Volume 665 Week 48 - Tuesday 20 July 2010 
Volume 665 Week 48 - Tuesday 20 July 2010 
[Volume:665;Page:12431] 
Tuesday 20 July 2010 
Mr Speaker 
 took the Chair at 2 p.m. 
Prayers 
. 
Questions to Ministers 
Economic Recovery—Steps to Help New Zealanders 
1. 
CRAIG FOSS (National—Tukituki) 
 to the  
Minister of Finance 
: What steps is the Government taking to help New Zealanders get ahead as the economy recovers? 
Hon BILL ENGLISH (Minister of Finance) 
: 
 The Government is focused squarely on developing a stronger economy because it is the only way that New Zealand can create new jobs higher incomes and more opportunities. We will achieve that when business has the confidence to invest expand and hire new people and when people with appropriate skills are available for those jobs. At the weekend the Prime Minister announced a fair and balanced employment package aimed at creating jobs and boosting economic growth. This package will give more people the chance to access the job market and more businesses the confidence to create new jobs. It is one more step on the road to recovery. 
Craig Foss 
: What are some of the features of the Government’s employment law package? 
Hon BILL ENGLISH 
: One of the main features is extending the 90-day trial period for new employees to all workplaces. This will give employees a shot at work and will provide employers with the confidence to hire them. Employers have generally acted responsibly and workers have been treated fairly. This policy is a moderate step compared with the policies of Britain and Australia both of which have longstanding probationary periods of between 6 months and 1 year. The Government is also making several other changes to the Employment Relations Act in line with the commitments National made in its 2008 manifesto. 
Hon David Cunliffe 
: Does helping New Zealanders to get ahead include raising their power prices forcing them to pay more to register their cars lifting accident compensation rates raising GST and on top of that stripping them of employment protections by having them fired at will with no explanation? 
Hon BILL ENGLISH 
: Clearly the member thinks that helping New Zealanders to get ahead means raising their power prices because under his Government those prices rose by 72 percent in 9 years. Helping New Zealanders to get ahead involves cutting their taxes so that there is more reward for work and savings and it involves boosting business confidence because that is how we will create new jobs. 
Craig Foss 
: What other measures is the Government taking to support jobs and get the economy growing faster? 
Hon BILL ENGLISH 
: The employment measures announced in the weekend are part of the Government’s comprehensive economic programme which includes investing in infrastructure getting the public finances in order providing a more competitive tax system and generally undoing the damage done by the previous Labour Government. That Government made this economy unbalanced and uncompetitive. 
Keith Locke 
: How much extra will it cost the taxpayer for all the publicly subsidised doctors appointments resulting from allowing employers to demand a medical certificate for only 1 day’s absence from work? 
Hon BILL ENGLISH 
: I do not have those details so I cannot answer that question. 
Hon David Cunliffe 
: What aspect of the Government’s so-called comprehensive economic programme will deliver the so-called step change that it promised given that it has been forced to abandon mining on the Coromandel and on Great Barrier Island? Is it the cycleway to nowhere the Job Summit with no point the 9-day fortnight that did not last as long as that or the rolling maul that is a few forwards short of becoming a real scrum? 
Hon BILL ENGLISH 
: It is the comprehensive economic package that the Government is pursuing and if I can draw attention simply to one aspect of it it is our multibillion-dollar investment in infrastructure which is keeping thousands of people in work and retaining skills in New Zealand. For instance over half of all non-residential building permits in the last 3 months were issued for public sector projects—the highest percentage in 20 years. So the Government is not only helping New Zealanders through the early stages of a recovery by providing jobs through infrastructure investment but building a platform for a much stronger economy and more jobs. 
Craig Foss 
: What reports has the Minister seen on the Government’s measures to support jobs and create faster economic growth? 
Hon BILL ENGLISH 
: I can quote one opinion from one of our daily newspapers which described the reform of personal grievance dispute procedures as “sensible” and “long overdue”. It also stated that the Government’s employment law package was “measured” and “will introduce greater coherence and flexibility into employment law.” I have also seen a report about the Government’s infrastructure programme. Pacifecon’s latest survey of construction sector activity found that four-fifths of big construction jobs are being funded by the Government. That is a significant contribution to many households in New Zealand and also to building a platform for a strong economy and new jobs. 
Mining in Conservation Areas—Changes to Schedule 4 
2. 
Hon PHIL GOFF (Leader of the Opposition) 
 to the  
Prime Minister 
: Does he stand by his statement on 9 February that “Notwithstanding the public consultation process it is my expectation that the Government will act on at least some of these recommendations and make significant changes to Schedule 4”? 
Hon JOHN KEY (Prime Minister) 
: 
 Yes and we are continuing with our proposal to add 14 areas totalling 12400 hectares of land to schedule 4. However we have listened carefully to the public’s concern and decided not to take any areas of land out. Instead we are focusing the Government’s effort on assessing New Zealand’s mineral wealth in the areas outside schedule 4. That mineral wealth is likely to be very substantial. 
Hon Phil Goff 
: Does the Prime Minister’s change of heart mean that he does not now believe in mining in our national parks and protected schedule 4 areas; if so why did he propose it in the first place? 
Hon JOHN KEY 
: Firstly there are a couple of things. The Government has listened to the people of New Zealand who I think on balance have said that they do not want mining on schedule 4 land but they do want expanded mining around the rest of New Zealand in certain parts as long as it is done in an environmentally friendly way; and I support them on that. I might add that Cabinet has always taken the conservative view which is why we whittled down the 467000 hectares recommended by officials to a mere 7000 before we even started the process. 
Hon Phil Goff 
: Is it true that the people who recommended to Cabinet with the Prime Minister’s concurrence that 467000 hectares of national park land be mined were Gerry Brownlee and Kate Wilkinson? 
Hon JOHN KEY 
: No officials recommended that. 
Mr SPEAKER 
: Today naturally is a little robust but I have called the honourable Leader of the Opposition. His colleagues should let him ask his question. 
Hon Phil Goff 
: Does the Prime Minister accept the responsibility for putting forward plans to mine our national parks and areas like Great Barrier Island and the Coromandel Peninsula or does he put the blame on Gerry Brownlee? 
Hon JOHN KEY 
: I take responsibility for wanting New Zealand to be a wealthier country and that is exactly what we will be doing by expanding our mining and exploration activities just not in pristine national parks. 
Hon Phil Goff 
: How does the Prime Minister rate the following in terms of his ambition to catch up with Australia and create jobs: his plan to mine in protected national parks his Job Summit the 2025 task force Chinese investment in broadband or New Zealand as a world centre for financial services; and what cloud is he going to jump on next? 
Hon JOHN KEY 
: Well I cannot be sure whether I am on cloud but I know that the Leader of the Opposition is in a hole from the latest polls we have seen. Talking of digging things up the only place he will be safe is in a pristine national park because that is the only place where he cannot dig a hole for himself. The member will have to wait and see—plenty of those things are coming. 
Rahui Katene 
: Was he aware of the statement by the chairman of Ngati Rehua Rawiri Wharemate that the Government failed to warn the hapu about its plans to commence mining on Great Barrier Island and what influence did iwi opposition have in the decision not to remove any land from schedule 4 of the Crown Minerals Act? 
Hon JOHN KEY 
: It is my understanding that Gerry Brownlee had a hui on Great Barrier Island with the iwi and their views were a factor in the Government’s decision. 
Mining in Conservation Areas—Prime Minister’s Statements 
3. 
METIRIA TUREI (Co-Leader—Green) 
 to the  
Prime Minister 
: Does he stand by his reported statement on  
Breakfast 
 TV yesterday regarding mining on schedule 4 land that “we are not environmental vandals that’s for sure”? 
Hon JOHN KEY (Prime Minister) 
: 
 Absolutely and today we proved it. 
Metiria Turei 
: Does he agree that today’s decision not to mine in schedule 4 land is a victory for our “clean green” brand which will be better off because New Zealanders fought his Government’s plan to mine in their most precious places? 
Hon JOHN KEY 
: No. 
Metiria Turei 
: Does the Prime Minister agree that New Zealanders are not hysterical but are incredibly proud of these precious wilderness places and their rich biodiversity and that New Zealanders love them for their intrinsic value? 
Hon JOHN KEY 
: What I think came through in the submission process were two clear streams of thought. One was that New Zealanders do not want mining on national parks and Government has accepted that. But New Zealanders also espoused the clear view that they do want to see an expansion of our mineral and exploration activities in New Zealand. The Government will now be doing that and that is why we have commissioned amongst other things the aerial magnetic surveys in Northland and the West Coast of the South Island. 
Metiria Turei 
: Can the Prime Minister confirm that our “100% Pure New Zealand” brand and our tourism industries are worth far more than mining in our national parks and precious places could ever be? 
Hon JOHN KEY 
: One of the factors why the Government originally scaled back the large recommendation from the officials from 467000 hectares to 7000 hectares was recognition that there is natural tension there. But it is worth looking at the indications that came from the Tourism Industry Association and its members because they were fifty-fifty actually on the issue of mining in national parks. 
Metiria Turei 
: Will the Government consider adopting my member’s bill currently before the House which will increase the protections that schedule 4 provides for our national parks our marine reserves and our other most precious places? 
Hon JOHN KEY 
: We have not had an opportunity to consider it but the Government will come and speak to the member about it and see whether we can lend our support. 
Metiria Turei 
: Does the Prime Minister agree that the protection of the schedule 4 land our national parks the Coromandel and Great Barrier Island is a victory for the New Zealand community and the green movement who have made sure that his children and future generations of New Zealanders will be able to enjoy these wild places just as we do today? 
Hon JOHN KEY 
: I think it is a clear demonstration that this is a pragmatic Government that listens to the people of New Zealand. 
David Garrett 
: How does he explain shutting down all possibility of mining schedule 4 land while simultaneously preparing to give away billions of dollars of ironsand manganese and other resources from the foreshore and seabed in perpetuity to select iwi? 
Hon JOHN KEY 
: We are not giving it away. 
David Garrett 
: Is his mind made up regarding alienation of the foreshore and seabed from Crown ownership; if not if it took 30000 protesters to change the Government’s position on schedule 4 land how many protesters would it take to stop the Government from giving away billions of dollars of resources to select iwi? 
Hon JOHN KEY 
: Any good Government listens to the people of New Zealand. The feedback I have been getting on the foreshore and seabed recommendations made by this Government has been that they are again pragmatic and are seen to address the issues of access to justice and the concerns that New Zealanders had about solely having Crown ownership of the foreshore and seabed. On that basis the Government with the support of the Maori Party and others will be progressing with legislation. 
Employment 90-day Trial Period—Prime Minister’s Statements 
4. 
Hon PHIL GOFF (Leader of the Opposition) 
 to the  
Prime Minister 
: Does he stand by all his statements as Prime Minister on industrial relations? 
Hon JOHN KEY (Prime Minister) 
: 
 Yes. 
Hon Phil Goff 
: Why did he say yesterday at his post-Cabinet press conference that under the 90-day scheme employers have to give a reason for dismissal when the 90-day law that he has already put in place explicitly takes away from the employer the requirement to give a reason and to allow the employee being dismissed to comment on that reason? 
Hon JOHN KEY 
: Because I believe the statement I made yesterday to be correct. That is because the 90-day period—[ 
Interruption 
]—the 90-day— 
Hon Darren Hughes 
: Aw it’s not fair! 
Hon JOHN KEY 
: Nice haircut! Let us get back to the 90-day probationary—do not blush “Dazza”! 
Hon Darren Hughes 
: It’s a pretty tough job being Prime Minister! 
Mr SPEAKER 
: Order! 
Hon Darren Hughes 
: It used to be so easy! 
Mr SPEAKER 
: I am on my feet. The Leader of the Opposition asked a question that the Prime Minister appeared to be prepared to answer. I think the interjections are not assisting the answer. 
Hon JOHN KEY 
: I will start at the beginning again. Yes because I believe it to be correct. The reason for that is that within the 90-day period the provisions of good faith still apply. The concept of good faith— 
Hon Darren Hughes 
: The job has got so hard! 
Hon JOHN KEY 
: Mr Hughes can hear the answer if he wants to and not if he does not—I will not bother. 
Hon Phil Goff 
: I seek leave to table two documents: one is a statement made by the Prime Minister that the employer has to give a good reason; the second is the Act itself annotated to show that the employer is explicitly exempted from the requirement to give a good reason. 
Mr SPEAKER 
: Both of these documents are readily available to members. One is a piece of statute which is available to all members. The other is a statement that the Prime Minister made yesterday which again is a press statement. So I am not about to seek that leave of the House. 
Hon Phil Goff 
: Why are employees according to the Employment Relations Act as set out in the statutes of this House denied natural justice in that they are able to be dismissed without good reason and without being able to challenge the decision? 
Hon JOHN KEY 
: I will have another go at giving the answer. The 90-day period is covered by good-faith provisions. The concept of good faith requires an employer to be communicative. It is reasonable to expect that that includes giving a basic reason. However there is no requirement for a formal written reason. 
Hon Phil Goff 
: What protection is there under the 90-day law to stop bad employers from sacking employees without good reason thereby depriving them of their livelihood and leaving them with a blemish on their employment record? 
Hon JOHN KEY 
: Because one has to honour the provisions of good faith and an employee could take a good-faith case. 
Chris Tremain 
: What reports has the Prime Minister received on support for the 90-day policy from those who are marginalised in the job market? 
Hon JOHN KEY 
: I have seen a report of the case of Sanjay from Pizza Hut who has been delivering pizzas as it turns out to my house for about a year. He has a master’s degree in zoology and in India he worked in television education and health. He supports the policy and is just the sort of person the policy is designed to help. 
Hon Phil Goff 
: Why did the Prime Minister claim that the 90-day law creates extra jobs for disadvantaged job seekers when the Department of Labour report that he released on Saturday states that that cannot be demonstrated and states to the contrary that “very few” employers used the trial period for the purpose of giving a job to disadvantaged job seekers? 
Hon JOHN KEY 
: Because the same report quite clearly states that “40% of employers stated they would not have or were not likely to have hired that person without the trial period.” 
Hon Rodney Hide 
: What does it say about the broad acceptance of this Government’s employment law changes when the position of Phil Goff in Opposition is supported by former Alliance party strategist Matt McCarten former Green MP Sue Bradford and professional protester John Minto especially when those veteran protesters from the 1970s could not even find the right building in which to finally start their long-hoped-for class war? 
Hon JOHN KEY 
: I suspect it says that if they are not good at navigation they should not give up their jobs as serial protesters and become taxi drivers because they will not last the 90 days. 
Employment 90-day Trial Period—Extension to All Employers 
5. 
DAVID BENNETT (National—Hamilton East) 
 to the  
Minister of Labour 
: Why is the Government extending the 90-day trial period to all employers? 
Hon KATE WILKINSON (Minister of Labour) 
: 
 Because the 90-day trial period for small businesses has been a great success. It has given employees jobs that they otherwise might not have got and it has given employers confidence to employ people and grow their businesses. All over the country employers and employees are telling me that the trial period is opening up opportunities and is being used responsibly. Those sentiments have been endorsed by a report by the Department of Labour that found up to 40 percent of employers using the trial period would not have hired the employee without a trial period being available. Indeed in today’s paper there were two letters from employers who would not have employed people if it had not been for the very successful trial period. 
David Bennett 
: What protections are available under the 90-day trial period? 
Hon KATE WILKINSON 
: The good-faith provisions of the Employment Relations Act apply meaning that all dealings between employers and employees need to be reasonable and honest. Remedies are available to employees in the case of sexual or racial harassment or any kind of discrimination. Mediation is available to the parties to help address any issues that arise. Protections regarding pay conditions leave and health and safety are unaffected by the trial period. Those protections have worked well and the trial period has generally been used responsibly by employers and employees. 
Su’a William Sio 
: How can she claim that this policy has helped those on the margins of the labour market when figures from Statistics New Zealand show unemployment for Pacific peoples has increased from 7.8 to 14 percent while unemployment for Maori rose from 9.8 to 15.4 percent and when her own department’s evaluation of the scheme to date shows that 79 percent of employees hired on the trial period were European? 
Hon KATE WILKINSON 
: This trial period is about giving opportunities to employees and those at the margins. In fact those hired under a trial period represented 14 percent of the Maori population. The trial period is about opportunities— 
Hon Darren Hughes 
: I raise a point of order Mr Speaker. I appreciate that my colleague’s supplementary question contained a lot of statistics but he clearly was talking about Pacific people not Maori people. Her response was not consistent with his question. 
Mr SPEAKER 
: I beg to differ with the honourable member. Su’a William Sio also specifically mentioned Maori statistics as well and the Minister is at liberty to choose some part of the supplementary question which was somewhat lengthy. 
Rahui Katene 
: How many Maori started employment under the new scheme and how many if any Maori were kept on after the 90-day trial period? 
Hon KATE WILKINSON 
: It is not possible to say exactly how many Maori have used the 90-day trial or were kept on after the trial. I expect that like all New Zealanders Maori where appropriate have taken up and will take up the trial period opportunity because it gives them a good chance to get a job. As mentioned in my earlier answer according to the department study 14 percent of those hired on a trial period were of Maori ethnicity. 
Hon Trevor Mallard 
: Do the good-faith provisions override the employer’s rights to dismiss without giving a reason? 
Hon KATE WILKINSON 
: The good-faith provisions have been preserved in the legislation. In particular section 4(1A)(a) and (b) of the Employment Relations Act regarding the duty of good faith is retained for trial periods. Paragraph (b) “requires the parties to an employment relationship to be active and constructive in establishing and maintaining a productive employment relationship in which the parties are among other things responsive and communicative;”. That is protected in the trial provisions. 
Hon David Parker 
: I raise a point of order Mr Speaker. Mr Mallard’s question asked whether those good-faith provisions override the employer’s right to dismiss without giving a reason. It was a very straight question; it was a very narrow question. It has not been addressed. 
Mr SPEAKER 
: The member has made an interesting point; I appreciate that absolutely. I may be wrong here but I suspect that the member is asking the Minister to give a legal interpretation of the statute. Of course Ministers are not in a position to do that. The Minister has in answering the question outlined what the statute says and I am presuming it is then a matter of legal interpretation as to exactly what that statute permits and what it does not permit. That is why I believe that the Minister has reasonably answered the question. 
Hon David Parker 
: Further to the point of order— 
Mr SPEAKER 
: I will hear the honourable member again because it is an interesting issue. 
Hon David Parker 
: In response to the original question that the Government asked of itself the Minister said that good-faith provisions applied implying that the employer did not have an unambiguous right to dismiss without giving a reason. My colleague Mr Mallard asked a specific question from a policy perspective; it is not a legal question. He asked whether the good-faith obligation that the Minister referred to overrides the employer’s right to dismiss without giving a reason. I submit that it is a very specific and appropriate policy question. 
Mr SPEAKER 
: As the member should be aware having been a Minister the point is that if the law does not actually say that in those words then it is a matter of interpretation. Ministers have to be careful not to seek to interpret what the statute says. That is why I feel it would be wrong of me to insist on the Minister giving a particular answer to that. She has cited what the statute says and it is then up to interpretation as to whether it means something can or cannot happen. 
Hon Trevor Mallard 
: Is it the Government’s policy and was it the Minister’s intention as she introduced the 90-day legislation in 2008 for the good-faith provisions to override the employer’s rights to dismiss without giving a reason? 
Hon KATE WILKINSON 
: When the 90-day trial was first introduced it was very specific. It retained the good-faith provisions contained in section 4(1A)(a) and (b) and it excluded paragraph (c) which relates to access to information and opportunities to comment because of the time frames of that which were some weeks 60 days for some reasons and which would actually be too prescriptive in relation to the process. 
Hon David Parker 
: I raise a point of order Mr Speaker. Mr Mallard asked whether the policy intention was that the good-faith provisions override the right to dismiss without notice. That is the point of contention here. The Minister has been asked this question on two occasions; it is a central issue concerning this legislation. It is now being applied to all other groups— 
Mr SPEAKER 
: I think the member has made his point without needing to go on any further. On this occasion the Hon Trevor Mallard asked exactly what the Government’s intention was in respect of those issues. I do not believe that the Minister has on this occasion answered that question—the answer must be about what the Government intended. It is a relevant issue and there is a genuine public interest in that issue. The question is not asking the Minister to interpret a statute; it is asking what the Government’s intention was when it introduced the statute. I invite the Minister if it is possible and in the public interest to answer that question. 
Hon KATE WILKINSON 
: It is the Government’s intention that we have employment legislation and an employment regime that is flexible and is fair to both employers and employees. The idea of the 90-day trial was to give employers the confidence to take on new employees and to give employees the opportunity to get their foot in the door. If for any reason the employment relationship was not working the relationship could be terminated without the need to go through the prescriptive dismissal process under the legislation. 
Hon David Parker 
: I raise a point of order Mr Speaker. It would be perfectly permissible for the Minister to say “I don’t know.” But the Minister has not addressed— 
Mr SPEAKER 
: The member is questioning whether the Minister has answered the question. What I might do is invite the Hon Trevor Mallard to repeat his question because the question was commendably brief and to the point. I invite the Hon Trevor Mallard to repeat his question. 
Hon Trevor Mallard 
: The first part will not be an exact repeat because it was not written— 
Mr SPEAKER 
: In so far as the member is able. 
Hon Trevor Mallard 
: Was it the Government’s intention as it introduced the 2008 legislation that the good-faith provisions override the employers’ rights to dismiss without giving a reason? 
Hon KATE WILKINSON 
: The Government’s intention when it introduced the 90-day trial was that the duty of good faith did actually stay and was there for the protection of parties in terms of paragraphs (a) and (b) of the legislation. They were specifically retained. 
Hon Phil Goff 
: I seek the leave of the House to table an article from Lawlink saying that under the trial period the employer does not have to tell the employee of the decision to terminate that employees have no right to comment and that they are not able to request the reasons for their dismissal. 
Mr SPEAKER 
: Leave is sought to table that document. Is there any objection? There is no objection. 
Document by leave laid on the Table of the House. 
Jacinda Ardern 
: How can she claim that the 90-day trial will provide real opportunities for people at the margins of the labour market including young people when a quarter of those who did get jobs under this scheme have since been fired and there has been a 12 percent increase in youth unemployment since this policy was introduced? 
Hon KATE WILKINSON 
: The report actually said that three out of the four had been retained. In relation to the one out of the four it was not a question of firing. In one case it was because the employee’s family did not want the employee to be employed. 
David Bennett 
: What reports has she seen about the 90-day trial period? 
Hon KATE WILKINSON 
: I have seen an editorial from the Christchurch  
Press  
noting that “Especially for those with limited skill levels or work experience the scheme can spell the difference between getting a foot in the labour market door and lingering on the dole.” The  
Herald on Sunday 
 wrote that “Anything that encourages an employer to take a punt on a new worker and in particular to give a chance to someone who shows promise but lacks credentials must be worth trying. It defies common sense that cost-conscious bosses will casually sack someone they have spent 3 months training.” We have also had support from a surprising but welcome source. When asked about the 90-day trial period the former president of the Labour Party Mike Williams said: “I don’t think the unions are going to win the argument.” Mike Williams understands that the public take a common-sense approach and would prefer to give workers a go rather than leave them locked out of the labour market. 
Carol Beaumont 
: How does she think allowing all employers to fire staff without reason within 90 days will encourage investment in training and upskilling in the workplace? 
Hon KATE WILKINSON 
: This policy is about giving opportunities. This is a policy in relation to hiring staff yet the Labour Party considers it is a policy relating to firing staff. If we look at the 40 percent of employers who would not have taken on an employee without a trial period we see that that in itself is indicative of the success of the policy. 
Carol Beaumont 
: I raise a point of order Mr Speaker. My question was quite specific. It asked how this policy will encourage investment in training and upskilling in the workplace but I do not believe the Minister touched on either of those points. 
Mr SPEAKER 
: Members asking questions need to be aware that when they ask for Ministers’ opinions about things like that they will not always get the answers they seek. Today members have had a very very sharp lesson in how to ask tough questions. 
Carol Beaumont 
: Can she confirm that someone can be dismissed because first that person asked for some time off; second he or she questioned a manager’s decision; or third the boss’s golf partner’s son needs a job; and does she consider that to be fair? 
Hon KATE WILKINSON 
: I am not going to comment on hypothetical situations that require interpretation of an employment contract the Employment Relations Act and actual conduct that happened in the workplace. 
Employment—Proposed Legislative Reform 
6. 
Hon TREVOR MALLARD (Labour—Hutt South) 
 to the  
Minister of Labour 
: Does she agree with all of the Prime Minister’s statements about the Government’s proposed new labour laws? 
Hon KATE WILKINSON (Minister of Labour) 
: 
 Yes. 
Hon Trevor Mallard 
: Will her legislative change include a provision to allow people who have shifted from a permanent position into one where they can be dismissed without a reason being given to be reinstated in their original position; if so will that be limited to people who were in their previous position for more than 12 months? 
Hon KATE WILKINSON 
: The member will just have to wait and see what is in the actual wording of the proposed bill. Can I say in relation to the 90-day trial that there will be workers who do not want to leave the security of their present job and go to a new job with a 90-day trial but this policy is helpful to those on the margins those who have not had a job for awhile those who are young and inexperienced and migrants who do not have sufficient command of English. Those people can ask to be given a go and can get their foot in the employment market. 
Hon Tau Henare 
: What reports has she seen about— 
Hon Trevor Mallard 
: Welcome back Tau. 
Hon Tau Henare 
: Thank you very much. They found a heart and it is a real one! What reports has she seen about the trial period currently available to small businesses? 
Hon KATE WILKINSON 
: I have seen a press statement from the Council of Trade Unions issued back in 2008 which states: “Any small business that uses this law can expect to see the union and we will also publicly name and shame those that come to our attention.” I can only say that there has been no public naming and shaming which suggests to me that the hysteria around the original bill has come to naught. 
Hon Tau Henare 
: What protections for employees has the Government announced as part of the employment reform package? 
Hon KATE WILKINSON 
: We have announced plans to double the maximum penalties under the Employment Relations Act and the Holidays Act. These increases underline the Government’s view that it is important that employers meet their legal obligations. We are also extending the powers of labour inspectors including making it easier to ensure that all employees receive at least the legal minimum wages and conditions. 
Accident Compensation—Employers’ Experience Rating 
7. 
MICHAEL WOODHOUSE (National) 
 to the  
Minister for ACC 
: How will experience rating of ACC for employers improve workplace safety ensure fairer levies and encourage appropriate return-to-work programmes? 
Hon Dr NICK SMITH (Minister for ACC) 
: 
 The current system of averaging accident compensation levies means that safer workplaces are paying for the substandard work practices of others. Experience rating removes these cross-subsidies and provides stronger financial incentives for businesses to improve their safety records. Research also shows that keeping an employee engaged with his or her employer through appropriate return-to-work programmes ensures better rehabilitation and this too is encouraged by experience rating. 
Michael Woodhouse 
: What steps has the Government taken to ensure that smaller businesses and the self-employed are also given stronger safety incentives despite their size making experience rating difficult to implement? 
Hon Dr NICK SMITH 
: We have developed a very simple system of no-claim bonuses to be offered to businesses paying less than $10000 a year in accident compensation levies. If such a small business has no income compensation claim—that is for an injury involving someone being away from work for more than a week—in the previous 3 years then it will be eligible for a 10 percent no-claim bonus. The Accident Compensation Corporation estimates that 220000 small businesses and self-employed people will receive this 10 percent no-claim bonus next year. 
Michael Woodhouse 
: What research basis is there to show a clear link between safer workplaces and experience rating? 
