Reserve Bank of New Zealand (Economic Objective) Amendment Bill

Members, we now come to Part 2. Part 2 is the debate on clauses 5 to 13, “Related amendments”. The question is that Part 2 stand part.

Madam Chair, thank you very much. Part 2 of the bill makes a large number of consequential changes as a result of Part 1 and the narrowing of the economic objective down. What it means is that a large number of sections in the Reserve Bank of New Zealand Act where there has been reference to the dual mandate will now become null and void.

I want to begin my questioning of the Minister in this part by asking her the question as to whether or not she believes that there is anywhere in the other parts of the Reserve Bank of New Zealand Act that the concept of maximum sustainable employment could be incorporated. The reason I ask this, Madam Chair, is because in Part 1, as you know, we didn’t get an answer to the question from the Minister as to whether or not she believed that the Reserve Bank should take into account concepts—be it maximum sustainable employment or any other concept—of employment as being a relevant consideration in monetary policy. As we know, this is, in fact, the view that the Reserve Bank stated to the Minister in the letter that she tabled to the House last night. It’s a question of prioritisation, not a question of exclusion.

So my question to the Minister here is that there are a large number of sections of the Act being amended in Part 2, and would the Minister consider that within those sections, there is scope to at least give the opportunity for the Reserve Bank to be able to speak more about employment, or consider employment more in the work that they do?

I mentioned earlier on in contributions on this matter that other central banks around the world certainly do do this. Now, they do it in a number of different ways. So a further question for the member is what consideration she gave to international examples of the way in which employment considerations are reflective. This is relevant to Part 2, because it is in these clauses that this becomes effectively operative, as noted by the repeal of a number of words by the Government in these clauses.

I will shortly table a number of amendments that would give an opportunity for the Government to be able to express that the Reserve Bank does in fact have a role when it comes to employment. There would be, for example, the ability to amend section 130 of the Reserve Bank of New Zealand Act, which would require a report on monetary policy to look at the impacts of the monetary policy committee’s approach on economic development and employment. That amendment, I believe, will be tabled in the name of Deborah Russell, when the time comes. It’s an example of the point I’m making here and the question I’m asking the Minister, as that would give an opportunity for, at the very least, a report to be made by the monetary policy committee to talk about employment.

Because we come back to the very beginning of this discussion: the Minister has presented no evidence to the committee that there is any conflict between the two. We’ve now gone through Part 1 and the objective has been narrowed. Here’s the opportunity for the Minister to actually acknowledge that people’s jobs, the wages that they earn, are important, to take the point that both Damien O’Connor and Chlöe Swarbrick made in Part 1: the economy is more than just the numbers on the page. It’s all of the things that people do in their day-to-day lives, and most importantly, in this case, the work that they do.

So here is an opportunity for the Minister to take up the idea that the Reserve Bank, like all other central banks around the world, should at least consider employment, and the clauses being amended in Part 2 are the place where the Minister can insert that. So I invite her to answer the question: is she prepared to take on the idea that employment is important and significant for a bank and use these clauses in Part 2 to be able to add in references to employment and ways in which the Reserve Bank could take them into account? If she doesn’t, that signals a very radical departure from what has been monetary policy over many years.

Thank you, Madam Chair. I have a number of questions pertaining to Part 2 of this bill. As the previous speaker, my colleague the Hon Grant Robertson, has indicated, the objective now has been changed through the passing of Part 1 of the bill, but in Part 2 there are a number of amendments, and given that now it is being narrowed down to that sole objective of the Reserve Bank, in Part 2 we have the opportunity—what measures are we going to put in place to ensure that employment is something that is still on the radar of the Reserve Bank? I have two amendments in my name to Part 2 of this bill; I’d like to speak to one of them in this call, and I’ll speak to another in a subsequent call that I have and some questions for the Minister of Finance around that.

The first amendment that I will be tabling is that we extend the membership of the monetary policy committee to contain no fewer than one trade union or worker representative. The purpose of this amendment is providing that consideration to employment matters when the monetary policy committee does come to consider these matters, that they do not lose sight of that incredibly important factor that needs to be considered—accepting there is the sole mandate that the objective has been narrowed to, but there is not a central bank in the world, even those with sole mandates, that doesn’t have some ability to keep sight of employment as an objective. So this would be a mechanism by which we could ensure that when monetary policy settings are being considered, there is that ability to keep that line of sight into things and that when those decisions are being made, those perspectives are being brought to bear. My colleague the Hon Barbara Edmonds, in a contribution she made on Part 1 of this bill, tied back what was happening in this bill to her community at a prize-giving that she was at last night in Porirua, and how it is that those voices, when it comes to considering the decisions of monetary policies, which are about people’s jobs and wages and employment, how it is that we can ensure there are mechanisms for those considerations to be taken into account.

So my question for the Minister in the chair is: given that there is going to be the sole mandate, what mechanisms is the Minister going to put in place to ensure that we do not lose sight of those perspectives around employment when decisions are being taken by the monetary policy committee? If she isn’t willing to accept the amendment that there be no fewer than one trade union or worker representative that sits on that committee so they can bring those perspectives to bear, what alternative measures is she going to put forward, if any, to ensure that we do not lose sight of that?

One of the questions that I put to the Minister in Part 1 of the bill that wasn’t answered was about advice she had received around international best practice, particularly around secondary objectives. Now, I recognise we’ve moved beyond Part 1 of the bill and it’s not about that, but what I’d like to know from the Minister: has she received advice about international best practice when it comes to a central bank with a single objective—how it is that they can ensure that that line of sight is kept into employment? Obviously, you’ve heard in a number of speeches that the economy exists about people, that this is what the real economy is about. It’s about the people that Barbara Edmonds talked about in her speech. It’s about the members of my community in Wigram, that want to know that their jobs and their security are being taken into account when decisions are made when it comes to monetary policy.

So if not this amendment, then what, and what advice has the Minister received, either around options that she may have received from officials around that or what advice has she received on international best practice around mechanisms that can ensure that that line of sight is not lost when our central bank is narrowed to a single objective?

Returning the Reserve Bank to a single mandate is by no means out of step with international best practice, so long as a flexible approach to inflation targeting is maintained—which is allowed for by this Act—which means that the monetary policy committee can still have regard to the impact on the real economy in determining how quickly to achieve their primary goal of sorting out inflation. I would note that members are asking a number of questions that relate to the monetary policy committee remit, which the sooner we get this debate done, the sooner I can publish.

Thank you, Madam Chair. Given what the Minister has just said about the importance of stabilising the real economy, I’m proposing an amendment to set that out clearly in the primary legislation. If the committee will turn its attention to the amendment in my name to clause 6. It’s to replace clause 6, section 10(1)(a)(i) with “Formulating through the MPC and implementing a monetary policy directed to the economic objective of stabilising the real economy.”

Madam Chair, if you’ll just let me bring the committee back to my contribution in the first part of this debate, I gave some context around the recent economic fluctuations that New Zealand’s economy has seen. This relates directly to the economic situation we find ourselves in now and my questions to the Minister about whether or not it is true that this bill would have an effect on our inflation now. So the contention on this side of the House is that had the dual mandate actually caused the Reserve Bank to stay its hand and counteract inflation in a half-hearted way, then we would expect to see notable differences in the approach of our Reserve Bank as compared with those economies that have a Reserve Bank with a single mandate. That’s not actually the case. The Reserve Bank’s approach has not only been in line with international counterparts with a single mandate but they actually chose to tighten their approach to the availability of cash in the economy faster than some of their international counterparts with a single mandate.

