Parker David: International Finance Agreements Amendment Bill — First Reading 
Text is incorporated into the Bound Volume 
Parker David: International Finance Agreements Amendment Bill — First Reading 
[Sitting date: 08 May 2012. Volume:679;Page:2001. Text is incorporated into the Bound Volume.] 
Hon DAVID PARKER (Labour) 
: 
 I rise to speak to this bill the International Finance Agreements Amendment Bill on behalf of the Labour Party. The Labour Party will be supporting this bill to the Finance and Expenditure Committee. The Labour Party supports the function of the International Monetary Fund and the International Bank for Reconstruction and Development and broadly agrees with the Minister of Finance that these are good institutions that assist the conduct of international economic affairs in a way that benefits New Zealand as well as other countries. We do think that the regulation-making power that is conferred by this piece of legislation ought not to proceed and we will be seeking to amend that at the select committee. That is something that I will come back to a little later.  
This bill amends the International Finance Agreements Act 1961 and as the Minister says that includes our obligations to the International Monetary Fund and the International Bank for Reconstruction and Development. The changes that are afoot in this bill are giving effect to changes to the treaty which have been agreed in principle by the New Zealand Government but are not effective in New Zealand law until this Act is passed. I am aware that the changes that are promoted here are quite separate from the increases in commitments that were made to the $430 billion IMF fund which was backed by the G20 in recent months.  
I think that the underlying occurrence here is that the legislation is reflecting an update to the international agreement which changes the share of different countries in the world in terms of how much they have to contribute to the pool that the IMF maintains. Because there has been significant growth in other countries that is higher than New Zealand’s growth rate our relative share of that pool is decreasing. The effect on New Zealand’s contribution overall is not large. It goes from a NZ$2.9 billion to a NZ$3 billion share of the pool because the call that is being made on individual members per unit if you like is decreasing as the size of the pool increases through other countries that are growing faster than New Zealand increasing their share of the pool.  
I do not have a problem with that. I would point out that it shows that the underlying drive of wealth—or at least monetary wealth—does depend upon the relative size of your economy. We are not doing very well in that regard as evidenced by the fact that just today we have had an announcement from the Government to show that its growth forecast is not coming true tax revenue is down and the deficit is worse than was predicted at the time of the last election. But that does not mean that it is not wise for us to do our bit in respect of these international institutions. Although there may be some who say that New Zealand should be isolationist in our approach to these matters and just look after our own interests internally the Labour Party does not think that is right and indeed we think that New Zealand is one of the countries that benefit from international organisations such as the IMF.  
The Minister made reference to the advice-giving role of the International Monetary Fund. I think that is an important role. I think it is interesting to reflect on the fact that one of the most important pieces of advice that the IMF gave to New Zealand in recent years has been ignored. That advice was that we should be changing our tax system so that we have a neutral investment signal so that we have people investing for the growth of the New Zealand economy based on the profitability and the productivity of their business rather than the tax effectiveness of their investment. The International Monetary Fund along with the OECD our own Treasury and the Reserve Bank all favour New Zealand adopting a capital gains tax. So I would use this opportunity to note that if we are going to pay for these institutions we should heed their advice. On this occasion it has got it right and it is the National Government that has got it wrong. Of course that is one of the reasons why New Zealand misdirects its precious investment capital into wrong parts of the economy and we are not growing as well as we should which is the underlying cause of our Budget deficit not improving as fast as it ought to.  
The issue as to whether in future amendments to the International Finance Agreements Act should be made by way of statutory regulation is in my view an important one. At the moment the executive is required to come before Parliament and explain a change to these international agreements. That is the effect of the legislation as it currently sits; indeed the Minister of Finance has done that today. That is as it should be because these things have financial implications for New Zealand that are important and I do not agree that we should be creating a regulation-making power so that this is something that is done by the executive without further recourse to Parliament.  
Of course the executive has to authorise the Minister of Finance or his delegate to go along to International Monetary Fund meetings and make provisional agreements in respect of changes to the IMF rules. The IMF rules do not take effect immediately because the IMF rules contemplate that Ministers like our Minister of Finance have to come back and get approval from their legislatures. And that is actually why it is that this change to the International Monetary Fund rules did not take place immediately upon those meetings back in 2008 and 2010 because there had to be a sufficient number of countries that had ratified the agreement in principle that had been reached at those IMF meetings. The fact that we are one of the last countries in the world to do that—they are already up over 85 percent so these changes are already being given effect to at the International Monetary Fund—is because the Government has been slow in putting this bill on the Order Paper which does not mean to say that it ought not to be on the Order Paper.  
I think New Zealanders will have more confidence in our participation in these international fora if they think that Governments are being transparent about changes to those international agreements and the effect of those changes on New Zealand. There is already enough suspicion out there as to the effect of international agreements. We breed further suspicion if we are not open and transparent about changes to those rules.  
For those reasons amongst others the Labour Party opposes future changes to this legislation by way of the statutory regulation-making power that this amendment Act creates. We believe that future amendments ought to come back to this Parliament. If we look back in the history it has not been an onerous task for New Zealand to amend this legislation through annual amendments or anything like that. It is relatively rare that we have amendments to this International Finance Agreements Act which dates back to 1975.  
The Labour Party approves of the change that decreases the percentage of New Zealand’s share in this greater pool increases the size of the pool overall but then says that the individual contributions are pro rata decreased so that the overall effective cost to the country is about the same. We think it is a wise change.  
I would also note that I do not want to think that people should overstate some of the changes that have been made to IMF voting rights. I am informed that for amendments 85 percent of the votes of members are required or votes plus ratification by those members subsequently. The US still effectively holds a veto right because it has 16 percent of the votes. So we should not overstate the changes in that regard.  
We oppose the future changes being made by way of regulation but support this bill to select committee.