Hon Dr NICK SMITH 
: Recent research in both Canada and the Netherlands shows a clear beneficial linkage between experience rating and safety improvements showing the benefit to be a 15 percent decline in accidents. Noting that New Zealand workplaces injure 600 people every week and kill about one New Zealander each week this measure has the potential to save five lives a year and to prevent 3000 injuries per year. The Government is consulting on the specifics of the experience rating system to ensure that we get the detail right and that we get the maximum safety benefits. 
Employment 90-day Trial Period—Consultation by Prime Minister or Minister of Labour 
8. 
Hon NANAIA MAHUTA (Labour—Hauraki-Waikato) 
 to the  
Minister of Maori Affairs 
: Was he consulted by the Prime Minister or the Minister of Labour in relation to the extension of the 90-day trial period announced this weekend; if so what was his response? 
Hon Dr PITA SHARPLES (Minister of Maori Affairs) 
: 
 Tena koe Mr Speaker. Tena tatou e te Whare. No. 
Hon Nanaia Mahuta 
: Does he stand by his statement: “Look the 90-day bill we voted against it we fought against it we didn’t get it … but you go for the greater good and that’s why we’re there”; if so where is the greater good to be found in supporting a Government that is removing basic rights from Maori workers? 
Hon Dr PITA SHARPLES 
: My views are well known on opposing that legislation but the key thing in working with the Government is that we agree to disagree on certain issues. 
Hon Nanaia Mahuta 
: Not good enough. How can he support a law that makes it easier for employers to sack their workers casualising the workforce; and how will that measure help the 22000 Maori who are currently unemployed or the 36 percent of young unemployed Maori to get into a job? 
Hon Dr PITA SHARPLES 
: We do not support the current legislation. The issue is not about failing to support a trial. A trial is fine but once one removes the right to appeal then that is why we oppose that law. 
Carmel Sepuloni 
: Does he agree with his co-leader Tariana Turia that there is “no evidence” that the 90-day probation period will lead to employers taking on more young Maori; if so how can he justify his continued support of a Government that has raised GST denied Maori representation on the super-city and ignored his objections twice on the 90-day fire-at-will law? 
Hon Dr PITA SHARPLES 
: I do agree with Tariana Turia my co-leader and I work with this Government because it has been able to create initiatives like Mara Kai Whanau Ora Youth Training literacy programmes early childhood programmes and other initiatives. 
Roading Newmarket Viaduct—Replacement 
9. 
Dr JACKIE BLUE (National) 
 to the  
Minister of Transport 
: What progress has been made on the Newmarket viaduct replacement project? 
Hon STEVEN JOYCE (Minister of Transport) 
: 
 I am pleased to announce that the southern half of the Newmarket viaduct replacement project will be completed more than 6 months ahead of schedule on 6 September. The initial opening of three lanes is an important milestone in the $215 million project. Contractors are now on track to complete a fourth southbound lane by early 2011. The delivery of this new stretch of motorway 6 months early matches the performance of the team working on the Manukau Harbour crossing which is also due to be completed 6 months early. 
Dr Jackie Blue 
: What contribution has Government funding made to the early completion of roading projects like the Newmarket viaduct? 
Hon STEVEN JOYCE 
: I am pleased that this Government’s $10.7 billion commitment to State highway building over 10 years has provided a secure pipeline that has given contractors the confidence to continue investing in people and machinery and complete projects more quickly. The Contractors Federation stated last week: “The subsequent steady stream of projects and funding announcements have turned that enthusiasm into a higher level of confidence in an industry that would otherwise be focusing on a reduction of capacity.” The Government and industry are now able to look confidently ahead and deliver transport infrastructure projects that will assist New Zealand’s economic recovery. 
Employment 90-day Trial Period—Exclusions 
10. 
GRANT ROBERTSON (Labour—Wellington Central) 
 to the  
Minister of Labour 
: Are there any groups of employees that will be excluded from the extended 90-day trial period? 
Hon KATE WILKINSON (Minister of Labour) 
: 
 Yes any employee or group of employees that does not sign up to a trial period and does not want one in their employment agreement. They do not have to have a trial period if they do not want one. 
Grant Robertson 
: Does the Minister support the application of the 90-day policy to the State sector including nurses teachers prison officers and social workers; if so what does she think the impact will be on the quality of public services that New Zealanders receive? 
Hon KATE WILKINSON 
: The 90-day trial period is optional; it is not compulsory. I imagine that many groups of professionals like doctors nurses and teachers do not need a trial period because they already have an existing job or they have qualifications and experience to get them into that employment market. They are not the ones on the margins of the employment field who are the ones more likely to benefit from the 90-day trial. But if they want one they can have one. 
Allan Peachey 
: Who would be unlikely to agree to a 90-day trial period? 
Hon KATE WILKINSON 
: Well apart from Mr Goff most people changing jobs are unlikely to need to agree to a trial period as they will have a demonstrated work history and qualifications. This is particularly relevant for people like doctors and nurses. I would not expect them to accept or want a trial period. 
Grant Robertson 
: Would the Minister expect any State sector agencies to ask employees for a 90-day trial period? 
Hon KATE WILKINSON 
: Well it is up to the sector and groups themselves whether they want to ask for it. 
Phil Twyford 
: Does she expect that the extension of the 90-day law will mean that all 6000 staff of the new Auckland Council will be able to be dismissed for no reason in the first 90 days? 
Hon KATE WILKINSON 
: Unfortunately that shows blatant ignorance of the law. The trial period relates only to new employees; it does not relate to existing employees. 
State Housing—Upgrades and New Houses 
11. 
KATRINA SHANKS (National) 
 to the  
Minister of Housing 
: What has been the result of the extra $124.5 million that the Government provided for housing as part of the fiscal stimulus package? 
Hon PHIL HEATLEY (Minister of Housing) 
: 
 Housing New Zealand has carried out well over 20000 upgrades to State houses. Of those over 11000 were funded directly by the stimulus package. That is 11000 additional families who would otherwise still live in old cold houses full of mould that the previous Government left them in. The package also paid for 87 new State houses out of the 846 additional State houses that have been delivered over the last 2 financial years. The package also provided work for thousands of workers during a downturn. 
Katrina Shanks 
: What are the current challenges facing housing? 
Hon PHIL HEATLEY 
: The State housing portfolio was left to us with significant challenges. In fact I am advised that there are more than 20000 State houses that are the wrong size in the wrong place or in a serious state of disrepair. This Government wants the right houses of the right standard in the right places in New Zealand for those most in need. 
Moana Mackey 
: Does he understand that while the recession may be over for him and his National colleagues it is not over for the 11000 people currently sitting on Housing New Zealand Corporation’s waiting list; and maybe instead of patting himself on the back for the fact that he delivered an 80 percent cut in the housing budget he might want to do his job and help get those families into housing? 
Hon PHIL HEATLEY 
: The House might be interested to know that the waiting list has remained at around 10000 people for the last decade—10000 every year for the last decade. The question should be asked how the National Government was able to hold the waiting list at 10000 during a recession when the previous Labour Government could not hold it at that even during the good times. 
Employment 90-day Trial Period—Department of Labour Report 
12. 
DARIEN FENTON (Labour) 
 to the  
Minister of Labour 
: Does she agree with any of the conclusions reached by the Department of Labour in its  
Trial Employment Periods 
 evaluation; if so which ones? 
Hon KATE WILKINSON (Minister of Labour) 
: 
 I do agree with some of the conclusions reached by the Department of Labour but can I say that the evaluation was not exhaustive and in some areas could not be conclusive. However it has provided some very encouraging indications about how the 90-day trial is helping New Zealanders into jobs. 
Hon Darren Hughes 
: Point of order. 
Mr SPEAKER 
: I hear the honourable member. The question asked whether the Minister agreed with any of the conclusions—which the Minister has indicated—then asked: “if so which ones?”. Being a question on notice I think the Minister should answer as to which of the conclusions she does agree with—at least some of them. 
Hon KATE WILKINSON 
: I agree and I applaud the conclusion that 40 percent of employers using the trial period would not have employed that person if not for the trial period. That has to be a positive benefit of the trial period. 
Darien Fenton 
: Which statements are correct: the ones from herself and the Prime Minister that this policy has helped those on the margins of the labour market to get jobs or the Department of Labour evaluation which found that 72 percent of those hired under the 90-day law were European while those overrepresented on the margins—Maori and Pacific Islanders—made up only 14 percent and 6 percent respectively? 
Hon KATE WILKINSON 
: It certainly helped those 72 percent and also the 14 percent and the 6 percent. The study is not conclusive but it does show that all types of New Zealanders are making use of the trial period and they are often getting jobs they otherwise would not have got. That must be positive. 
Darien Fenton 
: How balanced a view does she think the Department of Labour evaluation has been able to reach on the benefits and risks of the 90-day trial considering that it talked to or surveyed 3532 employers and just 13 employees? 
Hon KATE WILKINSON 
: The study itself is only one part of the toolkit that we have used. We have also been speaking to employees and employers from around the country and we have received very very positive feedback. In fact if we look at this morning’s  
New Zealand Herald 
 we see two letters that talk about employers taking on employees whom they would not have employed without a trial period. I think it is a positive development and it is bringing us more in line with what is happening in international jurisdictions such as the United Kingdom and Australia both of which have more onerous trial provisions. 
Darien Fenton 
: Did she advise the Prime Minister that the Pizza Hut delivery worker who came to his house has no employment rights or protections against unfair dismissal because he is an independent contractor and that last year the Prime Minister’s Government voted against workers like that delivery man getting even the minimum wage? 
Hon KATE WILKINSON 
: I have given no advice to the Prime Minister on the employment status of his pizza delivery man and neither should I. 
Urgent Debates Declined 
Mining in Conservation Areas—Land Not to be Removed from Schedule 4 
Employment 90-day Trial Period—Government Response to Department of Labour Report 
Mr SPEAKER 
: I have received a letter from the Hon Phil Goff seeking to debate under Standing Order 380 the Government’s announcement today relating to mining in schedule 4 of the conservation estate. This is a particular case of recent occurrence involving ministerial responsibility. The purpose of the urgent debate procedure is to provide an opportunity for the House to hold the Government accountable for its decisions. As Speaker’s ruling 175/6 makes clear not every ministerial announcement even an important one will give grounds for an urgent debate. There must be such an element of urgency that the matter must take precedence over other business. The Government’s announcement that it no longer plans to remove any land from schedule 4 of the Crown Minerals Act 1991 for the purposes of further mineral exploration or extraction proposes no change to the status quo. In those circumstances I do not believe there is any justification that would require the setting aside of the usual business of the House to debate this matter. This application for an urgent debate is therefore declined. 
I have also received a letter from the Hon Trevor Mallard seeking an urgent debate on the Government’s reaction to the Department of Labour report entitled  
Trial Employment Periods: An Evaluation of the First Year of Operation 
. This is a particular case of recent occurrence involving ministerial responsibility. This report evaluates the 90-day trial employment period that came into effect on 1 March 2009. The findings of the report have been referred to by the Government when announcing recent policy changes to extend the 90-day trial period. The findings of the report although important can be examined in a number of ways by the House. An oral question on this matter has been lodged and answered today. Also in considering whether a matter requires the urgent attention of the House it is relevant to consider whether the matter proposed to be debated must come before the House reasonably soon in the form of legislation. The Government has announced that it intends to introduce legislation into Parliament soon to enact the proposed changes. The consideration of this legislation will provide the opportunity to debate the evaluation of the 90-day trial period. This application for an urgent debate is also declined. 
Governor-General Bill 
First Reading 
Hon JOHN KEY (Prime Minister) 
: 
 I move  
That the Governor-General Bill be now read a first time. 
 At the appropriate time I will move that the Governor-General Bill be considered by the Government Administration Committee that the committee report finally to the House on or before 14 September 2010 and that the committee have the authority to meet at any time while the House is sitting except during oral questions and during any evening on a day on which there has been a sitting of the House and on a Friday in a week in which there has been a sitting of the House despite Standing Orders 187 and 190(1)(b) and (c). 
The Governor-General Bill is important timely legislation. The Governor-General plays an important role in our constitution. As the Sovereign’s representative in New Zealand the Governor-General helps maintain the legitimacy and continuity of Government. The office of Governor-General is a symbolic link between the community and the State and the Governor-General also represents the New Zealand public in a non-partisan way on important public occasions. New Zealand Governors-General always support many community organisations. It is vital that the office of Governor-General is properly supported in carrying out these roles. 
For much of our history Governors and then Governors-General came from overseas. The office of Governor-General is now fully a New Zealand institution but the Act that provides for the support of that office the Civil List Act 1979 is outdated and no longer fit for purpose. As a result in 2007 the previous Government asked the Law Commission under Sir Geoffrey Palmer’s leadership to review the Act. The Law Commission found that the Governor-General provisions in the Civil List Act were old-fashioned unnecessarily complicated and no longer suited to supporting the office of a modern Governor-General. The Law Commission recommended a range of reforms to that part of the Act. The Government this year has agreed with the Law Commission’s recommendations and will implement them in time for the next Governor-General to assume office in August 2011. The new legislation will not save for one or two exceptions apply to the incumbent Governor-General but will apply when the next Governor-General is appointed. 
The main purpose of the bill is to streamline the financial arrangements for the support of the office of Governor-General promote transparency and ensure that they are simpler to administer than the present regime. The bill will also modernise the old-fashioned language found in the Governor-General parts of the Civil List Act. As a modern stand-alone statute it will separate the arrangements relating to the Governor-General from those providing for Ministers and MPs and will therefore better reflect existing constitutional boundaries as well as the mana and independence of the office. 
A key feature of the bill is that it creates a new funding structure for the office of Governor-General. The Governor-General’s personal allowance presently pays for a range of official functions that are much more properly supported by a separate programme appropriation. The bill provides for that separate appropriation. Similarly funds for international travel which the Governor-General undertakes at the Government’s request are provided for in a new international travel appropriation. Domestic travel will form part of the programme appropriation. 
The present exemption of the Governor-General’s salary from income tax will be removed. There is no longer any justification for this exemption and successive Governors-General have requested that it be discontinued. The Queen has voluntarily paid income tax on her private income since 1993. The Australian Governor-General and state governors have paid income tax on their salaries since 2001. Another anachronism that will be removed is the Minister of Finance’s power to exempt the Governor-General from paying any public or local taxes and any other rates and duties. This power came from an age when our Governors-General typically came from Britain and is no longer relevant to supporting modern New Zealand Governors-General. 
The bill will also remove certain outdated restrictions on the availability of the annuity paid to former Governors-General and their surviving spouses or partners. The annuity recognises the significant role played by a Governor-General’s spouse or partner in supporting the office holder. Compared with the present regime the annuity will continue to be available if a surviving spouse or partner remarries or enters a new relationship or if a former Governor-General or his or her surviving spouse or partner chooses to live overseas. The bill will carry over from the Civil List Act provisions allowing the Government to provide specified benefits and privileges to former Governors-General. In practice such benefits are limited to domestic travel and the use of chauffeur-driven cars. The provision of these benefits recognises that the public demands on a former Governor-General’s time may continue after he or she leaves office. Similar provisions exist for former Prime Ministers. The bill will further enhance transparency by requiring the Government to present to the House on an annual basis the details of the expenses incurred to provide such benefits. 
Overall the bill represents a big step forward in how the Government supports the office of the Governor-General. I would like to extend my thanks to the Law Commission to the previous Government and to the leaders of those parties in this House that have indicated to me that they will support this bill. 
Hon DARREN HUGHES (Labour) 
: 
 As the Prime Minister has indicated the Governor-General Bill enjoys a lot of support around the House. The Labour Opposition will be voting for its first reading this afternoon. The Prime Minister has indicated that this legislation is intended to act as a stand-alone legislative framework for the office of Governor-General which recognises the very important role that the position holds in New Zealand’s unwritten constitution. The modernisation of the salary arrangement and increased transparency of funding is an entirely appropriate way for that high office to be treated and the legislation that is now before the House should be considered in light of the gradual modernisation that New Zealand is taking with regard to its constitutional evolution. 
As Mr Key mentioned this legislation is the result of a recommendation of the Law Commission. The work of the Law Commission was set up by the previous Labour Government and its recommendation came at the end of last year. The Minister of Justice Mr Power has ensured that the recommendation of the Law Commission was turned into a nice tidy bill for the Prime Minister to use because the Prime Minister is always so busy doing many other things and bouncing from cloud to cloud that there would not be time for him to come up with legislation like this if it was not for the workhorse of the Government the Minister of Justice. In that respect I note that when Prime Ministers occasionally change position and abandon previously strongly held positions often it is the workhorse of the Cabinet who steps into their shoes. We saw that in the Australian example just recently so if I were Mr Key I would be looking Rudd-like at Mr Power when it comes to any matter about the changing of any constitutional position whatsoever. 
In a way this legislation has been preceded by similar legislation in other Commonwealth countries. Her Majesty the Queen has paid income tax since 1993—for quite a significant period. In fact the change was probably made in the period when Mr Key was in the United Kingdom for the many many years that he lived offshore. In that time no doubt he acted as a financial adviser to the Queen because he is able to write himself into almost every single story that has ever happened. He probably told the Queen to kick a few tyres on her financial affairs and to mine the depths of the Chancellor of the Exchequer in order that those investments could be realised. 
Hon John Key 
: You don’t know how close to the mark you are. 
Hon DARREN HUGHES 
: He claims that I am close to the mark but we know that the claims of the Prime Minister could mean anything. Today he is telling us that he advised the Queen on her financial affairs; by tomorrow he will be saying “Elizabeth who?”. I am very close to transgressing the Standing Orders by invoking the Sovereign and I will pull back from that. I am sorry; I correct myself on that. It is the inconsistency of Mr Key’s position that acts as such a distraction from the Standing Orders and the Speakers’ rulings. Who indeed would know? 
In Australia since 2001 it has been a practice of the Governor-General to pay income tax. So the measure in this bill is not a bold deviation from what occurs in other countries. This is not quite the step change that we associate the Key-led Government with in terms of any change that it makes. But this could be the economic transformation that this country needs. Now with every other idea knocked over this country will be transformed by the addition of one taxpayer: the Governor-General of New Zealand. Mr Key has charged into the House of Representatives today with a new bold plan: the Governor-General will pay tax and our country will never be the same again as a result of this additional taxpayer making a contribution to the Inland Revenue Department. I think that is probably as close to a step change as we are to get in order to turbocharge the economy. In fact if I recall it correctly during the Speech from the Throne His Excellency was forced to use the words “turbocharge the New Zealand economy”. 
I ask members to remember the summer of late 2008 and early 2009 when the office of Prime Minister was such an easy job to do and people hung on every word and laughed at every joke. It was an easy job in those days but it was much different from that at question time today when any little interjection on the Prime Minister caused him to stop dead in his tracks and look over in a sort of pouting way at the Opposition as if to say this was not fair and this used to be his stage where he got to say whatever he wanted. The problem for the Prime Minister is that things keep adding up. The cycleway was to transform the economy and we were to become the financial hub for China and for all the financial agencies in the world. We were to have a party central that would change all of Auckland and our tourism strategy all around the world. Of course that measure went through every possible iteration before we found out that the Auckland Regional Council’s position which was said to be dreadful at the beginning of last week was a good idea by the end of the week. 
All of the things that come along for consideration as a step change to the economy never seem to end up going anywhere. National members talk big at the beginning of the process but by the end the idea whimpers out. Today zero hectares of schedule 4 land will be available for mining but in February just half a year ago making that land available was said to be the sort of thing that New Zealand needed to do. Notwithstanding public comment the Prime Minister was going to be bold in his advice to the Governor-General on matters of legislation. He was going to be so bold that public comment would not matter. The problem is that the statement that the Prime Minister makes to Parliament is meant to last for an entire year. That one did not even last for 6 months—two quarters of a year—before the policy had gone. 
I return to the first reading of this bill. We do support this legislation. We think it is a very good idea to review the Civil List Act 1979 which is not necessarily widely known about in the country. Although many items referring to the Civil List have been brought to our attention more recently this recommendation came through in 2009. It ought to be supported. The office of Governor-General is an important one constitutionally. It has been held by some extremely distinguished New Zealanders who have served our country well. I note that the present Governor-General—although we do not bring him into the debate obviously—is in support of these measures as well and I think it is important to put that on the record of the House. The Prime Minister has gone through the other technical aspects of the bill which are not worth canvassing again but I say there will be support from the Labour Opposition to send this bill to a select committee. We are keen for this debate to be short because we do not want the Government’s position to change by the conclusion of the debate. Therefore I think the best thing that we can do is to hurry up and pass the bill’s first reading. 
AMY ADAMS (National—Selwyn) 
: 
 It is a great pleasure to rise to speak to the Governor-General Bill and unlike the previous member who has just resumed his seat Darren Hughes I do not intend to waste the bulk of my contribution rubbishing the importance of the Governor-General’s position or the necessity for this bill. In fact it is odd that Mr Hughes spent so much time ridiculing the need for this bill when as he knows it was the previous Labour Government that called for the Law Commission to investigate the relevancy and the appropriateness of that piece of the Civil List Act. As we have heard from the Prime Minister the Law Commission has now reported and amongst its recommendations is that the position of Governor-General should be governed by a stand-alone piece of legislation which I think is appropriate and takes the opportunity to modernise and update those provisions. 
As Mr Hughes said the Prime Minister has run through a number of technical provisions. One of the things that I think is worth touching on in the current context that we all find ourselves in is the issue of tidying up the transparency around the administration of a Governor-General’s position. It is not something I admit that I was aware of until I looked into this bill but up until now the office of the Governor-General was paying for many of its official duties through what was loosely termed the Governor-General’s personal allowance. In the environment we find ourselves in with intense scrutiny of spending of taxpayer funds—and appropriately so in my view—I think it is important that we carve out from those allowances matters such as the holding of official functions and international travel that is undertaken at the behest of the Government. It is important that we ensure that that sort of funding is separately appropriated. 
In addition to clarifying that spending through the Governor-General’s office we will also see as part of the drive towards transparency under this bill an annual report to this House of the Governor-General’s expenses. As I say in the environment that we have—in particular the media and public interest in and the scrutiny of spending—I think that that is a good thing. It is certainly the direction that this House has been moving in in general. I know that Governors-General will welcome that as they have called for and are welcoming the removal of the income tax exemption. 
I wanted to comment that it is not just income tax that Governors-General up until now have been potentially exempt from. The legislation provided a power to exempt Governors-General from any local tax rates fees levies and the like. That harks back to the day when Governors-General were appointed from Britain and were generally British residents so it was not then appropriate for them to pay taxes. But we have moved on considerably in the 160 years since our first Governor. We have moved on from the days of William Hobson. The Statute of Westminster in 1931 meant that Governors-General were simply the Queen’s the monarch’s representative here; they no longer represented the British Government. Since 1967 we have had New Zealand - born Governors-General which was a step in the right direction. It is certainly one that I think everyone would endorse. 
Now it is appropriate that the highest office-holder in the land is subject to income tax and all other taxes and charges that every New Zealander pays and contributes to the running of this country. I support that. I also support—as a matter of wrapping up my contribution—tidying up the rules around the payment of the annuity to a surviving spouse of a deceased Governor-General. It was not appropriate in this modern environment that that should be subject to restrictions such as not being able to remarry or to move overseas. The spouses of Governors-General play an important role. I think they are widely recognised for the work they do. The current spouse is certainly in that position as others have been. There will be widespread support for ensuring that their annuity is not subject to some sort of anachronistic restriction of not being able to remarry and the like. I think the bill is timely and it is worthwhile. I am pleased to be able to commend it to the House. 
PHIL TWYFORD (Labour) 
: 
 As my colleague Darren Hughes has said Labour is supporting the Governor-General Bill at its first reading. This legislation as has been pointed out sets up a stand-alone legislative framework for the office of Governor-General. It is an acknowledgement of the important role the office plays in our constitution and it acknowledges that it is time to modernise the arrangements to do with salary and the funding of the Governor-General’s programme of activities. 
It is Labour’s position that it is no longer appropriate for the Governor-General to be exempt from paying tax. It is an anachronism that that situation has continued to this day. We believe that it is time to modernise all the arrangements to do with the Governor-General’s office and these clearer funding arrangements are certainly an important first step. 
We will support this bill’s referral to a select committee and we look forward to a debate there about New Zealand’s constitutional arrangements. It must be said that the Governor-General is the most important figure in our constitution—he or she is at the apex of our constitution—and this is a great opportunity to discuss the arrangements surrounding that office. 
The bill does not make any sweeping changes; it is simply about a gradual modernisation of the arrangements supporting the Governor-General’s office. But I think there is some important symbolism to do with the Governor-General paying tax. The values of responsibility and equality of opportunity are core Labour values and core New Zealand values. We strongly support the removal of the tax exemption as an important symbol of that fundamental equality. 
The Law Commission has made a number of recommendations on this bill which we support. One of them concerns the definition of “family” which has never been set out clearly in legislation until now. The salary rate will be set by the Remuneration Authority. It cannot be reduced during the Governor-General’s term of office. There is provision in clause 7 for a sum to be payable at the conclusion of a Governor-General’s term. 
When we put all these provisions together we find that the employment package for the Governor-General is very satisfactory and that is as it should be. In fact the payment of a lump-sum equivalent to the gross salary for the last 6 months of office is really a kind of redundancy payment. It is not really redundancy; the position is not being abolished. But it is good to see members on the other side of the House supporting something that is in substance very much like a redundancy payment. I call on them to extend the same kind of generosity and logic to other New Zealanders. Until this time we have not seen that kind of generosity of spirit from members on the other side of the House. 
There is much in the current arrangements that is anachronistic and overdue for an overhaul. In the current legislation the Governor-General is entitled to a trip by sailboat from Britain to New Zealand at the beginning of his or her term—[ 
Interruption 
]. Unbelievable yes. It is good that we are getting rid of that provision. It is timely and in fact it leads one to wonder whether this is the step change that we have all been waiting for. Looking for the step change is a bit like playing a game of  
Where’s Wally? 
 with this Government. Where is the step change? 
We wondered for about 2 minutes whether the Prime Minister’s cycleway would be the step change but that is clearly not the case. We hoped that Gerry Brownlee would unleash a wave of economic development by mining our national parks but that is clearly not the case. We are left wondering whether this measure is in fact the step change—whether this could be the Holy Grail of this Government’s economic development plan. 
Other provisions in the bill include providing for an annuity for a former Governor-General after he or she has left office an annuity for a former Governor-General’s spouse setting up a permanent legislative authority for the funding of the Governor-General’s programme—that is taking it out of Vote Prime Minister and Cabinet—and amendments to the Civil List Act and the Income Tax Act. 
Labour does not have a firm view about republicanism and I mention that now because any discussion about the arrangements for the Governor-General’s office deserve some discussion about the future structure and status of our head of State. We are however of the view that now is the time for New Zealand and this House to have a debate about our future constitutional arrangements. It is not time to progress immediately to establishing a republic. There are conversations that we need as a country to have. 
It is clear from earlier discussions about Keith Locke’s bill that there needs to be discussion about the future status of the Treaty the reserve powers of the head of State and whether the head of State should be elected or appointed. Labour does not have a firm view about those things but we think it is inevitable that one day New Zealand will become a republic. It is time now for us to have this debate. I think it is a shame that this bill is not a bit more ambitious in opening up a conversation on some of those matters. It is my personal view that it is time for us not only to have a debate about the way we appoint or elect our head of State but to really explore the possibilities for electing our Governor-General. 
