Parker David: Reserve Bank of New Zealand (Amending Primary Function of Bank) Amendment Bill (No 2) — First ReadingText is subject to correctionParker David: Reserve Bank of New Zealand (Amending Primary Function of Bank) Amendment Bill (No 2) — First Reading[Sitting date: 13 November 2013. Volume:694;Page:65. Text is subject to correction.]Hon DAVID PARKER (Deputy Leader—Labour): I suppose the most notable thing about that speech from Mr Goldsmith was that he said the currency is a little bit overvalued—a little bit overvalued. Last year this country had the worst current account deficit in the developed world according to the IMF. This year and for the next 3 years to the end of the projection period it will have the worst in the developed world according to the IMF. According to the OECD it is the second-worst in the world because they include Turkey—the OECD includes Turkey.Mr Goldsmith the problem with some historians is that they can never look forward; they can only ever look back. That speech was such an edited view of the past. He pretended that the Rt Hon Winston Peters’ Reserve Bank of New Zealand (Amending Primary Function of Bank) Amendment Bill (No 2) took us back to the 1970s a time when we did not have an independent Reserve Bank and when we did not have a floating currency. Mr Peters’ bill leaves us with an independent Reserve Bank leaves us with a floating currency but also tries to address this fundamental hollowing-out of the New Zealand economy caused by our prolonged current account deficit a contributor to which is our overvalued currency.Paul Goldsmith: You’re going to support this?Hon DAVID PARKER: We are supporting this bill. We are supporting this bill. After 25 years of the current Reserve Bank of New Zealand Act it is time to have a look at it again. There are some wording changes I would make. I would prefer to look at an external balance objective rather than an exchange rate objective but we should be talking about this.Last year I did a study tour of various notables on monetary policy. I believe that Winston Peters is right that we have got a problem. I saw amongst other people Jeffrey Frankel at Harvard University. He said two things that stuck in my mind. He said firstly that no one system of monetary policy is right for every country in the world. There is no universal principle there. Secondly he said no one system of monetary policy is right for any one country all of the time.After 25 years of this current iteration of monetary policy it is time to look at it again. It is not sacrosanct. It is not writ by Moses on some ancient stone tablet as Mr Goldsmith would have us believe. It is an area of policy that the Government should take responsibility for. He says that in the old days we used to have house price inflation. Well actually we had house price inflation that ran at roughly the same rate as general inflation. Now we have got house price inflation that runs way ahead of general inflation. We have got unaffordable house prices in Auckland to such an extent that the Reserve Bank is worried about the financial stability of the financial sector and the Government has effectively delegated housing policy to the Reserve Bank. After the abject failure of its own policy the Reserve Bank has been forced into a corner and has introduced loan-to-value ratios which hurt most first-home buyers. We in Labour say that is an indication of how poor this Government’s policy is.There is no doubt that New Zealand needs to broaden our export base. We need to get the investment going into the right place through a capital gains tax. We need to increase the depth of our capital markets by having a universal KiwiSaver scheme so that we have got more capital to invest in our own businesses. But we also need to look at whether we are hobbling our exporters and our import substituters by inappropriate monetary policy that drives the exchange rate and holds the exchange rate higher than it should be.Who warned New Zealand that under current monetary policy we would end up with structurally higher interest rates than the rest of the world? No one. But we have done—but we have. We have got higher interest rates which mean that when a New Zealand company hits a bump it is more economic for an overseas buyer to buy that company than a New Zealand company.We should be looking at this issue. It is an important issue. I am surprised that the National Party is so narrow-minded so defensive that despite a decrease in exports outside of the primary sector it will not consider helping our export sector by introducing a broader objective and more tools for the Reserve Bank. It does need more tools. It is not giving up on the inflation objective but it needs to do more than just say it can look only at inflation not the exchange rate. The Government then says it can do nothing about the exchange rate because it is all delegated to the Reserve Bank and no one takes responsibility for the developed world’s largest current account deficit and the rising debt and foreign ownership that accrues from it.