Reserve Bank of New Zealand Bill

I present to the House a legislative statement on the Reserve Bank of New Zealand Bill.

ASSISTANT SPEAKER (Hon Jacqui Dean): That legislative statement is published under the authority of the House and can be found on the Parliament website.

I move, That the Reserve Bank of New Zealand Bill be now read a third time.

Before I proceed to go through where we’ve reached with the bill, I do want to reiterate my thanks to all members of the House who have participated in this debate; an excellent and detailed examination of the bill in the committee of the whole House stage, which, I think, has shed more light on what the Government is trying to do here with this piece of legislation. I want to particularly thank members of the Finance and Expenditure Committee, who worked on this bill and made some very useful and important changes to it. I also want to make special mention of the officials from the Treasury and the Reserve Bank who have been working on this legislation. This bill, as I have said a number of times, is second in a trilogy, and the work that has gone into those three pieces of legislation has been, essentially, for more than three years. A joint team between the Reserve Bank and the Treasury have worked together on this, and I want to thank all of the members of that group for their hard work, along with other officials from both agencies. Finally, in this part of my acknowledgments, I want to acknowledge the independent expert advisory group that we established right at the beginning of this process—

💬 Hon Simon Bridges: What about Andrew Bayly?

—under the chairpersonship of Dame Suzanne Snively, they have done a tremendous job in supporting the work that we’ve done. And Mr Bridges, I did acknowledge Mr Bayly for his contribution in the committee of the whole House stage; I don’t recall the member’s contribution, but I’m sure it was there behind the scenes, as the member so often is: behind the scenes, manipulating people around, moving the chess pieces about! I’m sure that is what Mr Bridges was doing during the Reserve Bank of New Zealand Bill as well!

The core of what we have been trying to do through this Reserve Bank reform process is to modernise the Reserve Bank Act. As I’ve said a number of times over the two bills that have already come forward, the Reserve Bank Act passed in 1989. I was in seventh form; Mr Bridges was tearing up university or somewhere—oh, high school at that point as well. It is the case that in the 30 years that have passed, the functions of the Reserve Bank have expanded somewhat—in particular, in the area of financial policy.

So while we can be familiar with the things we see of the Reserve Bank in the news about—such as monetary policy and the setting of the official cash rate. A core part of the business of the Reserve Bank is its prudential-regulation role; the work that it does in making sure that New Zealand has a stable financial system. That has been added iteratively over the years to the Reserve Bank, and yet the legislation has not really reflected those changes, and so that is the reason for this particular piece of legislation.

As I said in earlier contributions, the first of our pieces of legislation dealt with monetary policy, the decision-making process around that, and the objectives for monetary policy. This is what we have colloquially called the “institutional bill”. This is the bill that sorts out the way in which the Reserve Bank operates in order to fulfil not only the monetary policy objectives, as I say, but also its broader financial policy work.

The bill—and the Act, as it now stands—will continue to uphold the operational independence of the Reserve Bank. That is a very important principle that we worked with all the way through this piece of legislation. There were times in our debate in the committee of the whole House where, variously, members of the Opposition either seemed to want to pull us closer or take us further away from the bank. The fundamental principle of operational independence is important in central banking. Again, that year, 1989, was significant because it followed on from the concerns that arose in the early- and mid-part of the 1980s about what might happen when there are people who perhaps seek to control aspects of monetary and financial policy from a political perspective. We have, in this legislation, protected the independence of the bank.

In terms of what the bill does, the key provisions we’ve covered often. But one of the most important ones is the establishment of a governance board for the bank. The Reserve Bank of New Zealand has had a board, but it has not operated in the way that we might expect a governance board to operate, be that from the private sector or be that from a Crown entity. So we now have that. This is a further extension of the concept of a more collective decision-making model that we helped create with the monetary policy committee, and moving away from that concept of a single decision-maker. That puts the Reserve Bank of New Zealand in line with central banks around the world, in terms of how they operate. When we started out in 1989, the Reserve Bank Act was leading legislation and it had that single decision-maker model. Central banking around the world has evolved to a more collective decision-making model and that makes further sense than to have the board undertake the duties as it does.