As I said it is an incredibly important role. The Governor-General has the ability to appoint and fire Governments Prime Ministers and their Cabinets. The Governor-General can call an early general election and can potentially refuse the Royal assent—that is the signing of a bill passed by this Parliament into law. That position is so important that I believe the position should be fully accountable and I think it would be worthwhile for this House and our country to have a debate about whether that office should be elected. It would not be the same as becoming a republic. In fact many other countries including Ireland elect a Governor-General who has a package of powers that is similar to those our Governor-General has currently. Other members of the Commonwealth elect their Governors-General. 
The Hon Peter Dunne the leader of United Future was preparing a member’s bill and was very disappointed that this National Government chose not to support it. I quote him: “There is an inconsistency bordering on full-blown Nanny Statism” in the Government’s refusal to allow that debate to happen. He states: “National seems quite happy to let people have their say on the electoral system—although even then it is reserving the right to itself to change the MMP system in the future even if people vote to retain it—and to do deals with the Maori Party to retain the Maori seats under the guise of constitutional reform but will not give New Zealanders a say on the most constitutional issue of all—how our Head of State is chosen.” I want to associate myself with those words. 
If we were to consider the idea of electing the Governor-General it would simply require an amendment to the Constitution Act of 1986 and it would be advisable that more than a simple majority—probably a majority of three-quarters or two-thirds—be required in order to pass it. As I said Ireland does this. It elects its President at large and that office has a very very similar package of powers to those exercised by our Governor-General currently. 
The idea is not so radical. In fact it was proposed by Governor George Grey twice—once when he was the Governor and once when he was the Premier in the drafting of the New Zealand constitution in 1856. The British Colonial Office vetoed it. It did not want that to happen. It did not like the idea because it meant it would not be able to control who became the Governor. In fact George Grey tried again in a member’s bill to this Parliament which was defeated in 1857. One hundred and nine years later commentator and journalist Colin James made a very similar suggestion that we consider electing the Governor-General. I reiterate Labour’s view— 
The ASSISTANT SPEAKER (Hon Rick Barker) 
: I regret to advise the member that his time has expired. 
Hon RODNEY HIDE (Leader—ACT) 
: 
 I raise a point of order Mr Speaker. I was so wrapped up in that speech that I am sure if the member sought leave to have a further speech the House would grant it because it was so riveting. 
The ASSISTANT SPEAKER (Hon Rick Barker) 
: That is not a point of order. A member cannot seek leave on behalf of another member. 
KEITH LOCKE (Green) 
: 
 The Greens will support the Governor-General Bill. As other speakers have said it represents a step forward a modernisation beyond the practices of the colonial era. The fact that the Governor-General did not previously have to pay tax relates to the nature of rule by a monarchy. We have moved in the United Kingdom and New Zealand towards a constitutional monarchy over the years but despite that the aspects of the monarchy in the United Kingdom that were carried over meant that the Governor-General retained certain privileges above other citizens one of those being not having to pay any tax. Of course in the United Kingdom the monarch has substantial wealth and properties in addition. 
The carry-over to New Zealand was partly driven by the fact that the Governor-General for many decades was not a citizen of New Zealand but a British person appointed by the Queen or King of the day. Since 1972 Governors-General have been New Zealand residents which I think gives impetus to this progressive change to a more transparent and just system. The Remuneration Authority will determine the Governor-General’s remuneration and the remuneration itself will be taxed. It is hard to avoid this change: the Queen herself decided to pay tax from 1993 on and tax has been paid by the Governor-General in Australia for some time too. 
The Green Party believes that there is still a carry-over of unnecessary privileges in the Governor-General’s role and I think this is shown in the annuity payment which will probably be quite substantial if the parallel in Australia is anything to go by. In Australia former Governors-General are paid 60 percent of the Chief Justice’s salary which is a huge amount. As has been pointed out there is already in this bill and rightly so a “redundancy pay” provision for 6 months. That provision really should suffice. If there are ongoing responsibilities for former Governors-General they should be given costs. If they have to come to a State dinner or something like that as a former Governor-General they could be paid the costs of that dinner—the travel time expenses and all the rest of it. They do not need an annuity for the rest of their lives. We in this House are moving away from giving perks to former members of Parliament; the pension perk and the travel perk have been taken away from us and rightly so. I think that should apply to people at all levels including the Governor-General. 
A very strange clause in the bill provides that former Governors-General will get domestic travel expenses paid and “the use of chauffeured cars”. I think that provision is a bit over the top and reflects the old rule of the monarchy—a carry-over to the present day. It should not be there. That matter can be addressed at the select committee. 
Another matter which Phil Twyford referred to is how we appoint and dismiss Governors-General. It is the Green Party’s belief that there should be a democratic process; we agree with Phil Twyford. At the moment the Governor-General is appointed by the monarch on the recommendation of the Government of the day and can be dismissed on the recommendation of the Government of the day which gives the Government of the day too much power over that role. We have seen in the past politically partisan appointments like a National Government appointing Sir Keith Holyoake a former Prime Minister as Governor-General. That is the most obvious example. We want to avoid that. I think if Parliament itself appointed the Governor-General or at least recommended to the Queen the appointment of the Governor-General that would be a step forward. At least we can make this minimal change although I see that Phil Twyford is actually proposing that we elect the Governor-General as such perhaps without reference to the Queen which of course as a republican I support. It has been proposed by the Republican Movement of Aotearoa; in fact it has proposed an amendment to the current bill which will no doubt be contained in a submission from the movement to the select committee after the vote on the first reading which I am sure will pass today. Effectively that amendment is to insert another clause on the appointment and dismissal of the Governor-General—that is that the recommendation to the Queen should be endorsed by 75 percent of the members of Parliament. That is not a big change from the present situation but it is important in that the Governor-General in that situation will have much more of the authority of the House and of the people of New Zealand and be more representative in a non-partisan way of the people of New Zealand. That would be an important step change. 
The amendment also talks about a term of 5 years and the dismissal procedure—that the Governor-General cannot be dismissed without a vote of 75 percent of the House. That would be a step forward from the present situation where at any time the Government of the day can say to the Queen that she is acting on its advice and it wants her to dismiss the Governor-General. I think members can see the importance of that when they look at some of the stand-offs there have been in countries like Canada most recently and Australia. In the Australian situation the Gough Whitlam Government was effectively sacked by the Governor-General. It was a rapid-draw situation. Governor Kerr as he was at the time drew the gun first and recommended to the Queen the sacking of Gough Whitlam; if Gough Whitlam had acted first and recommended to the Queen the dismissal of the Governor-General it might have turned out somewhat differently. To avoid that situation we want a Governor-General who has the support of the Parliament as a whole and the whole nation and is not acting in a politically partisan way. 
Certainly it is important that all these constitutional questions are raised in the select committee discussion on this bill. I support what my colleague Phil Twyford has said in that regard. There is a strong movement towards constitutional change; it is a great pity that my member’s bill did not get to a select committee even though there seemed to be a majority of members in the House supporting it. The vote tended in many cases to be more along party lines which prevented the bill going to a select committee. This bill will provide a venue for discussion of some of those questions. Phil Twyford mentioned amending the Constitution Act. Various changes that flow out of what is proposed in this bill could be made. But certainly we want to get away from that whole history of the monarchy and the Governor-General as a matter just for pomp and ceremony and not really a part of our democratic tradition. 
I think the cost of maintaining the Governor-General is about $6 million or $7 million a year. With tax being required of the Governor-General perhaps we will get a bit more back. I do not know whether it will be enough to pay for what has been announced over these last few days: the extra doctors’ visits as a result of the Government saying to employers that they can get people to rush along to the doctor and get a medical certificate for only 1 day’s absence. I am sure that if this proposal goes through and is not stopped by Parliament as a result doctors will go to the Government and say that they want extra money for all the people coming through their doors unnecessarily. It is only making them sicker. People are off for 1 day with a migraine they come along unnecessarily— 
Darien Fenton 
: For an hour. 
KEITH LOCKE 
: Yes. They have to wait in the waiting room get sicker cost the taxpayer more money and cost the employer more money. I think that is where the problem lies. I do not think the extra money we will get out of the Governor-General by way of tax will fully cover that cost. The Greens support this bill. It goes towards us being more of a modern 21st century nation. 
RAHUI KATENE (Maori Party—Te Tai Tonga) 
: 
 I find it ironic that I am standing here today to support the Governor-General Bill a bill that requires somebody to pay tax when tomorrow I will be standing and getting support I am hoping for my bill which will remove GST from healthy food. But to look at the situation now on Waitangi Day this year our present Governor-General stood on Onuku Marae which was the first place in Te Wai Pounamu at which the Treaty of Waitangi was signed 170 years ago. While he was there this year he referred to the example set by Ngai Tahu as being one that provides us with “a vision in which the Treaty is not a burden but a beacon for all New Zealanders”. He explained what he meant by a beacon in these words: “Although it is right that we should continue to debate and learn from the past we should not let that discussion stop us from focusing on the Treaty’s underlying promise of a partnership. Those who cannot remember the past are condemned to repeat it.” 
Sir Anand is not of course the only Governor-General who has issued such a challenge to this nation. The relationship between Governors-General and the Treaty has been intimately linked since the very birth of Te Tiriti o Waitangi. If we look at the Treaty of Waitangi or at what is left of it or at facsimiles of it we see that alongside about 40 signatures at Waitangi from the 540 chiefs who signed the Treaty is the signature of Governor William Hobson. When we look at any legislation such as this which tinkers or tampers with the overriding brief for the Governor-General we must as a matter of course look at it in the wider context. That context is firmly based in the constitution of this land. 
We come to the House today to simplify the funding of the office of the Governor-General and to bring the taxation treatment of the Governor-General’s salary into line with that in other Commonwealth countries. At a very rudimentary level the bill determines that the Governor-General must be paid a salary at a rate determined from time to time by the Remuneration Authority and must not be reduced during his or her term of office. It would seem to us that this is an entirely reasonable expectation. In essence this bill is a pragmatic response to the Law Commission’s report. It basically establishes that the Governor-General must be paid an allowance at a rate fixed from time to time by Order in Council for official expenses. 
Although this is no doubt of great significance to those who administer the salary and to those who receive the salary it does appear to me that we are missing an opportunity for there to be an even more important debate about the very nature of the role of the Governor-General. Fortunately the Maori Party believes that there is another opportunity for that debate to occur: through the process of the constitutional review that is set out in the coalition agreement signed in November 2008 between the National Party and ourselves. National agreed to the proposal for a group to be established to consider constitutional issues. This proposal relates to the Maori Party policy to establish a constitutional commission aimed at among other things drafting arrangements that give effect to the Treaty of Waitangi. Within that same framework we seek to appoint as an Officer of Parliament a parliamentary commissioner for the Treaty to proactively promote the Treaty’s commitment to partnership. 
I come back to the bill. Perhaps the most contentious aspect of it is that in the Law Commission’s view it is no longer appropriate for the Governor-General’s salary to be exempt from income tax. Similarly the commission advised that there is no longer sufficient justification for retaining a statutory power to exempt the Governor-General from paying any public or local tax duty rate levy or fee—and I bet he has been paying GST on healthy food anyway. 
Again inevitably I return to the connection between Te Tiriti o Waitangi and the Governor-General. I return to the period a quarter of a century ago when on the advice of the then Prime Minister David Lange Queen Elizabeth II appointed Sir Paul Reeves as the 16th Governor-General of New Zealand on 22 November 1985. As a member of the Puketapu hapu of Te Atiawa of Taranaki Sir Paul Reeves was the first Governor-General of Maori whakapapa. At the time many Maori groups welcomed the appointment with Sir James Henare arguing: “It must be a fruit of the Treaty of Waitangi to see a person from our people.” 
For Maori the promise of the Treaty and the direct relationship with the Crown has always been given an immediate association by virtue of the person of the Governor-General and his or her reporting role to the Queen. But although the Governor-General is obviously the representative of the Crown in this land there is no question that the person should be one who knows New Zealand as his or her home rather than some other country. So we think it only appropriate that as a person of New Zealand the Governor-General should also comply with New Zealand laws. Very simply New Zealand’s laws require people and organisations to pay taxes. The Government uses these taxes to pay for Government expenditure including public services in New Zealand such as education hospitals and health care roads and welfare. Almost all New Zealanders make a contribution to these services through the taxes they are required to pay by law—but soon hopefully not from paying GST on healthy food. So we support the intention of this bill to ensure that a Governor-General would pay tax alongside any other New Zealander. 
I return to the constitutional origins of this land and to the period before the Treaty was signed. In 1839 the Colonial Secretary Lord Normanby in his instructions to Governor Hobson recognised that Maori tribes held title to all land in New Zealand: “Maori title to the soil and to the Sovereignty of New Zealand is indisputable and has been solemnly recognised by the British government”. The first two Governors acknowledged that the Treaty recognised Maori title to the whole of Aotearoa and it was not until the late 1840s with increasing pressure from settlers that unoccupied land was classified as wasteland. These early beginnings of our Treaty partnership and the guidance and directions of the Crown’s representative at that time provide a very significant role in the formation and development of this nation. They are indeed at the roots of what it is to be a New Zealander. The payment of taxes as is the case for all other New Zealanders is but one part of consolidating the role of the Governor-General as being inherently and intrinsically part of the history of this land. The Maori Party is happy to support this bill. 
Bill read a first time. 
Hon KATE WILKINSON (Minister of Labour)  
on behalf of the Prime Minister 
: 
 I move  
That the Governor-General Bill be considered by the Government Administration Committee 
 that the committee report finally to the House on or before 14 September 2010 and that the committee have authority to meet at any time while the House is sitting (except during oral questions) and during any evening on a day on which there has been a sitting of the House and on a Friday in a week in which there has been a sitting of the House despite Standing Orders 187 and 190(1)(b) and (c) 
. 
Motion agreed to. 
Motions 
Reserve Bank Funding Agreement—Ratification 
Hon BILL ENGLISH (Minister of Finance) 
: 
 I move  
That pursuant to section 161(2) of the Reserve Bank of New Zealand Act 1989 the House ratify the funding agreement entered into by the Minister of Finance and the Governor of the Reserve Bank of New Zealand pursuant to section 159 of that Act on 8 June 2010 and presented to the House on 18 June 2010. 
 The activities of the Reserve Bank have become significantly more extensive since the last time that Parliament ratified the Reserve Bank Funding Agreement. Five years ago the Reserve Bank had assets of around $12 billion and it now has assets of $31 billion. In fact it holds half of all the assets that the Crown holds through financial institutions considerably larger than the New Zealand Superannuation Fund and about as large as the New Zealand Superannuation Fund and the Accident Compensation Corporation combined. It is our most significant Government-owned financial institution by some considerable distance. 
Interestingly the growth in the size of the Reserve Bank’s activities occurred during a time when the economy was growing and over the last couple of years it has been relatively stable. This is in sharp contrast to other central banks around the world that in the last 2 or 3 years have in a number of cases seen their size treble as they have taken on the assets or liabilities of struggling banking systems. We are fortunate to be considering this agreement in the context where the Reserve Bank has neither been unduly affected nor had its responsibilities stretched by a stressed banking system although there has been some relatively small impact on the Reserve Bank’s balance sheet. 
The Reserve Bank’s operating expenditure is funded from gross income under terms established by the Reserve Bank of New Zealand Act 1989 and the 5-year funding agreement. Section 159 of the Reserve Bank of New Zealand Act requires the Minister of Finance and the Government to enter into funding agreements for successive periods of 5 years. The current funding agreement was signed in April 2005 varied in April 2008 and expired at the end of June 2010. This motion sees the Reserve Bank’s operating expenditure profile increase from $46.9 million in 2009-10 to $47.8 million in 2010-11 then increase to $56.4 million by the final year 2014-15. This increase in expenditure reflects the additional responsibilities that Parliament has given or is in the process of giving the Reserve Bank as well as ensuring that the bank maintains the capability to carry out its functions effectively now and in the future. In the light of the financial crisis of 2008 and 2009 we pay a good deal more attention to the Reserve Bank’s ability to carry out its function of maintaining stability in the financial system. 
Changes to the Act in 2008 gave the Reserve Bank responsibility for the prudential oversight of the non-bank deposit takers. Under the Insurance (Prudential Supervision) Bill the Reserve Bank will shortly take on responsibility for the prudential oversight of insurers. The Reserve Bank also has a new role to play in the complex operation of anti - money-laundering and countering financing of terrorism. 
As well as resourcing the bank to undertake these new responsibilities the funding agreement provides for the upgrade of New Zealand’s banknotes which will be 15 years old by the end of the agreement. Provision is also made to maintain the current capacity and quality of policy teams and information technology systems. This Government is committed to ensuring that rigour is brought to the expenditure of all public moneys including that by the Reserve Bank. We have not increased funding without strong justification and clear benefits. Accordingly the new 5-year funding agreement has been developed in an environment of considerable scrutiny. The bank has had to convince the Government that its activities will provide value for money. Equally the Government has had to ensure that the bank is adequately resourced to carry out the significant new functions that Parliament is handing to it. The agreement reflects tight control of underlying costs and reprioritisation within existing funding levels to absorb a range of cost pressures. 
Our central bank has a reputation for efficiency and effectiveness. The Government expects it to continue to deliver excellence in outcomes while providing leadership across its entire range of activities. The Governor understands the need to use the resources he has available to best effect. Although New Zealand did successfully navigate the global financial crisis much still needs to be done and in this agreement we are ensuring that the Reserve Bank has the resources to complete the job. Ratification of this new 5-year funding agreement is evidence of a commitment by Parliament that the Reserve Bank remain operationally independent and that it is equipped to handle the roles that Parliament has given it as a prudential supervisor to ensure that the Reserve Bank can fulfil the functions that many central banks have now taken on to underwrite financial stability. I therefore ask for the House’s support in ratifying this new funding agreement. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 Labour supports this motion and recognises the valuable role that the Reserve Bank of New Zealand plays in conducting monetary policy and prudential policy and as the Minister has correctly pointed out being the custodian of New Zealand’s single largest financial institution and portfolio. This provides an opportunity to commend the bank for the admirable role it has played during this period of significant tension and challenge. It is largely thanks to the bank that New Zealand has come through this period of monetary crisis— 
Hon David Parker 
: And the prior Government. 
Hon DAVID CUNLIFFE 
: —and the prior Government; Mr Parker is quite right—in the good shape that it has. 
In saying that the Labour Opposition supports this motion it is very important to note that this motion represents an extraordinary wasted opportunity. The Prime Minister has said that New Zealand has the best monetary policy in the world and Mr English has said that there is absolutely no reason to change any aspect of monetary policy in New Zealand. What is fascinating is that those two speakers are now increasingly isolated in a world that has responded to the recent global financial crisis by a fundamental review of monetary settings and institutions. 
In these brief remarks today Labour will set out the nature of the problem the effects on the New Zealand economy the moves that Labour is making to seek policy reform in this area and an outline of the approach that we will be taking when returned to Government. Very simply Labour is on the side of the real New Zealand economy. Labour is not on the side of soft-shoe speculators who have been in many cases profiteering from the stress that the financial crisis has placed on ordinary New Zealanders. The reason they have been able to do that is that we are still using a monetary framework that was designed for a previous time under previous conditions and is now overdue for reform. 
What is the nature of the problem? The problem is that the New Zealand dollar is highly traded—so highly traded that it is one of the most highly traded currencies in the world in absolute terms. It comes in ahead of Mexico’s currency and Singapore’s currency. It comes in ahead of the yuan the South African rand the krona the rouble the Indian rupee the renminbi and the Brazilian real. Some of the major economies of the world are dwarfed by the trade in the little old flightless Kiwi dollar. It is extraordinary. 
The question that must be asked is firstly why this occurs and what effect it has. Traders have been telling us that one of the reasons the New Zealand dollar is so extremely highly traded is that it is such a clean float. There is almost no intervention—or very seldom—in the operation of the foreign exchange markets. We have a very clear and hands-off policy framework and that reduces some of the business and financial risk for the speculation industry. That is inappropriate in light of the effects. 
One of the effects is that we have made worse the volatility of our exchange rate. We would be the first to admit that the volatility is driven by a range of factors some of which are beyond our control. Some of them are the risk preferences of foreign institution investors but some of them could be attenuated if we had a regime that provided stricter oversight on speculation. Of course we have an average level of our exchange rate that has partly been fed by the financial inflows. The effect has been to inhibit exports to undermine New Zealand’s real economy to benefit the banking sector and to contribute to the real estate bubble that has been extreme in New Zealand to everybody’s detriment. We have had a single-tool single-goal approach that is now increasingly looking archaic in an international context. 
The second problem is that the world has changed but New Zealand’s Government has not caught up. Even the Reserve Bank has acknowledged this in recent  
Bulletin 
 articles and in statements by the governor. For change we have institutions like the International Monetary Fund the G-20 the Basel committee on banking the Bank of Japan the Reserve Bank of Australia the Federal Reserve Board in New York arguably the Reserve Bank of New Zealand and the New Zealand Labour Party for sure. Against change we have John Key and Bill English and possibly the Bank of England. That is a pretty small group. 
What would Labour do? Labour has been working on this problem since last year when we announced that we believed reform was essential. Our leader Phil Goff made public statements that Labour was withdrawing from the previous consensus and I underline “previous consensus” because I believe that it no longer exists now in any case. We set up a thoroughgoing research process which has been led by my colleague the Hon David Parker and in recent weeks in speeches made by David Parker and our leader the Hon Phil Goff Labour has set out its new approach. 
First we would move beyond the single-tool single-goal approach. We will do that responsibly. We will retain the independence of our full service and well-run Reserve Bank. We will retain the primary focus on inflation control and we will retain the 1 to 3 percent target range. But we will change the Reserve Bank of New Zealand Act. We will review the Act and change the goals and objectives to more closely mirror those of our near neighbour the Reserve Bank of Australia which includes growth employment and giving benefit to the sovereign territory of Australia amongst its objectives. We believe that having similar goals in New Zealand is important. 
We would change the policy targets agreement to reflect that new approach and we would broaden the tool kit in several respects. The Reserve Bank of New Zealand has elaborated important change in the area of macro-prudential policy and has in our view rightly advocated that this should be used in a counter-cyclical manner to assist the official cash rate to stabilise monetary conditions. We agree. We believe it would be proper for this Parliament to agree through an amendment to the Reserve Bank of New Zealand Act that specifically provided for an important counter-cyclical role for macro-prudential policies such as the core assets ratio because at present it can be used—arguably with a little bit of sleight of hand—by saying that it is only a secondary effect of direct prudential policy. We think that a more transparent approach would be appropriate in the new international environment. 
We are giving active consideration to the imposition of a tax wedge on international borrowing as recommended by the Reserve Bank in a previous review. We have excluded the imposition of a variable rate goods and services tax. We have excluded any consideration of a mortgage interest levy. We have excluded widening the inflation target range. We would encourage a more active role being taken by the Reserve Bank of New Zealand Act in the operation of the international New Zealand dollar currency market. 
We have excluded pegging or banding the New Zealand dollar in a strict sense but we believe that the New Zealand Reserve Bank is amongst a very small number of institutions that take such a hands-off approach that it reduces the business risk to speculators and makes volatility of the New Zealand dollar worse by attracting more speculators to our currency. We would note that on the few occasions when the bank has employed its intervention and stabilisation fund according to the current policy targets agreement it has made a handsome multi-hundred-million-dollar profit which it has returned to the taxpayer in the form of a dividend. So we do not accept given the skills of our central bank that it would be impossible for it to repeat the performance on average with more consistent intervention to impose more costs on speculation. 
We will be following the further evolution of the G-20 commitments and the G-20 reform process and we will be looking to support as the Minister has indicated the prudential role of the bank in insurance and the non-bank financial sector. 
In summing up I say that around the world in the wake of the global financial crisis Governments of developed countries know that monetary policy must change—that is all Governments apparently except the New Zealand Government where we have a Prime Minister and a Minister of Finance who are still stubbornly pretending that the tide can be stopped on the beach and that Canute is alive and well. Monetary policy needs reform. 
Dr RUSSEL NORMAN (Co-Leader—Green) 
: 
 I rise to speak to Government motion No. 3 about the Reserve Bank’s funding arrangements and agreements. The Green Party will be supporting this motion. This motion raises much broader issues which the previous speaker David Cunliffe from the Labour Party has discussed. I think the member addressed those issues well. I will address some of the issues with regard to how we can deal with some of the underlying objectives of the Reserve Bank. Its objectives are to keep inflation low to maximise employment and also to have a stable currency. These objectives are not all part of the Reserve Bank of New Zealand Act currently. One of the changes that needs to be made is that some other objectives need to be incorporated within the Act as they are in the governing legislation of other reserve banks around the world. 
I will discuss this issue particularly in relation to the asset bubble that we saw through the 1990s and into the beginning of this century which has only recently collapsed since the global financial crisis. That was the housing asset bubble in New Zealand—a classic example of why the current policy settings do not work. A classic asset bubble came out of the housing market. The Reserve Bank tried to squash it because it saw it as a source of inflation within the economy—quite rightly because households felt they were richer so they were spending more—and it tried to squash it with higher interest rates. But increasing the interest rates only drew more capital into New Zealand. At least in the short to medium term that blew up the housing asset bubble even further by drawing in more and more capital which was attracted to the high interest rates in New Zealand. The banks were very happy to funnel that capital into the housing market and to clip the ticket along the way and make a very fine profit. 
The other side was that as banks increased the interest rates they increased the cost of borrowing for the productive sector. They also drove up the value of the New Zealand dollar as more and more money came into New Zealand and drove up the cost of the dollar and that made it harder for the tradable sector. In many ways that was not the ideal outcome and monetary policy was not acting in the best interests of the New Zealand economy. It was adding to the imbalances in the New Zealand economy particularly through the destruction in the tradable sector—that is businesses that are competing with imports and businesses that are trying to export—by driving up the value of the New Zealand dollar. It also made it harder for the productive sector because it had to borrow at high interest rates. 
It seems to me that this is a classic example of where the Reserve Bank not only needed to have multiple objectives and more than one tool but also needed to have the different tools in the tool box operating together. If we were to address the housing asset bubble we needed to take much more of a comprehensive approach to deal with it. 
The first thing was that a capital gains tax excluding the family home would have had some downward pressure on the housing asset bubble. The Reserve Bank does not have access to the means to introduce a capital gains tax but in terms of having a comprehensive approach to dealing with things like asset bubbles it was one of the tools in the tool kit that the previous Government did not use but could have used during its last term when the housing asset bubble came up. 
The other side of it was to change the tax system particularly with regard to loss attributing qualifying companies. In the tax system these companies were set up to encourage speculation in the housing market so this tool could have been used in parallel with anything that the Reserve Bank had pushing up interest rates in order to try to reduce the asset bubble. We could have also limited the sale of New Zealand land. The Greens support a policy of having New Zealand land for New Zealand citizens residents and entities. Limiting the sale of New Zealand land would have also placed downward pressure on the housing asset bubble. The other side of it was to increase the manufacture of public housing to also put some downward pressure on the housing asset bubble—particularly in the rental market where affordable public housing was so short. Furthermore we could have had urban development rules that would have encouraged medium-density housing around transport routes. 
These kinds of measures may seem a long way from monetary policy but they are totally connected to monetary policy because the Reserve Bank was trying to deal with a problem coming out of the housing sector by using one tool which was interest rates or the official cash rate. The problem is that trying to use the official cash rate to address a very complicated problem like the housing asset bubble simply did not work. In fact it had all of these negative consequences. What we needed to do was to use all of the tools available to us. Some of those tools were available to the Government such as urban development planning so that we could have an increase in the supply of medium-density housing which would mean more public housing. Some of the tools were available to the Government and some of them were available to the Reserve Bank. Putting all of these tools together would have allowed us to address the issue that was obvious to everybody which was that we had a housing asset bubble. 
