Reserve Bank of New Zealand (Monetary Policy) Amendment Bill

I move, That the Reserve Bank of New Zealand (Monetary Policy) Amendment Bill be now read a first time. I nominate the Finance and Expenditure Committee to consider the bill. At the appropriate time, I intend to move that the bill be reported to the House by Monday, 3 December 2018.

This bill follows from phase one of the review of the Reserve Bank of New Zealand Act. Phase one of the review focused on modernising New Zealand’s monetary policy framework, which this bill delivers on by amending the objectives of monetary policy to require consideration of maximum sustainable employment alongside price stability in monetary policy decision-making, and instituting a monetary policy committee to take decisions on monetary policy.

The genesis of this bill is some 30 years in the making. In fact, it was around 29 years ago, in December 1989, that the Reserve Bank legislation passed. A lot has happened in the world since 1989, and if we do think back to that time, many great events were occurring in the world. Seinfeld premiered on television. The Berlin Wall fell. Ronald Reagan was finishing his eight years as President of the United States. Tim Berners-Lee produced the first design for a World Wide Web, and in that year the very first internet connection came into New Zealand—through, of all places, the University of Waikato. I say that respectfully, of course. In New Zealand, David Lange had resigned as Prime Minister, and I was just finishing high school in Dunedin. In fact, I was here—my very first ever visit to Parliament was the day David Lange resigned in 1989.

💬 Hon Ruth Dyson: Kieran wasn’t even in primary school.

And Kieran McAnulty wasn’t born. So it was a long time ago, and it is timely, after all of those 29 years, to take another look at the Reserve Bank legislation.

We do not do so lightly. It is a very important part of our financial framework in New Zealand, but after 30 years with much change it is time to make sure that we create a resilient and sustainable and productive economy, and make sure that every part of our apparatus fits with that. New Zealanders’ well-being is at the heart of this reform. The Government wants monetary policy to contribute to the shared prosperity of all New Zealanders. Together the changes in this bill represent a significant step in the development of our monetary policy framework. We will retain the operational independence of the Reserve Bank and continue the bank’s role in maintaining price stability, but we are strengthening the bank’s decision-making structures and ensuring transparency going forward.

In April 2017, I outlined our policy to modernise and reform the Reserve Bank legislation. This process has been clearly signalled. The policy included the two major changes to the monetary policy framework that we are looking at today: the broadening of the legislative objective from focusing only on price stability to focusing on employment, and ensuring that the decision-making process of the bank is modernised, so that there is a committee, including external appointees, who will have responsibility for setting monetary policy.

We follow this, in the coalition agreement between the New Zealand Labour Party and New Zealand First, to commit to review and reform the Reserve Bank legislation, and today is phase one of that commitment being honoured.

One of the very first announcements I made as a Minister, less than two weeks after being sworn in, was the terms of reference for our review. Those terms of reference split the review into two phases. Phase one is what we deliver on today. Phase two will consider the framework for financial stability, to ensure that the Act is fit for purpose and aligned with what the Government considers will provide a strong, flexible, and enduring regulatory framework that enjoys broad public and industry support. Phase one of the review was led by Treasury, who have been working closely with the Reserve Bank. An independent expert advisory panel was also established to provide advice to me on potential changes to the Act. The panel members, Suzanne Snively, Dr Girol Karacaoglu, and Dr Malcolm Edey, all put tremendous effort into this, and I thank them for it.

The key changes in this bill can be split into three main areas. The first of those is a change to section 1A of the Act: the purpose statement. We believe that this section of the Act should explicitly recognise the purpose of the Act and the bank’s monetary and financial policy functions to be to promote the prosperity and well-being of the people of New Zealand and to contribute to a sustainable and productive economy. The changes to this section included in the bill make it clear to the public that monetary and financial policy are not ends in themselves but a means to support the living standards of New Zealand and New Zealanders. Section 1A will now begin with the words “The purpose of this Act is to promote the prosperity and well-being of New Zealanders, and contribute to a sustainable and productive economy,”. I am very pleased that we are making such a change.

The second part is the change to monetary policy objectives. The current monetary policy framework, with its single price stability objective, has, by and large, served New Zealand well over 30 years. It was put in place at the end of an extended period of high inflation, which reduced the competitiveness of New Zealand’s exporters and created a drag on the New Zealand economy. It has been instrumental in reducing inflation and keeping it low over the past three decades. This has been crucial for supporting the well-being of New Zealanders, and the Government remains committed to ensuring that monetary policy continues to deliver low and stable average rates of inflation over time. However, as I have said, the Act is almost 30 years old, and there have been changes in the way the global economy, the financial system, and monetary policy operate since the Act’s introduction.

On the one hand, the bank has, for many years, in accordance with successive policy targets agreements, practised flexible inflation targeting, which, while focused on achieving a medium-term inflation target, also requires the bank to take account of the impacts of monetary policy on the real economy. On the other hand, the post - global financial crisis era has taught us new lessons—or, in fact, reminded us of old ones. Over the last 10 years, the global economy has experienced an extended period of weak inflation pressures while some other countries have experienced persistent high unemployment and low economic growth. Monetary policy has generally been the first port of call for policy makers to assist in bringing employment levels back to long-term, sustainable levels, and we have been reminded that in the face of large negative economic shocks, the real economy, and in particular the ability of individuals to find work, is an important target for monetary policy, as is price stability.

While the New Zealand economy has grown strongly over recent years and monetary policy has supported economic growth, the Government is keen to ensure that we learn the lessons from across the world about what kind of framework we need for the long term. This bill recognises the stabilisation role for monetary policy by giving the Reserve Bank a dual mandate to both maintain price stability over the medium term and support maximum sustainable employment. This specification seeks to ensure that monetary policy makes an appropriate contribution to supporting employment. In doing so, we recognise that prices will always be subject to temporary fluctuations, which it doesn’t make sense to try and eliminate, but what we are trying to do is seek to ensure price stability over the medium term. Monetary policy’s role is to assist the economy to adjust to periods of economic slack or exuberance, and that is when unemployment or economic activity is above or below its sustainable level. We believe these changes to the objectives will make a difference in terms of how we include all aspects of the economy within monetary policy.

In addition to that, we are changing the way that the decisions are made. We are creating a monetary policy committee that will make the decisions on monetary policy for the bank. This moves us on from the approach taken in 1989, where the Governor of the Reserve Bank had the sole responsibility for both monetary policy decisions and implementation. It is time to move forward from that, in line with international practice, and make sure that we have the right people in the room at the right time making the decisions. Under this legislation, the monetary policy committee will have between five and seven members—a majority will be internal members from the bank, including the governor, the deputy governor, and one or two other staff members; the balance of the committee will be external members appointed from outside the bank. They will bring different viewpoints to the decision-making process and introduce, challenge, and promote the inclusion of diverse views. We will appoint those committee members in the same way in which in the board currently appoints the governor, which is a dual-veto system between myself, as the Minister, and the board. There will also be a Treasury observer available.

