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 third time.

This bill makes clear that for New Zealand’s new Government inflation is public enemy number one. New Zealanders have elected a Government who has what it takes to address the cost of living crisis that was allowed to fester by the outgoing Government. We understand that for so long as inflation remains out of control then New Zealanders will continue to suffer. They will continue to suffer from price increases that erode the value of their savings. They will continue to suffer from price increases that eat away at the money in their bank accounts. They will continue to suffer with price and rent increases that make it impossible for too many to get ahead.

So what this bill does is it realises our commitment that in our first 100 days we would return the Reserve Bank to a single focus on inflation. This bill gives the Reserve Bank and its monetary policy committee absolute clarity about its role in our economy; it needs to focus on the principal objective of price stability because that is the best contribution that monetary policy can make to our economic and social wellbeing. Because without price stability, all of the other things that members of this House wish for, whether it be sustainable employment, well-paying jobs, good opportunities, none of that can be delivered without the foundation that price stability provides.

And be there no doubt about the scourge that is inflation, because the past three years have laid bare what happens when inflation gets its grip on an economy. We have had a cost of living crisis that has seen people across our community suffering. Loose monetary policy contributed to an asset price spike on a scale not seen for many, many years that had the direct impact of widening the gap between the haves and the have-nots. Inflation has been particularly hard on low-income earners as wages have struggled to keep up with increased price pressures. And in the debate about this bill, we have had some rather fatuous arguments from the other side who have tried to question whether we on this side believe jobs matter. Well, let me be clear: jobs matter very, very much and, actually, on this side of the House we understand what’s required to create them and sustain them. We have studied enough economics to know that monetary policy is not the primary determinant of the level of employment because, actually, structural factors—the tax system, the regulation of the labour market, the level of skills in the economy, all of those things must be considered.

We are a Government that will take responsibility for our role in creating the conditions for employment by ensuring that businesses have the confidence to invest, they have the confidence to create jobs, that they’ll give people a go and create opportunities. And I would note that, actually, the former finance Minister was advised himself in May 2018—when he took advice on whether he should fiddle with the Reserve Bank Act he was advised of that very thing, that, actually, the monetary policy was not the primary determinant of the level of employment, and, in fact, that price stability, low, stable inflation, is the precondition on which employment sits.

There have been questions in this House about why we would amend the Reserve Bank of New Zealand Act. Confused questions, because some members have sort of been saying this is a terrible, awful bill—and we had the former member for Wellington Central waxing lyrical about the 1980s and 1990s; we got to occupy that part of his mind that lives in the past—but then we also had them saying that the bill would have no effect whatsoever. Well, the fact is this: without amending the Act, the monetary policy committee would still be required to have regard to maximum sustainable employment. So in order to achieve our objective and the promise that we have made to New Zealanders—which is to ensure that single focus for the monetary policy committee—we must amend the Act and that is what we are doing today. The value here is that we ensure greater focus than we could through doing things with the remit alone. And I have to say, was it a low point in Mr Robertson’s career when he used a filibuster in the House today to question whether the Governor-General should really be able to offer assent to bills at all? It felt like a bit of a low point to me.

The benefits of this bill are not only that it gives clarity in how the monetary policy committee operates but also that it will give clarity for those rare circumstances, which economists agree could occur, where the two goals of maximum employment and price stability could be in conflict. With this Act, we will make clear that price stability should be the objective. It will also have an impact on perceptions of the role of the Reserve Bank, of its decision-making processes, and of its objectives. The Reserve Bank itself has noted—itself has noted, including in a letter I have tabled in this House—the need for that priority of inflation busting to be made clear to everyone, to be made clear to decision makers, to be made clear to market participants, to be made clear to New Zealanders. With this bill, we will ensure that price setters—that is, the people who are setting the prices for the goods in the shops that New Zealanders are buying—will be thinking about what inflation is going to look like in the future. And when they’re thinking about those questions over the coming months, they should think about this: we have a Government now that is crystal clear it wants inflation out of this economy. It wants price stability back. It wants inflation gone. They can be crystal clear when they’re thinking about where inflation is going that we have equipped the Reserve Bank with the singular focus it needs to drive that goal.

