, even though she wasn’t the Minister of Finance at the time—and that is what we have introduced, and we would be most certainly voting for a dual mandate. And that’s to ensure that when decisions are made, the impact on the employment labour market is equally as important as the interests of the money-lenders—fiscal temporals that pass for corporate New Zealand. We campaigned to change it and we’re now at the final hurdles. He’s a man that we should all listen to, really. This was in the third reading speeches, and he says right before some changes come to pass, he said “I’ll make a prediction. The other side of the House, despite all their lamenting”—this is now National—“will not change it back because they won’t have the opportunity in the foreseeable future.

But look, I don’t want to get petty about this: this is a great opportunity. It would spoil the occasion as we prepare for one of our members to move into life outside of politics, which is an improvement in terms of qualities of the House that I currently enjoy. So, he said, “I’ll be voting for this”—this was our bill. “Wonderful bill”, he says. “There will be the ability for Treasury to have a non-voting member on the committee despite the fearmongering and pretty tedious speeches from the dirty, rotten National Party”—I might’ve added a little bit there, all right! “But our party has not a sliver of doubt that that is the way forward.” And that was former Minister Shane Jones. So where’s Mark Patterson—he’s gone, has he?

ASSISTANT SPEAKER (Greg O’Connor): No, no. We don’t comment on members not being here, do we, Mr Jackson?

Hon WILLIE JACKSON: But here’s the question. Shane Jones—and I’ve got something from Winston, but I don’t have three minutes to read it out—but, Winston, also, hugely supportive—

ASSISTANT SPEAKER (Greg O’Connor): We also use full names, don’t we?

Hon WILLIE JACKSON: Winston Raymond Peters. I remembered his middle name! But it just shows you that this is what the Minister of Finance has to deal with—Winston Raymond Peters and Shane “Sell-out-the-Māoris” Jones. You reckon Jonesey’s listening? I hope so. And that’s what this lot has to deal with. They loved what we did. And how are they going to get all this past Winston? That’s the big question. I’d like to carry on, but my time’s run out. Kia ora tātou.

I sit here trying to listen to wisdom from all through the House here. And when the member across the aisle there, the Hon Willie Jackson, talks about a Māori’s perspective, boy oh boy I’m pleased he’s on that side of the House and not this side of the House.

Because no wonder it’s such a mess, and I tell you: I hear a number of members on the other side of the House talk about the problems that they believe this bill is going to present with employment, particularly for Māori in there. Well, it’s exactly the opposite. This is exactly what’s needed to actually get a great employment, great economy going throughout our country. This is exactly what is needed. It’s exactly the opposite of what they’ve been talking about.

When inflation increases significantly, a sensible Government would look at how its own spending would actually have an effect on it. But what we saw in the last term was a Government that had an increase of 83 percent over its two terms in Government—83 percent. That went from just north of $76 billion in 2017—ended up being at $139 billion. That had a significant effect on the inflation as well. We saw a Government that didn’t understand what its purpose was in endeavouring to control inflation with what strings it could actually pull.

So inflation is not only unnecessary for economic growth; as long as it exists, it is the enemy of economic growth. So we need to make sure that we get everything, pull all the levers that we can with regards to getting inflation under control. The—sorry—[member refers to notes]

Hon Willie Jackson: Speak from the heart.

DAVID MacLEOD: I’m learning, Willie—sorry, Willie Jackson. I believe that’s Willie Jackson. If I’m speaking from the heart, I would suggest: don’t listen to that side of the House, especially from that seat over there. It’s a muddled mess, as it is when the Reserve Bank is trying to serve two masters with the fact that they had these two objectives to serve. We need to get it back to one. I believe that the Reserve Bank can’t wait for this to actually occur so it can get things under control. With that, I commend this bill to the House.

This is a split call—Helen White.

Thank you, Mr Speaker. I don’t think it is a split call.

It is a split call.

HELEN WHITE: Thank you, sir. I want to talk first to New Zealand about what the maximum sustainable employment phrase actually means. What it means is the highest utilisation of labour resource that can be maintained without generating or accelerating inflation. So it’s not something that competes with a policy of prioritising taking down inflation, and it does not compete with a stability goal. It sits alongside it, and it’s been thought out.