And so why that’s relevant to this amendment that I’m proposing—and I hope the House will take into consideration when voting on it later—is that this is a measure of meeting the Government halfway. It’s saying that in our primary legislation we all around this House acknowledge that the Reserve Bank has a role in stabilising not only the effect of price changes on consumers and on working people but also on their ability to get work and, if they are laid off from their jobs, to be able to find a new job. Having employment—especially for those people on the margins of employment, people who are Māori, people who are women, people who live in regions where unemployment climbs faster than those in the cities—is an important goal of the monetary policy committee and will always be a consideration. We’ve heard that from the Minister, and that is helpful for this debate to advance in that way.

So, if that is the case, if we all agree that our monetary policy should be focused on inflation and should also take into account the effect it has on the real economy, and that stabilising the economy is not only stabilising prices, it’s also stabilising people’s experience of the real economy, then it is useful for us as a House to say that in the primary legislation. It’s useful for us to set out that goal really clearly. You’ll have heard my colleague the Hon Grant Robertson talk about the need for the Reserve Bank of New Zealand (RBNZ) monetary policy committee to do two things at once to be able to consider those things. The Minister needs to tell us if she does not have confidence in the monetary policy committee to also take into account the effect of their decisions on employment and people’s enjoyment of a stable economy, because that would be a radical departure of the Government’s approach to what it is telling the RBNZ. And because we haven’t had a select committee stage here in this legislation it’s also really important that we have a sense of where the Minister is tracking in her intentions with the RBNZ and how things will go forward.

Madam Chair, if you’ll allow me to just comment briefly on the lack of a select committee stage on this. It is a shame, I think, because the role of monetary policy within our economy is something of the constitutional framework of New Zealand. The RBNZ’s role should be independent from Government, and this section that I am seeking to amend actually makes that really clear. It says, “Formulating through the MPC and implementing monetary policy directed to the economic objective while recognising the Crown’s right to determine economic policy.” Those are balancing two considerations at once as well; we’re recognising that the RBNZ was designed in the 1980s when the Government did not have an independent approach to monetary policy in the same way, and that the RBNZ’s independent role is really important in establishing consumers’ and market participants’ faith in our economy and expectations that things will remain stable over time.

If we have a Minister who’s proposing that the RBNZ was saying one thing and doing another in its 2021 monetary statement then we do need to know that. We need to establish that, and that there will be a departure from the way that the Hon Grant Robertson has dealt with the RBNZ. I don’t think that that’s the case and that’s why we should make my amendment.

I just want to respond to a question put by the Hon Megan Woods which I think illustrates just how far the Labour Party is now prepared to stray from economic orthodoxy, because what she asked is whether a union rep could be appointed to the monetary policy committee. Now, this represents a significant departure from the Reserve Bank as it was presided over by the former Minister of Finance, the Hon Grant Robertson, in which he oversaw the Reserve Bank of New Zealand Act 2021, that in Schedule 3, clause 20, says that, “A person [may] not be appointed on the basis that the person represents a particular industry sector.”

In fact, when Grant Robertson, back in the days when he used to do the make-believe that he believed in economic orthodoxy and he was responsible, he presided over an Act in which Schedule 3, clause 20 specifically required the Minister to appoint only “a person who, in the Minister’s opinion, [had] the appropriate knowledge, skills, and experience”—the appropriate knowledge, skills, and experience—“to assist the monetary policy committee [in] its functions”. So I think what we can see, members, is that just as they strayed away from economic orthodoxy and threw new objectives at the bank and threw it at the wall and failed to actually achieve anything, so they will continue for the next couple of years straying from the orthodox path, being prepared to put the economy at risk. And what a concern that is.

I call Dr—sorry, the Hon Dr—

Hon Members: Deborah.

CHAIRPERSON (Maureen Pugh): Deborah Russell. Thank you.

We got there in the end. I have been seeking the call all morning, so I thank you for giving me an opportunity now. I have been seeking it because we did not have a select committee stage on this bill and so if we don’t have a select committee stage, for new members, the usual practice is to have a pretty extensive debate in the Chamber, and certainly more debate than has been allowed until now. So we do want to canvass some pretty serious issues in the Chamber, given that we were not able to do it in the select committee. Because we weren’t able to do it in the select committee, we weren’t able to hear submissions from people who had a real concern about the bill but I have sought opinions from people who have views on this bill and I want to bring one of those. To me, it’s written here; I’ve received it the last couple of days. It speaks particularly to a new clause that I have suggested for this part of the bill. I have an Amendment Paper there inserting a new clause which suggests that there should be compensation for workers adversely affected by monetary policy.

So, in support of this particular amendment—here’s what a westie, a west Auckland person, Michael Bain, wrote to me about this bill. He started because he was concerned, too. He said, “I have heard that the Government is attempting to rush through the Reserve Bank of New Zealand (Economic Objective) Amendment Bill which is of concern for me as any changes to this must and need to go through the select committee process as a bare minimum.” So, in lieu of that bare minimum, I’m going to read some of his submission which goes directly to this amendment that I have proposed. He points out that only focusing on inflation means that unemployment is used to keep inflation artificially low—used to artificially keep inflation low. He says “artificially” because although low inflation rates look good on paper, it does not take into consideration the impact and harm done on people, whānau, and communities where people have lost their jobs. It goes on to say high unemployment is damaging to our country, and having economists say that we need higher unemployment for a stronger economy is a morally reprehensible and irresponsible stance. It is also the stance of someone who has never had to line up at Work and Income to ask for help to cover the costs of schooling for a child, or to explain why childcare costs are more this month than they were last month.

Then Michael goes on to say, “I remember the economic policies of the 1990s under Jim Bolger’s and Jenny Shipley’s Government, where high unemployment was used as a tool to keep inflation rates down. I had just graduated from university and it was really hard to find a job at the time. I ended up spending a number of months on the unemployment benefit, now called jobseeker support. Every week, I had to go to a Work and Income office and explain what I had been doing in seeking work. It was embarrassing and degrading to have to go in every week. It felt like I was being interrogated and I was being judged for not having a job—

Hon Nicola Willis: What does this have to do with Part 2?

Hon Dr DEBORAH RUSSELL: —or for not trying hard enough”—it goes to my amendment— “despite doing everything I could. I heard from a number of my fellow university graduates who were going through the same thing and were struggling with the same feelings of being judged and not being considered worthy enough.” No one should be forced into that scenario.

So employment purpose, it gives people motivation, it gives people hope, and it gives people inspiration. Unemployment is the opposite; it sucks hope out of life, it steals purpose, it drains motivation, and it kills inspiration. Knowing that the Government and the Reserve Bank are using unemployment as a tactic to make the economy appear better than it actually is is dehumanising. Then he asked me to really push this in the House and here’s the line that really got to me: he said, “We cannot see a return to 1990s ideology where people’s jobs and livelihoods are sacrificed on the altar of a low inflation figure.” That is why I have proposed this amendment. If we are going to sacrifice workers, if we are going to force people into unemployment in order to adjust around inflation then, he says, there should be compensation for those workers who are used as a tool in the economy. That is why we actually need to retain both maximum sustainable employment and price stability in the objectives for the Reserve Bank. So this goes to the heart of this bill.

The member’s time has expired.

Thank you, Madam Chair. I’m very pleased to follow on from my colleague the Hon Dr Deborah Russell, the previous speaker, who pointed to the past and the direction of travel for this not “back on track” but backtrack Government. The Minister spoke of economic orthodoxy or monetary orthodoxy, and on the same day that we’ve been in lockstep with the Canadians and the Australians on a humanitarian crisis, we seem to be moving apart when it comes to monetary policy. Because if we have a look at what Australia had proposed, of course, it had talked about a triple mandate. The recommendations that had come back on that review said no, it should go back to a dual mandate that included a secondary objective, which was, of course, employment. If we have a look at Canada, the Bank of Canada is now required to actively seek a level of maximum sustainable employment.

It’s simply sensible, logical, and progressive to include more than a single mandate for monetary policy. That was the doctrine of the 1990s that did result in the kinds of manipulation of employment rates to keep inflation down, and we do not want to go back to that.

