Joyce Steven: Debate on Crown Entities Public Organisations and State Enterprises — In CommitteeText is incorporated into the Bound VolumeJoyce Steven: Debate on Crown Entities Public Organisations and State Enterprises — In Committee[Sitting date: 17 June 2014. Volume:699;Page:18537. Text is incorporated into the Bound Volume.]Hon STEVEN JOYCE (Minister for Economic Development):Well it is an interesting little story that Mr Parker runs. We have actually had in this country an independent Reserve Bank focused on fighting inflation since 1989. It was introduced of course by a Labour Government and in all other respects they are ashamed of it on the other side of the House but nevertheless the members of the Labour Party seem to be a little bit happier with this one.That model is based on transparency and independence and Labour has now decided—or more particularly Mr Parker has now decided—to pretend you can simultaneously have low inflation low interest rates a low exchange rate low house prices and a current account surplus all because David Parker magically says that is possible.The only way you can have a few of those things is if you allow more inflation in New Zealand. Actually it is a law of physics that actually unless you have an independent monetary policy then you will have more inflation. Labour is basically saying that if it is going to change this thing then the interest rates would be different and if the interest rates are different then that means more inflation. All inflation does is destroy the savings of New Zealanders it makes it more difficult for businesses and consumers to invest and it sets off wage and price spirals. And interestingly it hits the people who are struggling the most the hardest.As one commentator said after Labour had announced its policy: “It’s deeply bizarre that the Labour Party would actually actively promote policies that would harm the worst off in society the most.” That is what Labour’s proposed softening of its attitude to inflation would achieve which of course brings me to the small issue of the KiwiSaver idea the interest rate jack-up idea—the “big tool” that Mr Parker likes to refer to—which I respond to today. But the moment you think about that it falls apart because housing is less than half of New Zealanders’ debt. The rest is companies credit cards farmers councils and Government agencies.Apparently Labour is going to tell businesses and councils to carry on borrowing and spending because wage and salary earners will be forced to have more money taken out of their take-home pay to do the belt tightening for them. Weirdly Labour has still not come up with any sort of indication of how much it would require people to put into their KiwiSaver accounts to offset a 1 percent increase in interest rates. So here we are—I think it was the beginning of May that this thing came out—6 weeks down the line and Labour is still shtoom on any suggestion of what the actual trade-off would be between rising interest rates and forcing people to put more money in their KiwiSaver accounts.Well over on this side of the House we actually did the exercise. We reckon that to get 1 percent Labour would have to increase the KiwiSaver contributions by around 6 percent. Those members are out there today saying that they are already going to increase your KiwiSaver—Hon David Parker: Rubbish! Making it up.Hon STEVEN JOYCE: It is true. And if it is not true then the Opposition should actually come up with some numbers.Phil Twyford: You’ve made it up.Hon STEVEN JOYCE: They are not made-up numbers. They are actually worked out and what we know is that the Opposition has come up with nothing. So here we are debating the Reserve Bank of New Zealand Act and the Reserve Bank and the Labour Party is proposing to throw away the independent control of inflation. It is talking about this “big tool” this weird big tool which apparently magically can keep interest rates under control while boosting people’s KiwiSaver rates and it has no idea how that works.It is actually embarrassing in a debate about Crown entities for that sort of ridiculous policy-on-the-fly rubbish that the Opposition has come up with. So fundamentally the good thing about the Reserve Bank policy is that it controls inflation. Inflation is very tough particularly on those people who are struggling the most in society and what we know is that the Labour Party would change that. We know it would relax the control of inflation and we know that its monetary policy approach is to force people to have more money taken out of their take-home pay but Labour says: “Don’t worry. You’ll all get it back when you are 65.”So while you are sitting there with your families under Labour Party - type inflation conditions—which as we know is about 8 percent which is what it was at the last election or higher again; those were the high inflationary times—Labour will be saying to New Zealanders: “Don’t worry. The solution is to whip some more money out of your pay. Don’t worry that prices are going up. You will feel it for oh I don’t know maybe a year but the good news is that in the long run”—the very long run when you are 65—“you will get a little bit of it back.” That is those members’ answer and what a load of rubbish.Report noted.