Now, why is that important? I was an employment lawyer for a long time and I know the value of work in people’s lives. It’s an incredibly important stability in itself. It’s also really important to the economy, and we saw that in the COVID disaster, because when COVID happened, I had clients ringing. They were employers, and they didn’t know whether they were going to be able to sustain the situations that they were in. They were looking at widespread redundancies and fiscal policy came alongside them and so did monetary policy, and the maximisation of people being employed without tipping inflation up—that’s an important objective. It sits alongside and it works absolutely collaboratively with price stability.

So these things are not in competition. What we have here is a logic that is myth. We have a logic that doesn’t stand up in the evidence, and you’ve heard Grant Robertson talk about that today. He’s talked about how you can take systems where there are dual mandates and you can take systems where there are single mandates, and you can see that the inflation’s been going up at the same rate or if not more than the ones with a single mandate—there is no correlation here.

What we have is a myth that if we prioritise people’s work, if we think that it’s truly valuable, what we are going to do is we’re going to overheat by wage growth because there’ll be pressure, because there’ll be full employment. And that is the worry, isn’t it? Really, that’s the worry at the heart of the National Party dream and myth machine. Because what it is effectively saying is the way to get inflation down is to make sure that we have as much unemployment as we damn well can, and the wages will plummet as people compete for lower paid work. I never want to see that future in this country. And so I am sorry that we’re in Opposition at the moment, because I know that people will be harmed because of that myth.

This policy, this change, is actually frittering. I agree with my friend Chlöe Swarbrick. This is actually virtue signalling, because this policy won’t make a difference, but the actual value set that it betrays, that’s going to make a difference in this country. What the National Party is still thinking is relevant is trickle-down economics: that if we just max out the amount of people on low-wage work in this place, everything will come right because it will trickle down—and it never did. It never did. We are stuck in the 80s, which is why we’re hearing anecdotes from it, because there is half the House stuck in the 80s and the 70s, and it’s time to move on.

We need a modern economy. This is the same Government that is—and I keep on banging on about it—about to get rid of the Productivity Commission, people. I mean, how ridiculous. You’re talking about productivity, you’re talking about making this economy work, and you’re getting rid of the very independent tools that would be best to do it. Because they support a high-wage economy, that’s why. Because it’s something that the National Party is underpinning in this legislation, its commitment to low wages for New Zealanders, and that is a tragedy because we can have inflation come down and we can maximise sustainable employment. Those concepts have been thought out; they are actually already in balance in the very heart of the phrase—maximum sustainable employment means employment that does not harm price stability and does not cause inflation. Please, please take that on board.

I am pleased to speak on this second reading of the amendment bill for the Reserve Bank objectives. I just want to talk about what happens when you try and do two things and don’t do either well. The interesting thing I will speak on is public transport. We want to try and reduce inflation. We are not going to do it by also focusing on the jobs. We need to reduce inflation first. Now, when you try to reduce emissions, you don’t do it by running a bus all around town trying to pick up every single person. You need to go somewhere faster so people actually get out of their cars. You’ve got to do one thing well, and this is what we are here to do. We are here to do it quickly, because we cannot go one more day without it, but we need to do one thing well, and that is our focus. We need to give the Reserve Bank one single mandate, not two things that they can’t do well. We need to do one thing well. So we are here to move this right before Christmas so that people can get to the new year with the best control over inflation that we have not seen for the last six years. It is time, and I will say it again, to do one thing well, and that is what we are here to do as a Government first up: we are going to do one thing well—and I will say it again. So I commend this bill to the House.

Hon Deborah Russell.

Doctor. Ordinarily in the second reading of a bill, we would be coming to this House having gone through a select committee process where we would’ve heard submissions from all sorts of actors in the community, where we would’ve teased out some of the nuance of the bill, where we would’ve understood the implications, and, having been so informed, we would’ve come back to this debating chamber to present a variety of views. And, ordinarily, there would have been some amendments to the bill. That’s a pretty standard practice as a bill comes back from a select committee.