To ensure that there is a connection between the monetary policy work, which is outside of the board—that remains the monetary policy committee’s job—and the other functions of the Reserve Bank, the decision was made to include the governor as a member of the board. That also was not without some discussion in the committee of the whole House stages, but I am absolutely convinced that is the right thing to do. The Reserve Bank Governor continues to play a very important role in all aspects of the work of the Reserve Bank, and having that person on the governing board gives me confidence that all of the different functions of the bank will be able to be undertaken with clear line of sight for each other.

The bill also strengthens the accountability and transparency arrangements of the Reserve Bank. There is now a formal departmental monitor that the Minister of Finance will appoint. The board has very clear duties and roles and responsibilities. The bank will be subject now to the oversight of the Ombudsman and the Auditor-General, so further strengthening and enhancing the accountability arrangements.

The bill further clarifies the financial stability objective for the bank to protect and promote the stability of New Zealand’s financial system.

💬 Andrew Bayly: But not efficiency.

That is an appropriate primary objective for the bank. The question of efficiency, that Mr Bayly is rightly interested in and concerned about, is more properly dealt with not as a secondary rather than primary consideration; it will be a factor in everything that the bank does—in particular, in its prudential framework, but also all of its statutory principles. Efficiency is not lost, Mr Bayly, but it is now appropriately placed in the criteria of objectives for the bank.

Also, what the bank does is provide for the Minister of Finance to issue a financial policy remit. This is an important development to give the financial policy and stability work of the bank an appropriate status. So we have a monetary policy remit; it is the agreement between the Minister of the day and the bank around how they will work in monetary policy: operational independence but the Government gives them guidance. This is what we used to call the policy targets agreement when it was done by previous Ministers before we created the monetary policy remit. Having a financial policy remit as a partner to that is really important because it means that there is a clarity of what the Government’s expectations are in financial policy, but then the ability of the Reserve Bank to independently operate and implement them. In the absence of a remit like this, we’ve had the situation where there was concern about house prices and their impact on financial stability, and we ended up having to use section 68B of the Act to deal with that—

💬 Andrew Bayly: After I asked you to do it.

—financial policy remit. All-powerful, Mr Bayly! The financial policy remit now gives the ability for the Government to be able to have that clearly laid out in law and avoids those ad hoc changes that we have seen.

In the time remaining to me, I just want to note a point that I made right at the end of the committee of the whole House stage: that also within this bill is the first statutory recognition of the Council of Financial Regulators. This is something that I have personally pushed for. It is important for New Zealanders that all of the bodies that are responsible for regulation within our financial sector, regulation of the very important things that happen in banking and in the way in which financial institutions operate—that we actually have a council that is there to make that consistent and to make that work clear to the public, but we’ve never recognised that in statute. So this means that the likes of the Financial Markets Authority, the Reserve Bank, the regulatory aspects of the Ministry of Business, Innovation and Employment, and the Commerce Commission are now coming together and we can get better, more consistent, and more clear regulation in front of the House.

I am very proud of this legislation. I want to acknowledge, again, the hard work that has gone into getting us to this point. And lest anyone think that we might lose out on the excitement of legislation about the Reserve Bank, I have this promise: we’ll be back shortly with the third in the trilogy, the Deposit Takers Bill, which will be another important piece of legislation and will finish off the reform of the Reserve Bank that we have undertaken that is 30 years in the making and very important to the stability of New Zealand’s finances.

Well, that is what we’re worried about, Mr Robertson: what you’re going to concoct next!

It is my duty to talk on this third reading of the Reserve Bank of New Zealand Bill. I think I just want to start out by saying that there are elements of the Reserve Bank of New Zealand Bill that we’re discussing that we have absolutely no problem with. Just picking up on the Minister’s last comment, around the Council of Financial Regulators, those types of provisions we’re very happy with. There’s a lot of good in this bill; however, that’s not to say that we do not have some fundamental issues with this bill. We have sought to work collaboratively with the Government to try and address these issues, because I think it’s particularly important that, as the finance spokesperson and shadow Treasurer for the National Party, at least we as the major Opposition party—the major Opposition party—have the ability to help actually formulate a new framework for the Reserve Bank that will be enduring. And that is the issue with the process that’s been adopted: that there are some fundamental issues that should have been debated more, that should have been taken into account, and I think what went on in the committee of the whole House actually showed up some weaknesses, in terms of understanding, particularly of the Minister, around certain elements.