The legislation also includes the accountability arrangements through the remit that will replace the policy targets agreement and the charter which will set the operational details for accountability, transparency, and decision making of the monetary policy committee. I believe that these changes represent steps forward in transparency and decision making on monetary policy. The committee will be required to publish a summary record of each of its meetings, and the bank will publish reports on monetary policy at least four times a year. These are changes to a significant piece of legislation in New Zealand’s history. We do not take them lightly. We look forward to the contribution that will come from the select committee in debating these, and I commend this bill to the House.

Thank you, Mr Assistant Speaker. I am happy to come down, of course, and take a call on this first stage of the Reserve Bank of New Zealand (Monetary Policy) Amendment Bill, and I want to just start by acknowledging the Minister of Finance. This is an important area, as he said in his speech. It’s an area that has been, traditionally and importantly, independent of politics, and it is important of course that we ensure the bank continues to operate in a way that is not subject to the cut and thrust of three-year terms of Government.

I’m actually happy to acknowledge that it is timely to review the Reserve Bank of New Zealand Act, and I’ve said as much to Mr Robertson, and I want to acknowledge that Mr Robertson has been very good at including me along steps, in appropriate ways, making sure that I was informed. We are certainly going to reciprocate that approach from this side of the House, being constructive. It doesn’t mean, of course, that we will always agree, as I have signalled to Mr Robertson, and there are areas where we don’t agree, and, on balance, we won’t be voting for the legislation, as I’ve previously told the Minister of Finance. But I think that there is a lot in this legislation and in the review that is certainly commendable and worth supporting. So I want to be very clear that our opposition is not in totality. There’s a lot in here that we find very useful and worthwhile, and I look forward to working with the Minister on the second stage of the review as that continues to progress.

I want to deal reasonably briefly with the monetary policy committee, because that is an area where we see a lot of merit in what has been proposed. Of course we want to go to the select committee and see what comes in, and we may well find issues that need exploring, but, at this stage, I think the monetary policy committee makes good sense. The Minister has, obviously, looked at the Rennie report which came out, and then his own independent advisory panel went through a number of the recommendations in that, and the Minister has run through, in his speech, the core issues for the committee.

A couple of small points that are worth getting on the record: we do now have a very senior Treasury adviser sitting in on that committee in a non-voting role, and while I understand the way it’s being presented, which is that it’s important that there is an understanding at the Reserve Bank of what happens at Treasury, I am concerned at the increasing linkage that creates between Treasury and the executive and the Reserve Bank. Similarly, of course, with the external members of the committee, those are appointed and dismissed by the Minister. So there will have to be, I think, a high degree of probity and transparency around the management of both of those offices, to ensure that they don’t become subject to a criticism of any improper political interference.

Of course, the Minister has described the fact there will be a charter for the committee. That is important, and we look forward to seeing the draft of that and understanding, in better detail, exactly how that committee will operate, how they will work to reach a consensus, share views, and how that will be described and distributed. Equally, I have raised with the Minister the importance of ensuring that the members of that committee are very high-calibre people, with appropriate skills, and don’t become some of what could be described, perhaps unkindly, as the usual fodder of political appointments. This is a critical role and it deserves people of the right calibre, with the right skill set, and I would very much like to ensure that we make that appointment process a bipartisan one.

Turning to the dual mandate—and this is the area where we have, on balance, decided that we won’t support the legislation at this stage—I do want to pick up on a couple of the things that have come through in this. The first, as I said, is that this was certainly pitched in the Rennie review. When the Reserve Bank themselves responded to that review, they made the point—and I agree—that there is no demonstrated problem that we’re trying to solve here in reviewing the mandate. In fact, when you talk to the Reserve Bank—as I have, and as others have done in public session—about the concept of this imposing dual mandate, the response has always been, “Well, broadly it won’t make any difference to the way we make our decisions. We’ll continue as is.” So the question then becomes, “Well, what is the need to do it?”

I raised the point at question time today that there has been no example in the history of the Reserve Bank of New Zealand Act where inflation and unemployment have been in some sort of contest, and that this direction would have been useful. Not only is there a question then of “What is the problem we are trying to solve?”; there is no guidance or clarity around, if there was a tension between the two, how the Reserve Bank should resolve that tension. I would suggest that we’re creating a lack of clarity around exactly how that would operate, in a situation where there’s no recognised need to do it.

I think it’s well-known that monetary policy isn’t able to drive maximum sustainable employment over the long term. In fact, the departmental disclosure statement says exactly that. It says monetary policy has relatively little influence on the long-term or sustainable level of employment, which is more influenced by factors such as the level of skills and labour market laws. I think that’s absolutely right.

Now, I want to be really clear, of course I would expect a Reserve Bank or a central bank to be considering factors like employment, prosperity, economic growth, well-being—all of those terms as part of their decision making. They do already, as the Minister and I have discussed. In fact, the way the Minister has framed his interest in seeing employment considered in the current policy targets agreement reflects that that is already very possible in our framework. So there is nothing wrong at all with a Minister of Finance entering into a new policy targets agreement with the governor, as this one has chosen to do, and expressing that he would like the governor to pay particular attention. But to do it in a way that elevates the issue of maximum sustainable employment to the same level of price stability creates, I would suggest, a confusion and a tension which is unresolved and unnecessary.

I am concerned that given that the major levers that drive maximum sustainable employment in the long term are, in fact, fiscal policy and microeconomic settings, there is a far greater risk that the Government, which controls those levers, will instead look to either put pressure on the Reserve Bank or sheet home responsibility to the Reserve Bank should there be a decline in employment or job creation, when, in actual fact, the control for those matters sits squarely and almost entirely within the control of the Executive. So I think there are questions that need to be asked about why it’s needed, how a tension would be resolved, and whether there has ever been any example of such tension applying.

The other matter I wanted to raise is reference to other countries in the world, because it’s true that other countries do have mandates which go beyond price stability. What’s interesting is that when you read through them, very few of them pick out only employment, because the Reserve Bank will say—and does in many occasions—that in reaching their decisions around monetary policy and where they set the official cash rate and how they deliver on their objective of price stability, they already do consider a range of wider economic outcomes, of which employment is one. That’s absolutely appropriate. But I can’t see why the Government has pulled out, through this legislation, just one of those economic criteria, without reference to any of the other basket of criteria that matter equally.