A lot of people did not want us to address the housing asset bubble because they were making a lot of money out of it. The banks were part of the problem and the real estate and property sector was part of the problem as well because they were all making a fortune out of it. But it was really bad news for the New Zealand economy. What we need to do in terms of reforming our approach to monetary policy is to say that these different tools and levers need to work in sync with monetary policy and need to support it. 
The other side of it which I think we need to explore is the use of capital adequacy ratios which is a Reserve Bank tool. But it should be used explicitly not just for prudential reasons but for monetary policy reasons. The Reserve Bank currently uses prudential policy to have the secondary monetary policy effects which is fine but we need to say that it is OK to use some of the prudential measures directly for monetary policy purposes. We need to be open about it. 
The capital adequacy ratios can work in different ways. One way is to target the asset bubble class themselves. We need to say to the banks that if they want to lend into the housing market if that is the asset class that has the bubble then they need to have a greater proportion of cash on hand or triple A rated assets on hand before they can lend into the housing asset bubble. That makes it harder for the banks to lend more and more money into the asset class that is of concern in terms of a bubble. We can change the capital adequacy ratios in order to directly target the asset bubble rather than simply using interest rates across the board to push up the price of money across the whole economy. 
The other way we can use capital adequacy ratios is in a counter-cyclical way. That is we say to the banks that during the normal business cycle during the upswing when it seems like they can lend more and more money because we are seeing the inflation in asset prices we can increase the capital adequacy ratios and relax them during the down cycle. Instead at the moment during the up cycle the banks look at the value of the assets and can lend more and more money based on the value of those assets. All they do is inflate the bubble. Then on the downward side as the value of the assets is static or the banks are short of credit they close down credit right across the board which means that it exaggerates the downward trend on the other side. We need to use capital adequacy ratios not only to target particular asset bubble classes but also to reduce in a counter-cyclical way these kinds of bubbles. Those are a number of tools we have available to use in parallel. 
The other tool that I think we have not really considered properly in New Zealand is the use of a Tobin tax. A Tobin tax is a tax that applies to international currency transactions. It has been supported by the Canadian Parliament previously and I think we need to have a position working with other countries to support a Tobin tax right across the planet. The idea of a Tobin tax is to increase the cost of international currency trading which if you like puts a bit of grit in the wheels of international currency traders so that it slows down the movement of currency trading. New Zealand has a problem with a very volatile currency which has a dramatically negative impact on the productive sector in New Zealand so that if we were to slow down some of the volume of currency trading we could slow down some of the volatility in the New Zealand dollar which would be tremendously helpful. 
The other part of it that I just want to touch on very briefly is that we have some issues and there will be further issues around structural inflation pressures which the Reserve Bank struggles to deal with. Oil is likely to become a structural inflationary pressure in the New Zealand economy over time. As the price of oil continues to go up it will have continual inflationary effects in New Zealand. I think we need to think carefully about how we can reduce the vulnerability of the New Zealand economy to oil price shocks that are very likely when the previous Government did the opposite by making us more dependent on oil. We also need to empower the Reserve Bank to look not just through short-term price shocks which it is currently empowered to do but also through long-term structural price shocks. If we say that oil prices in the long term are bound to increase then it becomes a structural inflationary effect on the New Zealand economy and we need the Reserve Bank to be able to look through that as well. 
The last thing I will say is that anyone who has seen the movie  
Inside Job 
 currently on at the film festival and anyone who has seen the tax avoidance activities of the New Zealand banks will know that it is absolutely essential that we have a strong regulator. For that reason we support this funding agreement. 
Hon DAVID PARKER (Labour) 
: 
 I rise on behalf of Labour to speak in respect of the 5-year funding agreement of the Reserve Bank which is being discussed at the moment. Labour supports the motion but makes the point that a lot more reform is needed in respect of monetary policy. As Russel Norman has said and as David Cunliffe agreed before him there is a problem with current monetary policy in New Zealand. What was world leading and right at the time when monetary policy was introduced in the late 1980s when New Zealand had rampant and out-of-control inflation now needs to be updated because it has had some perverse effects in the last decade. Most notably the world has changed substantially in the last 2 or 3 years as a consequence of the international financial crisis and the lessons that have been learnt from it. 
I will restate my view and the Labour view on some of the current problems with regard to monetary policy. There is no doubt that in order for New Zealand to improve our relative wealth amongst the countries of the world and to maintain the quality of services that we want to have in health and education we have to do better than we have been doing relative to the rest of the world. In order to do that we need to increase our growth in exports. At the moment we are running quite a large current account deficit and we cannot become wealthier as a country until we export more than we import—and in those exports I include the investment flows: the interest that we pay to overseas lenders and the dividends that flow to the overseas owners of New Zealand assets. We cannot reduce our current account deficit if the settings in our economy are not conducive to an export economy. Our settings at the moment are not conducive to an export economy. Monetary policy is one of the settings that is not quite right. 
That has a couple of impacts on New Zealand. It is now abundantly clear that New Zealand’s long-term interest rates are higher than those paid by the competitors of our New Zealand export businesses when they are operating in other parts of the world. New Zealand businesses that try to invest in sophisticated plant and machinery in order to improve their productivity and compete against international competitors—be they competitors in China the United States Europe or Japan—face higher interest rates because we have ourselves on the track towards perpetually higher interest rates. I know that at the moment our interest rates are not higher than Australia’s; they are pretty much the same as Australia’s. But that is pretty rare in the longer term and it is because Australia is one of the few Western countries of the world that are still booming. If we look at ourselves compared with all of those other countries be they Japan Australia or the European countries we see that our interest rates are higher than the rates in those countries. Our exporters face that disadvantage. 
In addition to that our exporters face the problem of having an incredibly volatile currency. It has been said by some economists that our commodity prices and currency act as a hedge to each other and that may well be true in respect of the dairy sector. If dairy prices go high the currency reacts and goes high and conversely when dairy prices drop the exchange rate drops a little. There is a bit of a natural hedge perhaps in respect of major commodities like dairy products. But that is not true in respect of manufactured goods. 
I saw a presentation recently from Rick Boven of the New Zealand Institute who was analysing the difference between New Zealand’s economy and the economies of other developed countries that are wealthier than us. He looked at the issue of whether we can bridge the gap between us and Australia by increasing either mineral extraction or agricultural output. It was abundantly clear that the difference between New Zealand and Australia in respect of minerals is only about 10 percent of the difference between the two economies. Although the Government said a couple of months ago that mining would be the panacea for New Zealand and that moving in on minerals in the national parks and the like would bridge the gap in a large way between New Zealand and Australia that was never the case. It was never the case in theory and of course it is never going to be the case in practice now anyway because the Government has now abandoned its attempt to mine in national parks. 
If we are to become wealthier as a country relative to other countries and get back up the OECD rankings we have to increase our exports. At the moment our monetary policy with its effects in terms of creating a higher and volatile exchange rate and higher entrenched interest rates is curbing the performance of the export sector. If it is riskier for our exporters relative to investment in export industries by competitive producers of those same manufactured goods in other jurisdictions it is then absolutely true that there will be less investment in the expansion of those important export industries in New Zealand than would be the case otherwise. So we will not bridge that gap as we ought to. 
I agree with what Russel Norman has just said in terms of the perverse effects of monetary policy in recent years. I am someone who can stand here with my hand on my heart and say I have been saying that since I have been here. I was on the Finance and Expenditure Committee when I first came to Parliament in 2002 and I said the interest rate differential between New Zealand and overseas countries was driving an inflow of capital into New Zealand that was being lent by the banks on ever-higher lending margins and ever-higher loans on the same securities. Those higher interest rates were through the liquidity being introduced into the New Zealand economy driving the very consumption pressures that higher interest rates were meant to curb. 
The interest rate differential between New Zealand and the rest of the world has become a problem. Therefore we need more tools for the Reserve Bank to control inflation with than just the interest rate lever because the use of that lever is having two perverse effects. I have mentioned one which is driving liquidity into the country and feeding the consumption pressures that it is meant to curb. But as well as that given our reliance on overseas capital every time we have an increase in interest rates in New Zealand where does the money go? We export it overseas. We increase our current account deficit through the interest rate differential between New Zealand and overseas because the majority of money that the banks have to fund their operations in New Zealand—their lending to New Zealand companies and individuals—is sourced from overseas lenders. When the interest rate goes up the major beneficiaries of that money that extra interest that is being paid by New Zealand borrowers are the overseas lenders. 
We currently have another strange effect. Because we have a current account deficit we are very reliant on overseas capital flows. We are seeing increasing pressure by overseas interests to buy more New Zealand assets. The Government is deeply conflicted on this. On the one hand it says it does not want all of the Crafar farms to be sold to overseas interests be they Chinese or otherwise but on the other hand it says it is happy for a number of small ones to be sold to them. Personally I cannot see the difference between one block of 20 farms and 20 separate farm transactions but the Government seems to see some difference. The Government wrings its hands about that particular problem but then it says it will loosen the foreign investment rules in New Zealand. I find that to be completely inconsistent. Bill English said he does not know what a strategic asset is. I can tell him that we in the Labour Party know what a strategic asset is. Anything that has monopoly characteristics as in an infrastructure asset is in my view strategic for two reasons. The first is that it will be extracting monopoly rents at one level or another and the second is that it will be important to the wider functioning of the economy. Those infrastructure assets have importance beyond their own individual business units because they facilitate the operation of other businesses. 
Those sorts of assets ought not to be sold overseas. I ask why we are under such pressure to sell such assets overseas. It is because we have such an enormous current account deficit and we have that because we do not save enough. In response to that the Government has cut the incentives to KiwiSaver. Again it is going in the wrong direction. This is another problem that we have because of higher interest rates in New Zealand. It is cheaper for an overseas owner to own a New Zealand business borrowing from offshore credit lines than it is for a New Zealand purchaser who is borrowing from New Zealand banks. I ask how that can be in New Zealand’s national interests. We have a set of policy settings that means it is cheaper for an overseas person to buy a New Zealand asset than it is for a New Zealand purchaser. In other words all other things being equal an overseas buyer can afford to pay a higher capital price for the same asset. That has to be wrong. It is an outcome of current monetary policy settings; it is also an outcome of current savings and investment policy. We cannot cure that through monetary policy but monetary policy can and should do some of the work. We need to put more focus on liquidity and flows of money in addition to interest rates. The singular reliance of the Reserve Bank on an interest rate tool is out of date and it is not in New Zealand’s interest. The National Government has its head in the sand. 
I finish by quoting from Rod Oram’s  
Sunday Star-Times 
 article. He said: “Given the new understanding growing overseas about the need to better manage fiscal misalignments in order to promote greater economic stability plus the shift at home by the Reserve Bank and the Labour Party monetary policy could become a defining issue at the next election.” I suspect that that raises the issue a bit too high because most people do not understand it but it ought to be a defining issue because it is a very important one. This motion is a missed opportunity on the part of the National Government. 
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. 
RAYMOND HUO (Labour) 
: 
 Section 159 of the Reserve Bank of New Zealand Act 1989 requires the Governor of the Reserve Bank and the Minister of Finance to enter into agreements that provide funding for the bank’s activities. The agreement is a 5-yearly one that specifies how much of the bank’s revenues can be retained by the bank to meet its operating costs with the remainder going to the Government. Such funding agreements become effective in law only when they are ratified by Parliament and that is why we are here to debate the relevant issues. 
Labour supports this motion but we reiterate that it is a missed opportunity to address one of the critical economic issues facing New Zealand and that is our monetary policy setting. In 2009 the Labour Party withdrew from the cross-party consensus on monetary policy. Labour believes that the policy is in need of reform and that it has been one of the underlying limits on our economic performance relative to wealthier developed countries. 
I recently listened to the Hon David Parker when he spoke to the New Zealand Manufacturers and Exporters Association in Auckland in June. The heading of his talk says it all: “Monetary Policy Reform for an Export-led Economy: Labour’s direction”. The efforts of the Reserve Bank to rein in inflation were formalised by the late 1980s. By then New Zealand had been suffering from high and erratic inflation averaging between 10 and 15 percent for close to two decades. The Reserve Bank was given independence and a mandate to pursue price stability to preserve New Zealand’s purchasing power. However as argued by the Hon David Parker it is at the very least arguable that the New Zealand prescription of monetary policy was applied in too Draconian a fashion in terms of how high interest rates were pushed and in too lax a fashion in terms of credit flows into New Zealand. 
The New Zealand export sector is roughly 30 percent of GDP or about $40 billion. Broadly primary production processed primary production and manufactured goods each contribute one-third of New Zealand’s export sales. According to the New Zealand Manufacturers and Exporters Association our tradable sector has been in decline since 2003. New Zealand has slipped in OECD rankings from 5th in 1950 to 23rd in 2007 and well into the lower-middle bracket of global income per capita. Much of the decline of the tradable sector can be attributed to currency instability and uncertain returns in the medium term for efforts in export markets. 
It is worth noting that a 1 percent change in our terms of trade can have an impact of around $400 million and we have witnessed changes of over 30 percent a month. Furthermore if our economy fails to develop and instead produces ever-simpler products we will not develop skills in our labour force and we will see local wealth polarisation. We will all be part of an ever-poor New Zealand and we will witness a widening gap between what the world has to offer and what New Zealand can afford in health infrastructure and general consumption. 
I agree with the New Zealand Manufacturers and Exporters Association that New Zealand is too small an economy to amortise the research and development costs associated with added-value products on sales to our domestic market. To recover the costs of added-value development New Zealand must sell to the world. Only successful export and trade can increase wealth and improve our living standards. 
As a member of the Finance and Expenditure Committee I had the privilege of participating in the parliamentary banking inquiry initiated by Labour Progressive and the Greens. The submission by the New Zealand Manufacturers and Exporters Association is worth noting. It said: “The “must-trade” imperative must be at the forefront of our policy design if greater investment and consequently higher growth and productivity in the export sector and ultimately our entire economy is to be anticipated.” The inquiry found that our commercial banks which are largely owned by Australians did not pass on the full effect of reductions in the official cash rate to their customers. 
Statistical evidence produced to the inquiry showed that although most interest rates have fallen since the global financial crisis began major banks had not passed on the full impact of official cash rate cuts into short-term interest rates charged to customers. As the Hon David Cunliffe who chaired the inquiry said the Government failed in its responsibilities to hard-working Kiwi families and taxpayers by refusing to even take part in a bipartisan inquiry. 
The inquiry recommended more policy work to explore reforms to better align bank supervision monetary and taxation policies. It is appropriate for me to emphasise what the Progressive party leader the Hon Jim Anderton said during the inquiry—that party politics should be put aside in search of monetary policy that supports people who produce tradable goods rather than those who speculate on property and take the profits offshore. 
Although the Reserve Bank cut the official cash rate from its high in mid-2008 of 8.25 percent to only 2.5 percent banks kept a 1 percent margin in interest rates for themselves. 
Hon Gerry Brownlee 
: Free Tibet. 
RAYMOND HUO 
: The reality is if that member is interested in knowing that 1 percent extra interest adds $787 million in costs for New Zealand businesses $460 million extra to the cost of loans in the farming sector and $1.6 billion to the cost of mortgage repayments. 
Hon Gerry Brownlee 
: What about Tibet? 
RAYMOND HUO 
: Well I welcome the member to the debate if he wishes to join in. 
So what should we do? I ask that member whether he is really interested in knowing. In March 2004 Labour introduced an important change to enable the bank to pursue a more active role in foreign exchange markets. This assisted the economy by tempering exchange rate volatility and moving New Zealand monetary management closer to Australian practice. 
Another important change we would make as the Hon David Parker noted in his speech would be to amend the Reserve Bank of New Zealand Act to broaden its objectives. The objectives of the Reserve Bank of Australia are the stability of the currency of Australia the maintenance of full employment in Australia and the economic prosperity and welfare of the people of Australia. In contrast our Reserve Bank is tasked solely with maintaining stability in the general level of prices. 
Changing the objectives in the Act will not in itself sort out the problems we are faced with. It is a necessary but not sufficient part of reforming monetary policy. As the Hon David Parker pointed out focusing on the medium term not on the short term helps. The core assets ratio can help reduce risk in our financial systems by anchoring reserve assets in known risk classes with a minimum onshore deposit funding requirement. This will share the load borne by the official cash rate. It can also create a stronger demand for domestic savings. Further Mr Parker indicated areas Labour would not change. Labour will not undermine independence will not widen the inflation target range will not introduce a mortgage interest levy and will not introduce a variable goods and services tax. 
When Reserve Bank governor Dr Alan Bollard released on 30 June the Reserve Bank’s statement of intent for 2010 to 2013 he acknowledged that there was likely to be a debate on the role of monetary policy in managing financial misalignments. It is good news that Dr Bollard has confirmed that the Reserve Bank has been investigating the potential for other policy tools to help support its traditional official cash rate instrument in monetary policy and will continue to look. Thank you. 
Motion agreed to. 
Residential Tenancies Amendment Bill 
Third Reading 
Debate resumed from 30 June. 
KATRINA SHANKS (National) 
: 
 It is my pleasure to stand this afternoon and talk to the third reading of the Residential Tenancies Amendment Bill. First I acknowledge the Social Services Committee and all the hard work it put into this bill. In particular I acknowledge my deputy chair Hekia Parata from Mana; Tim Macindoe who will speak later from Hamilton; Todd McClay from Rotorua; and of course Chester Borrows the member of Parliament for Whanganui. Of course other members who sat on the committee contributed as well. I also acknowledge the hard-working officials who worked for us. It was a very intense bill and we made many significant changes to it. 
This bill took a while to get to Parliament. The previous Labour Government first started a review on residential tenancies in 2004. Unfortunately it took 4 years to get the bill before the House. In 2008 the first bill came before the House. When National came into power we looked at the bill and did a bit of a review on it. In 2010 it is here for its third reading; it came to the select committee that I chair last year in September 2009. So it is a pleasure to be here supporting this bill today. 
Obviously the residential tenancy market has undergone significant change in the 22 years since the Residential Tenancies Act was last looked at. In fact one-third of New Zealanders live in rental properties today which is quite significant. It is quite a big change from 22 years ago. So it was important that this Act was addressed. Both landlords and tenants have been asking for issues around residential tenancies to be brought forward and addressed. These reforms are long overdue. 
This bill provides a modern framework that addresses the needs of today’s residential property market. The bill defines the rights and obligations of residential landlords and tenants in a clearer and much fairer way. 
The review of the bill identified five primary issues with the current Act which we believe this bill will address. Currently there is insufficient compliance enforcement and dispute resolution. There is a lack of knowledge around landlord and tenancy rights and the obligations that ought to be conferred. It leaves open mixed capability to manage property and tenants. It allows too variable a standard of rental housing and it lacks the opportunity for a stable tenure of longer-term tenants. It was important that this bill came to the House to address those issues. 
In light of these concerns the bill makes positive changes and will encourage the development of a rental market to provide stable quality housing to those who live in rented homes. It will enable landlords to manage their properties more effectively giving them certainty around obligations. 
Many of us stand here today representing our electorates. My electorate is Ohariu which I represent for National. We have a big area of rental properties which may surprise many people and we also have many many landlords. So this bill is quite relevant to all those constituents in my electorate of Ohariu. 
The committee looked at certain slightly contentious areas more closely than others. One of those areas was the disclosure of cleaning orders. We are unfortunately in a society where P is manufactured in residential properties. When that manufacture is identified the question was what to do if there are cleansing orders. The committee had a big debate around whether one has to disclose that information to tenants when they come into a tenancy and whether the fact that it sits on a land information memorandum was enough for the tenants to research it and find that there was a cleansing order on the property. We looked at this area in quite a lot of detail. The select committee came to the conclusion that we would rather landlords went out and got the properties cleansed and did not hide the fact that there had been drugs in that property for fear of never being able to let it again. So we decided they would not have to disclose that to the tenants in a formal way; it would still be on the land information memorandum of the property. This was to ensure that there was an incentive for landlords to identify whether their houses had been used as a P lab and whether they have had them properly cleansed. We had confidence through the cleansing process and the cleansing orders that tenants would not be at risk at all. 
We had a big discussion on what we should do about abandoned goods. We heard from representatives from universities which was interesting. Obviously students especially in Otago are renowned for leaving their property all over the place. They pack their bag leave the flat and leave everything there. So we discussed what we could do for the landlords and the tenants to make it fair and equitable for everybody. We put some practical solutions in the legislation around the cost of removal and what the price of those assets—if we can call them assets—would be. We discussed what to do with the couches the cars on the front lawn and the mattresses on the front porch and how to determine whether the landlord has to store them whether he or she should pay the cost of storage and whether he or she can dispose of them. We put some criteria in place in terms of what a landlord could and could not do. 
We looked at letting fees and temporary or transient accommodation. We excluded camping grounds which were caught up in the legislation. Retirement villages were also caught up in it. We opened up the legislation a little bit to boarding houses to give those tenants a lot more rights. We had a great debate on many of these issues. We feel that we have got it just right to make it fair for tenants and for landlords. I commend this bill to the House. 
CHRIS HIPKINS (Labour—Rimutaka) 
: 
 I apologise to the House for my slight lack of voice. I will see whether I can get to the full 10 minutes. There is a possibility that I might not. 
Craig Foss 
: That’s a good thing. 
CHRIS HIPKINS 
: The National Government prevented us from getting the good drugs over the counter at the pharmacy. We have to go to the doctor to get those now. I have not had the opportunity to do that yet—[ 
Interruption 
] Can anybody get a sick leave form for me? 
It is slightly ironic to hear Katrina Shanks complaining about the fact that the previous Labour Government did not do enough in this area and that it took too long. This bill has taken since September. Where are we now? We are towards the end of July. It has taken nearly a year for the Residential Tenancies Amendment Bill to be progressed through its remaining stages. So it is a little bit rich for Katrina Shanks to say that the previous Labour Government took such a long time. 
There were situations that could have been potentially avoided had this legislation been passed prior to Christmas. I am thinking about the boarding tenants who were chucked out of where they were living for the sevens rugby. That potentially could have been avoided had the Government got its act together to get this legislation passed before Christmas. I have to say that listening to the debate I was very disappointed that the Government chose to vote against an amendment put forward by my colleague Moana Mackey that would have guaranteed tenants certainty during major events. It would have prevented them from being evicted from their homes because of the very significant amounts of money that landlords could potentially generate by letting those homes on a short-term basis during major events. Moana Mackey’s amendment would have stopped that from happening. It was very disappointing that the Government voted against that amendment. Although generally speaking we are supportive of this legislation some changes proposed by Labour were opposed by the Government and we think that will make this bill much much weaker than it otherwise would have been. 
I will talk in particular about the issue of letting fees. There is a problem under the current law that a real estate agent can charge a letting fee but a property manager cannot. The Labour Party’s view is that we should therefore do away with the letting fees. There should be an even playing field between real estate agents and property managers. The Government also thinks there should be a level playing field but it wants to do that by allowing property managers to charge a letting fee as well which ultimately leaves the tenants or the prospective tenants— 
Katrina Shanks 
: Or not. 
CHRIS HIPKINS 
: It may be a one-off fee but people on low incomes students in particular—and Katrina Shanks talked about Otago University students—now potentially face another fee on top of all the fees that they have to pay at the beginning of the year in order to find somewhere to live. I do not think that that is necessarily a good thing. I think it would have been much better had the Government agreed to the Labour recommendation which was to do away with the letting fees altogether. 
Ultimately if I sell my house I am the one who has to pay the real estate agent. Why should it be different for a tenant? The person purchasing the house does not have to pay the real estate agent; it is the person selling the house who has to do it. Why should the situation be reversed in the case of a tenancy arrangement? Should it not be that the person letting the house pays the fee not the prospective tenant? It is very disappointing that the Government voted against that. We know that for those looking for rental property accommodation sometimes letting fees can be a significant barrier to finding somewhere to live. 
There are elements of this bill that the Labour Party supports strongly; that is why we are voting in favour of it. Obviously we want stability and certainty for those living in rental accommodation. Being able to have some certainty about where one lives being able to put down roots and being able to send one’s kids to a school and know that they will not be uprooted and have to change school at short notice is really important. That is where stability in residential tenancy arrangements is important. It is really important that there is good faith on both sides of a tenancy arrangement—from both the tenant and the landlord. As a constituency member of Parliament—I know plenty of other people in the House will have this experience as well—I have seen evidence of where the good faith relationship has broken down on one side or the other or in some cases on both sides. Not all tenants behave the way they should; not all landlords behave the way they should. It is really important that we provide very clear legislation and guidelines so that everybody knows where they stand. I think this bill goes some way to improving the situation at the moment. 
I talked about good faith and with the Minister of Housing in the House I will once again pick up the major tenancy issue that exists in my electorate in the community of Pomare and the bad faith I think that the landlord—in that particular case Housing New Zealand Corporation—has been showing towards the tenants in Pomare. It has been leaving empty large numbers of Housing New Zealand Corporation houses. There were 42 empty houses at last count. There may be more in the last few weeks; I have not driven around there to count them. That is creating problems for the local community. 
One of the obligations on a landlord particularly in the case of Housing New Zealand Corporation where it may well own all of the houses in a neighbourhood should be to act in the best interests of the whole community as well as the individual tenants. When the landlord leaves a large number of houses empty prone to vandalism squatting and antisocial behaviour—a whole lot of those things—all that that is doing is exacerbating the problems in that community. I know that Housing New Zealand Corporation wants to do some redevelopment in that community. I welcome that; I think that is very good. It is long overdue and I think that successive Governments need to accept responsibility for that. But I would like to see that happen sooner rather than later. 
At the moment my very strong view is that Housing New Zealand Corporation is being a bad landlord to the people in Pomare. It is not maintaining the houses that are there at the moment. The tenants who live there are having a great deal of difficulty getting even the most basic maintenance done. That is not good enough. They deserve to have Housing New Zealand Corporation behave as a responsible landlord but that is not happening at the moment. I want to see the Government go back to Pomare give them some certainty around when the redevelopment is likely to take place give the tenants who are in the houses at the moment some certainty that when the redevelopment takes place they will be looked after and that they will be able to go back into their community once those houses have been redeveloped. One of the concerns amongst that community is that they will be effectively thrown out of their community so that the houses can be redeveloped they will not be able to go back there afterwards and the whole community will be broken up. I think that it would be good to see Housing New Zealand Corporation give them some certainty by engaging with them again to reassure the people there that this is not about turfing out people who are good tenants at the moment and not allowing them to return to their community but that there will be some staged redevelopment process that allows those already in the community to stay in their community while the redevelopment takes place. I do not have any problem with the Government cracking down on severe antisocial behaviour as part of the process. I do have a problem if innocent tenants the good tenants who take a lot of pride in their houses are being turfed out. One of those tenants has for example won a Housing New Zealand Garden Award. 
There is a winner of the Housing New Zealand Garden Awards in Pomare. I want to see those people rewarded for taking pride in their houses. I do not want to see them having their whole community effectively written off by the Government. Significant progress can be made in that area to improve the lot of those tenants. I hope the Government takes that on board and does something about it. 
Finally to conclude one of the things I have become aware of as a local member of Parliament is that there are good landlords and bad landlords. Possibly one of the areas of weakness in the legislation at the moment is that there are few minimum standards that a landlord needs to meet in terms of the property they provide to a tenant. The House may want to consider whether somebody who is letting a property should have to meet minimum standards in terms of its habitability before it can be let. Otherwise there is not much to prevent landlords running slums as some of the very irresponsible ones do at the moment and that is something Parliament should not turn a blind eye to. I think the possibility of some greater minimum standards for rental properties is something we should look at closely. Before a landlord can put a property on the market for rental perhaps they need to meet some minimum standards so that we know that those who are unable to afford to purchase their own properties are protected. As Katrina Shanks pointed out a significant number of New Zealanders live in rental properties. We want to provide them with some certainty that they can find not only somewhere to live but also an adequate standard of accommodation in their rental property. 