So where we are today with the passage of this legislation is we are marking a return to economic fundamentals. We are marking a return to proven economic orthodoxies that have delivered for New Zealand in the past. We are marking a return to clarity and purpose in the action of Government where confusion has reigned for six years. We have gone through, as a country, a period of economic experimentation; six years of failed experimentation that led to worse results for New Zealanders. We have had a Government that threw a thousand priorities at the wall, that made multiple aspirational statements on everything from a nuclear-free moment through to a hundred thousand KiwiBuild houses through to eliminating child poverty.

Carl Bates: Fantasy!

Hon NICOLA WILLIS: We’ve had a Government full of fantasies, a Government that added objectives and priorities willy-nilly across our statute book, that considered the signal of virtue more important than the realisation of deed. In this Government, we now have a crew who are committed to clarity of purpose objective, and with this bill we make clear that fighting inflation sits number one on that list because without inflation under control Labour’s cost of living crisis will go on.

And here’s the thing: this is a basic step, but if you don’t get the basics right, the words—all of those words—amount to nothing. And so today, in passing this bill, the Government makes clear our priorities, our expectations, and our grounding in economic fundamentals. Because for too long, New Zealanders’ living standards have been sacrificed on the altar of good intentions. And that’s all that the six-year experimentation with the changed Reserve Bank of New Zealand Act was; it was a mishmash of good intention, and good intentions without the foundations of basic economics amount to nowt. So with this bill we make clear that we wish to eliminate inflation. We are using all levers—

Hon Grant Robertson: Eliminate!

Hon NICOLA WILLIS: Eliminate high inflation, get it back within the target between 1 to 3, the midpoint of 2. Because at the end of the day you can’t deliver for people with words, you do it with action.

The question is that the motion be agreed to.

What a sad indictment on this Government that the very first piece of legislation they bring to the House is not to look forward, to take the country forward; it is to take away a focus on jobs by one of the most important actors in the New Zealand economy. It stands in stark contrast to what happened in the first hundred days of the Government in 2017, where we passed legislation to increase access to paid parental leave, where we passed legislation to create the winter energy payment and the Best Start payment, where we moved to make sure that there was legislation so that New Zealanders who lived in rentals lived in healthy rentals. That’s what you do when you’ve got a bold, progressive plan of action.

But what you do when you’ve got no ideas whatsoever is that you fall back to some kind of Milton Friedman - style dream that actually we’re living back in the 1980s. Well, we’re not—we’re not. We’re living in the 21st century, where we need monetary policy and a Reserve Bank that has the tools and the apparatus to be able to do a job that is equivalent to the times.

We were told numerous times by the Prime Minister and others that this would be a Government who would present to the House and to the New Zealand public evidence-based policy. Yet at every turn over the course of the last many hours that we have been in this House debating this legislation, no evidence has been presented that this piece of legislation is necessary. Because at every turn when the Minister of Finance was asked to provide that evidence to show that the Reserve Bank had somehow or other taken their eye off the ball of inflation because they had a dual mandate, she declined that. She talked about how it could happen or it might be possible, but it didn’t. The Reserve Bank Governor himself told us that—that that is not what occurred, and, in fact, the focus on inflation was resolute in a global inflation crisis.

So that is also where this piece of legislation falls down, because, on the logic of the Government, inflation should have been higher in countries with a dual-mandate central bank and lower in countries with a single-mandate central bank during the recent global inflation crisis, but that wasn’t true. In New Zealand and Australia, both of which have central banks with dual mandates, inflation peaked at—we have a prop—7.2 percent and 7.8 percent respectively. But in the United Kingdom, a central bank with a single price stability mandate, inflation peaked at 11.1 percent. Or in the Eurozone, where you have a central bank with a primary price stability mandate, it peaked at 10.6 percent. So no evidence there that there actually was a relationship. Actually, it was a global inflation crisis.

Equally, no relationship between the speed at which central banks responded depending on their mandate. The New Zealand central bank, the Reserve Bank, was one of the fastest and quickest to respond in the face of this crisis. Also, no evidence provided that the Reserve Bank didn’t understand that there were trade-offs to be made if in the future those two ideals conflicted with each other.

