Cosgrove Clayton: Crown Retail Deposit Guarantee Scheme Bill — First Reading Second Reading In Committee 
Cosgrove Clayton: Crown Retail Deposit Guarantee Scheme Bill — First Reading Second Reading In Committee 
[Volume:657;Page:6044] 
Hon CLAYTON COSGROVE (Labour—Waimakariri) 
: 
 As my colleague David Cunliffe said Labour will be supporting the Crown Retail Deposit Guarantee Scheme Bill but I will make a couple of points. The previous speaker said that deposits were being guaranteed and that is correct. But he made an assertion that companies would not benefit—that their share price or shareholders would not benefit from such a guarantee. Well I take issue with that. Of course they will. A Government guarantee around deposits generates far more stability in the nature and commercial stability of that company because by its very nature there is a Government guarantee on those deposits. Therefore it is more likely to attract shareholder support because of that stability. If there was no Government guarantee then it is open slather across the market. 
But I note a couple points. The bill does not outline the eligibility policy; it merely provides for the Minister to have the authority to determine that eligibility. We have some difficulty and concerns around that in that the criteria relating to this policy as it is currently being drafted requires companies to have at least a BB credit-rating to be eligible. The difficulty however is that some companies may not be able to obtain a sufficient credit-rating as they have insufficient scale to meet the requirements of the credit-rating agencies. Ultimately that may cause a shake-out in the non-banking sector resulting in potential further finance company collapses or losses and no one would wish that on Kiwi consumers of course. No one is willing it to happen; I think there is goodwill across both sides of the House. But the point should be made that it could result in further finance company collapses and losses for mum and dad investors while the big banks move to mop up customers. If we are not careful here we will see that the major winners of the Government’s criteria as authorised by the Minister are the Aussie banks which are able to benefit from the wholesale guarantee without being eligible to contribute to the retail scheme. 
I think the Government’s willingness to see major banks opt out is yet another demonstration of the Government’s willingness in my view to placate big business at the expense of the smaller end of town which is the mum and dad Kiwi investor. We have just had an unofficial banking inquiry that I and other colleagues from the Green Party the Progressive party and the Labour Party sat on but in which National refused to participate in a non-parliamentary sense. National refused in an official parliamentary sense to acquiesce to a request for an official parliamentary select committee inquiry into banks. Given there is a feeling perceived or otherwise by New Zealanders that they are being hurt by higher interest rates one wonders why when the official cash rate drops the drops in interest rates are not being passed on to mum and dad mortgage holders at the same rate as the official cash rate drop. 
I would have thought politics aside that was worth an official parliamentary select committee inquiry. Well National begged to differ and it said no. Then when other parties said “Let’s do it anyway and give institutions mum and dad Kiwis and those in the financial sector a chance to have their say.” National refused to participate in that process for its own reasons none of which we on this side of the House can fathom. I wager that no one in New Zealand can fathom the reason either. Perhaps only the big end of town may have an answer to why National did not proceed with an inquiry. Maybe it was the fact that National is concerned only with the big end of town. National uses the rhetoric saying that it is concerned about financial collapse that it is concerned about the stress being put on households through added expenses during a recession and indeed manifest through higher mortgage payments and higher interest payments. National says many correct things but the question is whether it follows those statements with actions. 
Although I support the guaranteeing of deposits I say that words are words and again I cannot for the life of me understand why National would not support a basic select committee inquiry which I think had the goodwill—and still has the goodwill—of almost all sides of the House apart from National to inquire. 
Hon Steve Chadwick 
: They know best. 
Hon CLAYTON COSGROVE 
: My colleague says that National knows best—maybe maybe not. If it turned out that the perceptions of mum and dad Kiwis were not correct that would be a good thing to shed some light on. But we are left with an inquiry that this side of the House will report on which I think had some very very good contributions from the likes of Kiwibank from economists and from other folks in the financial sector. It is interesting to note that the big end of town is a bit like the political big end of town over there the National Government very coincidently. The banks and National would not participate; they would not have a bar of it. We then must ask why. 
I say with caution that I support this legislation. But I wonder whether the Government has asked the banks and commanded the highest possible price or enough of a contribution shall we say from the banks in how they act within our commerce. There are other institutions that provide very very good financial services that because of size will not be able to gain the BB credit-rating that is required and may well then be seen to be unstable because they are not covered by this guarantee. As a consequence they have flight of capital out and therefore they could collapse. Again who is the beneficiary of that? The big end of town that National supports will then have the ability to mop up what is left after the dust and shrapnel have settled. The losers of course are the mum and dad investors who are caught in the middle and cannot participate. I say to National members that we support the legislation but I ask them to reflect on that. Maybe they will give us a reason today as to why they could not bring themselves to cross the political threshold—at no cost to themselves we believe but who knows maybe there was—and participate in but not necessarily support the outcomes of a non-partisan banking inquiry. If they had all the answers they could ask the institutions probe the institutions probe the great minds and economists in New Zealand and debate with them and tease out the issues that pertain to this debate. But it was left to colleagues in the Green Party the Progressive party and the Labour Party to have that discussion and I think the participation was very very profitable. I think people saw it as a goodwill exercise. 
Peseta Sam Lotu-Iiga 
: Good on ya. 
Hon CLAYTON COSGROVE 
: The councillor and member of Parliament on the other side of the House says “Good on ya.” I am not sure whether the Auckland City Council or the taxpayer is clipping the ticket at the moment as he double-dips over there. I thank the member for the compliment but saying “Good on ya.” does not do anything to meet the issues and alleviate the problems that people in the market place are feeling because of the behaviour of some banks. It is a simple question to ask— 
Hon Member 
: Sit down now! 
Hon CLAYTON COSGROVE 
—even for that member’s limited capacity. Why are banks not passing on those interest rates with the swiftness of their Australian counterparts? I leave that question sadly unanswered because that member and his ilk would not participate in an inquiry. It is sad I think that when we have these odd moments of non-partisanship or bipartisanship—or “tripartisanship” if we include the ACT Party—certain parties the tired old ones over there revert to type and draw the shades across drop the trapdoor and say no. The losers in that of course are the people who would like the questions answered. They are the mum and dad Kiwis with the big mortgages.