Overall this is a good bill. It does not go as far as the Labour Party would like. We think it has been watered down from what the Labour Party was proposing. We are disappointed the Government has voted against what we felt were some constructive common-sense amendments including the one I have mentioned in respect of protection for tenants during major events. Overall we are in support of the legislation as it stands at the moment. We would like it to go further and we will be voting in favour of it. 
TIM MACINDOE (National—Hamilton West) 
: 
 Tena koe Mr Speaker. That was a fairly considered and constructive contribution from the member for Rimutaka. So I begin by acknowledging that and thanking him for making some fairly thoughtful observations. Nevertheless I cannot let him get away with the suggestion that in some respects the Government has been sitting on its heels in respect of this legislation. He is after all a member of the party that as far back as 2004 started talking seriously about the need for changes to the residential tenancies legislation— 
Hon Phil Heatley 
: Talked about it. 
TIM MACINDOE 
:—that is right—and saying there were some really significant flaws in the legislation. Five years later Labour left office and what had it achieved in this area? Positively zip. We certainly heard a lot—Labour said a lot—but it achieved absolutely nothing. So I say to Mr Hipkins that he needs to brush up on his history a little bit before he takes the Government to task. It is certainly fair to comment that this bill has taken just over a year from its introduction to what is very nearly its passage. But it is incredibly complex legislation a very important bill and it is therefore right that we have taken our time. I am delighted that we are now in the final lap. 
I reiterate that there are three main purposes to the bill. The first is to encourage the development of a rental market that provides stable quality housing to those who rent their homes. The second is that it will enable landlords to manage their properties more effectively. The third is that it clarifies and appropriately balances tenant and landlord rights and obligations. That is not an easy task. It was important that we took our time to get it right and I am confident that we have. 
By and large it is fair to say that the bill has enjoyed cross-party support in a very constructive progression through the select committee process and I thank everybody involved in that. As the Minister commented when he spoke on the bill on previous days and as other speakers have said it is a very very important bill that affects literally hundreds of thousands of New Zealanders. It was important that we did the job thoroughly did not rush it and took our time to address the significant changes that have occurred in nearly a quarter of a century since the Residential Tenancies Act came into force back in 1986. I am not sure whether the previous speaker Mr Hipkins was even on this planet at that time but I am sure that if he had been he would recognise huge changes in the quarter of a century since. 
The bill has received very careful and thorough consideration from the departmental officials who have guided our deliberations as it passed through the Social Services Committee. I thank those officials and acknowledge the good job they have done. We are all clearly in their debt. They have given us very good advice at every stage along the process and they have taken on board the many submissions we received and have incorporated them to make sure the bill is a really balanced piece of legislation. 
I also pay tribute to Katrina Shanks the chair of the Social Services Committee who has provided very fair and able leadership in this and indeed in all measures since she became the chair. She is doing a very fine job and she deserves praise for her commitment and for the intelligent approach she is bringing to that responsibility. I also acknowledge the contributions of my select committee colleagues on all sides of the House for their collective efforts to get this bill right. 
As I have mentioned literally hundreds of thousands of New Zealanders are affected by the provisions of this legislation and as we go further on through the years more and more New Zealanders will come into that category. They will all depend on the legislation to deliver fairness and encourage adequate and ethical investment in New Zealand’s residential property market. 
Our landlords need to have confidence that they will receive fair rates of return if they invest in rental properties and that they will have adequate protection against that small minority of tenants who abuse their property and fail to meet their obligations. As the previous speaker has said all electorate members of Parliament are aware of a few cases of that type and it is very distressing for landlords when they find themselves in that position. 
Similarly tenants need to have the security of knowing that they will receive a fair deal that their rights are enshrined in law and will be respected and that they will have affordable and accessible remedies if their rights are abused. That is why the bill provides for access to advice information and dispute resolution services. It is why the responsibilities of landlords and tenants for various outgoings such as rates and water charges are clarified. Again this is an area where things have changed considerably in the last quarter of a century and we needed to ensure that the Act was updated to come into line with contemporary conditions. The bill includes measures to facilitate speedy and cost-effective adjudications of tenancy disputes and I thought I might just note how significant those changes are. 
The bill increases the Tenancy Tribunal’s monetary jurisdiction from $12000 to $50000. It increases the monetary threshold on the automatic right to use legal representation from $3000 to $6000 to ensure that legal representation is used only when it is justified. One of the features of the Tenancy Tribunal has always been that it is accessible and by and large does not require representation for the parties involved. The bill also requires the tribunal to order the other party to a dispute where that is the only way of trying to bring things to a head and to compensate the applicant for the filing fee if the applicant’s claim is upheld in full or partially by the tribunal and if in the opinion of the tribunal it would be reasonable to make such an order. I am pleased to see that additional discretion coming into place. 
The bill also improves the enforceability of tribunal orders by giving the tribunal jurisdiction to make an order against a guarantor of a party to a tenancy agreement. It allows a party to recover reasonable private debt collection costs associated with enforcing a tribunal order and it assists tribunal creditors to locate debtors by facilitating the release of address information held by Government agencies to the District Court. 
As I said there are some very significant changes here. Several speakers have noted that a major initiative of this bill is the provision of protection for boarding house tenants who were previously outside the scope of our tenancy legislation. I echo the concern of others that those New Zealanders have been vulnerable to exploitation and abuse and it is good to see them gaining some security and an acknowledgment of their rights under this bill. 
I have been proud to contribute to the deliberations of the select committee and the House on this bill. I congratulate the Minister Phil Heatley on his successful stewardship of this bill through to its third reading. It is a very significant bill and a very significant achievement for a determined and effective Minister. He will certainly be remembered for this in years to come—not that I am suggesting he is going anywhere—and it is another significant step along the road for a focused and effective Government which is delivering real gains for New Zealanders and improvements to our social and economic welfare and infrastructure. I am proud to have played a small part in that outcome. 
Bill read a third time. 
Electricity Industry Bill 
Second Reading 
Hon GERRY BROWNLEE (Minister of Energy and Resources) 
: 
 I move  
That the Electricity Industry Bill be now read a second time 
. The bill aims to improve the current electricity market by putting more pressure on costs and prices improving security of supply and streamlining governance arrangements for the sector. The bill ensures that Government decisions made last year on the recommendations of the ministerial review which I set up to consider how the electricity market was working are in fact put in place. 
The review was undertaken by six independent experts as well as officials and expert consultants and took into account submissions by interested parties on a detailed discussion document. The ministerial review as set up identified that the increase in prices for residential consumers over the last decade was a matter of particular concern. Everyone knows that in the 8 years prior to 2009 electricity prices for residential consumers rose by some 73 percent or three times the rate of inflation. The review identified insufficient competition—particularly at the retail level and particularly in the South Island—as key reasons for an undue increase in those retail margins for residential customers. 
The bill seeks to improve the level of competition through a series of measures. One important measure is to improve the balance in the portfolios of the State-owned generators both in terms of location of their assets and activities and the type of generation they own. The asset transfers include transferring Tekapo A and Tekapo B power stations from Meridian Energy to Genesis; transferring Whirinaki power station currently owned by the Government for reserve purposes to Meridian Energy; and putting in place virtual asset swaps by virtue of long-term hedge contracts between the State-owned generators. 
We are already seeing the benefits of these proposed transfers with more vigorous competition in retail markets including the entry of Genesis into the South Island particularly in Christchurch Dunedin and Queenstown. An important measure is to allow lines businesses back into retailing subject to certain restrictions to ensure open access to lines for competing retailers and generators. Another measure set to make a difference is the establishment of a liquid hedge market to make it easier for new-entrant retailers and generators to cover their risks and to get into the market place. Other measures include setting up a fund to ensure that consumers can shop around making more New Zealanders aware that electricity like any other consumer good can be purchased on the basis of the best price. 
It is also a fact that the main component of the bill concerns improving security of supply. The review concluded that the current arrangements provide incentives for undue and premature reliance on public conservation campaigns and that the reserve energy scheme put in place in 2004 was somewhat misguided and perversely reduces security of supply. No one doubts the motives for putting it in place but it did not work out the way it should have. At the same time the review noted that there are trade-offs between security of supply and price and that in improving security of supply there are implications for costs and prices. In that regard the review exhibited the realism that was notably lacking in a previous report on this matter. 
The bill seeks to improve security of supply through abolishing the reserve energy scheme requiring retailers to compensate consumers during public conservation campaigns and putting a floor on spot prices during such campaigns. The aim of these measures is to encourage generators and retailers to manage supply issues and to remove the free lunch option of transferring costs or socialising those costs to consumers through public conservation campaigns. 
Finally the bill improves the governance arrangements for the electricity industry. The ministerial review concluded that the Electricity Commission had not done its fundamental job of regulating the industry as well as it could because it had too many objectives and too many functions and it was not sufficiently independent. The bill fixes these problems by disestablishing the Electricity Commission and replacing it with a focused and independent Electricity Authority. Functions that are more sensibly performed by other bodies—such as approvals for grid upgrades management of supply emergencies and promotion of energy efficiency—are transferred to other bodies that already have a role in doing exactly those things. We are effectively taking out duplication of effort. The objectives of the authority are narrowed to the things that it can and should be held accountable for—namely providing for an efficient competitive reliable market—and do not include things that other bodies are already legislated to do. 
The bill was referred to the Finance and Expenditure Committee which heard submissions from a wide range of interested parties. I commend the committee for the excellent work it has done in refining this bill and I support the committee’s recommendations. The changes recommended by the committee are designed to fine-tune the bill and to address the concerns raised by some submitters. 
I take this opportunity to discuss several of the improvements made to the bill by the select committee first with regard to the proposed transfer of assets Tekapo A and Tekapo B from Meridian Energy to Genesis. The committee made several amendments to the Supplementary Order Paper that I sent to it for consideration. The Supplementary Order Paper set out various processes to maintain current environmental outcomes and the rights and obligations of various parties following the transfer. The Supplementary Order Paper has been incorporated in the bill with a number of changes. The most important of these changes is to extend the protection given to the named agreements in schedule 4A—ironically it has a similar name to another matter on which I have also been very keen to listen to what New Zealanders have to say—to any written agreements with Meridian Energy relating to the Tekapo station. Another important change is to make it clear to avoid doubt and to help address the concerns of irrigators in the Waitaki region that nothing in this Act changes the application of the Waitaki Catchment Water Allocation Regional Plan. 
Second a set of significant amendments made by the select committee concerns the rules that are designed to head off the risk of anti-competitive behaviour by lines businesses if and when they ever get back into retailing. The amendments raised several thresholds for application of those rules such as for when corporate separation is required and for the amount of generation directly connected to the grid that lines companies can own. These changes improve the balance between encouraging lines companies to provide competitive retail generation services and making sure we retain an open competitive market. 
A third set of significant changes by the committee relates to improving the incentives on lines businesses to offer remote consumers alternative types of energy for supply in situations where the cost of upgrading or replacing remote lines is prohibitive. Remote consumers whose properties were connected before 1993 retain the right to be supplied with electricity to the boundary of their property. The bill provides that lines companies may however supply alternatives to network lines after giving notice to that effect to consumers and property owners. In other words they may consider embedded generation right on the consumer’s property. Lines companies may also enter into voluntary agreements with remote consumers on an alternative supply of energy within the property boundary. Such arrangements may be the most cost-effective supply option. The committee has removed disincentives for such deals by requiring the Commerce Commission to account for the costs of any deal for price-control purposes. 
Finally the committee has made numerous smaller improvements to the bill ensuring that it works smoothly that rights are protected and that the overall objectives of the reform package are achieved. Some further minor technical amendments have come to light since the report back and I expect to table those amendments as a Supplementary Order Paper in the next few days. 
As I have said on many occasions I cannot promise that electricity prices will fall as a result of the reform package. There are a number of upward cost pressures in the electricity industry most notably the need to build new power generation to meet increased demand for electricity and to ensure security of supply. We have long since run out of cheap options for new power stations. However I can promise that this bill will increase the level of competition in the industry especially in retailing and especially in the South Island. This will put ongoing pressure on generators and retailers to improve their performance which will be very good for consumers. Thank you. 
Hon NANAIA MAHUTA (Labour—Hauraki-Waikato) 
: 
 I rise to speak to the second reading of the Electricity Industry Bill and submit Labour’s opposition to it based on three key points: firstly the bill fails to balance the priorities of security and supply in transmission; secondly the bill fails to achieve affordability for the consumer through greater predictability of pricing; and thirdly the bill is a light response to the real opportunity of achieving the sustainable production and use of electricity. 
Labour’s minority report is a good articulation of the key issues put forward by the previous Opposition spokesperson on energy Charles Chauvel. It is difficult to gain a sense of coherence about what the Government is trying to achieve in this bill on so many fronts. But the real question has to be the one that Kiwi families all around the country are asking. What will this Government do to get a handle on increasing power prices and will this bill actually lower them? [ 
Interruption 
] I will say it again for members. What will this Government do to get a handle on increasing power prices and how will this bill actually address that? Pensioners are feeling the pinch. Households with young people are feeling the pinch. Families with sick whanau are feeling the pinch and worrying about the next power bill over the winter period creates more worry and more frustration. This is a real issue facing Kiwi families right now and these are their questions. 
Labour’s minority report states that although this bill aims to improve competition in the electricity market and improve security of supply it does very little for consumers. Feedback from officials notes that such measures tend to put upward pressure on prices. The Minister of Energy and Resources would be hard-pressed to explain just how effective asset swaps amongst the big State-owned enterprises will be in addressing this question. One can only surmise that the real ambition is to prepare some State-owned enterprises for full or partial privatisation in the next term if National were to be re-elected. We find ourselves agreeing with the views formed that asset swaps increase the risk to electricity supply and will result in a loss of efficiency in some areas of electricity generation and that the cost-benefit case for asset transfer is unclear which view in part was supported by submissions from Transpower and the Institution of Professional Engineers New Zealand and by Treasury reports. 
There is a dogged ideological belief by the Minister and his Government that the market will better respond to pricing pressures. But will it fix what Kiwi households want? In several questions to the Minister Kiwi households wanted to know how this reform would lower their monthly power bill. The answer was that consumers should shop around. He certainly does not know some of the pressures on low and modest income households that are feeling the pinch. Many consumers join payment schemes that enable a bit-by-bit approach to paying off their monthly power bills. Some households that are feeling the pinch may have arrears on their power bills. There is no way that they can shop around until they clear their debts to the current providers so they become stuck in a situation where shopping around is not a real alternative that they can pick up on because they simply do not have the household income to bulk pay their monthly bills or any outstanding amounts. 
Worse still even if they do opt to change retailers it could take up to 6 weeks for a transfer to be effected. During that time some stress occurs because the household relies on a secure supply of electricity to their home. What if retailers have a communication breakdown and power is cut off before a new account starts? This is a particular concern for some elderly folk who are dissatisfied with their current supply but feel uneasy about going through the process of shopping around because they are not clear about some of the things in this whole process. There is no assurance from the Minister on this front. 
Some of the structural shifts effected by this bill compound the concern previously outlined. In fact to the layperson many of the changes proffered by the bill are a hotchpotch of measures that lack coherence or a plan. Coming from that Minister who changed the plan on the conservation estate and the mining of schedule 4 lands it should be no surprise. Despite the Minister’s assurances the Government has not updated the New Zealand Energy Strategy which he promised to do earlier this year. That is of real concern. Here we have a hotchpotch of measures that do not appear to be linked in any way to a big picture or vision for energy generation for a secure and sustainable supply and ultimately for better pricing conditions for Kiwi households. 
Most Kiwi households are not dogmatic about structural reform in this sector but they have some basic needs that should be understood. I am sure other constituent MPs will be hearing the same messages that I am hearing. Households want a secure supply of electricity to their homes. Households want a more predictable and accurate pricing structure. Households are open to incentives that promote energy conservation. Households would make better decisions around energy-efficient choices if there were better cost incentives. Labour is concerned that the Government is lukewarm on these concerns of real Kiwi households and it is lukewarm on the issue of renewable sources of energy when many Kiwi households are looking at more energy-efficient housing options to future-proof their existing homes. 
More important the goal of achieving 90 percent renewable energy should be more than as the Minister has said aspirational. It should be a goal that is actively worked on with some vigour by the Government. Maori are proactively venturing into the space of renewable sources of energy generation and electricity supply and are having greater regard for the health of the environment. It is all synonymous with the Maori world view. All new energy generation to meet the needs of a growing population should come from renewable sources. That signal alone will create new and different jobs and in some cases it will also build on and invest in our clean green image which we all boast about when we are overseas. 
Just briefly I want to comment on the removal of the Electricity Commission in favour of an Electricity Authority. One role the commission had was to provide coordination within the sector and to have oversight to ensure fairness and sustainability in the supply of electricity. The new authority will have no such oversight and this too is of real concern. Consumers who could previously take their concerns regarding fairness to the commission have nowhere to go or they have to go directly to the Minister. 
During the adjournment I received a complaint from a woman living in Nelson about the increase in her power prices from Contact Energy. She said that Contact Energy has raised its prices four times— 
Hon Parekura Horomia 
: How much? 
Hon NANAIA MAHUTA 
: —four times—in the last 20 months and she wants something done about it. She tried complaining to the current Minister and stated that no one will listen. Is this the way consumers expect to be treated? 
Will the Electricity Industry Bill lead to lower electricity prices? Will the Minister resign if power prices do not drop? This bill was commenced because of the pressure on households from increased power prices. The Minister put his credibility on the line saying that this type of reform will make a difference. Will the Minister resign if power prices do not drop? Labour is concerned about Kiwi households and the questions they are asking which are how we bring our electricity bills down and whether this bill will make a difference. Labour firmly believes that more can be done to alleviate pressure on Kiwi households and the cost of living pressures that they are currently facing. This bill is not the solution and we oppose it. 
CRAIG FOSS (National—Tukituki) 
: 
 In the normal course of events during the second reading of a bill we talk to some of the amendments the select committee has made to the bill that was originally introduced to the House. This is the first opportunity that members and particularly members of the Finance and Expenditure Committee have to comment on the changes that have come from the select committee process. The process for the Electricity Industry Bill was very robust and I think it shows the select committee in action. I say in respect of the previous speaker that Labour has put in a minority report but overall as we went through the process I think some good changes which the Minister acknowledged were put through. I acknowledge the hard work of my Finance and Expenditure Committee and the officials who got us to this place including some members on the Opposition benches who were subbed on and off because it was their particular area. 
We called for submissions on 15 December and they were open for a long time until 26 February 2010 just after Parliament resumed. But interestingly as we went through the bill some issues arose from the submissions. We received a letter from the Minister that pointed us to a Supplementary Order Paper that made some changes to the original bill which he intended to bring to our committee. The committee decided to reopen for submissions particularly but only on this Supplementary Order Paper as intended. 
Once again it is all credit to the process because from the submissions on the original Supplementary Order Paper that was before us further changes were recommended by the Finance and Expenditure Committee. I am sure members who are from down south will be talking about the various issues in relation to Waitaki which I will speak about during another reading of this bill. It was very interesting and I have learnt a lot about that part of the world. I acknowledge the changes that have been alluded to in the commentary and throughout the bill. 
I want to make a couple of points in particular. I note that this bill balances essential priorities in the energy sector. This bill adds equity and environmental protection and imposes coherent policy solutions to a very troubled sector. We saw increases of 72 percent in the cost of power when members opposite were in power. This bill implements proposals that have been properly evaluated. Goodness me the previous Government had 9 or 10 years to evaluate various solutions to the problems it now seems to acknowledge but it is now suddenly saying that it will vote against this bill which tries to fix some of those problems. I do not know what is up there. 
It is quite correct that this bill will not control price increases. It is not intended to do so. This is not the socialist nirvana that perhaps some members opposite might want. But what this bill will do is provide the opportunity to at the very least start to slow down the crazy increases we have seen in the price of retail power and business power over the last 5 years or so. In the last 6 or 7 years the increase has been 72 percent which is absolutely outrageous. A previous speaker had the audacity to talk about pensioners being pinched without even acknowledging or apologising for—which would have been more polite—the fact that those same consumers were faced with increases of 72 percent during Labour’s term in Government. I point out that those superannuitants are now better off. A married couple on superannuation are better off by $78 per week as a result of the tax changes and indexation of superannuation that this Government has brought forward to help those people cope with some of the increases they face such as electricity price increases. We all acknowledge that some consumers face a difficult time in meeting some of these obligations and this bill is about trying to address some of the structural problems that have led to this sector becoming out of control. 
I have yet to hear—but perhaps we will hear it from other speakers—apologies from members opposite for the brownouts and the threat of blackouts that we had during their term in office. Every winter there were publicity schemes to tell us to turn off our power because of the total mismanagement and structural inadequacies that the previous Government did not address in relation to electricity. I look forward to discussing this bill and these amendments further as we move it through the House. 
CHRIS HIPKINS (Labour—Rimutaka) 
: 
 If anybody should be apologising to the New Zealand public for the perilous state of our electricity system it is Max Bradford and his ministerial colleagues who created the mess in the first place. Although I accept that the previous Labour Government did not adequately solve the problem Max Bradford created it does not mean that the Labour Government was responsible for creating the mess in the first place. It is very hard to unscramble an egg which is exactly what Max Bradford did. He created a huge shambles and we are still living with the impact of that today. 
People who are worried about their increasing power bills will be very disappointed to hear Craig Foss stand up in this House and all but say he does not care. The Government does not care about increasing power prices. It accepts that this bill will not do anything to stop the massive increases in power prices that New Zealanders are seeing. Many submitters to the Finance and Expenditure Committee said that this bill will increase power prices not lower them. The select committee received some very considered submissions but the Government chose to ignore them. 
The Labour Party is opposed to this bill because we believe it fails to balance the priorities of a secure electricity supply affordable and predictable pricing and the sustainable production and use of electricity. Those are the three major points that we think the electricity system should be based upon and this bill does not do that. In fact we are very concerned that some of the proposals put forward by the National Government have not been subject to the type of rigorous analysis we should be able to expect from legislation that has a multimillion-dollar impact and that is the sort of impact this bill will have because it asset swaps. 
We are not talking about toys here. We are not talking about minor things being switched around such as saying: “Meridian have been allowed to play with the Waitaki for a little while so now we’ll give it to Genesis and let them have a play with it.” We are talking about multimillion-dollar assets and the least that the New Zealand public can expect from their Government which is the trustee of these assets on their behalf is that significant changes are adequately and robustly analysed to make sure they will work. We have seen very little analysis of that by this Government. 
Treasury’s regulatory impact analysis team argued that many of these proposals have not been properly thought-out. Treasury said that the regulatory impact assessment for the bill was lacking in certain areas and should have—and I quote directly from Treasury in the commentary on the bill—“included a more comprehensive discussion of the risks associated with proposed options”. We are talking about significant risks. I restate the point that we are talking about a multimillion-dollar asset reorganisation. Treasury has argued that the risks have not been properly analysed. 
Treasury also argued that the regulatory assessment for the bill should: “provide a better idea of the magnitude of costs and benefits of the options discussed in comparison to the problem they are trying to address”. These are pretty basic fundamental issues that the Government has not dealt with in putting these proposals before the House. Treasury argued that the assessment should have: “better reflected the range of views received during consultation”. The Government’s approach to the select committee process was to ignore the vast bulk of evidence put before the committee. Treasury also argued that the assessment should have contained: “a discussion of whether or not the options proposed have been tried overseas and if so what their impact was”. 
Electricity reform has been tried all around the world. We have one of the worst records for power price increases in the last few decades so why would we not look around the world to see what is being done? I am very concerned about the proposed asset swap. The select committee received some very considered submissions from organisations such as the Institution of Professional Engineers which argued that the Waitaki water system operates best as a coherent whole and that removing Tekapo A and Tekapo B—which is what this bill does—from Meridian and handing them over to Genesis is potentially creating a less-efficient use of the water. It argued that we are creating competition on that water system whereby the players will be incentivised to maximise their own commercial benefit from the use of the water rather than make the best overall use of the water on the Waitaki system. That view which was put forward by the Institution of Professional Engineers in a very considered submission was ignored by the Government. 
We are very concerned about the impact that this bill will have. TrustPower stated in its submission: “the uncertainty created by the industry shake-up [is] likely to have a chilling effect on private electricity generators’ willingness to invest in new electricity plant raising the prospect of shortages again within a decade.” TrustPower which is one of the bigger players in our electricity sector says that this will have a chilling effect on investment in new electricity plant raising the prospect of shortages within a decade. 
The electricity sector has long lead times. What we were suffering from a few years ago with the electricity shortages was a lack of foresight when those first electricity reforms were put forward in the late 1990s. It created this market and disincentivised investment in new generation. We suffered the consequences of that throughout the late 2000s before we reached 2010. The Government has not done anything to deal with that. 
Gerry Brownlee stands in the House and trumpets the fact that we have done very well in the last year or two in terms of the renewable electricity we have had. There are two reasons for that the first of which is that it has rained quite a lot. Gerry Brownlee may like to claim credit for a lot of things but I do not think he can claim credit for the fact that it has rained quite a lot in the South Island in the last couple of years. That has been a significant contributor to the proportion of renewable electricity generation that we have seen in New Zealand over the last couple of years. 
The other reason is the significant emphasis that the previous Labour Government put on encouraging investment in renewable plant. Things like wind farms which have been coming on stream and have increased our renewable energy percentage are very good things. Unfortunately this bill does nothing to further those reforms or to further the drive towards renewable energy. Of course that is not really surprising because this Government’s overall Energy Strategy is a total shambles. 
On the one hand Gerry Brownlee is saying that the Government is committed to having 90 percent renewable electricity but on the other hand he is going up and down the country talking about “sexy coal”. I am not sure how he manages to reconcile those two things but that just goes to show what a total shambles the Government’s energy policies are. 
I have to say that the Leader of the House and the Minister of Energy and Resources obviously do not get on very well together. What kind of Leader of the House would put forward an energy bill for debate in Parliament today? On the day that the Government backed down on the mining he put forward an energy bill for debate in Parliament. The Minister of Energy and Resources and the Leader of the House may want to communicate a little bit more! 
I would have thought that the Government would be conscious about not wanting to debate a whole lot of energy issues in the House today given the absolute dog’s breakfast it has made out of the mining issue and the absolutely humiliating back-down that John Key had to make today after going out there and promising that the energy sector would be the major cornerstone of the Government’s step change in the economy. Yet we have here today the Electricity Industry Bill which will not lower power prices or lead to a more sustainable supply of electricity. On the same day the Government is also backing down on its plans to mine in the national parks. It just goes to show what happens when the Government blunders its way through putting forward proposals on the energy sector without making sure that it has the evidence the facts and the research all lined up beforehand. 
The Government’s energy policies are a mess. Gerry Brownlee promised a New Zealand Energy Strategy within months of becoming the Minister of Energy and Resources. The Government is more than halfway through its term and we are still waiting for a New Zealand Energy Strategy. The importance of a New Zealand Energy Strategy cannot be understated. People and companies look to it for the important signals it sends about where they should be investing what the Government’s overall vision is where the incentives lie and where the penalties lie. There has been nothing from the Government on that. 
The current Energy Strategy is the Energy Strategy put in place by the previous Labour Government and Gerry Brownlee is going around the country telling everybody to ignore it because this Government does not support it. The Government’s official Energy Strategy is in fact the Energy Strategy of the previous Labour Government because Gerry Brownlee has not got around to putting in place another one. It is a year and a half since National became the Government and it is about time it finally stumped up and put forward a coherent plan and a coherent vision for the energy sector in New Zealand. 