It is worth noting at this point the complete misunderstanding of the Government of what maximum sustainable employment actually is. It’s written, for the benefit of members opposite, in the Reserve Bank’s monetary policy framework. As defined by the Reserve Bank, maximum sustainable employment is “the highest utilisation of labour resources that can be maintained … without generating an acceleration in inflation”. So it’s already built in to the definition of maximum sustainable employment that it shouldn’t undermine the work that the Reserve Bank is doing to control inflation. So no evidence presented to this House that actually there’s any contradiction whatsoever. The only conclusion you can draw from that is that the Government doesn’t care about people being in jobs, and it doesn’t care about their wages rising, and it would rather prioritise a narrow ideology from the 1980s than actually support working people.

It also ignores the virtue of having a dual mandate. It was covered a number of times during the debate that there has been an example in New Zealand’s recent history where having a single mandate arguably caused the Reserve Bank Governor to take actions that, in fact, would increase unemployment. So even though we had inflation running at about 1.5 percent, the then Reserve Bank Governor in 2014, Graeme Wheeler, decided that this was a good time to start a monetary policy tightening cycle. Unemployment was at 5.6 percent. And that’s the risk—that we put ourselves back in that position where a Reserve Bank Governor myopically focused on one objective misses the rest of it.

It’s always been about making sure that prices are stable, but what we did was modernise the legislation so it actually spoke to the higher and wider purpose of monetary policy. I note that the Government didn’t change the purpose section, which we put in in 2021, which continues to say that the Reserve Bank of New Zealand Act should have as its purpose the wellbeing and the sustainability of the New Zealand economy. So we’ve set that higher purpose. They haven’t changed it, but they’ve come along and changed the objectives, the things that you do in order to achieve the purpose, and narrowed them down. So you’ve now got an inconsistency there, but beyond that inconsistency, you’ve lost the opportunity for the Reserve Bank to be given that role of making sure we’re talking about maximum sustainable employment, we’re talking about jobs and keeping people in jobs.

The thing that’s got New Zealand through the recent global cost of living pressures and the spikes in inflation and the increases in interest rates that followed from that is because people have been in work. That’s what’s got us through this. If we hadn’t have had the low levels of unemployment that we’ve had in New Zealand in the last few years, we would have seen waves of mortgagee sales. We would have seen a far deeper impact.

So keeping the eye on the ball, on inflation? Critical. And the Reserve Bank did it. Keeping the eye on the ball of keeping people in work and making sure they’ve got money to be able to put kai on the table—that matters too. Every single part of the economic apparatus of Government should be playing its role in that. And today the Government decides Kiwis’ jobs don’t matter. That’s what they’ve decided with the change that has been made today.

The other claim without evidence throughout this debate has been that this change will magically improve the cost of living situation for New Zealanders. We even had members opposite in the debate in the first and the second reading saying “pass by Christmas and the cost of living for New Zealanders will improve”. Absolutely no evidence presented on that. In fact, some very big claims from the Minister of Finance. Just latterly, one of those was that she was going to eliminate inflation entirely. Good luck with that. But secondly, in the House yesterday, the Minister claimed that inflation would go down quicker under her Government as a result of this legislation than had been previously projected. Well, we will be holding the Minister to account for that claim.

Inflation is indeed forecast to be coming down, as we would expect and as we would hope when the Reserve Bank is doing its job. But nothing in this legislation is going to make that happen quicker. The members opposite are selling New Zealanders an untruth here, because they are claiming in this House that they are passing legislation that will reduce the cost of living by Christmas, according to some of those members opposite, and that simply is not going to happen.

So this first piece of legislation in the journey backwards that has been taken at rapid rate by this Government sets a very unfortunate precedent. The next bit of legislation attacks the wages of the lowest-income people. The bit of legislation immediately after that attacks the climate action programme. And this piece of legislation says that this is a Government who have got their priorities wrong. They are deciding actively to undermine efforts to make sure that we focus on jobs—the things that New Zealanders value so much. It is a depressing start from a depressing Government who only want to take us backwards. This is a bill that the Labour Party strongly opposes.

E te Māngai, tēnā koe. Tēnā koutou e te Whare. It is now many hours on from this legislation being introduced under urgency late last night, and I got to say I still am kind of left quite puzzled in the absence of any meaningful evidence as to the purpose of this very legislation.

I think it’s just worthwhile putting on the record once again for the nth time the three reasons as to why the Green Party oppose this legislation. The first is that, as was put forward by the Reserve Bank Governor, Adrian Orr, in the Finance and Expenditure Committee most explicitly in the November 2022 hearing, which the now Minister of Finance was present at—in response to my question of whether that dual mandate had made any difference to decisions that they would have made, had they only had that sole mandate of the focus on price stability, he said, and I quote, “No is the answer. We haven’t come across any trade-offs of employment versus inflation. There is no conflict.”