The Minister, in his speech, referenced the purpose of the bill which he is amending—and I support, actually, the wording of the purpose clauses he’s written—which talks much more extensively around wider economic benefit. It talks about prosperity and well-being and a sustainable and productive economy. That’s the sort of language, actually, that other countries have used when they’ve included that wider basket of economic objectives in their mandate. But, in this instance, the Minister hasn’t copied that international experience. He hasn’t reflected the purpose of the legislation as he’s written it. He has instead chosen to pull out just one of those criteria of economic objectives and elevate that to a level where it is equally as important as price stability. Price stability and the need to maintain a low and stable level of inflation is a critical part of our monetary policy settings.

So I do think there are those questions around the confusion that’s created, and the reason that we now have these mandate provisions not reflecting the very purpose of the bill. I think those are serious issues that we want to work through as we work through the select committee process.

The last thing that I wanted to note in my concluding time on the bill, is in the regulatory impact statement on the bill when it talks about the benefits and why you would do this—so I had a look at that, thinking, well, what is the reason that the Government is giving as to why we need this dual mandate? And in fact the section that talks to the benefits of the proposal only refers to the benefits of the monetary policy committee, and we agree there’s benefit in that.

So my question again remains what is the problem we are trying to solve? How do we think this solution will solve it? Why have we differed from the very purpose clause that the Minister is introducing? And why have we not followed the international example which reflects that whole basket of economic conditions that the Reserve Bank has already taken into account?

So I do look forward to this going through select committee. I’ve given my assurance on behalf of the National Party that we certainly want to work constructively. I think it is helpful if we can get to an agreed position. But for the interim, we won’t be supporting the bill, because of the reservations that I’ve expressed at the stage.

The coalition agreement that forms the platform for this Government, an agreement between the Labour Party and New Zealand First, has both parties committing to review and reform the Reserve Bank of New Zealand Act, and this is the next chapter in the great modernisation and reform project that is this Government.

In our first 100 days we announced the terms of reference for a review of the Reserve Bank Act, to move New Zealand to a modern monetary policy that meets the needs of the 21st century economy. It’s disappointing that the National Party is not supporting the bill at this stage, but I’m glad to see that there’s obviously constructive dialogue between the shadow finance spokesperson and finance Minister, Grant Robertson, and I hope that that dialogue will continue.

This bill legislates for changes stemming from phase one of the review of the Reserve Bank Act. They’re focused on modernising New Zealand’s monetary policy framework. The bill delivers on this with two measures: one is amending the objectives of monetary policy to require consideration of maximum sustainable employment alongside price stability; and, secondly, by instituting the monetary policy committee to take decisions on monetary policy. It’s our view that monetary and financial policy should promote the prosperity and well-being of the people of New Zealand and contribute to a sustainable and productive economy. Included in our changes on this to section 1A, we’ll have the Act now beginning: “The purpose of this Act is to promote the prosperity and well-being of New Zealanders and contribute to a sustainable and productive economy.”

We continue to recognise the important role of stabilisation in the bank’s mandate and the important contribution the bank makes in that respect to the whole economy. But we’re giving the Reserve Bank a dual mandate to both maintain price stability over the medium term and support maximum sustainable employment. What this means is that the bank will take employment outcomes into account when it reviews monetary policy. We’re not setting an unemployment or employment target for the Reserve Bank, but they can make sure that they’re keeping employment outcomes front and centre when they are making monetary policy decisions.

Why is this important? Well, employment is a proxy for the real economy. Inflation control is, of course, important, but it’s no longer the bogey, the all-consuming preoccupation that it was in the 1980s when the Reserve Bank Act came into effect. The bigger challenge now, both here and around the world, includes managing demand in the economy, investment, productivity, and real-world outcomes, like jobs. That’s why we are making this change.

New Zealand will not be the only country with a legislated dual mandate. Australia and the United States already have legislated mandates for employment alongside price stability, while other inflation-targeting countries tend to require consideration of real economy factors through secondary agreements, such as what New Zealand has with the policy target agreements. Economies with legislated dual mandates have succeeded in controlling inflation over the many years, while also taking into account their employment objectives. I want to point out the contradiction that was very evident in Amy Adams’ contribution. She says, “Well, they’re doing it anyway. They’re already taking into account employment objectives.”, and then in the same breath she says that making it an objective will create confusion. Well, you can’t really have it both ways.

Secondly, the monetary policy committee, which is the other main provision in the bill, changes the way that specific operational objectives of the monetary policy are set. The bill legislates to create a committee for monetary policy decisions—that is the official cash rate decisions—rather than just having them be the responsibility of the governor. Now, in practice, the Reserve Bank’s decision-making practices for monetary policy have adapted to reflect this already, with an internal governing committee collectively making decisions on monetary policy; however, the Reserve Bank Act has not been updated accordingly. We’re doing that with this bill, and also legislating so that a minority of members on the monetary policy committee are external members so that they bring in outside expertise and world view to monetary policy decisions. The members will be appointed by the Minister on the recommendation of the Reserve Bank board, and this means that there are appointed on merit and due to their abilities and knowledge rather than being pure political appointments.

I want to recognise the role of finance Minister Grant Robertson in leading this work and also the contribution of other Labour colleagues over the last few years in developing this policy. I also want to give special mention to the advocacy of the Rt Hon Winston Peters on monetary reform over a very long period of time, and also recognise the fact that the Green Party, the confidence and supply partners of this Government, have long advocated for monetary policy reform. This has been a priority for all three parties that make up and support this Government.

I look forward to phase two of the monetary policy review, which will look at, among other things, macro-prudential tools, which, as has been demonstrated over the last couple of years, can be powerful tools in helping to manage demand in the housing market. I think the effect of financial flows in housing markets and asset bubbles has been a somewhat neglected area of concern and policy debate as we grapple with the effects of the housing crisis in this country. I look forward to the consideration of phase two of the review in looking at macro-prudential tools and how they might help us in the future.

These changes highlight the importance of monetary policy as a tool to support the real, productive economy. Our concern with the productive economy is something that marks this Government out as different from the kind of Government we’ve had in recent years in this country. Our thinking on this has been evolving in recent years and will now be recognised in New Zealand law by adding employment outcomes alongside price stability as a dual mandate for the Reserve Bank.

Thank you, Madam Assistant Speaker. It’s a privilege to be able to take a call on the Reserve Bank of New Zealand (Monetary Policy) Amendment Bill. As has been outlined, the National Party believes that this bill is somewhat not needed, given that the Reserve Bank has done an outstanding job in securing and working to its mandate to actually keep inflation under control and prices stable.

Many of us are old enough to remember what happens when inflation gets out of control, and, particularly, can remember back in the days of the 1970s and 1980s, when, in fact, pricing was out of control and the Reserve Bank of New Zealand Act needed to be brought into play. We are concerned at the, say, “mission creep” that we see for the Reserve Bank. So we are going to need to have some real convincing done for us in the Finance and Expenditure Committee and our caucus before we can bring ourselves to support this bill, because now we see the Government saying—the Labour - New Zealand First - Green Government saying—that it would now like to have responsibility for employment moving to the Reserve Bank.