So we put forward five Supplementary Order Papers (SOPs). The first one was the issue of efficiency. We’ve just heard the Minister talking about this. This is in relation to when the Reserve Bank goes about setting financial stability objectives, whether in fact efficiency should be one of the main elements of that. We believe it is crucial. The reports and the submissions from many in the industry thought also that it was very important. We totally disagree with the concept that it should be subsumed into a secondary role, as the Minister has just noted.

The second SOP that I put up was that the board needs to appoint people of the appropriate calibre, and the weird thing is that we have adopted—and the Minister has talked about this and Treasury officials have talked about it—the lowest sort of issue or framework for providing guidance on who could be appointed to this most august and, in my view, most significant economic entity in New Zealand in terms of its role in our financial markets. So the bill is full of stuff about what you can’t be to be a board member. It says “if you’ve got a criminal record”. You can’t be a serving politician. You can’t have been adjudicated to have been in receivership at some stage—a whole list of absolutely mindless, silly things that, if you even were to put that into your CV or had any chance of being in that situation, these people would not be, or should not be, even contemplated as having any of the skills to be even contemplated to be put on the board.

What we were proposing was that it was very important that this board—which has changed under the new arrangements that Mr Robertson has brought in—now has an executive role. There are four key aspects of the executive role—namely, the issue around financial stability. So we need people on that board who actually understand what financial stability is, how it will be implemented, how it will be managed through the Reserve Bank. The second one is about prudential policy in the sense of how it is managed and how banks are managed. It requires deep understanding. Again, the bill does not set any parameters as to the types of skills we should be seeing on this board. The fourth one: macro-prudential policies as well—another key aspect of the Reserve Bank that most people have no understanding of what I’m talking about, but it’s a crucial aspect of the Reserve Bank. Was that included in the bill? No.

The other one is the ability to manage crises, and we have them. We have them from time to time—Asia flu crisis; we’ve had lots, actually, out of Asia—where periodically we have major financial meltdowns around the world that seriously impact on the financial performance of New Zealand. And those are the four ones that we said, “Fine, you should be looking for a board that has diversity, has different skill sets, but there are some crucial skills that should be on that board and you should be explicit about it.” Because what we don’t want to do is to see retired politicians—and, yes, retired politicians can be appointed to the board. We don’t want to see a whole glut of different types of people that do not really understand the core requirements of the operation of the Reserve Bank. And that is crucial because of the part that this entity plays in our financial system.

The third SOP I put up was around making sure that, if there is a change to the remit—and the Minister talked about implementing section 68B after I asked him to use it and after he called me Muldoon, including the Prime Minister calling me Muldoon, subsequently did it, I think, 10 days later. He used that power to actually instruct the Reserve Bank, under the new bill—under this bill, there was a new process; it’s called a remit process. We said that, if that is to take place, that should be debatable in this Parliament. And the missed opportunity with section 68B is that I should have requested of the Speaker a special debate on it. Unfortunately, because I didn’t, there was no opportunity for anyone in this House to actually debate a major change to the remit of the Reserve Bank, one imposed by the finance Minister. And that is the type of thing that should be open and transparent and subject to debate so at least the Minister has the opportunity to explain why he—and I’m talking about Mr Robertson, in his case—did that change and make sure that it is transparent for people, and that industry and everyone hears why that has been put in place. We said it should be subject—the Minister should still be able to make those changes in a remit, but it should be confirmable in Parliament, which means it is subject to debate. Unfortunately, Mr Robertson chose not to follow that advice.

The fourth SOP I put up was the change regarding the issue of the functions of the Reserve Bank. Now, I’ve been pushing for the Reserve Bank to take a much more active role on cryptocurrencies, and the Reserve Bank Governor has been reluctant to—this pre-dates the introduction of this bill. In this bill, they have put in a specific clause that they’re going to monitor cryptocurrency. In my view, there are times when the Minister of Finance should be able to say to the governor, as an executive role, and possibly to the chair of the board now, that he or she should have the opportunity to require them to have a particular look at some aspects, because it may impact on the Crown. And you may have a governor or a board that chooses not to do it. Now, under the current bill arrangements, a change in the functions of the Reserve Bank can only be requested by the Governor of the Reserve Bank. We think that is appropriate, but we also think there should be the opportunity for the finance Minister to request a change in the functions. So there should be a two-way street to it. It doesn’t change the right of the governor or the board to request the change, but it should be a two-way street. And, again, Mr Robertson chose to ignore that advice.