The points I made—and I appreciate I got ahead of myself a little bit on Part 1, but Part 2 is around ensuring that we have more than a single objective. Because people are in this House, in Parliament, and should be in Government, even in a coalition Government that might be a muddle—they should be here for people, for the multiple purposes that people exist and work in New Zealand, not for the purpose of a low-inflation economy that is supposed to automatically deliver benefits for each and every New Zealander.

Because the reality is if the Reserve Bank is to manipulate things to ensure that unemployment rises to stop any labour inflationary pressures—and that’s an economic, logical argument. That’s the reality, of course. And there’ll be people who say that, you know, if we have full employment—and the coalition Government is saying that: if employment is part of this, then in fact we may have pressure from the labour market upward that flows through to inflation. That indeed is a reality, but so too is the opportunity to increase profits if you’re in a part of the economy that has a monopolistic position where they can push up prices just because of the benefit of scale or lack of competition.

Nothing is referenced in this piece of legislation to address some of the other pressures on inflation. All this coalition Government is attempting to do is to take away the focus of full employment as an objective for monetary policy.

Well, I would like to—and I heard on the hustings from many people across the other side of the House that we want as many people working as possible, and 100,000 people who should be working, who are not working, should get off their backsides and go and work. That’s what I heard. And yet this Government has come in and one of the first pieces of legislation—in fact, the first piece of legislation—is to remove the objective in the Reserve Bank of New Zealand Act to try and get that to happen. That is to make sure that monetary policy, a core framework for our country, has, as part of its objective, employment as well as low inflation.

This is a backtrack piece of legislation, and I am horrified that we’re running counter to economic orthodoxy, not buying into it, when countries like even the US, but in particular Canada and Australia, have more than a single mandate, because they understand that monetary policy must work for their people. And it should work for the people of New Zealand, not just work for the economy. What is the economy? What’s it here for? It’s for the people, the people, the people.

This piece of legislation is a backtrack one, and I wish to see my amendment supported by members on the other side of the House.

Thank you, Madam Chair. I’ve spoken to one of the amendments that I’ve put up to Part 2, and I’d like now to take the opportunity to speak to the second part—although I am still waiting for an answer from the Minister on the first amendment I put up, around the mechanism that is going to be put in place to make sure that we can still have sight. And also, additional to that, the question I asked was about advice she received about what options there were, or what international best practice there was for that.

The only answer we’ve had from the Minister has been to say, “Well, we’re not having a union member, because under your Government and under Grant Robertson, you wouldn’t have one either.” But the mere fact of the matter that we had a dual mandate made that not as necessary. So the question for this Minister to answer—

Hon Nicola Willis: Oh so that’s why you had the dual mandate—for your union mates!

Hon Dr MEGAN WOODS: —not just point to what happened under the previous Government, is that given she is narrowing—

Arena Williams: Point of order, Madam Chair. I hope you can give the committee some guidance on Speakers’ ruling 66/2. There’s a convention that, in committee, members in charge of legislation should not take interjections, given that the mike is in front of them and that they have an unfair advantage. I know the Minister is passionate about this topic, but she had interrupted one of my honourable colleagues.

CHAIRPERSON (Barbara Kuriger): Thank you to the member for that point of order. I think the message has been directed to the new Minister. Now that she’s aware of it, it won’t happen again.

Hon Grant Robertson: Further point of order, Madam Chair—it’s a technical one. The clock kept counting down through that. I think it was at 3 minutes 56 when my colleague took the point of order, so I’d hope that would be added back into my colleague’s time.

CHAIRPERSON (Barbara Kuriger): I’m sure we can add that back in, yes.

Hon Dr MEGAN WOODS: No matter what, we’re still waiting for those answers from the Minister—given the legislation is to have a single and narrow purpose around that mandate, what will she do to ensure that the bank and the monetary policy committee does not lose sight of employment, or maximum sustainable employment, or whatever she wants to call it, when it comes to making those decisions. Merely to stand up and say that Grant Robertson did or didn’t do it, now the Minister actually holds a warrant isn’t actually an answer. So the committee is still waiting for some clarity on that from the Minister in the chair.

I’ll take the remainder of this time to talk to the second amendment that I’m putting up in Part 2 of the bill, and that is around a new clause 14, to insert the following new section, which is a review of the Act: “The impact of the Reserve Bank of New Zealand (Economic Objective) Amendment Bill 2023 on inflation, employment, and economic output will be reviewed by an independent expert panel after three years of entry into force.” The purpose of this amendment is to make sure that there can be that independent and expert review into the efficacy of the bill in improving outcomes for all New Zealanders. This does support the purpose of the bill that the Minister is saying she wants to have, which is that clarity to the Reserve Bank—she’s making it crystal clear that people’s jobs and employment aren’t a focus that she wants her Government or the Reserve Bank to have in their sights—but it is also about how the financial markets and the public can see how monetary policy decisions should and will be formulated. That three-year independent review will also give an opportunity to check in about whether there has been a loss of sight around having a secondary and subordinate line of sight into matters of employment and making sure that people’s jobs are something that are taken into account and the ability of people to work.

My question for the Minister, if she is not going to support this amendment, is: what mechanisms will be in place to ensure that there can be scrutiny and that there can be monitoring to ensure that we are not getting into situations that we have seen in the past, when the legislation did have a single and narrow focus, where we saw the interest rate being raised when there was high unemployment? Members and my colleagues on this side of the Chamber have talked about and read out—and the Hon Deborah Russell read out a contribution from someone in her electorate—where the public has a fear that their jobs and their security are being sacrificed. How are we going to give the public confidence? What is the scrutiny? What is the ability of people to have that monitoring, so that there is not a loss of sight of the fact that people’s jobs and employment will be given some weight when it comes to decision making?

So I’d like to hear from the Minister not only on what she’s going to put in place but on what options and what advice she received around what we could do to ensure those mechanisms were in place, and what it was she gave weighting to in decision making around this, and what the criteria for the decision making were.

The irony of that contribution is not lost on me—as a member of a Government that repeatedly denied the Finance and Expenditure Committee the opportunity to review the economic decision-making by her Government in the period after COVID, where mass levels of fiscal and monetary stimulus led not only to massive asset price inflation, widening the gap between those in assets and those without, but also led to extraordinary inflation.

In specific reference to member Woods’ proposal to review the Act, there is already a post-implementation review of the Act due by 2027.

Thank you very much, Madam Chair, for the opportunity to take a further call on this part and ask a couple more questions of the Minister. Firstly, just before I do that, I want to go back and refer to the Minister’s comments that she made around Dr Woods’ amendment in terms of finding a place for the voice of workers. It is very clear to members on this side of the House that having removed the dual mandate, Part 2 of this bill offers the opportunity for the Minister—for the Government—to be able to actually give some evidence to the fact that they still think that the Reserve Bank should have the opportunity to consider matters of employment, or the labour market generally when it comes to setting monetary policy. The Minister, in an earlier contribution, mentioned the flexible approach being maintained—well, that’s actually not the same thing. What we’re talking about here is how do we compensate now for not having the dual mandate in question? So that was the purpose of Dr Woods’ amendment, to find a way of doing that.

We have in fact offered a number of opportunities for the Minister to take up ways in which Part 2 could be used to ensure that, actually, employment and other economic objectives could be taken into account, be it in the remit, or be it in the reporting arrangements, or the review arrangements—there are amendments on the Table in colleagues’ names on all of those matters. This is the opportunity and, as Minister Dr Woods—former Minister Dr Woods just said, if not these amendments, then what? Because if we are left in a position where the Reserve Bank is now being told by the Government it shouldn’t be considering employment or labour market matters at all, we are in a very difficult and dangerous position.