I heard some words about well-being, so presumably well-being will eventually at some stage creep into the mandate of the Reserve Bank. I heard some comments from the previous speaker, Mr Twyford, around the housing market becoming more of the preserve of the Reserve Bank. I think one of the issues with this is that just because the Reserve Bank is competent there’s no need to give it all the work of the Government. I think one of the reasons that the Reserve Bank has been so successful in bringing about a stable monetary policy and environment is that it has had a single focus. It has not been at all alert to, or taking any notice of, the whims of politicians or of anything else. They’ve just done their job and done it exceedingly well.

So we, on this side of the House, are somewhat bemused at the problem that is trying to be solved by the Government. I would have thought that if you have something that is working so well and has done so for 30-odd years—and has a tremendous amount of credibility built up, not only in New Zealand but also elsewhere in the world, and is often viewed as one of the great examples of a success—why would this Government want to fiddle with the mandate and the obligations of the Reserve Bank?

I understand that there may be some tension between Treasury and the Reserve Bank on various issues, and I see that part of this bill is to put a Treasury person on a monetary policy committee, and that that Treasury representative will not have voting power, but will be there. There as what? There as an advisor? There as what? Making the tea? What? And the answer, I think, has to be that it seems very unclear. So we are going to want to have some pretty clear answers as to exactly what the role of a Treasury official is in those meetings of the monetary policy committee.

We know that, often, the better decisions are made after careful consideration by a group of people in a committee, rather than a sole person making a judgment call. That is already the practice at the Reserve Bank, so it seems to me somewhat superfluous to have this bill coming through at this stage. So, again, we’re going to need some convincing as to why legislation and legislative time are being spent on remedying something which is not broken.

We are concerned at—as I’ve said before—creep within the mandate of the Reserve Bank and its obligations. New Zealand already has one of the lower unemployment rates in the world at around 4 percent. That is a very good result that has been in place now for some years. I would not like to see that unemployment rate go up, and I would certainly not want to see a Government plan to blame a Reserve Bank should that unemployment rate go up, because it certainly seems to me that that could be a result should this bill be successful in its way through the House.

One of the problems that we had before we had the Reserve Bank of New Zealand Act was a lack of focus, and certainly political interference in decisions—the monetary policy really needed to be free of that. So having a Treasury official sitting in a meeting; the Treasury official then reports through to the Secretary to the Treasury, who then reports through to the Minister of Finance, could well, actually, be seen as possibly bringing in some form of political influence or an attempt to do so when it comes to those monetary policy committee decisions. So these are all very genuine questions that we have and we will be, no doubt, looking at this very carefully on the Finance and Expenditure Committee.

So, from our point of view, some of the arguments I’ve heard from Mr Twyford are that, essentially, this has been a policy of the Green Party, it’s been a policy of the New Zealand First Party, and it’s been a policy of the New Zealand Labour Party. I have not heard an argument yet as to what is trying to be remedied, I have not yet heard an argument as to why it’s happening, other than that some political parties went out on the hustings and said there was a problem and that they were going to fix it. The problem is that there doesn’t appear to have been a problem, and that this could be a situation of considerable butt-covering—to use a very technical term—when it comes to making these promises.

So I think this is most likely a bill that the National Party is going to find is superfluous—worse than that, most likely going to find that unless we see better evidence and answers to our questions on the Finance and Expenditure Committee, it is going to be a bill that we see as, actually, a bit of the “thin edge of the wedge” type with this very strange acceptance that, somehow, the Reserve Bank needs to have responsibility for sustainable employment. I’m not sure that anybody quite understands what “sustainable” is in this, other than that you like to hope that people can remain employed, and perhaps that’s what it is.

But, ultimately, when we know, as we are told constantly by officials, that unemployment has very little to do with monetary policy and has a tremendous amount to do with skills and also confidence in business, it seems to me that this is a very strange requirement to put upon the Reserve Bank, given that the Reserve Bank has no power whatsoever to influence skills training of people who wish to be employed. It has no ability—no ability—to influence business confidence, other than for the Reserve Bank to do an outstanding job in keeping inflation rates at very reasonable levels so that people can plan better for their businesses and make decisions that they believe are in the best interests of not only their business but, actually, their employees.

So we think, at this stage, that this bill is not needed, it is window-dressing—a bit of butt-covering from Labour, the Greens, and New Zealand First—and seems to us to be not really worth much time at all. Thank you, Madam Assistant Speaker.

I call Fletcher Tabuteau.

💬 Hon Ruth Dyson: Oh, this’ll be better.

Ha, ha! Thank you, Madam Assistant Speaker, for this opportunity to speak to the Reserve Bank of New Zealand (Monetary Policy) Amendment Bill 2018. Look, I just want to start out by saying this has been a 30-year journey, and we are actually slightly past the time that we needed to take a grip of 30-year-old legislation and modernise it, essentially.

I just wanted to acknowledge the contribution from the previous speaker, Judith Collins, because, as is the duty of Opposition, they put in some doubt and some questions into the motives and perhaps even the outcomes of the legislation, as they are particularly good at doing. So I just want to assure the previous speaker that in this legislation there is no mission creep. There is no attempt to change the fundamental structure of the relationship between the Reserve Bank, the Reserve Bank Governor, the Government, and the finance Minister. I just wanted to allay those fears of the previous speaker.

But I wanted to then acknowledge the contribution from the shadow spokesperson. I just wanted to acknowledge it because it was a fair and considered contribution from the Opposition. So, in that, I congratulate the shadow spokesperson for the earnest and thoughtful contribution, and I do agree that the select committee process will be an interesting and important part of the evolution of this legislation.

Of course, I cannot proceed without first acknowledging the Minister of Finance. As has been noted in all contributions thus far, this is an important undertaking between the Labour Party and New Zealand First, and, rightly noted, the Greens have had the same angst and concerns about this 30-year-old legislation which we’re seeking to modernise—modernise being the key word here. So I think, whilst perhaps I wouldn’t say timely, but in terms of this Government and this coalition arrangement, actually, kudos to the Minister of Finance. In the first two weeks of his role, he came out and said, “This is exactly what we’re going to do. This is the work that we’re going to work towards.”, and here we are now.

💬 Hon Ruth Dyson: So he said he was going to do it and then did it.

He said he was going to do it, we made a commitment as a coalition to do it, and here we are.