The fifth thing, and this was an element of much discussion at the committee of the whole House, here on this floor, is changes to the capital structure of the Reserve Bank. We have ended up with, in my view, a very unsophisticated approach in this bill, and the case in point is that the Reserve Bank has been out buying billions of dollars’ worth of Treasury stock, Government stock, from the market. And the only reason that the Reserve Bank Governor went to Mr Robertson, as the finance Minister, was that he thought it would be advisable—he had absolutely no requirement to—to go to the Minister of Finance and seek an indemnity. And, because he did that, that gave Mr Robertson the opportunity to put some parameters around the nature of that spending. Now, if he hadn’t gone to him, there would have been no ability for the Minister of Finance to put in place some controls around the Crown balance sheet. We said that there should be a much more sophisticated approach. We actually provided the wording from the Bank of England, and there’s another example from the Canadian central bank that we provided to the Minister, that they recognise that things like derivatives, contingent liabilities, should be able to be captured, but, unfortunately Mr Robertson showed, on the floor at the committee of the whole House, he does not understand this. This bill is deficient in that regard.

The question is that the motion be agreed to.

Thank you, Madam Speaker. The Minister of Finance began his speech by mentioning that when the Reserve Bank of New Zealand Act was first established back in 1989, he was in seventh form. At that time, I was in my second year out from university, working as an auditor and, in fact, auditing the Reserve Bank. It was a grey and dusty institution, but the 1989 Act did actually substantially change it and modernise it, but that was 30 years ago in a different world. In the world we are facing today, we actually need to change the way the Reserve Bank operates to give it greater scope to act, but also to give the Minister of Finance greater capacity to work with the Reserve Bank in terms of managing the New Zealand economy for the betterment of us all, and that is precisely what this bill does. I commend this bill to the House.

Thank you, Madam Speaker. That gave me at least 45 seconds to get ready. I think Dr Russell made the very point that concerns me about this bill. She talked about the Reserve Bank of New Zealand Act when it was passed by the fourth Labour Government in 1989, and that this is some kind of a tidying up of a dusty old piece of legislation—32 years old—that, as she said as a sort of a “by the way”, gives the Minister a bit more influence over the Reserve Bank.

Well, I remind the House that the 1989 legislation was designed to do quite the opposite. It was actually designed to place the Reserve Bank in a more independent and arm’s length distance from the potential of an interfering Government. Now, it took a while to frame up, and it was in year five of the six years of the fourth Labour Government and it was part of a raft of amendments to legislation that were specifically designed to do two things. One was to free up a controlled economy, and the other was to reduce the influence, not so much of Parliament but of the executive, on the decisions of so-called independent institutions. My concern right throughout this process was that the creeping hand of the influence of any Minister of Finance, not just this Minister of Finance, becomes more likely.

In earlier readings, I talked about what the Hon David Caygill, the then Minister of Finance, had as his goal for the Reserve Bank Act, and it was simply this: the Act, when it was passed, placed the bank on a more independent but also more accountable legislative basis than at present. The National Party would love to be able to support it. It is a Reserve Bank bill, for goodness’ sake. It is one of those things that we should have bipartisan support for because it’s lasted 32 years; we hope it will last 32 years more, and as a consequence, it’s going to traverse the oversight of successive numbers of Governments on both sides of the aisle.

So the deeply disappointing part of this actually started with the fact that no other political party who has to consider and then vote on this bill was consulted with at any stage prior to the introduction of the legislation. The Minister says, “Oh well, you know, the parties can have their say at select committee.”, and they did and we had very good submissions. We had good support and good advice from the officials, and we made what we believe were constructive suggestions to improve the bill and to go back to its original purpose or to remind the committee of the original purpose which was that independence and accountability. None of them were successful, and that, I think, reflects the attitude that this was: the Government knew best; the Minister knew best. He had a particular vision of what the Reserve Bank Act should do and he was going to pass it, and that is the prerogative of the executive, but I am disappointed that there was zero consultation prior to it being brought in. It may have been a much more smooth passage had he done that. So we’re now faced with the situation—there will be a future centre-right Government in this country. It will be led by National and supported by ACT and we’ll be back here changing this and we won’t take as long as this lot did. [Interruption] There’s the arrogance. There’s the socialist arrogance that that’s not going to happen. Simply pointing out that Government’s change got them chuckling.

