Foss Craig: Insurance (Prudential Supervision) Bill — In Committee Third Reading 
Foss Craig: Insurance (Prudential Supervision) Bill — In Committee Third Reading 
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CRAIG FOSS (National—Tukituki) 
: 
 That was an incredibly scary scary speech from the Opposition’s spokesman on finance the Hon David Parker on the Insurance (Prudential Supervision) Bill. If people offshore are listening to that speech—they are probably not up at the moment; it is very good if they do not hear it though I guess they can access  
Hansard  
at some stage—my goodness gracious me! The only saving grace is that Labour is somewhat behind in the polls so the impact of what it is saying will probably not be reflected in the New Zealand markets. 
H V Ross Robertson 
: It won’t be long. 
CRAIG FOSS 
: Perhaps it will not be long but I say to the seasoned member from Auckland over there that we have just heard that essentially the party that would like to be Government—the second-largest party in New Zealand—is saying we should get rid of the inflation target. It says we should no longer target inflation. That is essentially what that party is saying. It wants to fix the currency or something because the implication of taking volatility out of the currency is a fixed exchange rate. Members opposite talk about volatility in the currency and then they talk about exporters. Here is a question: would they like the currency to be volatile around 40c to US$1 or would they like it to be stable at 80c to US$1? Which one? 
Hon Member 
: 60c. 
CRAIG FOSS 
: Would they like it stable at 60c or volatile between 35c and 45c? I am somewhat flabbergasted at those members. Do we have School Certificate any more? I do not know whether they passed it; it is quite obvious that they did not. 
Let us just think through what Labour members are saying. Here is the point: New Zealand is a debtor nation. New Zealand in 2000 owed the world $100 billion; New Zealand now owes the world $175 billion - odd. On the other side of the House they are talking about savings problems but actually $75 billion more was borrowed from overseas by New Zealanders—both private and State—over the 9 years of the previous Government. I now understand why they want monetary policy - type inquiries and why they want to go around the country and campaign on them rather than on the growth story of this Government. They are in denial. They are actually blaming the monetary policy settings for the Reserve Bank and they are blaming the Reserve Bank of New Zealand Act. Members should recall that under their watch inflation used to be 0 percent to 2 percent and then it went to 0 percent to 3 percent. Under their watch inflation was floored at 3 percent so we knew no upside. The cost of debt for New Zealand—the discount of future cash flows of any investment in New Zealand—went up and the present value went down. CPI was floored at 3 percent—not capped at 3 percent—under their watch. So maybe we can understand why they are in denial and want to change those actual targets and those settings. 
Labour members talk about not wanting volatility. The currency against the US dollar went to 80c under their watch—80c. It has been 73.5c or 74c under this Government but it went to 80c under their watch. If they want to moan about volatility fair enough but do they want it fixed and less volatile at 80c volatile at 40c or somewhere in between? How will they get there? Only one message has been heard—beyond perhaps the Bowen triangle if you like—in the financial markets who lend to New Zealand. The financial markets who fund New Zealand’s mortgages who lend to fund working capital in New Zealand are hearing that the second-largest party in New Zealand—the party that aspires to be the next Government; the party that was in Government for 9 years—wants to throw out New Zealand’s inflation targets in the Reserve Bank of New Zealand Act it wants to bring in some kind of premium on petrol I suppose and it wants to bring in some prudential management on mortgages or something. It is all State control. We need a lot more clarity. There used to be a party in the House that went down this path all the time. There was some popular stuff all around it. Actually there was. Yes exporters are having a bit of a squeeze at the moment when referenced to the US dollar. But those referenced to the Aussie dollar are not doing too badly. They are not doing too badly actually. At NZ40c to US$1 which customers would be coming to their door? Perhaps we would have some importers coming in and exporters would start to be a bit more comfortable trying to manage their way through. 
Members on the other side of the House need to think through just exactly what they are trying to say. They are in denial. The problem is not monetary policy; the problem was the balance between monetary and fiscal policy under the previous Government which is what we are trying to address. Fiscal policy resulted in real wages in New Zealand increasing only 3 percent over 9 years. They increased only 3 percent over 9 years because of the fiscal settings of that Government. What were those fiscal settings? An incredible hike in tax rates and tax take—$25 billion more tax was taken in 2007 than in 2001. Members on the other side have gone quiet. It was one of the key reasons why real wage growth was only 3 percent. The problem was the balance between fiscal and monetary policy. The learned speaker on the other side was constantly saying that we have to fix and tinker with monetary policy. Actually Government grew 20 or 25 percent over a couple of years the tax take was $25 billion more and New Zealand’s indebtedness went from $100 billion to $175 billion under their watch. Monetary policy ain’t got nothing to do with it. 
Then they talk about the housing boom. Do members know what fed the housing boom? Thank you Mr Deputy Speaker; this is a third reading speech. Do members know what kicked off the housing boom? It was the increase in the top marginal tax rate from 33c to 39c. If members do not want to take my word for it that is OK. There is plenty of research out there. I tell them to look at some of the archives and look what is happening now with the market when it is moving from 39c to 33c and aligning the rates because they created this credible arbitrage. If members want further evidence they should look at the briefings to the incoming Minister be they tax or fiscal. They should look at those taxpayers whose income interestingly enough sits around $59000—$1000 under that for the top marginal tax rate. 
Anyway this is a good bill. I felt the need to reply to some of the somewhat confused speeches from the other side of the House; no doubt we have a couple more coming. As I acknowledged earlier I appreciate and acknowledge the work of the committee and the House on this bill. I acknowledge political points from members on the other side as naive as they might be. I am grateful for their support of the general thrust of this bill and I am sure the whole House is grateful for their backing of the general thrust of the Insurance (Prudential Supervision) Bill. Thank you.