Now, this is the first phase, and this legislation arises from that first part of phase one of the review of the Reserve Bank of New Zealand Act. So I think I’ll say it again, because it’s worth noting for the Opposition: this is about a modernisation, about amending some of those objectives of the monetary policy to require consideration of maximum sustainable employment. That is perhaps the main driver, although the second part is to institute a monetary policy committee in that decision-making process. To be fair to the contributions from the Opposition, actually, the Reserve Bank have had quite a formal process of consultation and engagement using a committee process. You asked the question: why are we here? Well, actually, it was optional for them to do so. This amendment bill seeks to put that committee approach, that committee decision-making process, into that committee, rather than what we have now, where we have good and due consideration by the Reserve Bank Governor of those who are appointed to be considered and make that due decision on the official cash rate, which is the primary tool we’re talking about here, but then can actually independently choose to ignore that advice of the committee.

Now, what we have seen from research and actual practical application around the world is committee decision-making has been proven to obviously be more diverse and considerate of a wider range of factors in that decision-making process, and actually—let’s be fair—although there has been no case that I can think of in New Zealand, what that has meant is that there can be no extreme thinking by one person that will determine what it is the rate should be.

So I think we need to be cognisant of that, and so it is a simple but important change. What we are trying to do is make sure that we’re focusing on price stability, but making that commitment to full employment, and then making sure the process of the committee is a full and proper one. Actually, what I should say is that we had the Minister announce phase two of this process last month, and I just wanted to point out where to from here. So phase two will consider the framework for financial stability to ensure the Act is fit for purpose and aligned with what the Government considers will provide a strong, flexible, and enduring regulatory framework that enjoys broad public and industry support. Actually, I just wanted to note that that is what the Reserve Bank in its mandate is actually required to do.

I just wanted to touch on the history of the Reserve Bank in New Zealand because I’m not sure too many people will be aware but in 1989, when it was established, it was actually a world first. It was established at a time of quite high inflation, at a time of quite extreme fluctuations in those prices, and so New Zealand very wisely and ahead of its time decided that the best way to do that would be through this regulatory framework, the Reserve Bank of New Zealand Act of 1989. Originally, it was designed to cope with the extremes of pricing in the New Zealand market, and so originally the target was zero to 2 percent, so we were actually trying to eliminate inflation at the time. That was kind of the mandate back in the day.

I think about seven years later—I’m not quite too sure of the timing, but not too long later—we realised, actually, inflation in and of itself isn’t the problem; it is the maintenance of price stability, and so the target was actually changed to what it is that we have now: 1 to 3 percent. And so the economists and the Government of the time said, “Actually, inflation is OK. What we want for business is that confidence to know that we’re not going to get those huge fluctuations in prices, so that we can make good, long-term decisions in investments over time.” and hence the 1 to 3 percent.

So, I probably—I hadn’t realised, it’s like being back in a lecture theatre. I have spent way too long giving a history of inflation and the Reserve Bank’s formation itself. But to put that in context, that we were ahead of the time then and, unfortunately, we have fallen by the wayside is perhaps the best segue to finish my contribution this afternoon. This is 30-year-old legislation. New Zealand First and the Rt Hon Winston Peters have spoken to the inadequacy of the Reserve Bank of New Zealand Act in its current form, and what a great start we have here in terms of phase one in this legislation. So of course this has the full support of New Zealand First, and we look forward to it progressing through the House. Thank you very much.

Thank you, Madam Assistant Speaker. I don’t like to be unkind to the previous speaker—

💬 Rt Hon David Carter: To “the Professor”.

—“the Professor”, as we call him, but his grasp of history is not very good at all. The Reserve Bank was not instituted 30 years ago; it has been around for many decades, and this legislation that came in, which he now wants to modernise by taking it back closer to where it was before 30 years ago, shows the strange logic that they’ve got on that side of the House.

Look, this bill proposes to do two things. One is set up a committee to make the decisions around interest rates, and while you can argue about that until the cows come home, I don’t think that they have built a particularly strong case for why we need to change what has a been a pretty successful model in New Zealand. But it won’t be the end of the world if we move to a committee, and so we will be interested in working through that in the select committee process.

But the second thing that this bill does is bring in what we call a dual mandate. At the moment the Reserve Bank is focused solely on inflation and using monetary policy to target a low inflation rate, between 1 and 3 percent. Now the proposal is to come up with a dual mandate and say they should focus on price stability and maximum sustainable employment. Now, we don’t support that and we haven’t seen any strong case brought to justify that. There’s a couple of issues with it. Firstly, there’s a question of principle and that is, if you want to have more than one policy objective—price stability and maximum sustainable employment—then in general you need to have more than one policy instrument, and at the moment the Reserve Bank only has one policy instrument, which is monetary policy—to control using monetary policy. It doesn’t have access to fiscal policy or all the many other policies that you need. So to try and deal with more than one policy objective with only one policy instrument is a flawed approach in principle.

Secondly, the idea that somehow a little bit more inflation will lead to more employment has been debunked a long time ago. It’s true that monetary policy can lead to a short-term impact on employment, and that is why it was so dangerous in the hands of politicians—and we’re going to have to go back far into even the National Party’s history with Robert Muldoon to say that if you drastically reduce interest rates, particularly at a time of high inflation, then you can get a short-term burst in economic activity and an improvement in employment.

ASSISTANT SPEAKER (Poto Williams): Except I wouldn’t be doing that.

Sorry—the nation or the policy makers. But it doesn’t last, and there’s no evidence that you get a long-term effect on employment by the use of monetary policy. Nobody can really claim that. So why we would have, as a dual mandate of the Reserve Bank, to use monetary policy to somehow influence maximum sustainable employment doesn’t make much sense. So if you struggle with that concept that a little bit more inflation does not lead to higher employment in the long term, then what would you be trying to achieve?

So the problem that we have with this proposal is that if you have this dual mandate, where both of them are equally important, and that’s what this bill is suggesting—it’s not that we go from price stability and try and do what we can to manage maximum employment; it’s that both are equal objectives—then, of course, eventually at some point those two objectives will be in conflict, and then the Reserve Bank will be in a hopeless position. I think we’ve got a pretty good arrangement that has served this country well, and I don’t understand the rationale for changing.

A number of Government members will say, “Well, everybody else in the world does it. Lots of other countries have all these mandates.” Well, the answer to that, I would have thought, is that New Zealand actually has a good, clear, simple single-objective piece of legislation that many other countries would wish to have. Most of them developed more than 30 years ago, at a time when people actually did believe that a little bit more inflation could lead to more employment, but that has subsequently been debunked. So it’s really taking us back to a position where we were more than 30 years ago, and I don’t see how it’s going to benefit the country in any way, shape, or form.

Now, if you are indeed interested in improving employment, then of course there are—

ASSISTANT SPEAKER (Poto Williams): Of course I am.