The second point in question I wanted to put to the Minister in this particular call is around the amendment in clause 11 of the bill to section 125, which is the section of the Act as it currently stands that allows for a different economic objective or objectives. Now, this clause exists in the Act as it stands today in order to give flexibility to the Reserve Bank should a set of circumstances occur in which they require to do more than the objectives as they currently stand. So just one objective now, after the decisions in Part 1 on the bill.

I want to ask the Minister what her intention is, if, for example, we come to a period where there is for some reason or other a massive spike in unemployment? And in the old days, this used to be called the “foot and mouth clause”, which is that if there was a massive outbreak of something like foot and mouth—which would be an absolute disaster for New Zealand—it would of course have a massive effect on employment in the rural sector in New Zealand and resulting in our rural communities. So the question I’m really asking the Minister here is: does she believe that the power should still exist to add objectives? I think she does. I think that’s what this means, and, if so, wouldn’t it be better to take up one of the amendments of the Government that would make clear that employment and labour market matters are still the ones that we would primarily be concerned about? Should we be needing to use section 125 as contained in clause 11?

So just to recap for the Minister, I’m continuing to want her to answer the earlier questions that have been asked about whether or not she believes that the bank should continue to have regard to employment and labour market matters and monetary policy, and then, if that is the case, what would she propose to ensure that that happens, if it is not adopting the amendments that have been put forward by my colleagues?

Thank you, Madam Chair, for the opportunity to take the committee through my tabled amendments. There are eight of them, so I will turn to them in a second. I’m considering an amendment to the amendment moved in the name of the Hon Megan Woods that would be an amendment to the amendment, but I’m seeking some clarification from the Minister before I do that.

So you’ll know that the Hon Megan Woods has proposed an amendment which would, effectively, allow someone with a focus on unemployment and the effect that would have on working people to contribute to monetary policy. And I think it’s relevant since this bill has not had a stage in select committee to turn to some of the submissions by people who would fit that bill—who have expertise and the experience of working people.

So I’ll turn the committee’s attention to the submission of the Council of Trade Unions (CTU) made on 7 September 2018 to the Finance and Expenditure Committee. This submission was on the Reserve Bank of New Zealand (Monetary Policy) Amendment Bill at the time, but the comments made in that submission are directly relevant, particularly in this part which deals with the Minister’s contention that, you know, it might be contrary to what the Reserve Bank of New Zealand (RBNZ) is trying to do—to have a representative with this expertise contributing to monetary policy. The comments of Sam Huggard, the secretary, are: “We also wish to make it clear that unions and workers recognise the damage that can be caused by high inflation.” That points to an imperative that the CTU recognises where the RBNZ should be focused on inflation. “The purchasing power of wages is easily eroded by rapidly rising consumer prices. Our criticism in the past of the application of monetary policy due to the adverse effects of employment, output, and the exchange rate does not imply that we disagree with price stability. The issue is more that at low levels of inflation the costs of extracting the last bit of inflation out of the economy can outweigh the benefits.”

This is an important view because it really nicely captures the tension that we always ask the RBNZ to manage. It points, as well, to where you don’t have a dual mandate, you’re constantly asking the RBNZ to also have in the back of its mind the impact on working people’s experience of the economy, low-wage earners’ experience of the economy, and stabilising that for them.

He goes on to say, “Also, the rigid application of a target over too tight a time frame can damage employment prospects for workers.” And here we get to the nut of the issue that the CTU was submitting on where they were criticising the previous approach of the RBNZ as being too focused on inflation during the period prior to 2018.

If I bring the committee back to my comments on Part 1 of this bill, that is not the situation that we are in now. In fact, there is no evidence that has been presented to this committee by the Minister or any of the contributors from the Government side that the dual mandate actually had an effect in the last three years on inflation. The RBNZ was never asked to choose between its focus on unemployment and on curbing inflation.

I’ll also turn the committee’s attention to a letter to the Finance and Expenditure Committee dated 7 December 2018, from the secretary of FIRST Union, Robert Reid. This is another expert within the field of the experience of working people and the economy. He said, “The employment of our members has been particularly affected in periods where the Reserve Bank has run high interest rate policies in order to keep within a relatively low inflation window.” What he’s pointing to there is the effect on unemployment when you have an RBNZ that has set out to, essentially, extract the cost of a period where the economy is hot from working people rather than from those people with savings. He goes on to say, “We have seen these policies choke off growth”, and there he’s talking about the effect on the productive economy. Not only working people, but our hard working exporters—people within the rural sector who rely on the official cash rate to export their goods at a price that is competitive overseas. He says, “directly and also indirectly through increasing the exchange rate which has made our exports dearer and caused employment loss in New Zealand.”

So what Robert Reid from FIRST Union was saying there is that those workers in the rural sector, who he represents, were negatively affected by RBNZ’s single-minded focus on inflation in the period before 2018 in a way that affected not only those workers but those rural towns—those regions that rely on New Zealand’s competitiveness overseas. He was pointing to the need for someone with expertise of representing those people within those sectors to have a mind to those monetary policy issues, and to be able to contribute to the monetary policy committee’s decisions around where we should be pitching this.

Madam Chair, I only have four more seconds. I wonder if you would give me another five minutes to go through my Amendment Papers?

I want to acknowledge the Hon Grant Robertson for being one of the few members who’s had the courtesy to actually refer to Part 2 in any way during this stage of the debate. And I want to answer his question about the foot and mouth clause and to confirm that section 125 of the principal Act continues to provide for an Order in Council to set a different economic objective or objectives for the Reserve Bank. It remains the Government’s intention that the Act remain laser focused on inflation, and that other matters be set out in the remit.

Just before I take the next call, I’m just going to refer to Speaker’s Ruling 125/8. Because we are in urgency and this has not gone through a select committee, I am allowing detailed questions about the provisions of the bill, to the extent that it’s relevant to the bill, and they become debating points within the whole debate on this bill. It’s up to the Minister, you know, whether she addresses what is relevant or not, but I also want to just make people aware at this stage that there are a number of amendments and some of them are contrary to the objects and provisions—the principles of the bill. So we just want to be careful when we are moving amendments to amendments that it might not all happen at the end of the day.

Well, thank you, Madam Chair, and thank you for that clarification as well.

I want to refer to a specific amendment, which I believe is in the name of the Hon Deborah Russell, and that is the amendment that would require a report to be written by the Reserve Bank outlining a number of matters that they consider to be important when it comes to reporting on monetary policies. This is section 131 of the original Act. At the moment—and this also applies to the point that the Minister made about the Hon Dr Megan Woods’ suggestion about reviews—while the Act currently contains both provisions for reviews and provisions for reports, what we’re endeavouring to do through the amendments that we have tabled is ensure that both the review and the report contain reference to issues around the labour market, unemployment, and wider economic impacts.

Because at the moment, while the Minister is technically correct that there might be a clause to review the overall Act, that clause does not necessarily cover off the issues of employment. So that’s the reason for the amendments that we’re making: to make clear that we want both the review and, in this case, the amendment I’m talking about here to section 131 to actually have a report that does cover that.

So what this proposal proposes is that we have a new subsection to 131(2) to insert that the report must consider the observed impacts of monetary policies of the bank over the review period, including the impacts on price stability, employment, and economic development; and structural economic factors that influence monetary policy decisions; and any trade-offs involved in meeting the economic objectives of the bank; and the actions required to mitigate any identified trade-offs.

This is the very reason for us, in Part 2, asking, having dispensed with the dual mandate in Part 1, can we please have something that allows and prescribes for the Reserve Bank some attention to matters that are beyond just price stability? Price stability is important—always has been; always a core objective of the bank. But price stability and a focus on it will have impacts in other parts of the economy, and that’s what this amendment does—it says, “Well, if you’re going to do this, there’ll be trade-offs and there will be other impacts and we need to understand those.”