💬 Barbara Kuriger: They do. They do and they will.

Exactly. I won’t be laughing then—

💬 Anna Lorck: Led by who?

—because we’ll have a job to do. Oh, there’s Ms Lorck, the very reason it will happen sooner rather than later, I think. I think whoever stands for National in Tukituki—there will be a scramble in Tukituki in 2023 to get that candidacy. The campaign strategy will be simply to replay her Parliament speeches.

But we will be back here and we will have to amend this to maintain the integrity of the independence of the Reserve Bank, and we will be doing so, consulting with all parties. That’s what we’ll be doing. It’s something that didn’t happen in this bill and it’s deeply disappointing. It’s the reason the National Party hasn’t supported it so far and cannot support it now.

I was quite surprised. I thought that member Michael Woodhouse, with his passion about this bill, would have gone on to at least take his full time.

However, this is a bill—its time has come. There was a time when central bankers were people who sat in back rooms and were not particularly relevant. They certainly weren’t well known. Come 2008, all of a sudden the world looked to them and said, “Save us, because we’re going down the tubes very quickly.” So names like Mario Draghi and Janet Yellen became household names. They, central bankers, all of a sudden were elevated to a place in the financial system that gave them extreme power. Any hint of an interest rate rise or drop would see markets spiralling upwards and downwards. So we exist in that world; our legislation is part of that. It’s essential that we have good legislation with which to background that sort of power, that sort of movement, and this legislation will do it. I recommend it to the House.

Tēnā koe, Madam Speaker. The Green Party is supporting this bill. In fact, there are several changes that it makes that the Green Party was calling for for quite a long time, one of them being ensuring that a broader representation of people, such as the board, was overseeing key monetary policy decisions rather than just the Governor of the Reserve Bank alone. I do think it’s totally fine to have the Governor of the Reserve Bank be a member of that board but it is crucial that there is a broader perspective and that all of that responsibility doesn’t just sit in the hands of one person who’s deemed to be some sort of technical expert.

I think probably the area where the Green Party departs from some of the views that were expressed by the Hon Michael Woodhouse and even Andrew Bayly is that back in the late 1980s and early 1990s, there was a certain change in the way that people approached monetary and fiscal policy. There was a kind of belief that there were some technical experts, I mean, they all happened to be English-speaking white men, more or less. But, yeah, what a coincidence—technical experts who were somehow able to manage the economy as a kind of machine as if it were something separate to communities of people, and that they somehow knew better than communities of people.

Ultimately, money just is one tool for representing value that we have in our communities and in this world. It’s really important that it is democratically accountable and that the functions of the Reserve Bank are actually serving the needs of the community, because the economy is just one subset of our society and our communities. All the economy is is a representation of the commercial transactions that we undertake with each other. Really, the economy is just some of the stuff we do as human beings; it’s when we buy and sell things from each other or give each other services that we pay for, but there’s a whole lot of things that humans do that is not caught by the measure of GDP; it’s not caught by paid work. There’s a lot of things that enable our society to function that aren’t currently represented in commercial transactions. All of society, human society, is ultimately reliant on ecosystems to survive and thrive. If we aren’t looking after our ecosystems we are going to be in deep trouble. So while back in the early 1980s and 1990s there was this view that somehow the economy was something that functioned on its own, separate to humans, and we couldn’t possibly make trade-offs to protect the environment or to look out for the needs of people because of the economy. Well, in fact, the economy is just one part of what we do as humans.

It’s really important that the Reserve Bank is a democratically accountable institution. Of course we understand that there could be a desire to ensure that there is independence from the Government of the day, but that should not be independence from the community as a whole in New Zealand. There needs to be broader interests represented. This bill takes it in that direction.

I wouldn’t say that all of the concerns of the Green Party have necessarily been met by this particular legislation, and it will be interesting to look after the third bill that the Minister spoke of, which is coming to the House. But I would say that with the recently released Intergovernmental Panel on Climate Change report that states what a critical emergency it is for us to respond to climate change, that this is an existential threat to all humanity, not to the planet, just to the planet that supports life for humans on it. So it is going to be vitally important that all of our institutions are retooled to be able to deliver the solutions to that; that becomes our primary driver.