Sorry. If the nation and politicians are interested in increasing employment, then there are many things that can be done, well beyond the realm of monetary policy. That, of course, is just basic good government. The most important thing that any Government can do is deliver strong, stable, and predictable Government, leading to higher business confidence and consumer confidence, leading to investment, and when you get investment, that’s where you get jobs and growth.

Unfortunately, we’re getting a case study of how not to do that from this current Government, which, by introducing so much uncertainty into the minds of business people around the country—uncertainty through tax policy, where nobody knows. Who’s going to make an investment if they don’t know in two years’ time whether they’re going to be paying a capital gains tax on that investment, for example. There’s so much uncertainty around our immigration policy—the Government campaigned on slashing it and now it’s not quite clear. There’s so much uncertainty on foreign investment rules.

💬 Hon Ruth Dyson: This must be 10 minutes up by now.

No—nowhere near. Nowhere near. There’s so much uncertainty on industrial relations policy, and also uncertainty following the strange manner of Government decision-making that we’ve seen, particularly in the oil and gas process, where a major industrial policy can be made without reference to any evidence or actual decent advice.

So when you combine all those things, that has led to and contributed to falling levels of business confidence. Many would-be investors who could invest in hiring a new person, building a new plant, starting a new business, taking a new risk, are right now keeping their hands in their pockets, because looking out, they’re not sure where things are going. So if the Government’s interested in employment, then that’s what they should be focusing on, with all the many, many levers that Governments have available to them, and do the right thing. But somehow suggesting that by encouraging the Reserve Bank to just give a little bit more inflation—that’s not the way to go about it. So on that basis we will not be supporting this bill.

Tēnā koe e Te Māngai. Tēnā koutou e Te Whare. It is a pleasure to rise and speak to this, the Reserve Bank of New Zealand (Monetary Policy) Amendment Bill. There are a number of reasons that it’s my absolute pleasure to rise and speak to this bill, not least to address the assertions of the previous speaker, the Hon Paul Goldsmith. With regards to “strong and stable”—I’ve heard that somewhere else before, and I must say that it’s one of the most meaningless pieces of political rhetoric that I think I’ve ever heard. If we’re looking to predictability, if we’re looking to a framework that New Zealanders can trust, that New Zealanders can engage with, that feels accessible, that feels as though it is being accountable, then they can find it in a piece of legislation like this, and indeed in the work programme of this Government.

I’ve just come from speaking to a group of young people about how impenetrable politics and this place seems—its institutions included. I think that this piece of legislation, this bill, is a fantastic starting point for providing greater transparency and accountability for one of our most fundamental institutions. This is, ultimately, about democracy. The Hon Judith Collins, in her contribution earlier, asked what this bill is trying to remedy, calling it “window-dressing” and “butt-covering”. I want to shed some light for the Hon Judith Collins on what this bill actually does, because it would seem as though she, perhaps, has not engaged with the depth of its content. This is, of course, in response to phase one of the Government’s independent review.

In the current Reserve Bank of New Zealand Act what you’ll find is that the only objective required in considerations regarding setting monetary policy is that of price stability. Now, as previous speakers have addressed, that is absolutely, fundamentally important. It is about predictability for consumers, for business people, and particularly those within our society who sit at the lower end socioeconomically. But what it doesn’t do, what it doesn’t provide for at the moment is what a few other jurisdictions have explored and what we’re now seeking to incorporate in the form of maximum sustainable employment, which is, simply part and parcel of a work programme that looks outside of a myopic focus on what we deem as success in the economy.

If I may ask this House, what is the point of referring to the abstract notion of the “economy” if the people who make it up aren’t doing OK; if they can’t find jobs? This is part and parcel, as I’ve said, of a broader work programme. It is a step away from that narrow view of the economy and of financial success as a country, happening in the context, I would add, of a broader Government work programme related to what’s happening with the well-being index and the “well-being Budget” later.

So too, this amendment bill moves away from a one-man decision-making policy towards a committee decision-making structure for monetary policy, with the monetary policy committee, which includes members external to the Reserve Bank. Now, as we’ve seen in research that’s been conducted both locally and overseas, committee decision-making ends up in better decisions than what we may sometimes see from the likes of captain’s calls.

But one of the really exciting things—that’s actually tucked away in schedule 3 of this bill and is something which excites a nerd like me so keen on public participation and democracy—is in clause 3(2) of Part 1 of schedule 3, in regard to the remit. Under “Process for developing advice”, it states that “The Bank must, before the remit advice is given,—(a) seek the views of members of the public on the matters that the Bank considers would assist it to prepare the advice”. That is lifting the lid on what may seem an impenetrable Government institution, if I’ve ever seen it.

So too, there is the requirement that the bank must, as soon as practicable after the remit is issued, publish a copy of the remit advice on an internet site maintained by or on behalf of the bank, and whilst I note the archaic wording, that’s another really exciting feature which opens the door in regard to transparency and accountability. So I would love to see what comes out of the select committee stage and would hope that the Opposition would engage with it, so that we do end up with the most robust kind of framework moving forward.

So too, I’m incredibly excited as to what we’ll see coming out of phase two of the independent review. The Green Party is proud to be supporting this bill.

First of all, for the benefit of the Hon Ruth Dyson, I won’t take a full 10 minutes, because I know that she gets a bit prickly at this time before 5.30 p.m. and is always keen to get on that flight back to Christchurch to service the Port Hills electorate.

I listened with interest to the contribution by the Minister, the Hon Grant Robertson, when he mentioned the importance of the Reserve Bank of New Zealand Act, and with that I totally agree. It has been the very foundation to our economy for a long period of time. I listened with interest also to “Professor” Fletcher Tabuteau, and, of course, I think I’m very grateful that he’s here in Parliament and not now lecturing to students because, of course, if he was lecturing to students suggesting New Zealand was the first country in the world to have an independent monetary policy, an independent Reserve Bank, then it’s probably unfortunate they were so ill-informed by their lecturer at the time.

But what we’re doing here, and the reason National’s not prepared to support the legislation, is effectively we’re doing two things: we’re legislating the process the Reserve Bank uses now and then legislating that it goes and makes its final decision for a committee. We’ve had the Reserve Bank Governor recently before the Finance and Expenditure Committee and he tells us that’s exactly the way the Reserve Bank makes its decisions now. So why we need legislation to do that when it’s exactly the way the Reserve Bank operates and has operated for a period of time suggests to me, in all honestly, that why we’ve got this legislation before the House is we had a Government formed after the last election that didn’t really expect to be in Government. It’s rushing round to fulfil some promises and loose comments they made through an election campaign, so it’s come up with a piece of legislation that it will put before the House.

