Burns Brendon: Motions — Reserve Bank Funding Agreement—Ratification 
Burns Brendon: Motions — Reserve Bank Funding Agreement—Ratification 
[Volume:665;Page:12463] 
BRENDON BURNS (Labour—Christchurch Central) 
: 
 As indicated the Labour Party will support the Government notice of motion from the Minister of Finance on the latest agreement with the Reserve Bank. However we do so with a heavy heart because it is a missed opportunity as my colleague David Parker so eloquently outlined for a real consensus to emerge on some change to monetary policy settings. If I needed to learn a little about this issue it came a couple of weeks ago at a forum of Canterbury exporters in my electorate of Christchurch Central. It was called the 2010 Thinking Export Forum. There were a couple of hundred solid sensible Canterbury exporters gathered and the opening address came from the Prime Minister. He told that forum: “New Zealand has the world’s best policy when it comes to monetary policy.” It was a Canterbury audience so we did not flinch or sneer or show disdain for such a comment especially when it is being given by a Prime Minister but the body language was indicative. Any Canterbury exporter who is still in the exporting game has remained so through extraordinary ups and downs in large part set by our current monetary policy. When we have 12000 jobs lost in Canterbury over the last 12 months or so many of them from the residual base we have in manufacturing and exporting we are saying clearly that something needs to give. At the moment more and more jobs are giving. That comes in part from the current setting and focus we have where the Reserve Bank focuses solely on inflation but the Prime Minister does not accept that. He said to the audience that it was not true that the Reserve Bank’s only focus was inflation. 
I would like to ask what else there is in the policy targets agreement with the Reserve Bank other than inflation. My reading of it suggests that that is what is referred to. The Prime Minister said that New Zealand currently has the lowest inflation rate in memory but that the New Zealand dollar was still high so there could be no correlation between monetary policy and other settings. One has to say hello there has been a world recession and it has driven down inflation across the planet. Other nations’ currencies have declined much more than ours but I believe that what has held ours up in some good stead has been in large part the economic settings of the last Labour Government and some of the work we did to reduce Government debt. In fact we halved it during our time in office. 
I again quote the Prime Minister addressing that Canterbury exporters’ forum. He said: “No OECD country owes more to foreigners than New Zealand but it is mums and dads not the Government that owe the debt.” That is true but it begs the question as to why Labour’s record in office when we halved the debt down to 17 percent of GDP constantly comes under denigration in this House. Another comment from the Prime Minister to that Canterbury exporters’ forum was: “At some point international currency markets will respond and the exchange rate will come down.” I ask how long the export sector has to wait for that day to come and how many more jobs will be lost in the interim. I would like the Prime Minister to address those questions because as I mentioned we have seen 12000 jobs go in Canterbury in the last year already. That is a very high cost for a dollar that remains stubbornly high. 
Not only that it is the fluctuations in the dollar that create all of the problems for the exporters. When we have a dollar that has been below 50c and is nudging 80c in the last year or two how on earth do we plan prepare and try to make a living in foreign markets when our margins fluctuate by that amount? How on earth do we make a living when we are exporting to the British market which once upon a time meant nearly $4 to the pound and today is around $2 to the pound? 
Late last week I was in Marlborough talking to some in the wine industry. They were expressing very real fears that we will see more Marlborough wine companies close or go into receivership in the not-too-distant future. This is in large part because first the dollar remains stubbornly high and it is particularly attached to the British market as many will know and also to the American market and the Australian market all with their own particular issues. Second the wine is often being sold below the cost of production. That is being driven by some of the foreign companies coming here sucking up the wine and taking it back and selling it below the cost of production. That costs Kiwis their jobs and it costs Kiwi companies. That situation is aligned in part to the fact that our monetary policy setting is not working for exporters. 
I quote again from the Prime Minister’s address to the Canterbury exporters’ forum which was an open forum and at which the media were present: He said: “The Government is focused on improving New Zealanders’ savings.” Well the slogan on the Tui billboard comes to mind when we consider that this Government cut the employers’ contribution to KiwiSaver from 4 percent to 2 percent to help fund the first round of tax cuts and that despite the New Zealand Superannuation Fund having bounced back there are no proposals from this Government to put funding back into the fund. Although that is a working source of capital and an alternative to foreign borrowing we will not see that funding reinstituted under this Government’s policy setting. 
So again we heard the Prime Minister commenting on the issue of monetary policy setting and effectively pooh-poohing the idea that we could look at this issue review it and make some changes in line with what Australia has managed to do. He said: “Playing around with a few words in the Reserve Bank Act isn’t going to make a difference. Trust me!”. Should we trust the Prime Minister on that issue? Maybe what we need are 40000 exporters marching down Queen Street so we can show the Prime Minister that the current monetary policy setting is not working is not accepted and is not liked by New Zealanders. It is costing them jobs it is costing export income it is to the detriment of this country and we really need to see some changes made. So rather than sticking to it like glue why do we not see the Government and the Prime Minister acknowledge the problems that are being created by the fixation of a monetary policy focused only on inflation and look at what other nations are doing. 
Let us look at what Australia is doing with its recipe that says one looks at the health of the whole economy at employment at the export sector and then frames one’s reserve bank targets around those issues. That does not mean going soft on inflation; it simply means that we need to look across the board at the whole economic setting. Nobody wants to see rampant inflation again; that is an awful price to pay. But if we have only the one setting then that is what the Governor of the Reserve Bank will deliver on and that is what the costs will be to our export sector. 
I note also that although the Government is talking exports even with our monetary policy setting as it is in Christchurch we have seen the halving of the staffing of the New Zealand Trade and Enterprise office. That office has assisted many smaller Canterbury exporters but they are no longer able to get the assistance they were once able to get in Christchurch for advice facilitation and encouragement to get out into export markets. If they need to they can of course get on the phone to Auckland and Wellington but the word is that they really will get assistance only if they are a bigger company trying to grow their cake rather than being a small entrepreneur needing a bit of advice and assistance to get out there in that world already made difficult by the current monetary policy setting. So it is a double whammy for them as Canterbury exporters. Not only are they facing a prevailing high set of interest rates driven off our monetary policy and not only are they seeing the difficulties of trying to find capital but also they are not getting the assistance and support they were once able to get through the New Zealand Trade and Enterprise office which is down from 18 staff to nine in Christchurch. 
The key thing I would like to say is that we have the Prime Minister all over the place on this issue. He wants to see more foreign investment; he does not want to see the Crafar farms sold; he is saying that he wants to liberalise further the foreign investment laws. We have a dollar that remains persistently high and interest rates are remaining high sucking in more and more foreign capital. That is what is happening. That is why we need a review of the Reserve Bank’s policy targets.