I totally take on board the point from the Minister that there could potentially be a point of conflict. But therein lies our second point, that it is unnecessary for this change to come about in law. In fact, the major rationale that’s been relied upon in this debate from the Government side of things has been that letter that the Minister received, speaking to the need to explicitly prioritise that dual mandate, particularly, resulting in the primacy, the explicit primacy, of that price stability mandate. And to that effect, as was put in that June 2023 review from the monetary policy committee, there is a way to do that without changing the legislation. This was actually what the Minister’s own officials recommended with regard to the ability to simply change the remit. Again, that’s reflected in the regulatory impact statement out there for everybody to see.

Thirdly, I have heard throughout this debate that the Minister still wants the monetary policy committee (MPC) to have regard to employment. We’re yet to see how that will manifest through the MPC remit. I’m very interested to see that, but it is, I think, a little bit concerning that we’re basically being asked to wait and see here as to how that will manifest while this bill passes under urgency and we’re left without the evidence to have a meaningful and informed debate on what that remit is ultimately going to shape up to be.

So to reflect on some of the broader points that have been raised throughout this debate, because many have raised the notion of inflation in general and the notion of the economy, I just was reflecting on a meme, actually, that a friend of mine sent to me a few months ago throughout the election period, saying that whenever we’re hearing politicians speaking about the economy, you can replace that word, the “economy”, with “vibes”. And we’ve kind of heard that in some sense from the sentiments expressed by the Minister of Finance, that what is actually perhaps most important here is perception of market players, the vibes of market players, the confidence of market players.

And again, to that effect, what we’re really talking about here is that this economy that all of us so frequently talk about as a stagnant kind of set of rules that are somehow set in stone or concrete is, in fact, a set of rules created by human beings to govern all of us, our behaviour and activities, to get the kinds of outcomes that we all supposedly want in this society. Because we don’t live in a game of Monopoly, which, by the way, was invented in the early 1900s to actually teach children the pitfalls of an economy that is premised on land speculation and luck. Yet, hey presto, what do we have to this day?

I’d just like to quote here from Paul Hawken, who says, and I quote, “We have an economy where we steal the future, sell it in the present, and call it GDP.” GDP, of course, was invented by a guy called Simon Kuznets who took it to the US Congress in the 1930s and was, like, “Hey guys, here’s a really good way for us to measure economic transactions at a macro scale inside of our economy.” But, God forbid, do not use it as a measure of what he called welfare and we now call wellbeing. That’s because that baseline measure of just those transactions does not give us any meaningful insight into the value of those transactions, whether we actually want them in the first place, whether they actually benefit people and the planet, nor the distribution of those transactions; that is, who benefits from those transactions. Because the squiggly line of GDP can go up, but we also know full well that so too can homelessness, so too can the desecration of the environmental fundamentals that are necessary for life as we know it. So the kind of premise from the Green Party here is that we can do this economy thing a lot better.

We’ve heard a lot about how this bill is apparently going to be the magic bullet to deal with inflation. In fact, we’ve heard some really fascinating things, including in the closing remarks from the Minister of Finance, about how we want to get rid of inflation. The kind of logical consequence of that is probably deflation or stagflation. And again, I’d really like some clarity, and perhaps we’ll get that in this, you know, magical monetary policy remit which will come out at some point subsequent to this bill passing under urgency without any meaningful scrutiny, least of all through select committee.

But with all of this talk from members of the Government about prices going up for many goods which are provided inside of our domestic economy, largely under a duopolistic kind of behaviour, it seems as though they’re actually probably more fundamentally concerned about capitalism and the way that capitalism works. [Interruption] I can see that riled them up and I’m grateful for it, because I’d love them to stand up and to excuse or to make a rationale for those points that they’re talking about with regard to inflation and what drives it. Because, in fact, we actually also throughout the election had some great pieces of research coming out from the likes of the New Zealand Council of Trade Unions which showed us that corporate greed was one of the major drivers of inflation domestically. They may bicker with me about that point, but so far the major citation that I have heard from members of the Government about the market players that matter right now, with regard to their perception of inflation, are Business New Zealand. Again, we can have all kinds of debates about the relationships that political parties have with entities outside of this House.