It can’t just be about people getting rich for the sake of getting rich and living their lives and using their billions of dollars that they’ve accumulated thanks to the work, blood, sweat, and tears of many, many other people, such as Jeff Bezos going into space. It’s just a perfect representation of how financialisation and a growing of the financial sector as part of the economy over the last 20 to 30 years has not actually produced the supposed economic benefits for humans, for all humans, and that, actually, we’re going to need to look at money, how fiscal and monetary policy are used by Governments, and whether or not they’re achieving those objectives of supporting widespread flourishing of well-being, protection of our natural ecosystems, and climate action, or whether they’re meeting the needs of a small number of people, mainly white men, who are amassing all of the wealth, and using it on their ego trips to go into space, which is completely useless to most humans.

So, yeah, as I said, we need a paradigm shift. Unfortunately, I don’t think that—the Opposition’s kind of still stuck in the 1980s and 1990s on this. This is making some interesting changes that we can support. Ultimately, as a society, we need to have a conversation about what kind of economy we want and what is going to support our aspirations as human beings who have relationships with each other and who rely on the natural environment in order to live our lives.

Thank you for the opportunity to speak this evening, which is on the last part of the bill. I’m not, obviously, going to agree with my learned colleague from the Green Party on various aspects; I just want to concentrate on the bill.

One of the jobs of the Reserve Bank of New Zealand (RBNZ) is to be ahead of the curve, not behind it. We’ve seen since May a disconnect between monetary policy, fiscal policy, and the structure of this bill, and I don’t think this bill will last triple decades. We’ll be here very shortly again to revise some of its aspects.

The Reserve Bank, in terms of its operating environment—this bill has never been about structure. It always should have been about transparency and how the system gets managed and how they make their decisions and how individuals in the economy can benefit from a free and open market system that allows prosperity, the protection of property, the minimisation of taxes, and the ability to have certainty when it comes to wealth planning and superannuation planning as well.

It’s interesting that if you look at what’s happened with the Reserve Bank, the function of what Mr Robertson is proposing is that it actually does rely on people to make decisions, and a call for tightening an expansionary phase of $100 billion in the quantitative easing programme, the choking of the labour market. The situation has been quite clear, even with house price forecasting, that financial stability has been threatened, even in this current year, and it’s not because of COVID; it’s because of decision making around the institution.

So, structurally what happens appears pretty obvious. We’re now bringing in the world’s toughest capital requirements, which may squeeze credit. One of my concerns with the bill is that in terms of minimum capital allocation, which now needs to be raised to 16 percent from tier 1 equity of 10.5 percent, is that this is going to place too much emphasis on capital and far too little on risk mitigation. We realise that there will be another shock to the system. There may even potentially be a recessionary period in New Zealand within this time frame that’s severe, and the RBNZ should have a really balanced, in a sense, and calibrated capital requirement structure with what is missing—as Mr Bayly said, prudential requirements of Governments who run risk management, similar to Australia, the US, Singapore, and Japan.

We also anticipate that some of the decision making will make the cost of loans to customers more expensive. And to the Green Party, who lives in another world: in the household itself we see these distortions around capital affecting lots of individual citizens.

So the bill itself is near its conclusion. We’d just like to put on the record that we have concerns with regards to the managers at the Reserve Bank and the design of the bill. It’s either a case of they’re underqualified or they haven’t seen what has been coming in the economy or they’ve overcooked the economy, even with the COVID response. So if you look at the sensible framework that Mr Robertson laid out, accountability and transparency of the Reserve Bank was the number one goal. Let’s hope that that stays relevant and can be delivered in the future. Thank you.

Thank you, Madam Speaker. I just want to add a contribution that when we looked at 1989, the Berlin Wall collapsed and there was the crackdown in Tiananmen Square. As the Minister of Finance said, he was in college. As Dr Deborah Russell has said, she was at university—oh, actually, no, sorry. She was auditing at the time, and I was eight and at primary school. So this Act is far from overdue to be updated. The fact that we have an Act that is over 30 years old is probably not a good starting point.

When you look at Schedule 4 of the bill—and it is 15 pages—Schedule 4 covers the amendments to other legislation. That’s how much other legislation needs to be changed just for the title of this bill.

Therefore, I commend this bill to the House, and I thank Madam Speaker for the call.

The time has come for me to leave the Chair for the dinner break, and the House will resume at 7 o’clock this evening.

Sitting suspended from 5.56 p.m. to 7 p.m.