Labour members will have a lot to say about the Electricity Industry Bill as it progresses through its remaining stages in this House. We think it is very weak. The bill has a lot of flaws that will need to be addressed in the Committee of the whole House and we will have some further things to share with the House on that as we go through that debate. This is not a bill that will lower power prices for ordinary everyday working New Zealanders. The Government has given up on the task of trying to contain power price increases. Power prices will keep going up under National. 
Dr KENNEDY GRAHAM (Green) 
: 
 This Electricity Industry Bill is not the first and almost certainly will not be the last legislation that seeks to tinker with the New Zealand electricity sector. The generation and transmission distribution and retailing of electricity has become one of the jabberwockies of the New Zealand economy. The policy developments over the last 20 years reflect deeply held if dimly perceived points of economic ideology. Their structural implications have made for the labyrinthine institutional relationships between entities that pretend to compete and cooperate at one and the same time as the market signals conveyed by the sedimentary layers of legislation remain unclear over whether they are to compete or cooperate with one another and their retail pricing has become a political perennial in this country ranking as one of the most sensitive electoral issues each time round. 
It follows that the scope for political point-scoring between the two major parties is at its highest. We have heard in the first reading and now already in this second reading debate how National holds Labour and how Labour holds National to account for the 72 percent retail price hike in a decade which is threefold greater than the CPI inflation rate. For many decades until the 1980s the New Zealand electricity industry ploughed a reasonably contented field of security of supply and relative price stability rationally planned transmission and future-oriented generation capacity. This was based on the same power sources that we tend to rely on today: hydro geothermal and natural gas. It was Government-owned and operated and hence lacked the sharp-edged prod of private competition. But it had the associated freedom to regard the supply of power to industry firms and households as a public good. That is a freedom too often dismissed or denied. 
In the 1980s gripped by an excessive dose of ideological fervour the Labour Government commenced the move to dismantle the public sector’s control of the power industry and shifted towards a mixed public-private competitive model. Not to be outdone the National Government of the 1990s furthered this trend pitting public-owned State-owned enterprises against public tradable companies. The resulting mix has become something of a dog’s breakfast over the ensuing years. The 2009 ministerial review was fairly accurate in its critique particularly on the two major problems encountered: high retail prices and insufficient retail competition across regions and inadequate security of supply especially during dry years. 
Adding to these sectoral shortcomings is an institutional criticism that the governance arrangement is unsatisfactory with the current Electricity Commission having too many objectives and functions to its name and not being sufficiently independent of the Government. The current planning process does nothing to assist in clarity of purpose or operation. Most people assume that there is a planning process identifying the nature of electricity demand assessing operations available through a cost-benefit analysis and followed by a genuine Resource Management Act process. 
In fact nothing like this occurs at all. There is no public interest planning process to speak of. Rather individual power companies identify generation schemes to maximise profit margins and put these schemes into the Resource Management Act process with no comparable alternative offered. It is possible that an outcome reflecting the public good might emerge but only by accident rather than by design. The system is heavily biased to a think big style of generation rather than conservation and small-scale generation. So today after 20 years of so-called reform we probably have an electricity industry that operates more poorly than it did when it was under governmental operation. The continual need to attempt a reform of the original changes in the 1980s continuous through the past two decades and their continual failure to get to the heart of the problem provide testimony to this. 
Today after 20 years we have a strange economic system for the generation and delivery of power. We have essentially five generators three of which are public State-owned enterprises and two of which are publicly tradable companies. This in itself guarantees to distort the smooth operation of the upstream stage of the sector. We have one entity for transmission exerting a pure monopoly at that commercial level. We have 28 lines companies to distribute the electricity to the retailers. These are owned by trusts or by public companies except that some major industrial users—for example in the dairy or in the steel and aluminium businesses—are directly connected to the grid. We then have 12 retailers five of which are the generators themselves or are generator-owned. Seven others are private or local body - owned but all are smaller in size than the five famously named “gen-tailers” or generators/retailers. Floating on top of this structural nightmare we have pricing nodes at over 200 grid exit points where retail pricing is determined every half hour over a 24-hour period and where deals are struck between the generators and the retailers which are largely the same commercial entities. 
This vertical integration from generation to retailing allows the generators/retailers to operate as a natural hedge against any risk of volatility in the spot market. It also ensures that their margins are high no matter what the economic and social stress imposed on the most vulnerable of the end consumer—the householder—is. This bizarre commercial mosaic is the child of two estranged progenitors: ideological rivalry between the two major parties and historical mischance within the bureaucracy. New Zealand’s feeble attempts to tame and train the commercial industrial beast we have created have proved to be just that—feeble. 
How do we rectify matters? Through forcing the invisible hand of course! We shall make pricing fairer and more predictable and we shall increase security of supply. But how do we achieve those two over-arcing goals? By decree. By telling the invisible hand what to do. Listening to the pure sounds of perfect competition the Government will intervene in the market and restructure it. It will step in and redistribute assets. It will take some hydro generating capacity away from one State-owned enterprise and hand it over to another thereby economically fragmenting a single natural ecological system. The stated purpose of this legerdemain is to increase competition across regions essentially between the North Island and South Island. It will further stimulate competition not just through physical asset swaps but through virtual asset swaps between the three State-owned enterprises. It involves a 15-year contract designed to preserve the ability of each to provide increased competition in the island where they currently have little or no generating capacity. 
But wait there is more. There will be a fund of $15 million over 3 years to promote customers switching between retailers. “Do not complain about price increases in power” admonishes our Prime Minister “just shop around. Let the imperfect market speak and if it doesn’t shut up and don’t bother me.” All major generators will be required to put in place an accessible electricity hedge market which is yet another example of the free market singing its own praises. 
There is absolutely no guarantee that any of this will achieve the two stated goals of price stability and security of supply. Indeed these changes may result in so much more stage-managed confusion to the free market as to produce the opposite effect. I recall the debate in the first reading and I have sat through the select committee hearings and deliberations. I remain unpersuaded that the Government knows with confidence what it is doing with this legislation. It is the product of many bureaucratic minds working at cross purposes. Exposed by a negative impact analysis being hatched under the distant gaze of an unfocused Minister it guarantees in short further poor performance and further reform efforts in the future. 
At a more underlying level of concern the bill simply misses the point. In the early 21st century what the country needs is not ideological tinkering to restructure a flawed system that is malfunctioning; what is needed is a fundamental reappraisal of the need for greater conservation of use efficiency of generation and alternative renewable supply. We need to be targeting increases in solar energy wind energy and tidal energy. We need to focus on what market price signal through a proper carbon price mechanism is required so that these new sources of power can be enabled to flourish rather than be stifled by more of the same and silly asset swaps. Until that happens we shall be waiting for Godot whether it comes in the form of Minister Richardson or Minister Bradford or Minister Brownlee. For those reasons the Green Party will not be supporting this bill. 
JOHN BOSCAWEN (ACT) 
: 
 The ACT Party will be supporting the Electricity Industry Bill at its second reading. I am proud to say that I was a member of the Finance and Expenditure Committee that considered the submissions on this bill and deliberated on the Supplementary Order Paper put up by the Minister of Energy and Resources. 
As the Minister explained the fundamental objective of this bill is to create greater retail competition particularly in the South Island. There are three or four key things that this bill provides. Firstly it provides for the transfer of the ownership of the Tekapo A and Tekapo B power stations on the Waitaki River from Meridian Energy to Genesis Power. Secondly it provides for a swap market—or a virtual asset swap if you like—to provide forward electricity contracts for a further 15 years or 15 years from the bill coming into effect. Thirdly the bill makes it easier for lines companies to compete at the retail level. 
I would like to step back and try to briefly explain to the House the structure of New Zealand’s electricity market. It was not something that I understood well before I came to Parliament and as I have travelled around the country speaking on the issue of electricity prices it has been very obvious to me that New Zealanders also do not understand how the electricity market works. I guess in a way I will repeat part of what Kennedy Graham has just said. New Zealand has five major electricity generators and they are all different. Of those five three are owned by the State or the taxpayer as they are State-owned enterprises and two are privately owned. The three State-owned enterprises are Mighty River Power Genesis Energy and Meridian Energy. 
The make-up of those companies is fundamental to this bill which is why I think it is important to understand what those companies are and where they operate. Mighty River Power is a company that is based substantially in the North Island. It generates electricity from power stations and hydro stations on the Waikato River and geothermal stations around Taupo. So we can look on Mighty River Power as being a North Island power company with 90 percent of its production being renewable. Only 10 percent is generated from gas which comes from the Southdown generation plant in Auckland. 
Let us compare that with Genesis. It is a company that substantially has as its major asset the Huntly power station which generates electricity from the burning of coal and gas. Seventy-five percent of what Genesis produces comes from the Huntly power station and up until quite recently most of what Genesis sold was sold in the North Island. Genesis was a North Island retailer just like Mighty River Power was but in recent times it has moved into the South Island. The Minister referred to increasing competition by Genesis as a result of its move into Christchurch Dunedin and Queenstown and that competition has come ahead of this bill. Genesis has anticipated that this Parliament will pass this bill. 
The third power company is Meridian Energy which is 100 percent renewable. It generates electricity from the hydro stations in South Island rivers the Waitaki River in particular and it generates some renewable energy from wind stations in Wellington at the West Wind station at Makara and also up in the Manawatu. So there we have three Government-owned power stations. Mighty River Power is 90 percent renewable in the North Island Meridian is 100 percent renewable in the South Island and Genesis is essentially a non-renewable company. 
We can add to that list TrustPower and Contact Energy. Contact Energy which came out of the old New Zealand Electricity Commission was privatised and sold off by the Government. So there are two privately owned generators and three Government-owned generators. This bill is transferring the ownership of two power stations on the Waitaki River currently owned by Meridian to Genesis. That will give Genesis the company that operates predominantly in the North Island two power stations on the Waitaki River. The bill will give Genesis generating capacity in the South Island and this will make it much easier for Genesis to retail electricity in the South Island. 
In the expectation that Parliament would pass this bill as I said Genesis has gone into Christchurch Dunedin and Queenstown and has aggressively sought customers. It has underpriced the market and gone in there and competitively bid for customers by offering cheaper prices. Contact Energy is a major supplier of electricity in Christchurch and Dunedin and it has seen its market share undercut by Genesis coming in and anticipating this bill being passed. 
I do not think New Zealanders fully appreciate the fact—and Mr Kennedy Graham referred to this—that the wholesale price of electricity is set every half hour. So 48 times a day the generators conduct a computer auction against themselves and against other retailers and those generators offer electricity to the market. So 48 times a day a generator says that it is prepared to supply a certain amount of electricity at a certain price that for a higher price it will produce more and that at an even higher price it will produce even more. It is the balance between the retailers demanding the electricity and the generators offering to supply it that sets the market price. Once that market price is set that is the price that all the generators receive. So Meridian Energy may for example offer to supply electricity at 6c or 7c a unit per kilowatt hour and Genesis could be generating electricity from imported coal from Indonesia. If the price that Genesis offers electricity to the market is 10c a unit and that electricity is demanded by the market 10c is the price that all generators get. 
I found it very interesting that Labour members in particular have focused on electricity prices. 
Sitting suspended from 6 p.m. to 7.30 p.m. 
JOHN BOSCAWEN 
: Before the break we were talking about the structure of the New Zealand electricity industry. I was pointing out to the House that Genesis is our most expensive generator. Over 80 percent of the time it sets the wholesale price of electricity that all of the other generators benefit from. 
When the emissions trading scheme came into effect on 1 July Genesis’ cost of production could have been expected to have increased by about 5 percent in order to cover the costs of the carbon emissions it has to pay for burning that expensive coal and gas. There are only two things that have stopped Genesis from increasing the price of electricity on account of the emissions trading scheme. The first is the 1 million tonne stockpile of coal that Genesis is sitting on. I understand it will take some months to burn through that but by the end of the year Genesis can expect to be paying the 5 percent surcharge for burning coal. The second thing which people have not been alluding to is that Genesis put through a 4.5 percent price increase in June. One of the things Genesis put that price increase down to was the increased cost of producing wholesale electricity. Genesis is waiting 6 months for its emissions trading scheme price increase but it put through a 4.5 percent price increase before 1 July. 
It was very interesting that Nanaia Mahuta said that Kiwi households are asking how to get the price of electricity down. Of course there was a howl of outrage from the National MPs and well they might be outraged. We should all remind ourselves that had Labour been returned to office its emissions trading scheme would have come into effect on 1 January and the electricity price would have gone up by 10 percent. For Nanaia Mahuta to fake concern about electricity prices just defies logic because if Labour was in Government we could have expected electricity prices to be 10 percent higher. 
It is not surprising that Mr Brownlee is not prepared to guarantee that these reforms will reduce the price of electricity because he knows that although there was not a 10 percent increase the emissions trading scheme we have will have a 5 percent increase. When we add to that the 2.5 percent GST increase we can reasonably expect electricity prices to increase in the next 12 months by about 10 percent. 
Finally Mr Hipkins referred to renewable energy. He said it is a good thing that we have put more wind generation into the system. This country has spent hundreds and hundreds of millions of dollars if not billions building wind generation. The blunt reality is that that is extremely expensive—probably two or three times the cost of gas electricity. That is the reason that electricity prices have increased by as much as they have. Thank you. 
AMY ADAMS (National—Selwyn) 
: 
 I am happy to take a call this evening on the Electricity Industry Bill having been part of the Finance and Expenditure Committee that had the pleasure of working through the process in respect of this legislation. 
The electricity sector is a key part of our country not only of our economy but also of our household sector. I think it is worth recapping that the reforms in the bill arose from a ministerial review into the performance of this sector. That review came about because there was widespread concern amongst New Zealanders about prices security of supply and issues with the governance of the sector. It is also worth noting that the ministerial review was aided by an exceptional technical advisory group. The work that that review panel did laid the foundations for the bill we have before us. 
The key findings were that there were price rises particularly in some sectors well outside what could be justified. In particular the margins in the residential power price sector were much higher than could be reasonably expected. The review looked at the question of the adequacy of the new generation capacity. It found that New Zealand had a particular vulnerability to dry years and consumers were being repeatedly asked to go through public conservation programmes to make up for the failure of the electricity sector to adequately manage that vulnerability. The other key finding was that the Electricity Commission was trying to juggle too many balls and it was not sufficiently focusing on the key aspects of its role. 
With that in mind I say that the Electricity Industry Bill has come before us. I think the select committee process was valuable and the committee came up with some important improvements to the bill. One improvement I want to touch on relates to the work we did to make sure that the mechanics of the assets swap in terms of the transfer of Tekapo A and Tekapo B from Meridian Energy to Genesis Power would work properly and ensure in particular that third-party users of the Waitaki River system would not be detrimentally affected. There was considerable concern about ensuring that moving from dealing with just Meridian to dealing with Meridian and Genesis would leave the Waitaki irrigators in no worse a position. We understand and accept that they have issues remaining to deal with but they were outside the ambit of this bill. Our concern was to ensure that nothing to do with the asset transfers would put any party in a more difficult position in terms of resolving those matters. I think we have come to a good place there. 
We also did a lot of work around some of the technical aspects of governance including looking at some of the issues like the necessity for by-elections upon the retirements of trustees of consumer trusts and the like in order to ensure that we have a good balance between consumer protection and unnecessary cost. 
One of the other key changes that the committee recommended is increasing the threshold before lines companies are required to undertake corporate separation between their lines company business and the generating/retailing aspects of their business. The bill always had a threshold for that. There was considerable concern from submitters that that threshold was so low that it would defeat the objective of getting lines companies back into the game. We took that on board and we recommended that the threshold be increased. Certainly it is good to see the Minister take that on board. 
In closing my brief contribution tonight I want to mention some of the comments we have seen in the mainstream media on the reforms. The  
Press 
 editorial from my own part of the world commented: “Changes made by Labour did little to improve the sector and if anything worsened it.”—and I think we can all agree with that. It continues: “The signs are that the package may well deliver more competition and the prices will be more stable. These reforms should be effective in better meeting the aims of an efficient market.” Interestingly enough we have Jeanette Fitzsimons blogging: “The Government’s moves to make the power retail market more competitive are good”. That is strong praise indeed from Ms Fitzsimons. Consumer New Zealand’s chief executive said: “I think the asset swap—both the physical one and the virtual swap—will mean they will no longer be just competing in the regional area they are generating in but will have to go nationwide.” 
I think we will see from the reforms in this package a better-organised sector a better-governed sector more competition and at the end of the day a better outcome for the users of electricity which is what this is all about. I am pleased to commend this bill to the House. Thank you. 
CHARLES CHAUVEL (Labour) 
: 
 What is needed now in the New Zealand electricity sector is security of supply and transmission of electricity affordability predictability of pricing and sustainability as far as production and use are concerned. The Electricity Industry Bill fails to deliver any of those priorities. 
The bill fails even to meet the Government’s own stated goals and objectives for the sector. It is all very well to seek to improve competition—which is what the commentary on the bill says it will try to do—to seek to constrain price increases to seek to increase security of supply and to seek to ensure effective and streamlined governance of the sector; those are the three stated aims of the bill. But in the end what we need to do in this House is judge legislation by its likely effect based on the evidence we hear rather than on pious intention. The House needs to hear from members who served on the Finance and Expenditure Committee that the evidence before the committee was damning as far as the likelihood of this bill’s ability to achieve its aims was concerned. 
New Zealanders are struggling to keep up with the rapidly increasing costs of living. It has been interesting to hear the speeches in the House tonight about how high electricity prices have been. After nearly 2 years of this Government in office those prices have continued to rise and rise. 
Hon Members 
: No. 
CHARLES CHAUVEL 
: There is a howl of protest from across the House. How about some evidence? How about some facts? In the last quarter the CPI increased by 0.3 percent while electricity prices increased by 1 percent. There is runaway price inflation in this sector and members opposite have done absolutely nothing while they have been in office to address it. It is a trend that will only be exacerbated by a 2.5 percent increase in GST from 1 October. We heard Mr Boscawen talk earlier about the price gouging that we have seen from generators-retailers. He mentioned a 4.5 percent price increase from one generator-retailer as a result of the implementation of this Government’s completely substandard emissions trading scheme. 
If this Government was really serious about addressing the problems in this sector it would not be stripping assets from one State-owned enterprise and giving them to another in order to ready both State-owned enterprises for privatisation if the Government wins another term. Clearly that is the only purpose of and the only end for these asset strips and asset swaps. 
This Government and the Minister of Energy and Resources just do not understand what has gone wrong in this sector since the Bradford reforms in the late 1990s. The problem is the ongoing failure to treat electricity as a public good where fair access for everyone not just for those who can afford it should be the ultimate goal. It is true that when Labour was in Government it made the mistake of leaving the Bradford system in place which led to increased prices. Phil Goff apologised for that at last year’s annual conference of the Labour Party and the House can be assured that the Labour Party will not make the mistake again—when it is our privilege once more to lead a Government—of leaving the market in place in this area. But make no mistake this bill by seeking to apply “more market” reforms rather than “fewer market” reforms will just make the problems worse not better. 
This bill is a bad piece of legislation. It fails to balance the essential priorities that should be balanced. Instead it will exacerbate the problems identified by seeking to implement proposals that have not even been properly evaluated. With something as essential to everyday living and commerce as electricity any reforms should be evidence-based. But what did Treasury tell us about these reforms? Well here are three comments from Treasury’s evaluation of these reforms. 
Firstly the Government should “have included a more comprehensive discussion of the risks associated with proposed options”; secondly it should “provide a better idea of the magnitude of costs and benefits of the options discussed in comparison to the problem they are trying to address”; and thirdly it should have “better reflected the range of views received during consultation”. Those are strong words from Treasury yet this Government and this Minister are simply rushing to appear to be doing something in the electricity sector that will in fact weaken security of supply and increase the rate of costs in the sector rather than doing the opposite which is the stated aim of the bill. 
In reality the measures in the bill that claim to seek to increase security of supply will put huge upward pressure on prices and that demonstrates the fundamental conflict at the heart of this legislation. Contact Energy told the Finance and Expenditure Committee that it will need to raise retail prices by 5 percent per annum from now on. This cannot mean that we will see lower price rises in the sector. We will not see any “[taking] the sharp edges off the recession” for ordinary consumers because that is the price rise level that Contact Energy needs to put in place to keep putting generation assets in place in order to keep the lights on. There is not any way round it if the Government keeps the market in place which is what the Minister intends. 
It is also contradictory that the bill’s overall thrust is said to be to increase competition and to provide more market-based solutions in the energy sector when in fact many of the changes that the bill would implement run the risk of entrenching natural monopolies and their anti-competitive behaviour. We all know that monopolies and anti-competitive behaviour lead to prices rises as sure as night follows day. 
What are some of the short-sighted entrenchments of monopolies in the bill? They include the removal of the role of consumers and sustainable energy suppliers and the conversion of the present electricity market rule book to a new code. There will be no place for consumers or for representatives of sustainable energy suppliers on the new governance body. The proposed standardisation of distribution price schemes will limit lines companies’ opportunities to reduce costs to their own networks because their ability to offer differential tariffs to their customers is severely limited by the legislation. Why bother to bring lines companies into the equation if they will be told that they cannot price imaginatively or innovatively and cannot compete properly on the market in the areas where they can offer real strength? 
Another real problem is establishing Transpower as the system operator by statute; actually enacting that it should have a monopoly role in this area rather than providing by contract between the parties as now that that is its role as long as the parties continue to agree. The bill also allows lines companies back into retailing while having no regard to the real risk of creating huge barriers to other players entering the market once those retailers have entrenched themselves in their natural monopoly areas. These are really bad ideas that run contrary to the rhetoric in the bill about introducing more competition in the sector because for those reasons competition will in fact be lessened. They are essential areas that need to be addressed and were not adequately addressed by the select committee. 
Lastly this bill does nothing to bring coherence to the energy policy framework. The Government is rushing to legislate without providing any certainty over the status of the New Zealand Energy Strategy something that the Minister said 18 months ago he would update but on which we have heard no further announcements. He is simply putting all his faith in this legislation which the experts say is contradictory and unlikely to work. The bill fails to address any of the major issues that face the electricity sector even the issues highlighted by the Government in proposing it. It fails to address the major issues facing everyday New Zealanders such as the increasing cost of living and will in fact increase those pressures. At the earliest opportunity a Labour-led Government will repeal this legislation and replace it with a legislative framework that ensures that New Zealanders have an environmentally sustainable supply of electricity that is affordable secure and priced predictably. 
DAVID BENNETT (National—Hamilton East) 
: 
 I will take just a short call on the Electricity Industry Bill basically to refute the load of rubbish we have just heard from the previous speaker Charles Chauvel about the glory of the previous Labour Government in keeping electricity prices down. Under Labour the price of electricity for consumer groups rose by 72 percent. 
Hon Members 
: What? 
DAVID BENNETT 
: It rose by 72 percent. That is how much electricity costs increased under the Labour Government. It was good at controlling costs was it not? It was really good at controlling costs! Members opposite come into the House cry crocodile tears and say that they are sorry and that a Labour Government would not do the same thing again but those members cannot be trusted. One cannot trust Labour. When in Government it ripped billions of dollars out of the electricity sector out of those State-owned enterprises. It took $3.1 billion out of the sector and it increased the price of electricity for consumers by 72 percent. That is not a Government that is fair and equitable and is looking after those who have to pay their power bills; that is a Government that raped and pillaged the power industry for 9 years to pay for Labour’s election promises. 
The National Government has put this bill together to give a system that will provide fairness and competition. The good people of the South Island will be looking at this bill and saying that finally they have some competition in their power market in the south. This bill will give some diversity to the companies that are producing the power so that they can meet renewable targets. 
Under National the renewable energy targets have gone up. We have more renewable energy coming on board now than there was under the previous Labour Government which was going to ban thermal generation. It was going to increase the price of power and it would not have had a word or a measure for the consumers. It was just going to do it and rip the guts out of that industry. 
This is a good bill. It helps New Zealand consumers it helps the New Zealand electricity industry and it is important for the structure and direction of the industry. We support it 100 percent and it will be in the best interests of New Zealanders going forward. We commend this bill to the House. 
BRENDON BURNS (Labour—Christchurch Central) 
: 
 Is that it? Is that the defence of the Electricity Industry Bill? David Bennett said competition will sort out the electricity industry. Well Mr Bennett should remember back to Max Bradford. He was going to sort out all the issues in the electricity industry with his restructuring legislation but it did not do a darn thing to sort them out. The Minister of Finance who has joined the House will remember that well and also the electoral consequences that flowed from “Mad Max’s” electricity reforms. Gerry Brownlee has learnt very little in respect of these issues. Sure he thundered a great deal while he was in Opposition about how electricity prices were too high and he was right about that. But this bill does absolutely nothing to address the pricing issues and in fact he told the House that this afternoon. He said he cannot promise that electricity prices will reduce as a result of this legislation and he is bang on the money in respect of that—absolutely right. 
An interesting thing emerged during the consideration of the bill by the Finance and Expenditure Committee. We had the chief executive of Meridian Energy in front of us and I asked Tim Lusk a question about whether Meridian Energy supported the asset swap that takes the Tekapo A and Tekapo B power stations from Meridian Energy’s ownership and puts them into the ownership of its rival State-owned enterprise Genesis. Mr Lusk—with not the most convincing body language I have to say—said yes Meridian Energy did support this to a man and woman within the company. I thought that was interesting so I asked the Minister of Energy and Resources whether he had received any advice from Meridian Energy against the power swap. He told me that no he had not had any advice against the power swap. 
So I put in an Official Information Act request to the Minister for State Owned Enterprises Simon Power and back came a letter sent from the chair of Meridian Energy Wayne Boyd on 21 December 2009 to Mr Power to Bill English as the Minister of Finance and to Steven Joyce as the Associate Minister of Finance. It said this: “When we begin to consider the steps that must be taken to implement the changes a number of issues arise. It is a matter of particular concern that Meridian had no opportunity to comment on the final asset transfer decision losing Tekapo A and B with no offsetting new generation capacity. We had no opportunity to provide wider analysis of the wider market implications of the current decisions relating specifically to SOEs.” The letter goes on in some pages of detail saying the asset sale significantly worsens Meridian Energy’s dry-year revenue risk and compromises Meridian Energy’s ability to cover prudent financial earnings multiples. It states that Meridian Energy was not sure about the implications of the asset swap on its relationship with Rio Tinto the current owners of the Comalco aluminium smelter which takes 40 percent of Meridian Energy’s current generation. It said it would not be a simple process to negotiate a new contract based upon the changes with Tekapo A and Tekapo B. The letter goes on further to say that splitting the management of the Waitaki chain across two operators will result in a loss of efficiency in managing the water resource and from an efficiency perspective Meridian Energy will need to hold its lakes higher in order to counter the securities of supply risks that it had outlined. It said this will result in a much higher likelihood of spill and a loss of efficiency. 
This is the advice to three senior Ministers that somehow did not reach the Minister of Energy and Resources. It is an extraordinary thing that three Ministers were advised by Meridian Energy that the asset swap provided for in this bill will have dire consequences for Meridian Energy for the security of supply and for the financial status of Meridian Energy yet somehow or other I was told by the Minister of Energy and Resources that he had had no advice from Meridian Energy against the swap. That is an extraordinary state of affairs. 
Perhaps Gerry Brownlee also chose to ignore the advice from Treasury. It also submitted on the issue of the asset swaps saying how sceptical it was about the net benefits of the asset swap proposals in the discussion document and noting that the technical advisory group had underestimated the costs and risks of the asset swap proposals. The officials did not recommend an asset swap. The Minister decided that they should pursue an asset swap involving Tekapo A and B rather than just the virtual asset swap that the technical advisory group had recommended. 
