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:6064] 
Hon CLAYTON COSGROVE (Labour—Waimakariri) 
: 
 I will not take up much of the House’s time because I think a lot has been said. There is cross-party support for the Crown Retail Deposit Guarantee Scheme Bill but I note—as I did in the first reading debate—that the Opposition has some concerns. The member Aaron Gilmore made a variety of comments about small institutions. The concern we have is that the bill does not outline the eligibility policy. That is left to the Minister and provided for under the Minister’s authority to determine eligibility. The issue we have some concern about is the situation of a number of smaller institutions which the previous speaker spoke about in his wonderful speech which presumably was akin in his own mind to the Gettysburg address. Mr Gilmore is a member of everything and has done everything. Some people wonder whether he has fixed his “I” problem—“I’ve done this I’ve done that and I’ve done everything.” Maybe he has not. He is not concerned about the smaller institutions and companies that may not have the capacity for instance to meet the requirements—although he thinks that all one has to do is cough up a bit of money and the rating agency will gave them a rating. Well it is not as simple as that. 
In order to achieve a BB rating a company or institution has to be up to the mark. I am advised that it is quite an exhaustive process. It is not like ordering a double meat burger and chips from McDonald’s as that member may be wont to do. A company or institution does not just pay money and get a rating just as one does not just pay money and get a degree; it has to pay the money and then go through an exhaustive process. That is why those credit-rating agencies are particularly credible. A number of smaller companies and institutions have insufficient scale to meet the requirements of those credit agencies which in itself can create instability. If they cannot meet the mark and they cannot then get that guarantee does that become a shakeout scenario in the financial sector? 
Again as I said in the first reading debate no one would wish companies and institutions to fall over and for mum and dad Kiwi investors to be left in their wake. No one is predicting that and no one would want it. We are simply asking the question whether if the smaller institutions and finance companies do not meet the mark it is possible that in a financial investment sense there may be flight from those companies to larger institutions thereby bringing about the potential collapse of those smaller institutions. Who will be left to mop up what is left? It is the big Aussie banks and the big end of town that National seems to be particularly concerned for. The banks are able to benefit from the wholesale guarantee without as I understand it being obliged to contribute to the retail scheme. 
The member Aaron Gilmore mentioned the banking inquiry. Mr Gilmore is the learned professional who has done everything been a member of everything and knows everything by his own admission. I wish I was half as good as he thinks he is! I would have thought he would acknowledge that it is appropriate given the public perception around banking—whether that public perception be factual misguided or incorrect—to have a bipartisan banking inquiry as I said in the first reading debate. We had a banking inquiry. It was non-partisan for the three parties that participated in it—the Greens the Progressives and Labour—but there was a refusal by National ACT and a few of the others that linger around this place to even participate in an unofficial if you like informal inquiry let alone a full-blown parliamentary select committee inquiry. Such an inquiry—I think we all agree—would have been the best option because it would carry with it the authority of Parliament. 
The question I raised in the first reading debate—and I raise it again now—is why any party would object to such an inquiry unless there was something the party did not want us to know unless there was something it did not want this House to expose or unless it did not suit its political purpose for us to have a thorough examination of the sector of our economy called the banking and financial sector. I cannot for the life of me see where the politics in this particular question would be because the truth is that Kiwis—rightly or wrongly and it could well be wrongly I concede that—hold the view en masse that they are not getting a fair go from many of the participants in the financial and banking sector. As Kiwis look across the ditch to Australia they perceive that our official cash rate reductions are not being passed through as swiftly as those of our Australian cousins. I think it was worth it to have a crack at looking at that. In fact it would have been one of the finer moments of this Parliament if we did not play politics but just said that that is an issue New Zealanders are concerned about. In a recession the mortgage bill tends to be the biggest we face. That was a moment in Parliament when we could have dealt with something without politics and see what comes out of it.  
There is now a big debate around how we deal with inflation. There is a big debate with our manufacturing sector as it struggles with the high dollar and as it struggles to export and be competitive with its counterparts in other countries. There is a huge debate about how we can continue to control inflation and how if we choose to we incentivise or perhaps disincentivise different forms of investment in the non-tradable economy as opposed to the tradable economy. I would have thought that was a simple proposition that would not have taken a lot of steam or political venom to discharge but it appears that it was not. I think that lessens this place and some of the participants here in Parliament.  
We support this bill. It is a measure that as other speakers have said will indeed reinforce stability. The question I have with this Government guarantee is that contrary to what some people have said the big end of town will benefit because it has a guarantee. I think Mr Foss and others said the shareholders of the larger Aussie-owned banks will benefit. Any institution that has a guarantee has greater stability and greater confidence which is therefore seen by those who may invest in it—that is the shareholders. Generally—in my world of market economics anyway—that encourages an increase in the share price as a vote of confidence in a company or bank that holds that Government guarantee. I do not think we should delude ourselves by saying that the bill will not benefit shareholders and banks. Give me a break; of course it will. But the question is whether it will have a counterbalancing effect because the bar is very high—a BB credit-rating—for the non-banking institutions that may not have the scale to meet the mark. I will conclude with those points and reiterate that we support the bill with those reservations and points made.