In the debate on Part 1—actually, no, it wasn’t; it was in the second reading debate—I brought up the example of the former Reserve Bank Governor Graeme Wheeler, who did launch on a monetary policy tightening programme when unemployment was still very high—it was over 5 percent. Now, he did that for his reasons and he had those reasons, but that ultimately did start to see, potentially, unemployment rise from that point. That kind of trade-off is enormously significant for people’s lives, for jobs, and for wages.

So, for us, proposing these changes here in Part 2 is because we are concerned that the bank will now take its eye off the ball of the consequences of its single mandate. One of the issues that we have is that monetary policy is a long game. And, actually, what we’ve established through the debate thus far is in the period that there was a dual mandate; actually, the Reserve Bank wasn’t compromised in its focus on inflation and that situation could go on for a very, very, very long time. But there will come a time when the focus—and I’m giving the example from 2013-14 with the former Reserve Bank Governor Graeme Wheeler as an example of when I had a concern about a single mandate meaning that we didn’t focus on those other issues.

So we know the dual mandate didn’t have the impact that has been suggested it might possibly or could have, but some time in the future it might. So, therefore, we are asking for these amendments that we have tabled to Part 2 to be taken up so at least the Reserve Bank will be asked regularly to make sure it’s talking about the trade-offs that are inherent in monetary policy. If we don’t pass these amendments, we then run the risk that monetary policy goes off in a direction that New Zealanders are not comfortable with and that will have an effect on their jobs and their employment.

So I ask the Minister again: if not these amendments, then what will she be doing to ensure that the Reserve Bank reports and reviews regularly the trade-offs that it’s now going to have to make?

The member asking those questions should know that the Reserve Bank charter can already set out reporting requirements, and it will. Also, the member should know that the remit will allow that under section 117 of the Act, the Reserve Bank, acting through the monetary policy committee (MPC), is required to formulate monetary policy in accordance with the economic objectives in the Act, which has historically allowed—which will ensure that the MPC can be seeking to avoid unnecessary financial instability and instability in output in the economy. As I’ve said, the member seems very interested in the remit and the charter, and I look forward to publishing them shortly.

Thank you, Madam Chair, and thank you for the opportunity to take the committee through some of my proposed amendments. I’ll begin with clause 8, which is the first clause within Part 2 that I seek to amend. My proposal is to amend new section 117(1). After the words “over the medium term”, I would propose to insert “and continue to take a flexible approach to monetary policy that improves welfare by ensuring that monetary policy does not exacerbate periods of economic decline”, and, given what the Minister has said on this topic, I think that will be well-received in this committee.

Let me then turn to the regulatory impact statement that was prepared by Treasury, because Treasury have also advised on the usefulness of the flexible monetary approach that is concerned not only with stabilising the change in prices at any given time but also stabilising people’s experience of the real economy. So Treasury’s advice around this issue was that there would be an alternative to the approach that the Government is taking here to elevate that through primary legislation to just propose in the monetary policy committee (MPC) remit that there should be a more hierarchical focus on inflation, but they also recommended in the third paragraph of the regulatory impact statement that “The view of Treasury is that issuing a new MPC Remit without amending the Act would be sufficient to ensure monetary policy decision makers focus primarily on achieving and maintaining price stability”. So what this advice is doing is recognising that the monetary policy committee has a role in creating a more stable economy, and so therefore it would be useful for us to say this clearly.

My second amendment there to clause 9 is that in clause 9, I’m proposing that in the new amendment to section 118—it will be a really simple amendment. It’s replacing the words “economic objectives” with “objective economic measure”, and what I’m hoping to achieve with that amendment is to make sure that the monetary policy committee itself can determine what an objective economic measure of success is, given what their role in setting monetary policy in New Zealand would be. It belongs in clause 9 there because that is a clause that’s subsequent to clause 4. It would take into account the Government’s objectives with this bill to elevate the role of the Reserve Bank of New Zealand (RBNZ) to focus on inflation, but by doing this in clause 9, it would mean that the monetary policy committee had some room to interpret what a flexible approach in monetary policy in any given circumstance would be. That’s important, because if I take the committee back to my contribution in the first part of this debate, where we’ve been for a period—which was really unusual in New Zealand’s economy—in the last three to six years with fluctuations at whiplash speed between the need for a focus on employment to then a focus on taking the heat out of the economy, that would provide the monetary policy committee with the tools it needed to determine what at any given time was the appropriate approach.

My proposal to amend clause 10 would see in the new amendment to section 123 the replacing of the words “economic objective” with the words “an economic objective suitable for the prevailing economic conditions of the time”. What’s different about this amendment to my proposal to amend clause 9 is that this isn’t a section which directs the monetary policy committee to use its powers in a way which it sees fit, so in adding this, the House would be saying in primary legislation that the prevailing economic conditions of the time are something that’s useful for the monetary policy committee to consider.

Just building on the contribution of the Hon Grant Robertson, when he pointed to the example of the RBNZ chair Graeme Wheeler making those decisions to tighten monetary policy in such a way that it would have arguably exacerbated unemployment when it was already high, this would focus the monetary policy committee’s attention to when unemployment is high. When there are tens of thousands of New Zealanders who will be affected by even a one basis point change in the official cash rate—because they will bear the costs of inflation because there will be higher unemployment in the economy—then they should take that into account specifically, and it would be elevated to primary legislation.

My amendment to clause 11 is a little bit different from that. It would replace new section 125(2) with the words: “The economic objective or objectives may be: (a) the objectives specified by the Government, taking into account the Government’s role in setting monetary policy;”, and then a new paragraph (b), which is different from the previous Government’s approach, but it would be in line with the new Government’s approach, which would subordinate the Government’s priority for supporting maximum sustainable employment to that new paragraph (a).

So what this would do, essentially, is recognise that this Government’s priority, though this side of the House disagrees with it, is a single-minded focus on inflation, regardless of the effect on the employment of those New Zealanders who will bear it otherwise—accepting that that is this Government’s approach, which is wrong-headed, then there would be a subordinate concern for the monetary policy committee to take into account of supporting maximum sustainable employment in addition to or instead of that objective. So where there were prevailing economic conditions that require the RBNZ to take an approach to unemployment which did not see more New Zealanders out of work or those New Zealanders who lost their work not able to find it again, they would take that into account.

Clause 12 is also a bit different from that, and I’d like to hear the Minister’s willingness to take this on, because it is a more simple change. It’s not as substantive. It would be a new amendment to section 136(1) to replace the words “economic objectives” with “economic objective which stabilises the real economy, for example, in helping reduce fluctuations in unemployment”, so this one points back to the actual Act as amended. This would be in a subsequent amendment to it. It’s still subordinate to that clause 4, but it would bring in this need for the RBNZ monetary policy committee to have in their minds the fluctuations of unemployment at any given time within the economy.

It’s useful when paired alongside the amendment of the Hon Dr Megan Woods—sorry, I’m not considering an amendment to that amendment; I would consider another amendment that would be a substantive amendment, which would be in order. It is that if we had further representation on the monetary policy committee of someone with expertise in the experience of working people within the economy, then this amendment to clause 12 would guide that person within the monetary policy committee’s ability to make decisions which stabilised the fluctuations of unemployment in the economy.

To give you an example of what that would mean, in Manurewa, after the global financial crisis, people who looked like me—Māori women who are between the ages of 20 and 30—experienced unemployment that was up to 15 and 16 percent. The unemployment of men who are Pākehā in any given city, but particularly in somewhere like South Auckland, was only up around 3.5 percent. When we talk about unemployment increasing, it’s not felt evenly. That is an effect that is borne primarily by those people who are already on the margins of employment.

When you have a Government working in tandem with an RBNZ to bring unemployment to a low rate, you see people who have never had the opportunity to work because they would have otherwise been locked out of the employment market. Perhaps they didn’t have the requisite skills, as our economics textbooks would teach us, but perhaps for some other reason they were locked out of employment. Then those people are able to seek work, and I think in this House, but especially between the two parties who are best represented in this House now, we agree that working is important to people’s lives.