But the fundamental point remains that this bill will not do what it says on the tin and what the Government is promising that it will do. Because, again, those three core points that the Greens have stated time and again throughout this debate remain. It is that the Reserve Bank Governor himself has put it on the record, as the Minister well knows, that the dual mandate has not changed the way that they approach or focus on inflation or price stability. So the subtext of what’s being put forward today by the Government is that they don’t trust the Governor, as far as that goes. The second thing is that it is unnecessary to change the law to do this, as reflected in the regulatory impact statement from the Minister’s own officials. “They could do this through the remit”, which it appears that they’re also still planning to impose some kind of consideration for employment within—so, again, I’m still kind of quite puzzled as to what outcome we’re seeking to get here, because they still want the MPC to have regard to employment, if not maximum sustainable employment. And, thirdly, they still want the monetary policy committee to have regard to employment; i.e., they still want some kind of form of this dual mandate. We’re just not quite sure how that’s going to play out and we’re playing a wait and see game which is not a very evidence-informed way to have a debate or discussion or to progress legislation; in fact, it’s the opposite of evidence based.

So I am just finally reflecting on all of the other pieces of evidence that have come out, and actually also some of the sentiments as expressed by the Minister about the kind of interrelationship between monetary policy and fiscal policy, because she was making it abundantly clear that her view, the economic orthodoxy’s view, of which she and the Government is apparently the arbiter of—but their view is that the sole remit of monetary policy should be that focus on price stability and that it is the remit of fiscal policy; i.e., the things that the Government does, tax and spend primarily, which should be that which focuses on employment. But I would also argue that that’s where the Government should also focus on things like productivity and should also focus on things like inequality, should also focus on things like house price stability and otherwise, rental affordability.

To that effect, it would be remiss of me not to mention a landmark piece of research which came out at the beginning of this year from Treasury with subsidiary papers from the IRD, which gave us a pretty clear insight into where the productivity problem is in this country. It’s in our tax system. It’s in our tax system, which sees right now the top 311 families in this country holding more wealth than the bottom 2.5 million New Zealanders combined. That is not an accident. It is a consequence of a tax system which sees a disproportionate burden placed on those who work for their living versus those who simply accumulate more and more capital.

That can be addressed. That can be addressed whilst also addressing our productivity problem and, God forbid, rewarding hard-working New Zealanders for their work. If we were to fix the problem which sees us as the only OECD country without any form of capital gains tax, of inheritance tax, of stamp duty tax, of ghost house tax, or otherwise—you can reduce the burden on working people if you fix our tax system and you can get more productivity out of it in the long run.

We face massive challenges as a country and as a world with the dual crises of the climate crisis and inequality. This bill doesn’t touch the sides on either of those things.

Well, thank you very much, Mr Speaker. I thought that was another refreshing nugget of honesty in another of Chlöe Swarbrick’s speeches, where she said at one point—as someone who’s spent 6½ hours in this Chamber debating this bill—there’d been no meaningful scrutiny. I mean, I think she needs to give herself a bit more credit. I know there’s a productivity problem in New Zealand, but to spend 6½ hours and then tell the whole world and put in Hansard on the public record that you achieved nothing is really take self-effacement far too far.

I’m proud to stand on behalf of ACT and as part of this Government to support this bill. This bill is the right thing to do, and the Opposition knows it. And we know they know it, and everyone at home can see they know it, because they have made such contradictory arguments. We heard from Deborah Russell at one point that if this bill went through and there was no longer an objective of maximum sustainable employment, then we would be neglecting people’s jobs, that people could lose their jobs. I guess the logical response to that is that the Reserve Bank should print as much money as possible to keep people employed! That was an extraordinary thing for Deborah Russell to say, and to think that she was the Minister of Revenue responsible for the country’s entire tax system—it just makes me glad that we’re over that period, frankly.

But then we also heard from Grant Robertson—who, I’ve got to give credit, has a few more chops, at least when it comes to the economy and spending money. He was making the argument, as was Chlöe Swarbrick, that having a dual mandate for the past three years has actually made no difference whatsoever. So we might as well keep the dual mandate, we might as well keep the Reserve Bank focused on price stability, because it only focuses on price stability anyway. Now, if anyone trying to follow along thinks, “Well, that doesn’t quite make sense”, well, they’re actually right to think that because it doesn’t.

