Cunliffe David: Crown Retail Deposit Guarantee Scheme Bill — First Reading Second Reading In Committee 
Cunliffe David: Crown Retail Deposit Guarantee Scheme Bill — First Reading Second Reading In Committee 
[Volume:657;Page:6089] 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I will take the opportunity to respond to a couple of things the Minister said and then to do a wrap on some of the macro and debt issues that are covered in Part 1 under the term “debt security”. In respect of the first matter the Minister said in response to the Opposition that the reason we are in urgency and dispensing with any select committee process is to maximise certainty. There are two aspects of certainty. The first is in respect of timing and the other is certainty in respect of detail. It is certainly not as adequate for Parliament to debate this under urgency with no recourse to a select committee with no opportunity to hear the concerns of ordinary members of the public. They are the depositors as Mr Nash said who have in many cases lost their life-savings through failures in the non-bank finance sector. The questions that may be raised by the institutions themselves in public session which may or may not be the same as they have raised in private with the Reserve Bank deserve a fair hearing. As I said in my earlier intervention this Government is getting a bit of a name for sham consultation processes and it is a shame that this should be added to the list. 
The Minister of Finance mentioned consultation by the Reserve Bank. The issue with that is that the public cannot see it. The public is not exposed to the arguments for and against. The process is opaque. It is behind closed doors. The public is not even fully aware of what tools the Reserve Bank has at its disposal or the adequacy of those tools. But having said that the Opposition supports this bill because on balance notwithstanding those weaknesses it is important that we extend the scheme under controlled circumstances to match or approximately match the Australian scheme. Otherwise there could be a flow of funds potentially from institutions here to institutions across the Tasman that are covered by a deposit guarantee when ours are not. 
One aspect that has been debated in the Committee stage is the voluntary nature of the scheme and in particular the de-linking of the retail from the wholesale guarantee scheme. So it is instructive on page 10 of the regulatory impact statement to see these beautifully crafted words of bureaucratise: “The economic and stability pros and cons of delinking the retail and wholesale scheme are finely balanced including a possible variant of making it compulsory for some groups only (e.g. banks).” Well is that not what the Opposition has been saying? If those banks the self-touted pillars of security that the member opposite Amy Adams was keen to propound are providing 90 percent - plus of the breadth of assets that spreads risk and 90 percent - plus because of their size of the revenue streams to the Crown is the Crown not paradoxically exposing itself to a higher average level of risk if it allows them to opt out? 
In the end it brings us to the bottom line. This first part is about debt security. The debt we are talking about is private debt. It is overwhelmingly bank debt—90 percent - plus bank debt. How much? New Zealand’s GDP is around $140 billion to $150 billion. New Zealand’s gross debt is 140 percent of our gross domestic product. That is 140 percent in gross terms of our gross domestic product and it is rising at 10 percent per annum—that is 150 percent of gross domestic product in current trends; a year from now 160 percent if one rolls out 2 years. At what level does that become an unsustainable level of national debt? Compare that with the Crown’s balance sheet. The Government was perhaps rightly concerned to ensure that it did not get out of hand. We would too if we were on the Treasury benches. But it is not the main game in town nor is it the only responsibility of the Government of the day. The Government has its handle on the country’s most potent economic levers. The public elects a Government to manage the country’s book not just the Government’s book. Therein lay the weakness of this year’s Budget. It had much to say about the Government’s debt but nothing at all to say about the country’s debt which dwarfs it at 140 percent of GDP. Yes let us shrink it I say to the member opposite Craig Foss. It is 140 percent of GDP—and the Government’s debt is how much? In net terms it was zero. It was single-digit percents post-crash.