If you are able to seek employment, if you are able to contribute to a job where you find respect from not only your colleagues but your peers and your family, you live a better life, and so by making this amendment to clause 12, we would give the RBNZ the tools that it needs to be able to constantly prioritise making sure that there was not a trade-off between young Māori women’s employment prospects—because that was the trade-off after the global financial crisis; those were the people who bore the cost of high inflation, and the policy of the governor of the time to tighten monetary policy at a time that unemployment was high—and doing two things at once, by making sure that those women in South Auckland who look and sound like me can continue to be able to work in the jobs that they have now, that if they lose their job, they will be able to get a new one, and that their wages will continue to go up.

That’s the other thing that we haven’t really dwelt on in this debate. It’s that when the RBNZ pursues a single-minded policy of reducing inflation at the cost of working people, wages are also driven down. We end up with an economy in New Zealand where we’re in a constant race to the bottom, where people’s wages do not progress and, therefore, their purchasing power goes down. So even though inflation might be under control, the purchasing power of working people continues to decline under that sort of policy.

Clause 13 is also an important one, and I hope I can have more time to discuss that. It’s a change to section 138(1), which would replace—

The member’s time has expired.

Thank you, Madam Chair. I’ll pick up, actually, where I think the member from Manurewa was continuing, and it was really around the disproportionate impact of the economic tightening and austerity on our lower socio-economic areas and in particular on Māori, Pacific, women, and those as well who are disabled and generally are younger, because I’m pretty sure that the stats in parts of Porirua were very much the same as the stats in Manurewa.

That is why I think we need to again just remind the committee of the history in relation to why we moved from one mandate to a dual mandate. A number of members in the House have brought up the history around the Governor, Graeme Wheeler, in 2014 when again he started to hike the official cash rate (OCR), even though inflation was only running at 1.5 percent; it basically increased the unemployment rate. And again, even though inflation’s at 1.5 percent and the unemployment rate was at 5.6, you saw the disproportionate impacts again on lower socio-economic areas on those particular groups like Māori, Pacific, and disabled people, who were heavily impacted. That’s why I wanted to be able to take a call and then also to ask the Minister some procedural questions in relation to this, but also a call to support a couple of the amendments that have been proposed by members on this side of the Chamber.

If I turn to the amendment by Arena Williams in relation to new section 117(1), inserted by clause 8, after the words—she is suggesting that the House look at “continue to take a flexible approach to monetary policy that improves welfare by ensuring that monetary policy does not exacerbate periods of economic decline.” And also, specifically to clause 12, an amendment that the member is proposing to replace “economic objective” with “economic objective which stabilises the real economy, for example, in helping to reduce fluctuations in unemployment.” Again, I take the committee back to 2014 when that Reserve Bank Governor, under the one mandate, decided to still increase the OCR despite the high record numbers of unemployment.

I want to also rise to speak in support of another amendment that has been brought forward by the member the Hon Dr Megan Woods. I’m just trying to find that amendment, but nevertheless I always support what the honourable member Megan Woods proposes in amendments.

But probably a tip that I want to—and, again, I recognise our Treasury officials who wrote a regulatory impact statement even though they didn’t need to write one. To the new members of Opposition who are here in the Chamber, probably the reason why—you know, you could speculate as to why the Prime Minister and members of Cabinet didn’t want to have a regulatory impact statement. But if you actually have a look at the analysis in the regulatory impact statement, the advice from Treasury was despite what the Government wants to do through legislation, which they clearly made through their coalition agreement, they still recommended that the Government just change the remit, not the legislation, which is why we have got back here into the House, where we’re having to suggest a number of amendments to the second part of this bill because our concern on this side of the House is we’re going to fall back into that 2014 period, where, again, the disproportional impacts of increasing the OCR will impact on those more vulnerable members of our community in Porirua and in Manurewa.

So to the members, I looked again at the regulatory impact statement—this objective advice that’s been provided by Treasury. And again, just saying—I think it’s paragraph 16; it says “the Treasury’s recommendation is to issue a new monetary policy committee remit only. In making this recommendation the Treasury has weighed more heavily the need to achieve the Government’s policy intention to restore focus on price stability”, which the Minister confirmed in a previous contribution, “and the importance of an enduring and consistent legislative regime.” I think that second part of that first sentence in paragraph 16 of the regulatory impact statement is incredibly important, because what you don’t want to do is to have Governments come in and have such huge swings and changes in such important policy. Because what that indicates to the market—and we’ve already seen, actually, a number of examples worldwide of what their views are on this Government. What that indicates to our international partners is that we’re going to be swinging heavily—so what that indicates is that Treasury is saying to the Government: keep the legislation as it is, but you have these tools in the monetary policy remit to change it.

However, this Government has chosen to change the legislation, the primary legislation, and you can acknowledge that, yes, it was part of the part of their coalition agreement. However, the uncertainty that they could provide to the markets is something that I don’t think this committee has paid enough attention to. But that’s why we have regulatory impact assessments. It’s to be able to make sure that we can debate it in the committee. Because unfortunately we don’t have a select committee process as part of this, which is why you’ll see a number of members on this side of the Chamber trying to understand the policy intent. And the policy intent that I heard from the Minister was around—was it “laser sharp focus” on inflation, price stability? But again, your own officials are saying, “Don’t do it through the primary legislation; use the remit.”

So as you keep going through the regulatory impact statement, they also say that “The Treasury puts significant weight on the value of a stable and enduring legislative regime for the Reserve Bank, which supports public and market confidence in the independence of the institution”—the independence of the institution. And, unfortunately, what we have here is a bill which, because it removes that dual mandate, we on this side of the Chamber are having to put amendment after amendment after amendment after amendment and amendments to amendments just in case one amendment fails or if one amendment passes. That’s what happens when you don’t have the ability to take it through a select committee to be able to have those submissions from the public, from, actually, a number of experts.

I was on the Finance and Expenditure Committee with the Minister—actually, I haven’t actually said congratulations to the Minister for your new role. We had time and time again the Reserve Bank Governor come to us, and the Minister was very forthright in her questioning of the Governor at the time, particularly around these mandates. For me to be able to not have that ability to do that scrutiny through a bill and instead to be passing it through urgency means I’m on my feet having to ask questions and having to support amendments in relation to this.

So my question really for the Minister—and I want to absolutely acknowledge that these amendments have just been tabled, but, again, we’re in a position where we don’t have the ability to be able to scrutinise it further. My question is: given that the Treasury advice was around changing the remit rather than the legislation, and now we’re in a position where members now are having to do amendments to the bill through the different clauses, what are the other ways in which the Minister, other than the remit, because I know the Minister has said that the remit will come after this legislation—but, actually, I want the Minister to provide some assurances now to the New Zealand public around how will the Minister continue to take that flexible approach if we go back to 2014, where Governor Graeme Wheeler had one mandate, there wasn’t the flexibility. How do we have that flexibility? How is that flexibility in relation to this monetary policy?

Because, again, that’s why I stand in support of Part 2, clause 8 amendments put toward by the member from Manurewa.

Arena Williams: They’re good ones.

Hon BARBARA EDMONDS: Very good ones. And, again, as well, her amendments to clause 12. Because if you don’t have the flexibility, because you’re going back to the one mandate—and, yes, the remits do follow. There are mechanisms within the Reserve Bank Act to ensure that there are reviews. I understand there was meant to be one for five years as well, for the remit review, but I think there was one just done in 2023 that started in 2021. What is the flexibility, if you look back to 2014 when you had a Reserve Bank Governor who only had one mandate? What assurances can this Minister provide that there will be some flexibility and that, if not now but in the future, we won’t get to the position where a Reserve Bank Governor will keep increasing interest rates increase, keep increasing the OCR, even though it’s just outside the 1 to 3 percent? It was 3.5 under the Reserve Bank Governor Graeme Wheeler, but yet unemployment was rising and rising above 5 percent. Those are the types of assurance, in the absence of a select committee, that I would like to seek from the Minister.

