Carter David: Motions — Reserve Bank Funding Agreement—Ratification 
Carter David: Motions — Reserve Bank Funding Agreement—Ratification 
[Volume:616;Page:12408] 
Hon DAVID CARTER (National) 
: 
 Thank you very much for the opportunity to speak to this Government Motion No. 1 that the National Party will certainly vote against. It is a sad sad day that we are here now voting on the ability of the Reserve Bank to intervene in the exchange rate. One only has to consider the way in which the exchange rate has performed over the last 4 years and I suspect that this day was inevitable. Over the last 4 years the economy of New Zealand has performed quite credibly. The reason for the initial burst of performance by our economy was the New Zealand dollar at an unrealistic level. Dr Cullen as the Minister of Finance—in fact the untested Minister of Finance—thought that that those sorts of levels would be there for a considerable time making his job easier to run or to see the economy grow at a respectable level and accrue quite sizeable surpluses. 
What he did not realise was the inevitable—that as the economy performed the exchange rate would also improve as investors throughout the world recognised the performance of the New Zealand dollar. As the dollar started to rise Dr Cullen knew then that that may put some sharper focus on the continuing performance of the dollar. So his first response was a limp-wristed attempt to talk down the dollar. Of course that failed. His second response was another attempt to talk down the dollar. Of course that made no difference at all. The only time we have seen the dollar come back from 72c to a current level of around 65c was when he and the so-called independent Governor of the Reserve Bank came up with a proposal whereby the Reserve Bank had the ability to intervene at the margins and attempt to influence the level of the dollar and that is what we have seen over the last few weeks. 
As the spokesperson on agriculture for the National Party I spend a lot of time with farmers. They as much as any sector of our economy have been hurt by the ever-increasing dollar. Not one farmer I could name would support what the Parliament is proposing to do today. Not one farmer wants to see us go back to the days when somebody attempted to influence the market determination of the exchange rate. I acknowledge that Federated Farmers today have opposed this move even though they acknowledge that an appreciating exchange rate hurts them. When one talks to the farmers they say that it is not the ever-increasing dollar that is hurting it is the volatility. It is the ever-changing exchange rate. 
Most farmers are realistic and know that New Zealand will not be wealthy through a declining exchange rate. As Rodney Hide pointed out one has only to look at the performance of a former National Prime Minister and Minister of Finance Sir Robert Muldoon. If the answer was to try to interfere with the exchange rate and force it down then frankly Rob Muldoon had all the answers. That was what he used to do. When things got tough he would come to Parliament and simply declare a devaluation of the exchange rate. What he did not seem to appreciate was that that only made things get tougher so his next response was to come back to Parliament a second time and then talk down or in fact impose a devaluation of the dollar. That never worked. That made New Zealand poorer. I can assure the House that under no circumstances do I accept that any intervention either by a Reserve Bank governor or by a Minister of Finance trying to influence the level of the dollar as opposed to market influence makes any significant long-term beneficial difference. 
The incredible thing today was to listen to the contributions made by other politicians. The Rt Hon Winston Peters took a call earlier on in the debate to lament the fact that Australia had grown 35 percent faster than New Zealand over the last 15 years. In that respect he is right. Then he tried to suggest to the House that this move today allowing the Reserve Bank Governor to intervene at the margins of the exchange rate would in some way be a silver bullet to achieve a greatly improved gross domestic product growth rate so that we did start to close the gap with Australia. Nothing could be further from the truth. 
I do acknowledge that Australia has a mechanism whereby it intervenes with the exchange rate. But if members look worldwide the efforts by various Reserve Banks of the world to intervene is on the decline. The other point that needs to be made because it has not been made in the House today is that when other countries that have the ability to intervene do intervene more often than not it is an attempt to arrest a declining exchange rate in an attempt to restore confidence to an economy. 
We then listened to the co-leader of the Greens Rod Donald. I take exception to his suggestion that Don Brash as he said wanted to do this all along. Don Brash as a previous Governor of the Reserve Bank certainly investigated whether the Reserve Bank should have the powers to intervene in the exchange rate in an attempt to line out the volatility I spoke of earlier. The conclusion of his work and the work of the Reserve Bank was that it was not advantageous to intervene. In other words the risks of intervening certainly outweighed the potential benefits of the intervention. But Rod Donald went on further to outline the sorts of policies that New Zealand wants to be aware may arise if the Greens and the Labour Party form a coalition Government. 
Pansy Wong 
: Scary. 
Hon DAVID CARTER 
: It was scary. Rod Donald said that there would be a capital gains tax. He also said we would see the imposition of import tariffs again. These are all the tactics we saw 20 years ago under the Rt Hon Rob Muldoon and Rod Donald is saying that these are the sorts of issues we need to go back to. 
An amount of $1 billion will be available with the passing of this motion for Dr Bollard and the Reserve Bank to speculate in an attempt to iron out the exchange rate at the margins. I think that is the point that needs to be made tonight. The exchange rate so far in 20-odd years has varied from 37c to 72c and the current Governor of the Reserve Bank has said that even that extreme range would not be enough for him to attempt intervention. That suggests to me that any attempts to intervene at a range wider than that will have minimal chance of making a significant difference. 
Where the risk is then for exporters is that they currently have the ability and the responsibility to take things like forward exchange contracts to cover the risk of volatility of the exchange rate. This sends a signal to those exporters that the Governor of the Reserve Bank will do that job for them. The governor will not be able to do that job. He will not have the money and the resources required to influence a world market. He knows that. The Japanese found to their surprise that they did not have the resources so obviously New Zealand does not have them. I fear we will see that exporters will not take the exchange rate cover they should that they have been accustomed to taking in the past because they will be relying on the Governor of the Reserve Bank to do it for them. I know it will not happen and sadly exporters will quickly figure out that it will not happen. I oppose this Government motion.