And I guess the good news is—and, again, we heard comments from the Minister and particularly from the Hon Phil Twyford about how this legislation’s been discussed and brought together between the Labour Party, the Green Party, and New Zealand First. And I think the good news is that the New Zealand First policy, announced and pronounced by the Rt Hon Winston Peters on many, many occasions, that the Reserve Bank Act should also take into account in making its decisions the level of the exchange rate—at least that notion has been consigned to where it should be: the dustbin. And the Rt Hon Winston Peters either has forgotten that he’s gone around the country for many years claiming manipulation of the exchange rate should be the role for the Reserve Bank Governor—and that has been forgotten. So I think that’s good news.

The other comment I wanted to make is around maximum sustainable employment. I don’t believe this wording’s necessary. I again took the opportunity to ask Adrian Orr, as he appeared before the select committee, what exactly it means, and he was a bit unsure. He was very vague with his answer. And I do take this opportunity of congratulating Adrian Orr on his appointment as the Governor of the Reserve Bank. I think he’ll do a superb job, but they are words that aren’t well defined and could mean all sorts of things to all sorts of decision makers—“maximum sustainable employment”.

So for those reasons, I think, in summary, while it’s always good to have a look at Acts that have been around for 30 years to consider whether they’re still relevant, the fact that we have a two-phase discussion process being initiated by the Government and the fact that this is the result of the first phase and not the complete phase suggest to me, as I said earlier, this is a Government surprised to be in a position of power, surprised to be in a position where it’s got to advance policy. It’s come forward with something relatively simple and relatively unnecessary. It’ll go before the Finance and Expenditure Committee, where, no doubt—that committee works very collaboratively, well-chaired, I might add, by Mr Wood—we’ll work through the issues and bring it back before the House. But it’s unlikely to change the position that the National caucus is taking at this stage. I thank you, Madam Assistant Speaker.

I understand this is a split call—Dr Deborah Russell.

Thank you, Madam Assistant Speaker. I’d like to echo some of the comments made by our colleagues on the other side of the House. The Finance and Expenditure Committee, while we may fight tooth and nail over some policy issues, is nevertheless quite committed to arguing through the technical details of many bills and getting them right, so I’m looking forward to working with the Hon Amy Adams and the Hon Judith Collins and the Rt Hon David Carter and other members of the Finance and Expenditure Committee to work through the technical details of this bill.

I do want to address just one point that has been raised by the members of the Opposition—though I might say, in passing, if they think we are surprised to be a Government, I think they’re even more surprised to be in Opposition. They possibly need to learn how MMP works. But getting back to this idea about the dual mandate, and particularly looking at maximum sustainable employment, now the honourable David Carter raised an interesting point here that perhaps we weren’t even sure what this term means. Well, may I suggest that this select committee will work hard on that phrase of “maximum sustainable employment”.

We’ve talked a little bit in this debate about how pernicious high inflation could be, how the Reserve Bank of New Zealand Act was brought in in order to deal with high inflation. May I suggest that high unemployment is pernicious as well. Even that 4 percent unemployment figure we’ve had, it disguises partial employment, it disguises the gig economy, and it disguises the fact that many people have not had long-term employment, and that has a long-term effect on them. Graduates who don’t get work coming out of university—it holds them back right throughout their lives. People who don’t have sustained employment find that it affects not just their bank balance but their actual place in the community, so focusing on employment is a worthy goal. It is something that we do need to focus on. I’m looking forward to working through this bill and working out just exactly how we can ensure that our Reserve Bank can work towards focusing on these dual goals of keeping inflation under control and keeping unemployment under control too. I commend this bill to the House. [Interruption]

My apologies, Madam Assistant Speaker. I know how much everybody wants to get home. Look, it’s my pleasure to take a short call on this Reserve Bank of New Zealand (Monetary Policy) Amendment Bill. As we’ve said, and as this side of the House has articulated already, there’s a great deal in this piece of legislation that we’re supportive of, and I see no reason why we won’t go through with supporting an independent monetary policy committee and that sort of notion.

But, actually, I do want to talk about the dual mandate from a slightly different perspective than other speakers, because I am struggling to understand what exactly we are trying to fix. For 30 years—

Chlöe Swarbrick: It’s in the bill, mate. It’s in the bill.

I understand it’s in the bill. For 30 years we’ve had a wonderful system. The economy has gone incredibly well. We have single-mindedly focused on inflation and done an incredibly good job at fixing that. So if you look at the current state of the New Zealand economy and the state of the Government books—and the state of unemployment in New Zealand, which is around 4 percent, a very low level by international comparisons—then you have to say: what are we trying to fix? Because when this Opposition now, but Government then, left Government, the New Zealand economy was in incredibly good shape, and the benefits of that are flowing through even now. If you lose focus on things in life, in my view, and you broaden it too much, you lose the focus. We have focused on inflation for 30 years since the Reserve Bank of New Zealand Act came into place, with an independent person doing so, because inflation is actually like rust: if you don’t keep focusing on it, it destroys everything in an economy. My concern about this bill is as you start looking at employment and long-term employment issues as well, the Government takes its focus off that, as does everybody in the New Zealand economy.

So I stand here today, just before we rise for this week, and say this side of the House is not convinced that a dual mandate, first, is warranted, or, secondly, will make any difference. And, thirdly, I worry it’ll make things worse, because when the economy’s not going so well, decisions will have to be made, and decisions when you have a dual mandate will automatically compromise the single-minded determination of various Governments to focus on inflation. There can be no other way. It will compromise that, and I believe, personally, as does this side of the House, that inflation is one of the greatest evils in any society and in any Government. If you have a low-inflation environment, employment is actually, generally, very high—you know, there is very little unemployment—and I worry that this bill, as it’s written, and as it comes in, seeks to spread that concept into two parts.

I think that actually we risk undermining the very success of this economy, of the Reserve Bank of New Zealand Act, of the Reserve Bank Governor, and of all the things that that particular regime has helped get New Zealand through today. So I’m happy to speak against this particular part of the bill, and I look forward to the select committee working through the good parts. Thank you.

I understand this is a split call. Michael Wood, you have five minutes.

Madam Assistant Speaker, thank you very much. Can I start off this speech firstly by acknowledging Minister of Finance Grant Robertson for introducing this piece of legislation—and it’s a significant piece of legislation. Can I also acknowledge other members of the House who have spoken on it. I think the debate, despite the fact that the Opposition has indicated their intention to vote against at this stage, has been a constructive and quite a considered debate. I think some of the points that have been raised can be well considered at select committee to see just where we can get to on those issues. I might note that the original debate on the Reserve Bank of New Zealand Act, back in 1989—I checked out Hansard—was a little more fiery. There was quite a good interjection I noted in it. When the speaker Ruth Richardson said, “What does the Minister know that we do not know?”, Mike Moore yelled out, “Most things!” So the debate today has been a little more low-key and a little more considered.