If having a dual mandate, as we’ve heard claimed from the Opposition, made not a jot of difference to how the Reserve Bank acted, the Reserve Bank effectively behaved as though the dual mandate was never introduced, then you might ask: what was the previous Government, and specific members still on that side of the House who voted for it—what was their justification for introducing the dual mandate?

There’s a few possibilities. Perhaps they thought, wrongly, at the time, that the dual mandate would have an effect on monetary policy. That’s OK—we’ve all thought things in the past that turned out not to be true. In fact, that’s actually how knowledge advances: you have a theory, you test it, sometimes it’s wrong, you discard it and pick up a new theory—that’s fine. But if it’s true that they used to think the dual mandate would change the Reserve Bank’s behaviour, somehow, for the better, and they’ve since learnt that it didn’t, if they were rational people on the Opposition benches, they would have changed their position and said, “Look, we were wrong then, it didn’t make any difference, so we’re quite comfortable with getting rid of it.” That would have been a logical and sensible approach for the Opposition members to take. But they haven’t taken that approach. They’ve said, “We introduced it, it made no difference, but, somehow, it should be kept.” How they manage to square that circle, I do not know.

Another variant of that of that argument was made by Chlöe Swarbrick, who had read in the regulatory impact statement that there was the possibility the Government could achieve its objectives by changing the remit—that is, the direction or the lever from the Minister of Finance to the Reserve Bank Governor—rather than changing the Reserve Bank of New Zealand Act. But, once again, if that is true that the objectives of the bank set out in the Reserve Bank of New Zealand Act make no difference and can be somehow substituted for or even overridden by the remit, then that would have applied just as logically back when the previous Government changed the Reserve Bank of New Zealand Act to introduce the dual mandate. So if they really believe the argument they’re making today, they could have actually just changed the remit three or four years ago instead of spending all of the time that they spent amending the Reserve Bank of New Zealand Act.

That leaves the Opposition in quite a pickle. Were they right then? Are they right now? Is it possible they’re wrong both times? Logically it’s not, but I’m going to tell you which time they were wrong. You see, it is a simple fact that if you hold one lever, you can only pull it in one direction at a time, and if the Reserve Bank holds a lever which is how quickly the printing presses run or not—and I know some people say that’s a metaphor, and they’re right—how easily available do they make credit in the New Zealand economy? Well, they can either run the printing presses faster or slower, and if they run it faster, then at least in the short term that can stimulate economic activity—no question about that. Countries all around the world, despots, bad rulers—they run the printing press fast and everyone feels rich for a while, and, woah, the economy takes off. But if there’s not enough production, the prices go up, we get inflation, and people find that they’re actually just running to stand still and it’s hard to predict what stuff’s going to cost.

So you can certainly run it faster, and that can have an effect, at least in the short run. Or you can run it slower, and sometimes that’s necessary to make sure that there’s not so much cash floating around in the economy and prices are more stable. What the Government was asking the Reserve Bank to do with the previous policy of a dual mandate was push one lever in two directions at once. Well, it cannot work, and we saw it come out in the debate where some members opposite said, “Well, maybe there could be two objectives but we could just make it really clear that one was more important than the other.” But the question that immediately arises is: how much more important? Does it mean that just sometimes they should push the lever in one direction, but most of the time the other, according to whether it’s employment or inflation that is most important to control? How would they prioritise that one was more important than the other?

The fact is that the Reserve Bank has one lever—print money faster or print money slower—and they can only push the lever in one direction at a time. If they try to do both, or even if they try to pretend some subterfuge that they’re prioritising one over the other, then they will find that they cannot be honest and they cannot be accountable because it’s logically impossible to answer the question of whether they’re doing the right thing. The only available answer will always be “We’re doing both because we have to.” So moving back to a single mandate is the only way that we can be sure that we will have a Reserve Bank that clearly understands its job, that is totally accountable for doing its job, that can never say, “Well, I failed at one but I was doing both.” There will be one standard for the Reserve Bank and that is: have they met their single objective, which is price stability?