Can I, first, reassure the member that there will continue to be opportunities for her to question the Reserve Bank Governor through the Finance and Expenditure Committee process, which is an incredibly important part of our monetary policy framework and the accountability of the Reserve Bank under the Act.

Look, members have tabled a number of amendments and are having an ongoing, rather circular discussion about all of the things that the Reserve Bank will consider. Let me say, again: the purpose of this Act is to give crystal clarity of the objective of the monetary policy committee (MPC), which is to ensure price stability. None of that precludes the matters that are set out in section 123 and section 125 whereby the remit may specify the matters the monetary policy committee has regard to in pursuing that one clear objective. So there are other matters that they can have regard to, but they must pursue the one clear objective. I will be publishing the remit upon passage of this Act.

I’d also note that section 119 is very specific that the MPC must have regard to the importance of stability in the financial system.

Thank you, Madam Chair. I want to take up the debate about the concern that we haven’t really fleshed out the ideas behind the decisions that have been made, and that there is a rejection—as I understand it—of the amendments which try to do that and try to lock in some of the value systems.

I recall the Minister talking about “orthodoxy”, and I wanted to ask some questions around that; what she meant by “orthodoxy”. Because orthodoxy can mean many things. My understanding is that economic policy is a social science in some ways: it’s a strong belief system that sits behind economic views and so there is more than one economic pathway that is rightly called part of the science of an economist. One of those would reject the idea that employment is important at all, and it would go with austerity, for example. And I can see the tail of Graeme Wheeler fitting into that, where the tool was used crudely and caused a lot of harm.

And I also am reading at the moment Mariana Mazzucato’s works, and I’ve just read The Value of Everything. And it’s incredibly powerful because it’s important to consider new ways of thinking in economics. If this was being discussed in select committee, those economists and those economic views would probably have come forward and they would have been part of this debate—and we would have talked about the pros and cons of each. But I’m concerned that that debate hasn’t been had, and in fact, words like “orthodoxy” tend to cover words like “austerity”, which actually do terrible harm in our society and, in fact, increase the gap between rich and poor and devastate groups of our society which are already alienated; already under pressure.

So I want to know, really, what the Minister thinks—and I’d like to say, I’ve been remiss in not congratulating the Minister publicly on her position either, and I congratulate you for it. But it’s a great responsibility, the role of Minister of Finance, and it’s really important that we know what the Minister thinks when she says something like “We are just adopting orthodoxy.” What does she mean by that—and is that inconsistent with new economic thinking which is, after all, based on the lessons that we have learnt in economics since the 1980s? These are thoughts that are not right-wing or left-wing in particular—they’re based on the experience that we’ve had and the greater economic divide, which is of concern to us all, I think. It’s based on the commitment to representing those hard-working people we’ve all said we care about so much; so there’s a very, very important link between work and economic wellbeing. I believe very strongly in that link, and I would love for the Minister to talk about what she means when she talks about orthodoxy—but also why she seems to be rejecting these very important amendments which seek to commit to something which I think is a value we should universally hold: the balance of making sure that when we make these big monetary moves in the Reserve Bank, we’re not forgetting the harm that they can cause.

I also was interested in a comment that the Minister made about what the role of monetary policy was versus the role of fiscal policy. I reject what she’s suggesting there: that monetary policy somehow is divorced from affecting the plight of working people. In fact, the whole point of it is that it is for making sure that there is a wellbeing of working people—and employment is a large part of that, so it must clearly be an important factor, and so I want to know where it fits. Fiscal policy certainly has been very effective as a contributor, but monetary policy cannot be rejected as a major contributor. So I would ask the Minister to answer that question.

Thank you very much, Mr Chair. I want to speak to two amendments in the names of my colleagues that are on the Table to Part 2. The first of those is Deborah Russell’s amendment for a new clause 10. This is amending section 119 of the principal Act, and it specifically focuses on what the monetary policy committee must have regard to in formulating monetary policy. It adds, after section 119(1)(a) of the current Act, a new section 119(1)(b) to say “the importance of protecting and promoting strong and stable employment in the New Zealand economy”. Now, the phrase “strong and stable” is one that colleagues opposite might quite like. You know, it’s something that they’re aspiring towards in other matters. But here it is about strong and stable employment in the New Zealand economy.

Really, this is simply an example of the Opposition attempting to fulfil the very thing that the Minister has said she supports. That is the idea that there should be flexibility in what the Reserve Bank does when it’s considering the setting of monetary policy. But we are adding to that some specificity about the kinds of things they can consider.

This really comes to the crux of the entire debate that we have been having—or the argument that we’ve been given by the Government, anyway—which is that they were told by the Reserve Bank Governor in a letter and the chair of the Reserve Bank board that the Reserve Bank favoured prioritisation of inflation targeting over the maximum sustainable employment goal. Fine. Not what this side of the Chamber happens to believe, but it is what the Reserve Bank Governor and the board chair wrote to the Minister, and indeed the Minister appeared to tell us she supported that.

This amendment in Deborah Russell’s name actually allows what the Minister seems to be saying to now be put into the law, and that is that we now have that consideration of strong and stable employment when the Reserve Bank is formulating its monetary policy and pursuing its economic objectives.

We’ve had, a number of times, the Minister tell us that clarity is what matters. We need certainty and clarity. Well, that’s what this amendment does. It provides clarity to the bank and indeed financial markets and indeed the wider public that this is what should be considered when monetary policy decisions are being formulated. So I think it is an amendment well worth the committee’s consideration to support. It actually backstops during the debate what we have heard from the Minister that she believes should be happening.

The second amendment that I want to draw the committee’s attention to is the amendment to clause 10 in the name of the Hon Megan Woods, which is to amend clause 10 to, after section 123(2)(b), insert a new (c) that says “an additional economic objective”. Again, this is about backing up what we’ve heard from the Minister she believes should happen, which is that there should be flexibility in the way that the Government responds to unexpected circumstances.

This is really quite critical, because having now reduced the Reserve Bank’s objectives down to one objective, I think there is a serious issue now with the Act, which is that the objectives no longer fulfil the purposes of the Act. So the purposes were changed in 2019, and we wanted to make sure that the wellbeing and the overall economic position of New Zealanders was the purpose of the Reserve Bank of New Zealand Act. We’re now down to just one objective to fulfil quite a complex purpose there. So this amendment by the Hon Megan Woods to clause 10 actually specifically says you can have an additional economic objective. That at least in some ways continues to safeguard the connection between the objectives of the Act and the purpose of the Act.

So these are two serious amendments proposed by my colleagues that I believe should be considered strongly by the Minister. Again, I repeat: if not, what else? We haven’t had an answer to that question, so therefore it still lies on the Table as a live consideration. But I believe the two amendments that have been put forward by my colleagues will at least mean that the flexibility is there alongside some clarity about what New Zealanders should expect the Reserve Bank to be considering when it sets monetary policy.

As I have now repeatedly said, what this bill does is it makes clear the key operational objective we wish the Reserve Bank monetary policy committee to pursue. We believe that clarity has a number of benefits, which I have canvassed extensively. We believe that that is consistent with the purpose of the Act, in that, without price stability, all of the other good things that the Opposition seeks cannot be achieved. Price stability is the foundation on which employment and good economic conditions sits.

Finally, all of the discussion about all of the things that could be added to the Act to require the Minister to do, actually there is nothing to preclude these matters from being in the remit as things that the monetary policy committee should have regard to in pursuing the clarity of objective that the Act provides.

I move, That debate on this question now close.