One of the things I just want to put to the House and to members of the Opposition is there are, basically, I think, two things—two themes—that you can read into this bill. One is that it is an evolutionary bill, and a number of members who have spoken have made the point, quite well and quite fairly, that some of the things contained within this bill are kind of picking up on practice that is already beginning to emerge. So, for example, the Reserve Bank tells us that they have been shifting more in the direction of a committee decision-making model. I don’t think that it’s therefore a weakness to actually have legislation which transparently reflects that in terms of the way that the public can view it.

The second point is around transparency, and I want to pick up on one thing that hasn’t been noted in the debate here today: that by having a committee process and by ensuring that the minutes of the committee are published—which is one of the other aspects of this bill—the people of New Zealand, the people who rely on these decisions, can actually get more of an insight into the decision-making process not just of the governor but of the whole committee, and can begin to see where that committee might be moving over time. I think that will be of interest to New Zealanders. I think it is fair and reasonable that New Zealanders have access to that information, given how significant the decisions are, and I actually think it is market information that will be extremely useful to a range of other people.

I think most of the points in this debate have been made very well, so I’m probably going to leave it there, but I do look forward to the further discussion at select committee, and I would urge all members to reflect on those two points. This is an evolutionary piece of legislation, not a revolutionary one, and it certainly does increase the transparency of some very important decisions that are made within our economy. Thank you, Madam Assistant Speaker.

Thank you, Madam Assistant Speaker. I rise on behalf of the ACT Party in opposition to this bill—this piece of ministerial vanity and economic vandalism. Make no mistake: the people of New Zealand are being deceived that they can somehow get something for free. They are being promised that, by speeding up or slowing down the printing presses, a group of people—no longer an accountable individual; a committee of people—can somehow get them jobs. And it’s instructive to look at the cover sheet—very well designed by the previous Government, I might add—and ask yourself: what is the problem that they are seeking to solve with this piece of legislation? There is not one there. They say that, somehow, monetary policy could be used to stabilise the real economy—only at the expense of price stability, and price instability simultaneously destabilises the real economy. It cannot be done, and it is impossible that this bill can deliver what it promises to deliver.

Now, the kind analysis that, in civilised debate, we are supposed to offer is that people who put forward dopey, vandalising bills such as this have good intentions but they are misguided. They have brought in the rhetoric that they had when they were campaigning on university campuses and applied it to the big boy’s job of being the Minister of Finance. But there’s another possibility, because if it is impossible that fiddling with the money supply will improve economic stability and employment, then what other motivation could a Minister have? He hasn’t put one in the regulatory impact statement. What else could possibly be his motivation? And it’s this: we heard from the Minister about the dark old days of 1989. Well, just prior to that, we had a very different politician in charge; a guy called Muldoon. And he came along and he said, “Ah, ha, ha.” And every time there was an election, he ramped up the printing presses and got the short-term sugar hit, and then New Zealanders got the economic instability that followed.

Now, some people might put two and two together and ask themselves: why is it that a Minister is solving a problem that does not exist and devolving a set of decisions not to one individual who is totally accountable and whose job depends upon maintaining price stability but to a committee of people—a range of people—that he will have influence on the appointment of? Could it be that this is not just dumb policy; this is actually evil policy. This is an erosion of the independence of the central bank. This is the current Government attempting to take control of the printing presses—not quite Venezuelan style; just in a sort of smaller capacity than they’re used to.

It is a way that this Government will be able to influence the supply of money, and I bet this House that, when this is in place, and when their committee is making the decisions, we will no longer have independent monetary policy; we will have a pattern that will be detectable in a few electoral cycles, which will tell us that the money supply goes up and inflation goes up and the economic sugar hit comes out right before an election, and then, once the election is gone, they take the punch-bowl away and the New Zealanders get the economic instability that the Reserve Bank of New Zealand Act was designed to take away.

This is a black-letter day in New Zealand lawmaking. The Minister either has no idea what he’s doing or he has every idea what he’s doing. He is seeking to corrupt the independence of the Reserve Bank. He is seeking, for political advantage, to take away the price stability that New Zealanders have enjoyed for the past 29 years, and what a shameful day to erode those policy settings that a previous Labour Party proudly put in place. I am very proud to be opposing this stupid bill. Thank you.

Thank you, Madam Assistant Speaker. I too would like to speak against the bill for a couple of reasons. I do agree with Lawrence Yule, in that there is a real problem when we’ve got two—at times conflicting—targets.

It wasn’t that long ago when stagflation was rife: where you have a situation when inflation is high and unemployment is high. It wasn’t that long ago. In which case, cutting rates would help one and hurt the other. Dr Russell mentioned that unemployment was already too high, so, therefore, she would, I assume, want to cut interest rates further today because unemployment, in her view, is too high. But we know that cutting interest rates today has risks associated with inflation but, more importantly, with price stability. House prices will go north if we have Deborah Russell’s way.

💬 Hon Andrew Little: So what have they been doing for the last 10 years?

So what I’m trying to do here, Mr Little, is explain the conflict that is inherent in having two targets. Already we hear, in the current settings, the problem that the Reserve Bank Governor has when he’s already got an inflation target but also has to consider price stability. So look back at his reports over the last three years, and he’s often in a dilemma as to whether to cut rates, to kick in the inflation rate to get it back to his target, but knowing that cutting rates creates pressure on house prices. So you’ve got a conflict when you’ve got these two targets, and that is why I oppose this bill.

Thank you, Madam Assistant Speaker. It gives me pleasure to rise to speak in favour of this most excellent bill. I’m surprised that the Opposition doesn’t understand the idea of balance, the idea of tension, and the idea of reconciling those tensions, because that’s exactly what this bill does and what is needed. I’m extremely surprised that the member for ACT doesn’t even seem to understand monetary policy, given his party’s so-called monetarist approach.

The official cash rate is not about printing money; it’s about overnight interest rates to set the market for interest. It’s not the only lever of interest rates in the country; the fact is we’re a small economy and we’re affected by overseas markets, as well. In fact, this bill, in terms of monetary policy, is simply about balancing the economy, ensuring the best employment outcome and the best inflation outcome, and we need to balance those things against each other. Anyone who doesn’t know that those two things are related needs to go back to university.

Look, that feeds right into the fact of the wellness framework, which also underpins this and which I congratulate our Minister on: the fact that there is more than one thing we need to measure, more than one goal that we need to achieve. Frankly, there’s not a lot more to say than that in respect of this bill. This bill is about balance—balance in our economy and balance in our monetary policy—and, on that basis alone, I recommend it to this House.

I move, That the Reserve Bank of New Zealand (Monetary Policy) Amendment Bill be reported to the House by 3 December 2018.

Motion agreed to.