For members opposite who say, “When will this work and how can it work and did it work before?”, well, economies and market participants are funny things. You see, markets are really about processing information, and when new information comes into play, people start to take account for it. People start to price in what they expect to happen in the future. I suspect that, other things being equal, by taking this step today, by sending the message we now have a Government that is prepared to put its time and its capital—and a whole lot of Chlöe Swarbrick’s time, apparently—into making sure it’s perfectly clear what our monetary policy objectives are, that people are going to start pricing in, that a new sherrif is in town and inflation is going to the wall. I just suspect that, actually, that is going to have an effect on the prices that people pay, and they will be lower than they would have otherwise been, and people can start to feel some relief from the long, hard, grinding road of inflation they’ve been subject to by the previous Government for nearly three years now where inflation has been outside the target band.

That’s why the leadership being shown by this Government to everybody in the New Zealand economy that price stability and sound money are front and centre is an essential foundation to the economic recovery and the prosperity that this country sorely needs. I support this bill and commend it to the House. Thank you.

New Zealand First rises to support this bill in its third reading, probably in fewer words than the previous speaker, but we do endorse Mr Seymour’s comments.

We have recently had an election. The wheels were falling off everywhere in New Zealand, but, essentially, the biggest issue was the cost of living. We as a coalition Government, if we have one job, it is to get on top of inflation. Kiwis have found this in their back pocket: it’s their groceries, it’s their rent, it’s their rates—it is all pervasive. Inflation has impacted everyone, at an individual level, to businesses in employment, the ability to pass on wages, etc. This is foundational in terms of engineering our recovery out of the dire situation we found it in.

The Reserve Bank of New Zealand (RBNZ) in this is being sent a very clear signal that we want inflation under control. The RBNZ also sent the Government a clear message recently—in fact, Governor Orr telling the Labour Government that “monetary policy needs mates”. So it’s not only about this; it’s about making sure our fiscal policy is matching and that we’re not pouring petrol on the fire. We’re very confident that Minister Willis will take heed of that advice and that she will get her arms around this problem.

The target is unambiguous, it is clear, it is direct, and we are confident that the RBNZ will pick up on that and act. It’s also a signal to the markets, it’s a signal to businesses, and it’s a signal to the public that we mean business. We will banish inflation, and we believe, in New Zealand First, that this is a foundational step. We support the Minister of Finance in bringing this forward, so we’ll support this bill to the House.

Well, I speak on the third reading of the Reserve Bank of New Zealand (Economic Objective) Amendment Bill. As laid out in my contributions in the first and second readings, Te Pāti Māori are strongly opposing this bill. I want to begin by reiterating how outrageous it is that the Government have pushed this law through under urgency. To refuse experts in the public the opportunity to submit is arrogant and extreme. It is reckless lawmaking. Te Pāti Māori are concerned with the excessive use of urgency that we have seen from successive Governments. Urgency should only be used when something is genuinely urgent, such as bills that respond to natural emergencies—and don’t worry, this was the same speech we gave to the last Government as well. There is nothing pressing or urgent about this bill, and even when urgency is used there should always still be a select committee process, even if it is shortened.

As a new member of the Finance and Expenditure Committee, I would have welcomed the opportunity to hear from the Reserve Bank and the other monetary policy experts on the implications of this bill. But it is clear that the implications are all bad. The benefit of the maximum sustainable employment objective of the Reserve Bank of New Zealand Act is that it ensures that the bank considers how its monetary policy effects employment outcomes. During periods in which prices are relatively stable, which is most of the time, the bank can stimulate the economy to support high levels of employment. This is an important counterweight to the general price stability emphasis of the Act and the bank’s operational policy. It helps to ensure the bank doesn’t run an unnecessarily restrictive monetary policy that damages economic output and employment outcomes.

This bill is a solution looking for a problem. There is no economic evidence that the employment mandate has contributed to inflation over the past two years, nor that it has had any other negative economic impacts. Monetary and economic policy should be designed in such a way that it uplifts the social and cultural outcomes of tangata whenua, tangata moana, and working people. Monetary policy that is blindly focused on economic orthodoxy and protecting the interests of the wealthy must be rejected.

The Te Pāti Māori approach to reforming the Reserve Bank would entirely be different. We would be looking to widen the mandate of the bank, not limit it even further. If you look at other countries, many have a much broader view and mandates for their reserve banks to take into account social outcomes and ensuring the wellbeing of communities. The mandate should include holistic wellbeing outcomes including social, cultural, and environmental.

