Cosgrove Clayton: Reserve Bank of New Zealand (Covered Bonds) Amendment Bill — In Committee Third ReadingText is incorporated into the Bound VolumeCosgrove Clayton: Reserve Bank of New Zealand (Covered Bonds) Amendment Bill — In Committee Third Reading[Sitting date: 19 November 2013. Volume:695;Page:15017. Text is incorporated into the Bound Volume.]Hon CLAYTON COSGROVE (Labour): As we have already said—and we will not labour the point—the Labour Party will be supporting the Reserve Bank of New Zealand (Covered Bonds) Amendment Bill with some reservations. We note that covered bonds already exist and can be legally issued in New Zealand but they lack a regulatory framework which in itself could indeed generate instability. So opposing the legislation will not prevent the issuance of covered bonds. It will merely as I have said leave New Zealand without regulation.We note that the effect of covered bonds is to create a class of lenders to banks who have a higher level of security over banks compared with others. We have said in the previous speeches that have been made that we have some reservation about this given that there is an inherent unfairness that a two-tiered system has created.Most covered bond holders are foreign institutions. The question is where that leaves mum and dad investors. We know that in recent days as we noted in the Committee stage the preference given to foreign entities institutions brokerage houses and others over and above the mum and dad shareholders has been evidenced—contrary to stated Government policy and commitment. It has been evidenced through the recent sale of Air New Zealand where the Government went out to the big end of town and the best that mum and dad could do was wait until the shares hit the market and then make a purchase. That was not the agreement. We know that the big end of town and the foreign institutions were in like big hungry dogs hoovering up those shares—as was the case with Meridian Energy and Mighty River Power.As we said in the Committee stage there is a series of precedents where this Government has preferred the large corporates in the formation of Government policy in respect of the film industry Skycity Rio Tinto latterly Chorus Meridian Energy andothers. One would be forgiven I think for sitting outside this place and looking at this piece of legislation with some scepticism bearing in mind that we all agree that it is imperative to ensure that there is financial stability within the commercial sector. But mum and dad Kiwis might be forgiven for looking at this piece of legislation with a tad of cynicism given the Government’s penchant for looking after its mates up Queen Street. That is a fact and the difficulty with that is that even if this legislation which does make good sense in large part in terms of increasing the stability of the financial sector gets degraded—if the integrity of that legislation gets degraded by the past and present actions of this Government—the question is where that leaves mum and dad. Where are those second-tier investors left as they sit in the cheap seats while the big boys secure their base?The other point that we raised in the Committee stage was the differing limits between us and say Australia—the proposed limit being 10 percent of an asset base. We did ask the Minister in the chair for an explanation. We thought there might have been one or two who sat on the Finance and Expenditure Committee and dealt with this legislation—Mr Goldsmith Mr Bennett I think and one or two others who were hovering around the Chamber mid-morning—who might have assisted the Minister in providing an answer which he chose not to give. I think that is unfortunate because a question does hang over the legislation as to why there is a difference. The Minister could have sought advice from his officials and put on the record why that difference exists to give some commentary as we move through the final passage of this bill. Or those learned colleagues opposite who were on the select committee and part of the processing of this bill—and there was not a heck of a lot of politics in this I have to say—could have taken a call and could have provided perhaps an explanation because that is left hanging in the ether.On this side of the House no one wants to see a financial collapse. I do not think there is anybody in this Parliament who would want to see instability rendered upon our economy putting commercial entities at risk and ultimately putting investors’ money at risk particularly those folks who have squirreled a bit away in trying to make some sort of capital increase or increase in value on their investments. It is in everybody’s interest to create and reinforce an environment of financial stability avoid collapses and avoid difficulties within the commercial sector. However that has to be done in an appropriate way and although we support this bill as I say we want to make it very very clear that this bill follows a history of preference given to some over others. We think that is a concern. Even if that might be appropriate in this legislation it is undermined by the actions of this Government in other portfolio areas.Probably the biggest example is as I said in the Committee stage Rio Tinto where it appears on the face of it that money was simply just thrown at an entity. I do not know whether Bill English got down on both bended knees or just one. The last time I checked when you actually try to strike a deal you try to get a bit back for yourself. When you do a deal with someone there has got to be something in it for them. What is that wonderful phrase that Peter Dunne used? “Willing buyer willing seller.” But generally both parties come away with something. This was—Andrew Little: At least his dignity.Hon CLAYTON COSGROVE: Indeed. Well if you do not get anything at least your dignity is intact—Mr Little is right. But in this case it was a bizarre example of Rio Tinto bending the Government literally over the barrel waiting to spring the trap because it had nailed itself to a deadline. And it sprung it all right. Rio Tinto tied the noose around Mr English on his ankles and dangled him up the flagpole until he squealed enough and gave enough and it ended up with a decrease in power price half the notice period and just for good measure because I suppose we are getting nearChristmas 30 million pieces of silver—30 million bucks. Then you look at the other side and you ask what the taxpayer got—zip zero nada.Dr David Clark: The comfort of increased profit for Rio Tinto.Hon CLAYTON COSGROVE: My colleague says: “The comfort of knowing that—”Dr David Clark: They only made a few billion last year.Hon CLAYTON COSGROVE: —“that multibillion-dollar company Rio Tinto would be kept warm in its old age and maybe a more—”The ASSISTANT SPEAKER (Lindsay Tisch): Back to the bill.Hon CLAYTON COSGROVE: Indeed. Well indeed. This is also about transparency. Maybe Rio Tinto will be able to afford a nicer bottle of Scotch to whip around the board table for the brothers and sisters a few extra Chrissie presents and another room on the house thanks to Bill English. The truth is this: what did we get? Nothing. What were we told? Job security. What did we find out? He did not even ask for the jobs to be secured. What do we now know? That many of those jobs are slowly in the restructuring going—The ASSISTANT SPEAKER (Lindsay Tisch): Order!Hon CLAYTON COSGROVE: Sorry. Thank you. I was getting a tad emotional there Mr Assistant Speaker. I am glad you brought me back to the bill because when it comes to potential job losses we on this side get a tad emotional about that because we care about those folks and we do not like people being given falsehoods and false hopes especially by the Government.With that small contribution we will support the bill. We will be monitoring it closely and I think it deserves as it is implemented close monitoring not only by this Parliament but by others outside this Parliament. As I say we all in this place I think are for financial stability—Dr David Clark: What about Mainzeal?Hon CLAYTON COSGROVE: —for ensuring that people’s investments are secured given that there is no such thing as a zero-risk investment. You know every time you spend a dollar every time you invest a dollar you take risk and there is no way any Parliament can perfect a zero-risk investment. But you do see collapses as my colleague said like Mainzeal Property and Construction where again the big boys got secured. They got the security blanket and those at the bottom of the heap and those subcontractors and others just had to sort of wait in the queue with the tin cup out hoping somebody might put a dollop of soup in it in the form of some monetary compensation or actually get their money back so that they could move on to other things.We will be monitoring this. We look forward to some interesting contributions in the third reading. I hope that Mr Goldsmith might take up the challenge and actually talk about why that 10 percent limit is different from say Australia’s limit and maybe give us his thesis as to why he thinks that is appropriate given that the Minister was sadly lacking. He either was not interested in the bill or did not understand the bill. It is probably the latter. But it would be helpful perhaps if some members of the Finance and Expenditure Committee who put this bill through actually stood up and gave some sort of narrative around it.