The House is resumed. When the House rose for the dinner break, we were under consideration with the Reserve Bank of New Zealand Bill’s third reading. National have the next call.

Madam Speaker, thank you very much for the opportunity to speak to this, the Reserve Bank of New Zealand Bill. So, obviously, at this late stage, the position of the National Party has been made clear by previous speakers, so—

💬 Matt Doocey: Yeah, we don’t like this.

—I don’t intend to rehearse that too far. My colleague has said, “We don’t like this.” I just thought it would be worth indicating some of the reservations that we’ve had, notwithstanding the good intentions that may have—and let’s be generous—of course, underpinned the intention of the bill.

So whereas the purpose, of course, is to promote the prosperity and wellbeing of New Zealanders and contribute to a sustainable and productive economy, we do, nevertheless, have some reservations about the extent to which this can actually be achieved. Of course, we are concerned that there may be counterproductive effects, indeed, notwithstanding that we’re told, according to the legislative statement, that it’s a strengthening of the Reserve Bank’s institutional arrangements that’s intended as an enhancement of the bank’s role as a prudential regulator and intended, again, to increase coordination and the regulation of the financial sector.

So, of course, the context is the work that’s been taking place in relation to the monetary policy amendment Act and the bigger picture is, you know, the Government’s reasonably interventionist approach in this area. Our finance spokesperson, Andrew Bayly, has, obviously, been pretty hot on the heels of Grant Robertson in that regard. So while the Government’s intentions, as I say, may have been positive, to achieve consensus such as they were no doubt hoping for, perhaps a more collegial approach across the House would have been good, such that the Government could have reached out to us at a much sooner stage in proceedings.

So we’d previously suggested a number of amendments. Those were not supported at the committee of the whole House stage, as the record will note. Of course, to have put forward those, unfortunately, belies the fact that we are comfortable with a considerable amount of the bill none the less.

So the reference to efficiency that should have been in there, that’s something on which we’ve made our point pretty clearly, so at this, the third and final reading, I don’t intend to go into the detail much more than that. I’ll just note, perhaps, one other aspect of the Reserve Bank activities that we thought could be handled better, which was in the area of allowing the Minister of Finance to manage the risk of those activities where it would be said that those would negatively impact the Crown’s financial position. So the National Party statement on that has been along the lines that we would require the Minister—the relevant Minister, of course, the Minister of Finance—and the Reserve Bank to agree a capital and financial risk management framework.

So all that said, I think, as I say, on this side of the House, between the various stages of the bill, between the committee stage, at which we put forward those constructive suggestions, we’ve made our position pretty clear. Of course, we expect that it will pass in the way of these things because, of course, the Government can put through what it likes. But that, if anything, just reinforces the fact that with a bit more consensus seeking from that side of the House, we could have ended up with a better result than this. So National continues to oppose this bill.

Tēnā koe e te Māngai o te Whare, te Whare e tū nei e mihi ana ki a koutou i tēnei pō.

[Greetings Madam Speaker, and greetings to all of you in House this evening.]

It’s my honour to rise to take a short call this evening on the Reserve Bank of New Zealand Bill. This bill has been developed as part of phase two of the Reserve Bank of New Zealand Act review. The significance of this bill is that in 2017, the Government announced it would undertake a review of the Reserve Bank of New Zealand Act 1989, and this review is the first review of the Act since it came into force.

So what this bill does is: it’s an important bill that adds an overarching financial stability objective to complement the recently updated monetary policy objectives. It’s in its third reading and it’s really good to hear this evening much more of a passive approach from my colleagues across the way. We’re all in this together. We’ve got work to do and we are committed to doing it.

So without further ado, it’s the third reading and I’d like to commend this bill to the House. Tēnā koe.

I rise to speak as a member of the Finance and Expenditure Committee. This bill is the result of extensive consultation and stakeholder engagement. Critical to the modernising of this bill has been to ensure we protect the Reserve Bank’s operational independence and its governance and accountability, and those have been two of the most critical things in setting up for this bill here today. I have really enjoyed being part of this process and seeing this through. When the finance Minister said that he was in the seventh form in 1989 when this bill first came in, I can say that I was in the seventh form too, and what a long way we’ve gone. I commend this bill to the House.