However, we haven’t had a select committee process on this bill—not even a truncated select committee process, not even maybe a week to hear from people who could’ve been invited in to talk to us about this bill. As has been pointed out by other speakers in this debate, the bill itself is not complicated or long. There are only a few clauses which actually perform something, that actually make something happen. So we could have perhaps managed a truncated process on this and at least gotten some feedback from other players in the economy, and that would’ve introduced some nuance into this debate—and I think it needs nuance. As it turns out, I have contacted a number of people who I know are concerned about this bill, and I will be bringing their views to the committee of the whole House in an effort to at least get some nuance into it.

But I do want to talk about some of the nuance that is found in the material that has been placed in front of us already. I’m going to start with the letter that the Minister of Finance has already spoken about, the letter that she received from the chair of the Reserve Bank and the Governor of the Reserve Bank, which she has quoted and tabled in the House. Now, I have a copy of it here. It’s a bit hard: my eyes are getting a bit older; I have to expand the text to see it properly, but one of the words that is put in there is the word “priority”—not “exclusive”, not “sole”, not “only”, but the word “priority”.

So the chair of the Reserve Bank and the Governor of the Reserve Bank have quite a nuanced view in this letter. They don’t say the intended focus is exactly what we recommend; instead, they say the intended focus of this bill is consistent with the views we expressed. Now, that’s not an out and out endorsement; it’s saying it’s consistent—it can sit alongside; it can work with. So it’s consistent with their recent monetary policy committee remit review, which was published in June 2023.

So, they said—and they did say—that giving the inflation objective priority will assist with the credibility of the inflation target and so on. And they said it will simplify bits of the remit context, etc., etc., and so on. But I do want to draw attention to that word “priority”. It means that several things can be done at once, even if you put priority on one of them.

I want to turn to that other piece of nuanced advice that has been given to us, and this time it comes to us from the Treasury and it’s sitting in the regulatory impact statement. And, again, it talks about ensuring a primary focus on price stability and then offers options as to what the Government could do. So the Government could introduce legislation to amend the Reserve Bank of New Zealand Act, to remove the economic objective of supporting maximum sustainable employment, or it could issue a new monetary policy committee remit only, which would require the monetary policy committee to place greater weight on price stability relative to maximum sustainable employment. But that would have left the Act unchanged—so, going to the remit, the letter that sets out what the Reserve Bank monetary policy committee should focus on. So that was the other thing it could do, or it could have used section 125 of the Act to give the Reserve Bank a temporary focus on one priority only, on one objective only.

So, sitting in that regulatory impact statement is a lot of nuance about what the Government could have chosen to do, and all along what is very clear in this nuance is that it is entirely possible to retain an objective of maximum sustainable employment. Perhaps the Government could have said, “Actually, let’s keep that. We’ll just prioritise price stability.”, but, no, the Government has got rid of the objective of having maximum sustainable employment altogether, and that is a great shame. I think that is the kind of nuance we could have heard through the select committee process, and, more to the point, it is the kind of nuance that might have resulted in a better bill.

I want to talk about something here that the Minister of Finance said. She said in her speech at the start of the second reading, in talking about why the National Party have opted to go for a single objective, “Perception does matter.”—perception does matter. Well, how’s this for a perception: that Government is saying that people in employment don’t matter. That Government is saying that jobs don’t matter. That Government is saying that people getting a decent wage in their back pocket doesn’t matter.

Now, here on this side of the House, as a proud Labour Party, we know that jobs matter, that for ordinary people the dignity of having a job that earns a decent wage matters, that the dignity of knowing that your labour is valued matters, that the dignity of knowing that employers can’t just toss you out on the street matters. You see, the wonderful thing about full maximum sustainable employment is it means that employers need to compete a bit for labour. They need to offer a decent wage so that the working person gets up in the morning and knows that as she or he goes to work, it is not a matter of desperation but of a decent wage for decent day’s work because there is maximum sustainable employment.

So when we say that perception does matter, I put it to the committee that the perception that this Government is creating is that employment doesn’t matter. But it especially matters for Māori, for Pacific people, for rural people, and for young people. Employment makes a huge difference in those communities. So when the Minister of Finance says perception does matter, I suggest that she might like to take those words to heart and think about the perception that is out there that this National Party does not care about employment.

