Reserve Bank of New Zealand Bill

Members, we now come to—

💬 Hon Eugenie Sage: Mr Chair. I seek—

CHAIRPERSON (Adrian Rurawhe): —taihoa—the debate on Part 4. This debate is on clauses 168 to 199, which relate to the operation of the Reserve Bank. The question is that Part 4 stand part.

Point of order, Mr Chair. I seek your leave to correct the vote. It should be two votes against from the Māori Party.

Leave is sought for that purpose. Is there any objection? There is none. The record will be adjusted. So the Ayes are 75, the Noes are 45, and Part 3 still stands part.

Thank you very much, Mr Chair. So Part 4 of the bill is around the operations of the bank. Again, much of this is carried over from previous incarnations of the Reserve Bank Act. A very important clause for me is clause 168—the safeguarding of the independence of the bank—that has been consistent throughout the operation of the bank. And I do, on a serious note, want to underscore the fact that I do believe it is a genuinely held view of all members of this House that we do need to protect the independence of the bank. And to take up the offer made to me earlier on by Nicola Willis in terms of the Hansard, that is an important thing for us to reiterate at this time.

Over the years of the bank’s operation, it has evolved. Monetary policy has evolved. The responsibilities of the bank have evolved and increased. But that question of independence is important. The creation of the Reserve Bank Act in 1989 came from things that occurred in New Zealand in the first part of that decade. I think it is important for all members of the committee—and I’m not making a political point there, I’m making an overall point that actually it is important for the committee to reiterate the importance of that.

Otherwise, the part looks at the role of the bank as an employer and indeed being a good employer. Questions around liability, liability for the bank itself, for those within the bank’s operating models—so members of the board, the monetary policy committee, the governor and so on—how that liability is exercised, how the bank deals with third parties in terms of its contracting process. We then have the process for the review of the bank and its operations and reasons why it can release information, and then a set of miscellaneous conditions to allow the board, the governor and other office holders to go about their work.

I couldn’t resist a chuckle when the Minister Grant Robertson was describing what Part 4 did in the context of clause 168, where he quoted the section safeguarding the independence of the bank. Because, actually, subclause 168(1) refers to the operational independence as it relates to a particular person or persons—that is, the Minister can’t direct the bank to go after individuals or groups of individuals, which is absolutely right; that’s not the Minister’s role. But it is ironic in the extreme that he tends to reinforce the operational independence of the bank, when the bill as a whole actually undermines that in my view. The simple question that National members have asked themselves in their consideration of their support for this bill was this: does the bill make stronger or weaker the operational independence of the Reserve Bank of New Zealand? And the answer is inevitably “weaker”. In fact, Part 4 then goes on to list a number of ways in which the Minister of State Services and the Minister of Finance may give plenty of directions, instructions, remits, and so on—that is a greater power than in the 1989 Act. So I point that out at Part 4, my mirth at the irony of the introductory remarks the Minister made, which were in fact directed at protecting individuals and groups, not his overall influence.

I want to continue that vein of thoughts from the Hon Michael Woodhouse, because we’ve been talking tonight, and the first thing we do agree on is the independence and the importance of the independence of the Reserve Bank. I think there’s a difference around making sure we’ve got the right framework for that and then differentiating that in terms of the independence of the bank to perform its functions. I think it’s that crucial part of independence that it should be free to go out and execute and perform the functions that are set out clearly under the various remits that are provided, and we’ve just been talking about how the Minister can change that quite easily without much transparency or oversight by Parliament.

But with regard to the much wider issue of independence, there are some fundamental changes to this bill that give us a great deal of discomfort, and one is around the appointment process. So, essentially, what we’ve ended up with is moving from a single governor with wide-ranging powers to one where we’ve now got a board that is essentially appointed by the Minister of Finance without any real criteria as to how those people should be appointed and what skill sets. All we know is what they shouldn’t be able to do, like be an undischarged bankrupt. But that’s one level of oversight now by the Minister, and, of course, the board that is appointed by the Minister now has the role of making a recommendation around the governor, which, of course, is subject to oversight by the Minister, and, of course, we’ve got the all-important monetary policy committee, again, with ministerial oversight.

So this whole issue of independence has been cut through and degraded because now there’s a significant amount of oversight with the Reserve Bank, particularly where appointees to the bank board could now be very much ex-politicians and all those unfavourable things that we wouldn’t want to see creeping into the appointment process around the board. So that’s one issue around the lack of independence. If we’re talking about trying to achieve clause 168, I think that’s the first strike of a bow that says that, well, actually, this piece of legislation doesn’t help that.

We’ve talked about the remit process, and I think that is a very significant thing in terms of the way the Minister has oversight in terms of the remit. In the context of the Minister’s opening statement about protecting independence, we agree with that, but I’m not sure that we agree with the approach of it, and that’s why most of the five Supplementary Order Papers that have been put up are dealing with the issue of independence and making sure we are protecting it. What we’re seeing with this second of three—we haven’t yet seen the third piece of legislation coming through—is what other changes will be made that will undermine the independence of the Reserve Bank.

The question is that the Minister’s amendment to Part 4 set out on Supplementary Order Paper 44 be agreed to.