The 21st century calls for radical rethink to the way we do economics in this country. The economy is not an end in of itself. It is a tool we can use to improve the social outcomes for our communities. People are struggling. Just getting the basics is becoming more and more expensive. Unemployment is rising. Māori unemployment, as always, is rising even faster. This bill just fills the pockets of this Government’s rich mates. At this time, we should be laser focused on policies to reduce unemployment, yet this Government is doing the exact opposite. We can see clearly the agenda of this Minister of Finance, which is capitalism over workers. It is the beginning.

Carl Bates: Misinformation!

RAWIRI WAITITI: Oh, nickonomics. This is why we condemn this legislation. Te Pāti Māori will continue to fight for tangata whenua, tangata Tiriti, and for ordinary working people. E te Whare, tēnā tātou.

Tēnā koe, Mr Speaker. Can I congratulate you on your appointment as Assistant Speaker. Tēnā koutou e te Whare.

I think, for the benefit of people who might be watching at home, we should put our speeches and language into a context that means something to ordinary people. I think, to ordinary people, the work of the Reserve Bank is not always clear. The impact of monetary and fiscal policy on people’s everyday lives, when we use that kind of jargon, isn’t always clear. This bill is not likely to make any substantial difference to inflation in and of itself. There is absolutely no reason to believe it would make a difference to inflation.

As I showed members opposite last night in the second reading on this bill, if we look at Consumers Price Index (CPI) inflation right around the globe, New Zealand tracked right along with other countries, like the United States, Denmark, the United Kingdom, and Australia. In fact, New Zealand’s inflation peaked at a lower level and, while CPI inflation has been slower to come down, ultimately it’s the same general shape, and that’s because the shock that affected New Zealand affected the whole world, and reserve banks around the world responded in similar ways—the constraints on people going to work, because of the COVID pandemic, did result in supply chain shortages, and there were other factors, like the invasion of Ukraine by Russia, which affected gas prices and oil prices, which flowed on to energy prices here in New Zealand.

So the main takeaway for people at home is that New Zealand has been through a similar experience to many other countries—that the new Government is trying to blame these arbitrary things on that result, rather than looking at the factors that genuinely contributed to prices going up here in New Zealand. Once we got into a situation of inflation and the Reserve Bank started tightening, which means raising interest rates, that has almost a cyclical effect—like, it tends to reinforce the price rises that were happening. So now food producers’ interest rates are going up—they’re passing that on in the price of food. Interest rates going up for mortgage holders, interest rates going up for landlords—so they’re putting up rents, even when they probably already own the building outright and don’t have a mortgage on it. So we get into the situation where the fact of increasing interest rates, while it can only bring down the price of so many things, definitely has an effect on asset prices like housing, but not necessarily consumer goods.

Ultimately, what the new Government wants people at home to believe is that they have the answers, that they are the masters of the economy, and that they’re going to improve everything for everyone in the country. The truth is that they have been put in these positions by wealthy donors and vested interests to look after the interests of those people, especially from the ACT Party but also from Nicola Willis, the Minister of Finance, in the National Party. There is a dangerous ideology, which is the belief that letting rich people get richer is good for everyone—well, obviously that’s not true—that implementing the failed neoliberal policies of the 1980s and 1990s will somehow make New Zealand more productive and lead to everyone being richer. But the truth is that what works for individuals to get wealthy in this current system does not work for everyone.

So when you say, for example, that we’re going to reward people for being landlords—which means that they do no work and they earn a return on their asset, and they don’t pay tax on that—everyone in the country cannot get wealthy through being landlords. I mean, think about it: can every single person in New Zealand be a landlord and get rich that way? No. Property owning is a type of rent-seeking which is not part of the productive economy, but the people opposite cannot tell the difference between what is good for them and their donors and what is good for New Zealand as a whole. They can’t tell the difference, and the reality is that, if New Zealanders want to see genuine, sustained improvement in our quality of life, we need to protect our environment, we need to make sure our water is clear, we need to accurately price pollution and externalities, and we need to support people by investing in public services, by raising benefits, by limiting the growth of rents, through things like rent controls, and that will genuinely create an environment in which people have an opportunity to succeed.

We all do better when we share the wealth, not hoard it, and that’s what the Green Party will continue to campaign for.

Debate interrupted.

The House is now suspended for lunch and will resume at 2 p.m.

Sitting suspended from 12.59 p.m. to 2 p.m.