Thank you, Mr Chair. It is a pleasure to take another call on this bill. There’s still an outstanding question. I thank the Minister in the chair, Nicola Willis, for answering some questions and giving some clarity. But one of the things that I still am not clear on, from the answers that the Minister has given—and I’d welcome her, given that we’re not having a select committee process for this bill, to provide this committee of the whole House with some clarity on the need to have changed reporting requirements on the Act.

Part 1 of the bill is narrowing it down to that single purpose, so what advice did she receive around how it is that we need to change the reporting requirements to ensure that we’re not having adverse outcomes on employment, given that the dual mandate is being received? I welcome the Minister informing the committee of what advice she received and, if she’s not going to support that amendment, then what provisions and mechanisms is she going to put in place to ensure that we do have active monitoring? It’s not enough to say that the principal Act has a review requirement and leave it at that, because the Minister is changing the Act. So what is she going to do to change the reporting requirements and what are we going to see there?

The other thing that I’d just like to ask the Minister some questions around is my further amendment, the amendment to clause 10, which my colleague the Hon Grant Robertson just spoke about, after section 123(2)(b), to insert new paragraph (c), providing for an additional economic objective. The Hon Grant Robertson highlighted that, actually, in making these changes to the legislation, we might be doing something quite serious in terms of reducing the scope of the banks down to such a narrow purpose—so what do we do in those exceptional circumstances? I think previous colleagues have talked about the foot and mouth provisions—what mechanisms do we have where there are extraordinary circumstances where the scope and mandate of the bank needs to be changed within the legislation? I’m anticipating that the Minister may say that she’ll put it in the remit, but what about the legislation? What are the legislative provisions in this Act that could be put in place to ensure that we do have those protections and that we do have that other word the Minister likes—that sufficient flexibility—to ensure that we do have those provisions there?

Given that we’re not going through a select committee process and we don’t get to hear from officials, what is the advice that she received on this? What are the options that were put forward? I’d like to understand some of her reasoning for what options she either accepted or discounted and what the pros and cons of those various options were. When we’re putting a bill through this mechanism under urgency, it is the role of the House to understand the reasoning behind a Minister’s decision-making and to have some transparency about some of the options and advice that were offered to that Minister, and if the committee can go through and debate it.

So I would very much like to know whether or not she will support my amendments to add that amendment to clause 10, to add an additional economic objective; if not, why not, and what is the advice that sits behind her decision and the options that sit behind her decisions?

It would not be appropriate to add a new economic objective in the remit. This is not secondary legislation. Legislation is the proper place to set out the objectives, which this bill does. There was one objective: price stability.

Katie Nimon.

Catherine Wedd: Catherine Wedd.

CHAIRPERSON (Greg O’Connor): Sorry, have I got the wrong one?

Catherine Wedd: Yes! Ha, ha!

CHAIRPERSON (Greg O’Connor): Could you just identify—I will struggle, like the Speaker himself, at this stage. Catherine Wedd.

I move, That debate on this question now close.

Point of order, Mr Chair. Thank you, Mr Chair. We’ve come to some trouble, Mr Chair. I’ll take you to Standing Order 137(1), which is the closure motion clause. I’ll just read it for your benefit—

I think you’ve been very quick off the mark, Ms Williams. Just please allow the Chair to ensure—at this stage, look, the debate has been going for an hour and a half on this part. I will remind those seeking closure motions that the wording must be correct, so I’ll invite them to ensure that the correct wording is used. So, to that extent, was that a call? Arena Williams.

Oh, thank you, Mr Chair, for the call. I do appreciate the opportunity to speak to the trouble that the committee finds itself in now. We’ve usefully had from the Minister of Finance a contribution around the amendments that this side of the Chamber has put up to Part 2, which seek to clarify the role of the monetary policy committee in its view towards the effect of unemployment. However, the Minister has indicated that she will not be accepting those amendments, and I think that’s a problem, because we still have a purpose clause which was introduced in the 2019 amendment to the principal Act.

So if you’ll allow me to take the committee through why that’s a problem that we now find ourselves in, should the Minister not accept the clarifying amendments that have been put up by myself and my colleagues, the problem with that is that the purpose of the 2019 amendment, which still remains in the primary Act, and the purpose of the original 1989 Act are at odds. So, now, if the amendments that are being proposed by the Minister in this bill that we’re debating today go ahead, we’re still left with the purpose clause, which is in the 2019 amendment.

If you’ll allow me to take my colleagues through the context of this, which is in the explanatory note of the amendment that was put forward in 2019—if you’ll bear with me, that explanatory note clarifies that the Reserve Bank of New Zealand (Monetary Policy) Amendment Bill had two main objectives, and those were amending the objectives of the monetary policy committee to require consideration of maximum sustainable employment alongside price stability in monetary policy decision-making and institute a monetary policy committee to make decisions on monetary policy. We’ve got these two objectives of the 2019 bill. One is still something which the Minister herself seems to be supportive of; one is not. However, that went alongside a new purpose clause in the Act that is not being amended, and that’s why we have a problem.

I would ask the Minister: is she proposing to amend the purpose clause today? I would love to hear her amendment. Perhaps her amendment will say, “I’m the inflation-fighting Minister; let unemployment rip.”, or perhaps it will say, “Unemployment is not a concern of the Reserve Bank.” Now, we need to have that explained, because there is some confusion here, and though the Minister has said that this is a circular discussion, the committee now finds itself in a bit of confusion because of the Minister’s answers on this topic. At one stage, the committee is asking the monetary policy committee to have in its mind the impact of its decision making on working people, on unemployment, and on the stability of the real economy and on fluctuations within it, and people’s experience of the economy, but at the same time, it’s talking out the other side of its mouth and saying that there will only be one focus.

We’ve heard from the Minister that this is clarifying that, so what we really need here is a proposal from the Minister to change the purpose clause. If she wants clarity in this bill, she must amend it now. There is only one opportunity to get this legislation right, because we are not going to select committee on this bill, and so I want to hear the Minister’s proposal to amend the purpose clause. I would like her officials to consider what their amendment will be, because it does not make sense, and this House will be passing legislation which says one thing and does another. This Minister is prioritising inflation over the concerns of working people. She needs to be clear with New Zealanders that she does not care if they can get a job, she does not care that if they lose their job they will not be able to get another one.

When the Reserve Bank of New Zealand (RBNZ) is single-mindedly focused on inflation, like Graeme Wheeler was in the tale of the global financial crisis, which this Government presided over, we saw people in New Zealand losing their job and not be able to get another job. These were working people who had had experience in jobs. They had the skills that they needed to get employment in our rural sectors, in our towns, in our manufacturing sectors. The only reason why they could not get a job is because unemployment was at a level which was unsustainable in our economy. But the RBNZ at that time was not focused on unemployment. They did not see it as their role to make sure that people’s experience of the economy was stabilised in some way.

We need to have it clarified in this bill how the RBNZ is going to focus on those things, and if we don’t, if our clauses that we have put up as Amendment Papers on this side of the Chamber are not accepted, then the Minister will have to explain that to New Zealanders.

Tim Costa.

Hon Members: Costley.

CHAIRPERSON (Greg O’Connor): Costley—that’s not bad; I got the Christian name right.

I move, That debate on this question now close.

The question is that Arena Williams’ tabled amendments to Part 2 be agreed to.

The question is that the Hon Damien O’Connor’s tabled amendment to Part 2 be agreed to.

The Hon Dr Megan Woods’ tabled amendment to Part 2 amending clause 6 is out of order as being out of scope of the bill.

The Hon Dr Megan Woods’ tabled amendment to Part 2 amending clause 10 is out of order as being contrary to the objects and principles of the bill.

The Hon Dr Deborah Russell’s tabled amendment to Part 2 inserting new clause 10 is out of order as being contrary to the objects and principles of the bill.

The Hon Dr Deborah Russell’s tabled amendment to Part 2 inserting new clause 12 is out of order as being outside the scope of the bill.

The question is that Part 2 stand part.