So we have a Minister of Energy and Resources who either does not receive or chooses to ignore the fact that the State-owned enterprise that he is responsible for has given him very strong advice about the dire consequences of this asset swap. He has Treasury telling him about the consequences of the asset swap being negative but he proceeds with his own decision to make the asset swap the cornerstone of this electricity industry restructuring bill. It is a very high bill based upon that. Not only did Treasury and Meridian Energy question the value of the asset swaps as proposed under this bill but so too did other experienced operators in the electricity industry such as Doug Heffernan from Mighty River Power I thought that was an extraordinary thing. It was brave for a man who is still in the employment effectively of the Government as a State-owned enterprise chief executive to tell the Finance and Expenditure Committee quite candidly about his belief that asset swaps did not deliver the value that some people might ascribe to them. 
Hon Tau Henare 
: What’s strange about that? 
BRENDON BURNS 
: It is strange because he was being candid but his advice was totally ignored by the Government. Gerry Brownlee got it into his head that this measure was the answer to the electricity industry’s problems but at the outset and on the return of this bill to the House today he could not say this legislation would lead to reduced power prices. It will not according to Treasury’s advice according to Meridian Energy and according to other power operators increase the security of supply which is the second issue. I do not need an inhaler. Mr Henare might; he has had the operation not me. 
There is also commentary from Powershop’s chief executive. Powershop is a new player in the market—take heart I say to Tau Henare. Ari Sargent the chief executive of Powershop slammed the reforms saying there was a high risk that they would lead both to higher prices and to less secure power supply. Here is another player in the electricity market expressing concern so it is all rather stacking up in one direction. The technical advisory group did not recommend a physical asset swap. Treasury said it will not work and the chair of the board of Meridian Energy outlined in a document not disclosed until today that it will not work. He said there are real consequences stretching as far as Meridian Energy’s supply agreement with the power station in the electorate of the Minister of Finance I believe or certainly just outside it. Yet Gerry Brownlee was able to proceed with this whimsical scheme which supposedly will deliver huge competition on the basis of an asset swap that gives Genesis some of the supply from the Tekapo scheme. That will mean at the other end of the deal that Meridian Energy which has made its whole basis around being the only 100 percent renewable electricity supply company in this country gets the Whirinaki power station powered by diesel and powered up when we really need the electricity. Meridian Energy will either have to sell Whirinaki or completely rebrand itself. 
This is a cock-eyed scheme if ever there was one. Ari Sargent is one person who very clearly identified that amongst a number of other submitters. One of the best submissions that we received on the select committee was from David Close who has been an Electricity Commission member and has long been involved in power boards in Christchurch. In terms of the price issue he noted—and yes he did acknowledge there has been that rise in price across the retail sector—in a graph that was later picked up and re-presented to us by officials that although there might have been a 72 percent increase for the retail sector over the last decade if we look at the price increase that has happened across the commercial and industrial sectors we can see that those sectors have had much smaller increases. That is a very real concern. Those sectors have not had the price increases; the retail sector has paid the price. 
Here we have a scheme that is based upon a whim of the Minister of Energy and Resources. It was not backed by Treasury by Meridian Energy or by others in the power sector. They say it will not work and it will not deliver security of supply. It may well increase the price pressures at a time when already people are reeling under the existing prices for electricity. Prices are already starting to rise in anticipation of this bill coming into law. That is before the GST increase takes effect on top of it all. This is a bad bill. It is a whim from Gerry Brownlee. It deserves to be dismissed by the House. 
CHRIS AUCHINVOLE (National—West Coast - Tasman) 
: 
 It is my pleasure to speak on the Electricity Industry Bill. As my respected colleague and energy mentor the Hon Gerry Brownlee so eloquently and succinctly put it during the first reading of this bill its purpose is to improve competition in the electricity industry to constrain price increases to improve the security of supply and the management of dry years and to improve governance arrangements in the sector. 
This bill addresses some of the major failings of the previous Government. It is significant that I can look across the House and see the Hon David Parker who provided covering defensive fire against the Nats’ attacks when we were on the Opposition side of the House. He did so reasonably convincingly I guess in retrospect but he must have known about the tragedy the travesty of what he was doing. The previous Government let price increases get totally out of control and it put the security of supply at risk. The potential consequences for our poorest most vulnerable citizens were devastating. Nevertheless Labour allowed that to happen. Thankfully National has been able to step in to save the day by implementing this bill to address our previously poorly governed and poorly regulated electricity industry. 
This bill enables the most effective concept that we call increased competition to be implemented. That will lead to constrained price increases. This bill will ensure that the market operates in the most efficient and competitive way possible. That is what this bill will achieve. It also abolishes the Electricity Commission. This is necessary because the Electricity Commission is a perfect example of an unnecessary convoluted bureaucracy. I do not mean to be critical of the best efforts of the people who were involved in it—they did try to do their best—but it had too many objectives and it had too many functions. It tried to be all things at all times and did not operate effectively. 
When I was glancing through some of the first reading debate speeches I was not surprised to see that Chris Hipkins had accused National of having blind faith in the market. That is typical of a Labour Party member—heavy on ideology short on economic knowledge and industry experience and perhaps short on personal commercial experience. Perhaps he or one of his colleagues would like to explain why electricity prices went up— 
Hon Members 
: 72 percent. 
CHRIS AUCHINVOLE 
: —by 72 percent over 9 years under Labour against an inflation rate at the same time of 28 percent. Under this National-led Government electricity prices thus far have gone up by only 2.9 percent—2.9 percent—over the year from May 2009-10. If I throw in the facts that Genesis Energy is now offering very competitive rates in parts of the South Island where it has previously never competed before and that this bill requires consumers to be compensated by power companies in the event that there is ever another national electricity savings campaign people will see that National is doing all that it can to help those who can least afford the necessities of life: those on fixed incomes those on pensions and those on superannuation. 
What is most pleasing about these reforms is how consumer friendly they are. I challenge the Labour members to look at what the bill delivers and then on reflection to support this sensible and needed legislation rather than turning up their noses at anything and everything that might vaguely smell like sensible economics. 
The reforms also replace the unfocused Electricity Commission with an Electricity Authority as an independent Crown entity. The objective of the Electricity Authority will be to promote competition reliable supply and efficient operation of the electricity market for the long-term benefit of consumers. This is a much narrower set of objectives than the Electricity Commission’s which included in addition to the above objectives fairness environmental sustainability promotion of energy efficiency plus seven more detailed outcomes. 
In summary I am very pleased and proud to support this bill. After careful consideration of the recommendations of the ministerial review this Government has produced an effective enduring bill. This legislation will constrain price increases improve the security of supply and the management of dry years and improve the governance arrangements in the sector—just as it has set out to do. Thank you. 
Hon DAVID PARKER (Labour) 
: 
 In this debate much has been made of the fact that electricity prices increased by including inflation 72 percent over the past decade or so. The National Government has tried to make that out as being the fault of the previous Labour Government. 
David Bennett 
: Which it is. 
Hon DAVID PARKER 
: Who said that? Mr Bennett I think. Well if that was the case why has National not been able to reverse it? The reality is that we all know in this House that the main driver of the increase in electricity prices was that the Maui Gas fields ran out. 
David Bennett 
: Oh rubbish! 
Hon DAVID PARKER 
: I tell Mr Bennett that that is ill-informed. It is the reality. Maui Gas ran out and alternative sources to replace Maui Gas—either gas sources or renewables—were more expensive. Under the marginal cost competitive model that we have for electricity we see that that is the most significant cause of increase of the price of electricity in the last decade. I tell the member not to give me this rubbish that it was some sort of mistake by the Labour Government that led to that because that was the main cause. Were that not the case were there some other cause then the National Government would have put our electricity prices down. But it has not; it has left them where they are because it knows that that was unavoidable. 
This legislation in respect of the changing of the name of the Electricity Commission to the Electricity Authority does not change a lot. It makes a few changes; we can argue whether those changes are good or bad. But actually that was just Gerry Brownlee saying that he had to change something. So he did away with one regulator and he has created another. We heard from the prior speaker Chris Auchinvole that objectives have been slightly changed—but really they have not been changed a lot. 
That is not the most offensive part of this legislation except that it is a ruse. It will not change much in terms of competitive pressures in the electricity market; it is a ruse. To that extent it is offensive. But what is more offensive in this legislation is the asset swap that is being forced upon Meridian Energy. That is trying to pursue an improved market-competitive outcome at the expense of resource efficiency. If the market is so uncompetitive that we have to use the physical resource less efficiently in order to get a more efficient financial market outcome we have to say that the market model is fundamentally broken. If to obtain market-competitive price efficiency one has to use the underlying physical resource less efficiently then that is wrong. 
We heard the warnings from Treasury from the technical advisory group and from market analysts that we do not want to use the water in the Waitaki system anything less than as efficiently as we can use it. If we use it less efficiently—we spill more of it so that we do not use as much of it for electricity and it flows out to sea—what do we do when we would otherwise be using the water that would not have been spilled for electricity generation? The reality is that we need more electricity generation to replace the generation that would have come from the water that we have wasted. 
Pursuing a market-efficiency outcome through less efficient use of the water is nonsensical and that is the greatest flaw of this bill. It forces Tekapo to be sold to Genesis or given to Genesis in an asset swap. It means that that water does not flow through Tekapo the Pukaki the Ohau system Benmore Aviemore and the Waitaki system in the ownership of one controller which is the most efficient way to use that resource. That is just common sense. If we split that between different owners who have different imperatives we will end up with less resource efficiency. Not only that we will need different sets of engineers. We will have engineers down there from Genesis and from Meridian. How is it sensible to have two sets of people servicing those sets of dams on the Waitaki? It is nonsensical. The less efficient use of those resources can have only one consequence which is that we will need extra generating capacity to make up for it and that comes at a cost to the consumer. 
I will say two other things. One of them is a thank you to the Government. I agree with the move that is being made here in respect of requiring or allowing penalties to be put upon generators and retailers in the case where a conservation campaign is said to be needed among retail customers. I thank Gerry Brownlee for seeing that through. When I was Minister of Energy I thought that was something that needed to be done. Last time we had a water shortage it was all too easy for the generators to say that residential consumers could suck it and have a conservation campaign. Consumers were the ones who effectively suffered the cost of the generators not having enough generating capacity or not having stored water early enough in the season. It is appropriate that there be a financial penalty there for generators in those situations so as to discourage them from doing so and I congratulate the Government on doing that. 
But the big issue that remains in New Zealand is whether we have true competition in the electricity market. If we do not we have price gouging. In the absence of competition markets with monopoly characteristics act as monopolies are reputed to act: they extract monopoly rents at the expense of consumers. The issue that Brendon Burns raised is the issue that I was never convinced about as Minister of Energy. We have seen a 72 percent increase in retail tariffs during the period that the National members have quoted. During the same period industrial and commercial tariffs—especially industrial tariffs—have not moved nearly as much. We are now in the position in New Zealand where the gap between tariffs paid by industrial users and residential tariffs is higher than anywhere else in the world. 
There has never been an adequate explanation of why that is justified. I suggest to the House that it is because at the industrial level there is a bit of competitive pressure on those big power sellers but at the retail end of the market there is not adequate competition. That is why we have seen increases that are higher in respect of retail tariffs than industrial tariffs. The Government does nothing about that in this legislation—and why not? The answer is that it wants the dividends from the electricity State-owned enterprises. It suits the Government’s purpose for those profits to stay high so that the Government can gather the dividends. It has had tax cuts that increase the deficit of New Zealand and how will it fund those? In the future it will fund them in part by the dividends it wants from the major electricity State-owned enterprises and perhaps—we do not yet know the Government’s plans—through the sale of those electricity State-owned enterprises. 
Of course the Government knows that if the profits of the electricity State-owned enterprises are maximised in the meantime they will go for a higher price when the Government flogs them off. The Government has been very careful to say that it will not sell any State-owned enterprises during its first term of Government. That is its mantra. If the Government gets a second term it is not promising that it will not sell them. It has now backed away from under pressure and after all its flip-flops proposals to sell Kiwibank and New Zealand Post. Those assets are already owned by New Zealanders and ought not to be flogged off but the Government is keeping an eye on that option by maintaining profits higher than they should legitimately be because there really is not adequate competition at retail level. 
Rather than complaining to us about the electricity price increases I say to Mr Bennett that he should be asking himself why the Government has done nothing to reverse that and why the Government has done nothing to address the differential between retail and industrial tariffs and why in the name of a market efficiency the Government is using less efficiently the underlying resource that is used to generate electricity. In the end that can have only one consequence and that is a need for extra generation which has to be paid for by the consumers of electricity. Labour opposes this bill. 
A party vote was called for on the question  
That the Electricity Industry Bill be now read a second time. 
Ayes 69 
New Zealand National 58; ACT New Zealand 5; Maori Party 5; United Future 1. 
Noes 53 
New Zealand Labour 43; Green Party 9; Progressive 1. 
Bill read a second time. 
Infrastructure Bill 
In Committee 
Part 1 Utilities access 
Hon DARREN HUGHES (Labour) 
: 
 I ask you to indulge me Mr Chairman just briefly to say how nice it is to see the Hon Tau Henare in the Chamber this evening as part of the Committee. If I link it back to the Infrastructure Bill I know he has had some changes to his own infrastructure lately and I know he has 21st century equipment now in that respect. It is quite genuinely good to see him. On this side of the Chamber we will be ensuring his continued recovery by encouraging him not to interject quite as thoroughly and aggressively as he normally does. We will be doing that out of aroha for him not out of any sense of trying to shut him down politically. I was concerned at various parts of his recovery when I felt that some of his Facebook status updates were getting a little too edgy politically and I thought he should be focused on his recovery. But it is great to see him here looking so well so we extend that to Mr Henare tonight. 
We are debating the Infrastructure Bill 2 years after the election of the National-led Government. This is a Government that came into office saying that it was determined to lead a “step change” in the New Zealand economy and that it was determined to in fact “turbocharge” the New Zealand economy and infrastructure would be one of the ways in which it sought to do that. 
Hon Georgina te Heuheu 
: That’s right. We’re doing that. 
Hon DARREN HUGHES 
: Mrs te Heuheu says that is absolutely what the Government was trying to do but the only thing she has been able to turbocharge is the Pacific Economic Development Agency. She sure built up its infrastructure until things got a little bit difficult for her in that particular respect. 
This bill has been languishing on the Order Paper. Once it is split through Supplementary Order Paper 152 later this evening Part 1 will form the new Utilities Access Bill. The largest chunk of the Infrastructure Bill is here in Part 1. It troubles the Opposition considerably that what was meant to be a key part of the Government’s economic programme has sat around for 2 years of this Government’s term with absolutely nothing happening about it. 
The new infrastructure portfolio was created for Minister English after the election as part no doubt of some sort of power struggle with the Hon Steven Joyce. Mr English insisted on an extra portfolio and that is fair enough as he has been burnt often enough in politics to know that it is important to cover one’s bases. When the Minister for Infrastructure speaks maybe he could tell us why this portfolio was set up. He has had to introduce only one piece of legislation as a result of picking up this portfolio. This bill is it. Two years later we are stuck in the Committee stage on this bill. 
We would be very interested to hear from the Minister to what extent this bill is a priority. We are debating it on a day in which the Government has backed down on what was in just February a centrepiece of its economic policy: mining of schedule 4 lands in precious conservation areas of New Zealand. That policy was so important that it was in the Prime Minister’s annual statement to Parliament but today of course it has been completely abandoned halfway through the year the statement was meant to apply to. We would like to know just how critical this is seen to be. It appears to me that that back-down was a political back-down and not a back-down of principle or a change of decision or philosophy by the Government. I believe that it still believes those areas should be mined but it has backed away from it on the basis of its political imperatives and the changing political environment. There does not appear to be a lot left to hang the turbocharging of the economy on. The Infrastructure Bill is stuck well into the second year of the Government’s term and the mining proposal has been mined in the opposite direction. 
To the Minister’s great credit he always opposed the cycleway. The Minister for Infrastructure always knew the cycleway was a complete joke—he knows how to recognise such things—and he never lent any meaningful support to it. Of course nothing in this bill covers the cycleway at all but that should not come as a surprise to anyone. 
As we open up the debate on the part by part consideration of this bill we want to know from the Minister for Infrastructure just how important this bill is to the Government. In the 2 years it has been dithering on this bill turning it into legislation what significant items of infrastructure development in New Zealand have been stopped or stymied because this legislation was not present? If the Minister could tell us that it would give us some sense of the urgency of this bill. Goodness knows the House has been put into enough bouts of urgency since the election but on not one occasion was the Infrastructure Bill part of those motions. That is despite I have to say the Labour Opposition offering to facilitate that bill through its stages in urgency. 
We support this bill with the exception of Part 4 which my colleague Moana Mackey will go through when we get to it. For Parts 1 2 and 3 there is bipartisan support for this bill because we can see what some of the issues have been with inefficiencies and uncertainties. So we are interested to hear from the Minister why the bill has taken so long to get to this point. 
Hon TAU HENARE (National) 
: 
 Twenty-nine smoke-free days ago there was a clog in the system. Like any infrastructure one has to get in there put in a stent and unclog the arteries. This is what the Infrastructure Bill does. I could not believe my luck when I looked at the notes and I looked at the bill more seriously than I have for a long time. I saw that it was about unclogging the arteries of what can only be considered an appalling state of affairs. We have a country that wants to get ahead just like anybody would want to get ahead. It wants to show off and it wants to go out at a rate of knots that will take this country further and faster than it has ever gone before but it cannot because of the build-up of plaque and the build-up of a clogged system. 
I consider this bill to be the economic stent taking the red corpuscles to the tissues of the nation. It is taking the red corpuscles to the tissues of the nation. 
Hon Darren Hughes 
: Spell it. 
Hon TAU HENARE 
: T-i-s-s-u-e-s. There we are—“tissues”. It is great to be back. It is great to be back in the fold of those who want to see the arteries of our nation unclogged so that we can get ahead. 
Hon Member 
: Welcome home. 
Hon TAU HENARE 
: I thank that member very much. 
Let us be serious. We are a small nation. I do not want to stand here and tell the nation what happened in the last 9 years of the Labour Government. 
Chris Tremain 
: “But I will.”! 
Hon TAU HENARE 
: No I will not say: “But I will.” I will say that unless we have good infrastructure unless we have a good system whereby people can get ahead—and that is from the smallest business the one-man operation to the 200 300 or 400-person operation—and unless we allow those companies and businesses to succeed we are not going anywhere. The net effect of having a poor infrastructure can only be a poor future for our children and our grandchildren. 
I know it might be funny to use the analogy of my unfortunate experience 29 smoke-free days ago but it is a serious matter. Unless we unclog those arteries and unless we unclog the systems that are clogging up business and the airways I think that we will be in trouble. It is just like me. If I had not had that stent put in to open up the artery I would have been in some serious serious trouble. The future would not have been bright for me my children or my grandchildren. 
I see this matter actually as being above all else. We can talk about the foreshore and seabed and about all sorts of things but clearly if we are to move this nation forward economically then we have to have the tools with which we can do just that and can do justice to our kids and our grandchildren. Without further ado I say that it is essential—it is essential—that our infrastructure is there and can cope with what will hopefully come in the future: better roads better rail better infrastructure and better utilities for the whole of the nation. 
DARIEN FENTON (Labour) 
: 
 I add my “welcome back” to Tau Henare. It is really good that he is back in the Chamber. We did not miss him a lot but it is kind of nice that he is here. I have to say to my whanaunga that I was very very disappointed. I saw his note on Facebook about the 90-day probationary period bill and being congratulated by—what is his name? From the Hospitality Association— 
Hon Darren Hughes 
: Bruce Robertson. 
DARIEN FENTON 
: Bruce Robertson was saying congratulations to Tau and good on him. I put a little note on saying that I hoped to see him at the protest on Sunday but I did not see him there; he was probably inside. This is the union organiser of the 1980s the worst union organiser that we had ever known in the whole of the country. I am being generous here tonight but I am genuine when I say that I am pleased to see Tau Henare back. 
The Transport and Industrial Relations Committee dealt with this bill. I am not going to praise the chair; he has had enough of that—look at him! The select committee that considered this bill took it seriously. I thought that the great speech from the Hon Tau Henare about the infrastructure future of our country was very interesting but it was also timely given the considerations and things that are happening right now. 
I want to take us back to reality about what this bill does. The bill has been around for a long time and it has been languishing. It went to the select committee in July or August 2009 and we heard from a whole range of people. This bill sets up a code. It does not build a road or a railway; it does not build anything. It does not do anything. It sets up a code. 
Hon Tau Henare 
: Unclogs the arteries. 
DARIEN FENTON 
: No it does not unclog the arteries. Well it unclogs the arteries of the Utilities Advisory Group. This poor group set itself up years and years ago under Labour. It has been working away on a code and hoping that the National-led Government would do something about putting it in place. It must be absolutely fed up with waiting. I congratulate the group on being so patient. Let us not get carried away about what this bill actually does. I am sure as we go on we will talk about many of the other things. I am really looking forward to talking in the Committee stage about many of our utilities. Going back to the Utilities Advisory Group may I say that it is just well it did not have a 90-day trial period because it would have been fired some time ago. 
I go back to the bill. Labour began the work on this bill. In 2006 we agreed on some policy objectives to reduce the costs and inefficiencies arising from the current statutory framework including avoidable damage to roads and utility networks delays and disputes and inconsistencies between statutes and poor coordination. The work was done under Labour. This bill came together under Labour under the wonderful Ministers we had in the previous Government. I regret as indeed my colleagues do that it has taken us so long to get to a point where we are not actually unclogging the arteries but perhaps releasing the potential of the Utilities Advisory Group which under this legislation has the right to set up a code that the Minister can approve or disapprove. It is a voluntary code. They will then work together on it and hopefully we will see some change. 
Yes let us unclog the arteries by all means. Let us talk about what Labour did to unclog the arteries during its 9 years in Government. I am looking forward to talking about that as well. 
Hon Darren Hughes 
: 9 glorious years. 
DARIEN FENTON 
: Labour had 9 glorious years in Government. I regret the fact that this has taken so long for this Government having been through so many periods of urgency. We have seen the wonderful National Party conference that was held over the weekend. There were the wonderful announcements of a step change. The step change? Where is that? It is the stepladder— 
Hon Darren Hughes 
: The plank. 
DARIEN FENTON 
: It is the plank; that is what it is. It is stepping off the plank into the sea. No one knows what the step change means except that they see it as taking away workers’ rights and taking away their wages. 
DAVID BENNETT (National—Hamilton East) 
: 
 I echo the thoughts of other members of the Committee in welcoming back Tau. It is good to see him; he made a great speech. The way that Tau outlined the analogy between his physical being and the need for the New Zealand economy to have its arteries unclogged so that it can achieve its full potential—and in the case of Tau Henare he can live his life—is something that this Committee should put great store by. We congratulate the Labour and National members of the Transport and Industrial Relations Committee on their work on the Infrastructure Bill. 
The Labour members are voting for this bill apart from the last part I presume. After listening to the previous speech one would not necessarily have picked that Labour members will actually vote for the bill. I thank the officials as well for their work at the select committee. 
There are three basic things in the bill: a change to the access to corridors which is in Parts 1 and 2; changes to the Railways Corporation which are in Part 3; and some amendments relating to affordable housing in Part 4. We are on Part 1 now which relates to utility access to transport corridors. Essentially for a layperson that means that if we look at the links between our major cities throughout New Zealand we see that they tend to be large infrastructure corridors. If we drive along the southern motorway going into Auckland for example we can see it is a wide road. There are power lines beside us. It is an infrastructure corridor; it covers a lot of infrastructure. Rail power and roading are normally all in very close proximity and follow a very similar line in the important infrastructure corridors of a country. We are trying to make sure that in future those infrastructure corridors are managed in a way that enables the best development of this country and that infrastructure going forward. 
What can happen is that areas companies or infrastructure providers provide their own infrastructure to the detriment of the provision of other infrastructure or potentially new infrastructure. The Government has made a commitment to the roll-out of broadband around New Zealand. That is a huge infrastructural connection that we need to make through New Zealand so we want our core infrastructure—for example around broadband—to be able to travel along those main arterial routes. We do not want that to necessarily be constrained by the existing infrastructure. 
Basically this bill enables the providers and those who are involved in the infrastructure to formulate codes of practice. Those codes of practice will then be taken to the Minister for approval. The Minister will approve them subject to whatever the conditions are and they will become regulations that guide conduct in those transport and infrastructure corridors. This is a very important role. It is safeguarding New Zealand’s future economic efficiency by providing those pathways where we can structure and transfer our major infrastructure whether it is utilities such as electricity or transport in the sense of roading rail and suchlike. That is the general concept of what is being achieved in this bill. 
This has been lacking for a long time. As we look at growing a country and taking advantage of potential technology and investment we need to secure our infrastructure. This bill rectifies an issue that had not been dealt with in the past and that should have been dealt with. It also safeguards and provides for the future of New Zealand’s growth in infrastructure—those vital pathways. This is a forward-looking bill just as much as it is a bill that deals with the case in point at the moment. That is why it is so crucial and shows the Government’s long-term direction in wanting to build a stronger economy. We are providing the building blocks so that infrastructure can take advantage of structures that enable investment and delivery of key infrastructure to New Zealanders so that we can grow our economy and achieve our purposes. 
That is what this bill is about. That is why the Labour Party will support it. Labour members know it is in the best interests of New Zealand and that is why this bill will pass through the Committee tonight. 
CAROL BEAUMONT (Labour) 
: 
 I too rise to speak on Part 1 of the Infrastructure Bill. But I want to make a few general comments first. Even though Tau Henare is no longer in the Chamber I would like to acknowledge him as other members have done. It is good to see him back and he made a very interesting analogy about the unclogging of arteries. Unfortunately this bill will not unclog the arteries as others have said. It is an important bill in so far as it goes and it makes some very sensible suggestions to ensure that the people who provide utilities and those who control the transport corridors must cooperate. That is sensible so Labour will be supporting this bill. 
But infrastructure is about people really. It is about providing services to people and those services getting to people and it is about the movement of people on for example transport corridors. I think this is what we really need to focus on here. Certainly in many countries in the world infrastructure projects have been used in the current recession to the benefit of people both in terms of investing a lot in extra infrastructure and also providing jobs. Of course we have seen the National Government fail significantly in this area. It has shown a complete lack of leadership in the area of job creation. Unemployment in New Zealand is significantly higher than in many comparable countries as a result of that. That issue too is about people. It means that people are struggling to make ends meet and in many parts of New Zealand they do not have the opportunity to have a standard of living that we might think is fair and reasonable. 
Going back to the bill I point out that as others have commented this work was originally begun under the previous Labour Government and considered by Cabinet in 2007. I was on the Transport and Industrial Relations Committee which considered this bill more recently under this Government and it is fair to say it clearly has not been a priority for the Government. This bill which will unclog arteries as others have said has clearly not been a Government priority because it has been languishing on the Order Paper. 
None the less I will talk specifically about the code provided for in Part 1. I note that it is probably a substantive part of the bill and it ensures that both the transport corridor controllers and the utilities companies have to try to work together on the content of the code. The code has a process whereby others do get to comment on it and ultimately it is approved by the Minister and gazetted. Quite a lot of changes were made by the Transport and Industrial Relations Committee in relation to this part. I think they were all positive changes. Many of the submissions were quite technical but they were also constructive in terms of trying to ensure that we did get this right. The officials also had to deal with quite complex matters in order to get this right. [ 
Interruption 
] The chairperson of the select committee seems to be making funny gestures. I am not sure quite what that means. 