On this side of the House, we know that in the past few years we have managed an economy with very low unemployment, the lowest unemployment in 30 years. We know that when he was the Minister of Finance, Grant Robertson managed to produce this even though we were dealing with a global pandemic. In the hardest time that has hit New Zealand since, I guess, the world wars or before, we nevertheless had the lowest unemployment for 30 years. And at the same time, yes, inflation went up as part of a whole worldwide phenomenon, but it is coming down. Why? Because both those objectives could be managed.

As I said, this is the sort of nuance that would have come through. The National Party has chosen to avoid nuance. The Government doesn’t care about employment. That’s what this bill is telling us. This House should reject this ridiculous bill.

Thank you very much, Mr Speaker. I rise with great pride to speak on the Reserve Bank of New Zealand (Economic Objective) Amendment Bill. The National Party and the ACT Party campaigned on removing the dual mandate and getting the Reserve Bank focused back on achieving and maintaining stability in the general level of prices over the medium term, and that is exactly what this bill does. We are keeping our commitment with our coalition with the New Zealand First Party to deliver on this, and I’m proud to do that.

Let me just say I am child of the 1980s in New Zealand and I know what inflation does to people at the bottom end who don’t have a lot of money. I know what inflation does to employment. I know what inflation does to the price of food. It means that people don’t buy it—they don’t have the money to buy it. We need to fix inflation in this country to fix this economy to make sure people can have good jobs, can build good businesses, and put food on the table. That is exactly what this bill is about.

Some of the things we have heard from the other side tonight have just blown me away. They’re saying that the National Party or the coalition doesn’t care about employment, doesn’t care about people, etc. It’s complete and utter nonsense. In fact, those members might want to just have a look at some interesting comments made by, let’s say, the International Labour Organization. There’s someone you’d think the left would probably pay attention to, but in the speeches I’ve heard tonight I don’t think so. But let me just, for the interest of the House, read out a few things that they’ve said about price stability. They said, “Severe inflation is reducing the purchasing power of the middle classes and hitting low-income households particularly hard. Income inequality and poverty will rise if the purchasing power of the lowest paid is not maintained. Rising inflation has a greater cost of living impact on low-income workers. This is because they spend most of their disposable income on essential goods and services which generally experience greater price increases than non-essential items. Inflation is also biting into the purchasing power of minimum wages. Accelerating price inflation is quickly eroding the real value of minimum wages in many countries for which data is available.”

You’d think this is something the left would pay attention to. Inflation affects those who have the least the most, and that’s what this bill is about. It is about addressing the thief in the pocket of all New Zealanders, particularly poor New Zealanders. We are here to solve that. We are here to help the poor; to help the workers. We are here to get this country back on track and create opportunity for them and help them and help their children. That’s what this is about.

The regulatory impact statements, as has been noted by a couple, said that perceptions of the effectiveness of monetary policy matter. So perceptions of the effectiveness of monetary policy matter. They said: “Expectations can have a significant impact on inflation outcomes.” I’ll say it again: “Expectations can have a significant impact on inflation outcomes.” That’s why getting rid of this dual mandate, getting us back to a single mandate, is so important. We are fixing any misperception that there may be out there; any expectations that are not set properly that this is what this Government is out to do. We are here to fix inflation; to fix this economy; to make sure people can build good businesses here, create good opportunities for employment, create good opportunities for people who can develop a mana that they get from jobs, put food on the table for their children. And we will not have a return of the 1980s.

Can I say, a big reason I came to this House back in 2020—I put my hand up to come into this House and to give up my previous life—was because of that experience in the 80s, that experience of being a kid who did not have food on my table. This is why we are doing this tonight. We are here to fix the inflation—that will mean the kids of today and tomorrow do not have to experience that. So this is incredibly important. I’m very proud to be a part of a Government that’s delivering on what we went to the people of New Zealand to say. We are here to fix the economy. I commend this bill to the House.

This bill is set down for committee stage immediately. I declare the House in committee for consideration of the Reserve Bank of New Zealand (Economic Objective) Amendment Bill.

In Committee

Part 1 Amendment to Reserve Bank of New Zealand’s objectives