I want to rise and take a short call on this bill as well, because the Reserve Bank of New Zealand Bill, at its third reading, is an important one. And I’d say my colleagues, I think, have made it very, very clear as to why we’re opposing this bill over several readings of this legislation that’s been coming through. I guess we have concerns around several things, and the first is the changes that this reform makes. Unfortunately, the fact is that all of our amendments that we were talking about that could have addressed our concerns have not been supported at the committee of the whole House stage.

I guess there’s sort of four big concerns. The first is really that reforms of this nature—to one of our most significant economic institutions—shouldn’t really be taken lightly. It is National’s view that the Government could have worked in a much more consensus, cross-party manner in putting these changes forward. The bill is, as you all know, the second of three bills that the Minister of Finance is trying to take through the House to reform the Reserve Bank of New Zealand Act, and that is the first time, in fact, that our legislation for this critical institution has been reviewed in over 30 years. Therefore, I do think it is important that we look at these reforms, that we make sure they are enduring, that they last. It is therefore regrettable that cross-party consensus hasn’t been taken, because, ultimately, what we do not want happening is we do not want, every time a new Government comes to power, that we go and upend and open up and recreate a whole bunch of new legislation around the Reserve Bank. That’s not good for New Zealand and it’s certainly not good for the Reserve Bank.

We were, as we’ve talked about over several readings now, quite comfortable with big parts of the bill, but we do have serious concerns in several areas, and I think the first was that the bank’s traditional objective that it is efficient has been omitted here. And we really believe that efficiency should be part of the core charter of what the Reserve Bank is about. I think, also, the New Zealand Bankers’ Association, in their submission, said as much, as well. Efficiency is a really important objective for a prudential regulator, there’s no doubt about that. We see that all around the world. We believe it is equally important that the bank pursues a financial system that’s both stable and efficient, and that’s important because trying to get the balance right between efficiency, but also having enough dynamism and innovation in the system such that we can see innovation from the regulated financial sector, is a very important thing.

I think the other big concern that we’ve had, and colleagues have spoken about in some detail, is that one of the bill’s more significant changes is, in fact, to the Reserve Bank’s governance arrangements. The bill creates an executive board responsible for all the financial policy decisions of the bank, and it vests all those functions and all those powers of the bank in the bank, other than those with the monetary policy committee, which has been how we’ve historically managed it and which are currently invested in the governor and will be vested in the new board. National, fundamentally, believes that if you’re going to have an executive board responsible for all financial policy decisions of the bank, there should be some basic technical competencies that each of those members of the governance board, or directors, should have. That includes some basics around understanding of financial stability, understanding of prudential regulation, macro-prudential policy, and, certainly, crisis management and resolution. We believe the Parliament should be given more oversight over changes to the bank’s monetary policy remit.

I guess the other big concern that we have is that we believe there should be a much better mechanism to allow the Minister of Finance to manage the risk of the Reserve Bank activities that could negatively impact the Crown’s financial position. We would have required, I think, the Minister of Finance and the Reserve Bank to agree between themselves a capital and a financial risk management framework, and that would have been to ensure that the Crown isn’t just picking up a position that the Reserve Bank takes.

So, Madam Speaker, in our minds, we think it’s a real shame that there’s an enduring piece of legislation here that is setting the Reserve Bank up for the future, and it should have been done in a cross-party consensus way. We do think efficiency as a measure of the purpose of the bank is important to have had in it, and we also believe that the governance arrangements and the changes to those mean that we need to make sure that people who are put on those governance boards have a set of skills. Finally, we think that there’s a risk framework that needed to be created between Minister of Finance and Reserve Bank to manage that. So it is disappointing that National’s very, very constructive amendments were defeated, and we regret that we must oppose this bill.

Thank you. I rise to commend this bill to the House. I’m the last speaker, so I just want to really focus on wood for trees here. This is actually a bill which modernises the structures that are in place around a system, and it is very cognisant of the rest of that system. So we’re going to have a board instead of a single person, and that board will have responsibilities. And the people on that board, it is true, are not prescribed in the kind of person they are. As pointed out by Hon Julie Anne Genter earlier, that actually allows for a kind of great latitude, because what you want on that board is people with different skills and different experiences, and those people all contribute to the whole, and so does the governor, who will also be on that board. That board will be linked, it will work together, with the Council of Financial Regulators. Those are things like the Commerce Commission, and those are really important institutions, and they will work together. So this bill is all about working together, and I commend it to the House.