Hon Darren Hughes 
: He’s about to join Mr Henare. 
CAROL BEAUMONT 
: That is probably true. So this part of the bill provides a code that will hopefully ensure cooperation. 
The code requires some changes. One change that I thought was particularly important was as I said coordinating the work between utilities operators. In many parts of New Zealand we as MPs—and I would say this applies across the Chamber—hear from constituents who are concerned about the lack of coordination. During the second reading of this bill I gave an example from Onehunga of some roadworks that impacted on water pipes and other services and the complete lack of cooperation and coordination in that case. 
In Auckland we have some significant infrastructure needs. We have a fast-growing population and there are some real deficits there. I am concerned as an Auckland-based MP that this Government seems to have focused far more significantly on roading than on the public transport that we require. This trap which many countries in the world have fallen into will mean that ultimately we will never properly meet the need to move people around Auckland until we get the necessary degree of investment in transport infrastructure particularly public transport infrastructure. That is an important area for the Government to consider. It needs to look at improving its game not only in terms of improving transport in Auckland but also in relation to the other real risk for us which is the super-city structure. 
DAVID SHEARER (Labour—Mt Albert) 
: 
 It is a pleasure to rise and speak on the Infrastructure Bill as well. As my colleagues have said the Labour Party supports the first three parts of this bill but the last part on affordable housing which my colleague Moana Mackey will talk on later we certainly do not support. 
This bill is an important bill in terms of coordinating and safeguarding our infrastructure into the future. It is interesting to note the announcements made in the last few weeks and even today by the Minister of Transport—for example that the Newmarket Viaduct was due to open in record time as was the Mangere Bridge crossing. It is all good news and they were all projects put in place under a Labour Government. It is gratifying to go around when invited as an electorate MP to many of the railway stations that have been upgraded as a result of the Labour Government investing 15 times more in public transport infrastructure than was the case in 1999. 
Infrastructure is one of this country’s economic drivers. When we look at transport in 1999 1 percent of GDP was allocated to transport; by 2008 it was 1.6 percent. It went up under a Labour Government which said more or less what the National Government is saying today except that the Labour Government had 9 years to prove and show the difference it can make in infrastructure. 
Part 1 introduces a code that enables a much more coordinated approach to the corridors and main infrastructure routes that affect New Zealand. When we look at some of the priorities being set aside in relation to future pieces of infrastructure and particularly in my area in Auckland we see that one of the roads of national significance does not even meet the grade on a cost-benefit analysis of a dollar for dollar benefit. The Puhoi to Wellsford road is being pushed through as a road of national significance. It is that sort of wayward—and I would even go so far as saying irresponsible—type of infrastructure that means we are looking at a motorway that is not able to generate the returns and benefits to justify its cost yet we are putting in $1.6 billion possibly rising up to $2 billion to support it. That is a colossal and utter waste of money. Most people in Auckland know that. Pretty much everybody in Auckland knows that this is a road that will really only benefit those people going to their baches in the northern part of Auckland up in the Warkworth area at holiday times. 
It is an extraordinary waste of money—$1.6 billion. I think of what we could use $1.6 billion for and I will give members one quick example. Right now Auckland is expanding at the rate of one Wellington City every 8 years. Basically 180000 people are being added to Auckland’s population every 8 years. We need to be able to think about transport infrastructure and public transport infrastructure. The railway system needs to be substantially upgraded. The key aspect of the railway system is the inner-city underground loop that runs through the inner part of Auckland. This one project which we believe will cost about the same amount of money as the $1.6 billion for the Puhoi to Wellsford road— 
MOANA MACKEY (Labour) 
: 
 I am happy to take a call on Part 1 of the Infrastructure Bill. 
Hon Phil Heatley 
: We’re happy to hear from you! 
MOANA MACKEY 
: I thank Mr Heatley. He will be hearing a lot more from me in the debate on Part 4. Part 4 marks yet another day in the sad sad history of Phil Heatley Minister of Housing but we will get to that in debate on Part 4. As other members have done I thank the submitters who came along to the Transport and Industrial Relations Committee and I thank the officials who worked on the bill. 
It is interesting that when the Government puts up legislation in the House that has the word “infrastructure” in the title National MPs think they have solved all infrastructure problems. They kind of think that if they pass it it will come. The reality is that although this is good legislation—it was drafted by the previous Labour Government—it will not solve all infrastructure problems. This bill does not change the fact that the Government’s focus and priorities in infrastructure are skewed. They do not represent the infrastructure needs particularly in rail. Where I come from the Government is looking at closing the Gisborne to Napier rail line. We have fought for a long time to keep this rail line open. It was only under the Labour Government that that became a reality and now the National Government wants to try to get rid of it. It wants to turn it into a cycleway of course which is its answer to everything—if in doubt build a cycleway. The reality is that rail will always be part of the long-term mix of transport in Gisborne. It could be used an awful lot more than it is currently being used; I hope that the Government will see sense on that matter. 
Part 1 implements a code. The interesting thing about the code is that when National members were discussing the code at the select committee they said how important it was that there was buy-in and that they would go out and consult on it. They then told us that the code had in fact already been written and was already there in draft form. The cart was put before the horse in that respect. 
It became clear at the select committee that there was an expected and I suppose understandable tension between rail operators and road transport operators. It seemed as if the National members on the select committee did not want to acknowledge that there was a difference between the road corridor and the rail corridor. When there is a problem people need to be able to access infrastructure to do with power lines gas and water but the difference is that when work is being done in a road corridor it is easier to divert traffic. A rail corridor has to absolutely shut down when work is being done. Those who came along and submitted from the rail perspective wanted that point to be understood. It is all very well to say that everything should be treated the same but the rail corridor is different and the disruption is far greater when they have to close down the entire line. It seemed as if National members did not want to acknowledge that point which was a shame. 
Darien Fenton 
: They don’t like railways really. 
MOANA MACKEY 
: They do not like rail; I think that is the point we came to. We had a little bit of insight as to why a number of infrastructure and lines companies were quite keen to turn rail lines into cycleways when that point came out. I often wondered why Eastland Infrastructure was so keen on turning our rail track into a cycleway until I started to read the submissions on the infrastructure legislation and realised that it would probably find it far easier to access its lines if they ran along a cycleway rather than a rail corridor. I think that that is where it is coming from which is a shame because— 
Hon Darren Hughes 
: They haven’t seen how fast Mr Mallard would cycle down it. 
MOANA MACKEY 
: That is right. We would have to put out a special warning if Mr Mallard was on the corridor on the cycleway. 
Hon Trevor Mallard 
: You know that Mallard is an engine don’t you? 
MOANA MACKEY 
: I did not know that the Mallard was an engine. That is extremely interesting. 
The other part I will speak about in this bill which is very important is the definitions. Labour members were very concerned about the definitions relating to waste and waste water infrastructure and about who would be considered to be the utility operators. Paragraph (d) of the definition of “utility operator” in clause 4 originally stated: “in relation to water and wastewater infrastructure a local authority as defined in section 5 of the Local Government Act 2002”. The National members on the select committee added these words: “or any person acting on behalf of a local authority in relation to that infrastructure:”. When this amendment was flagged at the select committee it was raised as being just a small issue so that we could have flexibility. 
This issue is clearly intended to pre-empt the future privatisation of the infrastructure services in waste water and water. We accepted that Auckland has already gone part of the way and that we need to make sure that the situation in Auckland is covered by this legislation so we suggested alternative wording that would have captured the situation in Auckland whilst not opening up the door holus-bolus to the privatisation of waste water and water infrastructure. That suggestion was turned down by National members which clearly indicates to us in relation to the debate that is going on with regard to the Auckland super-city the National Government’s intention for the future privatisation of these services. It wants to make it as easy as possible to privatise these services. 
There were other ways to word the definition and submitters came along and suggested wording that would have captured the situation in Auckland with the council-controlled authorities that are already there but would not have allowed the definition to open up as widely as it has. We did not really get any answers from the National members on the select committee on this matter. Clearly they were told what they needed to do and that is the way that they voted. But it was an issue of significant concern for a number of the submitters who came along. It seems like such a small thing but the difference that those 10 or so words can make is enormous when it comes to our infrastructure services. 
Another interesting thing about the code is the exemptions—that is where it does not apply as much as where it does apply. I think we will have to be very very careful and keep a close eye on this area. It would have been far simpler for us to design a situation that ensured a total buy-in from all the parties but that is not what we got. That work had not been done at the very basic level. The Government wanted to get this legislation through and its overarching intention was that its focus was purely on roads and it was not very fussed about all the other types of infrastructure that this bill deals with so we did not get to that situation. That is unfortunate. We were basically told that the code had already been drafted. Despite the fact that the legislation states that it is yet to be drafted and that there was a whole process of consultation to go through we were told categorically that it had been drafted. Lots of people do not agree with it and a significant number of those in the infrastructure sector do not agree with it. 
Darien Fenton 
: Who’ve dropped out. 
MOANA MACKEY 
: Yes they have dropped out of being a part of it. I think that that fact really undermines the very basis of this code and the purpose of having it. The reason for having a code was that we could not get agreement on when people could access the transport corridors. This legislation is still before Parliament and has not even been passed and already parties are dropping out and do not want to be a party to this code. I think that it speaks to the process that this Government has taken in getting the legislation to this point. We can understand people’s frustration when we hear big words and big speeches about the fantastic process that has been set up yet the select committee was told that the code has already been drafted. We were told that the code was already there and that we could basically take it or leave it. The Government did not see any point in going back and relitigating it with the sector. Well that runs contrary to Part 1. As I said before it puts the cart before the horse. 
I would be interested to know from the Minister in the chair the Minister for Infrastructure what work he is doing to try to make sure that all the parties who should be signing up to this code will be brought on board. A code becomes somewhat redundant if all of a sudden people are dropping out all over the show. We end up in exactly the same situation that we ended up in before which is that someone going in to do work on a transport corridor has absolutely no idea where the infrastructure is located because that information is not being supplied. The council plans may be 2 or 3 metres out so people may dig somewhere that they think is safe but suddenly they hit a water main or a— 
Hon Phil Heatley 
: It’s madness. 
MOANA MACKEY 
: Well Mr Heatley would know. I will take it from an expert. 
Hon Darren Hughes 
: He knows how to dig. 
MOANA MACKEY 
: That is right. Phil Heatley certainly knows how to dig so I will take it from an expert in that regard. 
I think all members of this Committee acknowledge that we are in an untenable position with regard to access to these corridors but I ask whether this is the best way to go about it. I ask whether we will actually resolve anything when affected parties are basically being told to take it or leave it that this legislation will implement a code but that the code has already been drafted by certain elements of that sector and that if they do not like it that is just tough. The fact is that we have been in the position of telling people to take it or leave it before and it has not worked. That is how we have ended up where we have ended up. Part of the problem has been the Government’s refusal to acknowledge that rail is different from roading and that the implications for carrying out work in the transport corridors that involve rail are different from those for carrying out work in the transport corridors for roading. It is far easier to do work on roading and to leave the road open than it is to do work on rail and leave the rail line open. 
Hon DARREN HUGHES (Labour) 
: 
 The Opposition is surprised that the Minister in the chair the Minister for Infrastructure—it is the first time we have ever had that portfolio in a Government in a formal titular sense—has not seen fit to take a call during the Committee stage on this bill and explain his legislation. Many members have asked questions or have raised issues that came up at the Transport and Industrial Relations Committee and the Minister has not seen fit to speak to his bill. This is the Infrastructure Bill. It is a bill that we were told formed a critical part of the Government’s economic programme. The Minister for Infrastructure also holds the portfolio of finance so presumably he is interested in the Government’s economic programme and I would have thought that he would take the chance to explain to us why after 2 years in Government the bill is still languishing at the point where it is. He has chosen not to do that so maybe he will answer a few questions about different clauses in Part 1 to enable the Committee to move forward. 
Obviously the Opposition is supporting Parts 1 2 and 3 but we are trying to engage in a debate that the Minister said was serious for the New Zealand economy. He said that if we could sort out infrastructure matters and remove roadblocks or whatever the other Crosby/Textor road-tested phrases were then we would be able to achieve nirvana in New Zealand. But such is his enthusiasm that he has been reading all manner of reports. I am surprised the Minister has not taken a call. He has probably been reading the  
New Zealand Woman’s Weekly 
 to check out the engagement of Kate Hawkesby and Mike Hosking. He is not that interested in the Infrastructure Bill. I saw him with a magazine over there before but I am not sure what it was. 
One of the points that has been raised by the Opposition tonight is in respect of the definition of “utility operator” in clause 4(d). Government members on the select committee insisted on the words “or any person acting on behalf of a local authority in respect of that infrastructure:”. My colleague Moana Mackey made that point. The commentary on the bill states that “not all water and wastewater utility operators are local authorities.” I wonder whether the Minister could speak to that and let us know the Government’s philosophy in respect of those assets. I ask whether the Government in wording the legislation in that way is signalling that part of its approach to infrastructure is that it wants to see more private provision of water and waste-water services in the community. I think that is a reasonable question. It is either something that the Government is open to and enthusiastic about or it is something that it is closed off to but wants to make sure that no one is not caught who is currently operating in that space. 
It seems to me that if there is a Minister for Infrastructure being serviced by a National Infrastructure Unit which is part of Treasury then he should be able to answer my questions. Before the election the problem was too many bureaucrats; after the election Bill English has been able to accumulate all manner of taxpayer-funded resources. We will not go down the particular path of what all of those have been but he has his own National Infrastructure Unit or NIU which is anything but new. I would like to know from him what advice he has received on whether that is an area for further infrastructure exploration and development and whether the Government wants to see more private provision. I think that would be a pretty straightforward issue for him to address for us. 
I turn to clause 9(b) which requires operators to keep disruptions to a minimum. I wonder whether the Minister could comment on that particular phrase. It seems to me that if we are talking about big infrastructure works in New Zealand it would be useful to know whether the Minister believes those are just words or whether it is an achievable measure. There can be major change to infrastructure and somehow it can be passed off that disruptions will be kept to a minimum. There can be a variety of different projects under way and we would like to know what the Government means by that requirement. If the code is very literal about keeping disruptions to a minimum it may extend the time frame for projects. The Government is saying that everything is so quick and that we need to build all this infrastructure now. Of course that has not followed through to the speed of this bill. It has been sitting around for 2 years. However the Minister might be able to comment on clause 9. 
Clause 6(3) states that operators do not have to comply with the code if it is inefficient or if it would be too costly to do so. I think the Minister really does owe it to the Committee to go through the provision in clause 6(3). It seems preposterous that we are going to all the effort to come up with a code and the people whom the code covers can opt out of it at any stage that they like simply by invoking an argument of inefficiency or cost. I think the Minister could very quickly address that issue for us so that we have a sense of the Government’s thinking on that if the main part of Part 1 is to include a code. 
Clause 10(2) provides for the ability for different applications of the code depending on geographic locations. It would be helpful if the Minister could comment on how he sees that operating in practice because one of the things we all know as members of Parliament is that whenever each of us advocates for a case the example in each area is “very unique”—that double saying that makes no sense. That “very unique” example is separate from everywhere else in the country. We can see that that provision could be absolutely rode roughshod over by operators who did not want to comply by arguing for some special feature of their geographic location. I would like the Minister to offer some comment on that. He must have advice on that. His failure to engage in this debate raises a lot of questions about what advice he is getting if he is not able to share any of it with the Committee. He has set up a whole unit to help him so none of these are challenging questions for him. 
Clause 10(1)(d) talks about the managing of conflicts of interest. We could easily see a conflict of interest happening between the various operators and the corridor managers. The clause states that the code must contain a contact which outlines processes for how one would resolve those conflicts. It would be good to learn from the Minister where he sees the priority of where the interests should fall as those conflicts are resolved. We know that conflicts of interest are matters that are often on the mind of Government; it is just the way things are. They have to be managed. In this legislation the Minister is writing it into a code but it is not clear from the reading of it how that would be managed and where the priorities would fall for the different players. 
Finally clause 11(2)(a) talks about consultation with utility operators and corridor managers who are likely to be affected by the code. But it is silent on the matter of consultation with local government. That issue may well have been explored at the select committee but I was not a member of the select committee so I am not sure whether that was covered off there. But there are different references to local government and I quoted a clause earlier relating to additional parties being added because there was a recognition that not everyone involved in certain services were local authorities. But it seems to me that if the code has to be written once and it has been consulted on with utility operators and corridor managers then where is the role for the local authority in respect of where that access for utilities services is needed? If the Minister could comment on those things he could prove to the country just how important it is to have a stand-alone Minister for Infrastructure rather than one who is giving all the appearances of being mute on these very important macroeconomic reforms to the New Zealand economy. But I have failed entirely to even attract the Minister’s eye throughout the Opposition debate as he has worried himself away on other topics and I wonder whether he might be able to show some courtesy in respect of this crucial legislation. He picked up on Amy Adams’ voice because it is very distinctive and I can see how it could interrupt the inner peace of the meditation that the Minister up until that point was ensconced in. The piercing tones of the member at the back of the Chamber cut right through. 
Amy Adams 
: That’s the nicest thing you’ve said to me in weeks! 
Hon DARREN HUGHES 
: I have said many nice things to the member. In fact I have said lots of nice things about the member behind her back and that is very rare in politics. That is a very useful observation for her to have. 
If the Minister could be minded to answer some of the points that have been raised I think that would be useful especially seeing as he is enjoying some pretty broad support across the Committee for his bill. 
The question was put that the amendments set out on Supplementary Order Paper 115 in the name of the Hon Bill English to Part 1 be agreed to. 
Amendments agreed to. 
Part 1 as amended agreed to. 
Part 2 Amendments relating to utility access to transport corridors 
Hon DARREN HUGHES (Labour) 
: 
 I expect this consideration of Part 2 will be much shorter. At the select committee there was a great degree of agreement from what I can read in the commentary on the bill. The only issue I wanted to raise with the Minister in the chair the Hon Bill English for all the good it appears to be doing is what his policy objectives were in respect of amenity value and the restrictions on local government in setting that amenity value—the debate between improvement and keeping the amenity value consistent. That may be an area where local government may well feel that the bill is written in a way that could be taken as being against them and against the work that they are doing in their communities. So it would be of some use to get the Minister’s comment on that. Whether that is a big thing I am quite genuinely not sure. He could shed some light on that. 
Just in case he chooses not to maybe I should do part of his job for him and say what Part 2 does. For the people who are viewing Parliament TV this evening and need to know exactly what we are debating this is Part 2 of the Infrastructure Bill. It is a bill that was a centrepiece of the National - ACT - Maori Party Government. Sometimes it is the Maori Party - National - ACT Government but on this occasion it is the National - ACT - Maori Party Government. This is a bill that was central to reforms to the economy that would “unlock growth”—and the other phrases clichés and slogans that seem to fall by the wayside as things get so tough for the Government in politics. This bill remains stuck here in the Committee of the whole House 2 years into Government. Part 2 amends the Telecommunications Act the Electricity Act the Gas Act and the Local Government Act 1974 to provide consistency around reasonable access to corridors allocation of costs when utility operators are required to move assets and time periods for notification and response. It also amends the Railways Act 2005 and the Government Roading Powers Act 1989 to provide timeframes for responding to requests for access to rail corridors and motorways and requires controlling authorities to publish criteria on which they will base their decisions to grant access. 
Those are all matters in the bill that the Labour Opposition is in agreement with. As Darien Fenton commented earlier a lot of this work had been commenced under the previous Labour Government. That work was taking place. We believe that those changes will be of use. As I said at the beginning of my contribution there is the issue in clause 21 of setting reasonable conditions which we have made some comment on but there is also this issue of the amenity value. We would like to hear from the Minister in the chair on that. We respect the fact that he is obviously a very busy man; it is obviously a very taxing and challenging portfolio for him. 
Hon Bill English 
: Very busy. 
Hon DARREN HUGHES 
: We have an interjection out of him. That is a great thing! The good news is he is alive and at least he will now appear in the  
Hansard 
 record as making a contribution on his own legislation which at one point a couple of Speeches from the Throne and Prime Minister’s statements ago was one of the turbocharging pieces of legislation. Goodness knows what the next 6 months of the year will be about given that so many of the initiatives in the first half of the year appear to have gone west. 
Moana Mackey 
: They’re turbocharging moving forward. 
Hon DARREN HUGHES 
: Are they turbocharging the move forward? If there is one thing— 
Hon Bill English 
: That’s Julia Gillard; that’s Australian Labor. 
Hon DARREN HUGHES 
: Mr English knows all about that. He knows all about being the loyal deputy who stabs the leader in the back. He did that when he was deputy himself then the full political circle came around and it happened to him. He would be able to tell us quite a few stories about that. 
Hon Bill English 
: That’s all going to happen in your party. 
Hon DARREN HUGHES 
: The politics of personality always get him going. One of the only ways to get him to contribute at all is to get into that nasty little side where it is all about the machinations of politics and who has sold out whom and for what reason. 
The phrase that Bill English would secretly like this Government to be known by is the “crunching of the gears” Government as it goes from fifth gear to reverse in very very quick order as policies and priorities change. Thankfully the Infrastructure Bill will not be one of those because it has the support of the Labour Party—the Minister’s best efforts notwithstanding. 
MICHAEL WOODHOUSE (National) 
: 
 I am very happy to take a quick call on Part 2 of the Infrastructure Bill particularly on the issues that the Transport and Industrial Relations Committee discussed in Part 2. I want to touch a bit on the rewrite of history that Moana Mackey went through in terms of getting the cart before the horse—the drafting of the code before the bill was drafted—and the fact that some of the corridor providers have dropped out. In fact that is why the bill has come into existence. 
The goal of having a voluntary code between corridor managers and utility providers has been the target for a long time now. After many years of trying utility operators and corridor managers have failed to agree on a voluntary code. That puts us in a bit of an interesting situation because we are being asked to legislate for that which the industry could not come up with by itself. I think the select committee members would agree that when we heard submissions there was a kind of Mexican stand-off going on between the corridor managers and the utilities providers. I think the Local Government New Zealand submission was the most revealing about how difficult that had been. 
Local Government New Zealand did a couple of things. It described some of the authorities around the country that have come up with their own voluntary codes and have achieved agreement with utilities providers. But that becomes very difficult for utilities providers that are nationwide—telecommunications providers and so on. They are forced to try to comply with a plethora of voluntary codes and that has become very difficult. I think the gold standard the goal within a regulatory framework is to come up with a code that everybody can sign up to. Once this bill is passed the Minister will have the legislative power to bang heads together to make the code work. But as we know that will be very difficult unless those organisations come willingly. I hope that that is the case. 
It was also evident in Local Government New Zealand’s submission that it wanted us to keep everything it agreed with in the code but put things that became quite tense into law. That would have become very messy and it was not the select committee’s recommendation. As-built drawings were one of the examples it came up with. It has had constant problems trying to get as-built drawings out of utilities operators but the code as it is drafted makes it very clear that coming up with accurate as-built drawings is a requirement that cannot be contracted out of. It is not just utilities providers; anybody who has been in the construction industry or has been a client of a building project knows that as-built drawings take forever to come and are often the last thing that gets ticked off in any construction project. 
There was quite a bit of discussion about the issue of amenity values and the causer-pays principle. For the benefit of the Labour spokesperson on transport the real issue was a belief by utilities providers that as a condition of access to the corridors local councils often burden them with the cost of maintaining or improving the amenity and that that is disproportionate to the disruption being caused. The bill clarifies that it is causer pays as long as there is no expectation by the local council to improve the amenity or to somehow make a better visual amenity—for example taking away cabinets or putting lines that were previously overhead underground. Having considered hither and to the issues around amenities values the select committee was quite comfortable that the bill as it was drafted with a couple of amendments covered the issue of access and amenity values pretty well. 
We also considered the issue of lining up the notice periods which were different in the respective Acts—the Telecommunications Act and the Gas Act. We now have a bill that will be quite consistent in terms of the expectations to provide notice of access. I think that was a really good improvement to Part 2 as well. 
This bill is about reducing red tape but it is actually about orange tape. It is the orange tape and the orange cones that the public see every day with transport infrastructure changes that seem to be constant. Local Government New Zealand said that there were 8000 separate applications for access to corridors in the Auckland area alone and not all of them were well coordinated so I hope that that improves. 
DARIEN FENTON (Labour) 
: 
 I will speak to Part 2 of the Infrastructure Bill. It is good to see that members opposite have had some further unclogging of their arteries and that the Minister in the chair the Minister for Infrastructure has stirred himself as has a member of the Transport and Industrial Relations Committee. It is good to have a contribution from them. 
I will go through Part 2. My colleague Darren Hughes has talked about the purpose of Part 2 which is stated in clause 19(1) to be: “to amend a variety of Acts relating to utility operators’ access to transport corridors in order to achieve greater certainty and consistency in the rights and obligations of utility operators and corridor managers.” 
Starting with the amendments to the Telecommunications Act 2001 I cannot help but note the irony in having this bill go through its Committee stage today when other things are happening that apply to every single worker in the country. Before I get on to that though I recall that in the first reading of this bill Clare Curran Labour’s spokesperson on communications was talking about the situation in the telecommunications industry with regard to the Visionstream workers who were contracted out by Telecom and who went from being “employed” to being “self-employed” and the consequences of that on the telecommunications industry. I think Clare Curran is very very good in constantly calling the Government to account on its broadband strategy and on how that is rolling out although it seems to be stalling somewhat appallingly at the moment. 
I turn to clause 21 “Criteria for setting reasonable conditions”. I would ask the Minister in the chair the Hon Bill English whether he could define the word “reasonable”. The reason I want him to do so is that I know that the Minister of Labour currently has a proposal to remove the access of workers to their union unless their employer agrees to that access and that agreement cannot be “unreasonably” withheld. There is a whole lot of real difficulties around what is meant by “reasonable” and “unreasonable”. I would like some answers because that might help us when it comes to considering what the Minister of Labour is proposing. 
I also note the irony of clause 22 “Notice requirement”. The previous speaker Michael Woodhouse talked about lining up the notice requirements for the various utility operators which other speakers have also spoken about. We support that. We think it is reasonable that utility operators should be given notice just as we think it is reasonable that workers who are to lose their jobs should be given notice. But indeed under the Government’s proposals for the 90-day Act workers will not be given notice. It is not required. In terms of clauses 22 to 25 I would like the Minister to tell us what he thinks the words “notice” and “reasonable notice” mean. 
New section 147A “Local authority etc may require lines etc to be moved” which is to be inserted in the Telecommunications Act by clause 28 did not come up in the debate on Part 1 but there was a long debate in the select committee about the definitions of “local authority” “wastewater” and “water requirements”. A great deal of concern was expressed and I think that concern is still there given that the Minister of Local Government has a bill coming forward that would enable the contracting out of water for 35 years. That issue has been discussed up and down the country and it was certainly discussed in Auckland where I come from. Although I think we reached an agreement in the select committee on new section 147A I would like to have an assurance from the Minister in the chair that the proposal from Rodney Hide will not affect that new section. We worked hard in the select committee to try to clarify that issue and in fact the Greens were very very keen on that. We reached an agreement on it and I know that Jeanette Fitzsimons who was on the committee at the time was very very keen that we certainly had that sorted out. 
I also note that we have amendments to the Electricity Act. We had a very interesting debate in the House earlier tonight during the second reading of the Electricity Industry Bill about electricity generation. There are a lot of questions around that issue. 
Clause 30 inserts new section 24A “Criteria for setting reasonable conditions” in the Electricity Act where again we go back to the word “reasonable”. Again I ask the Minister in the chair to tell us what he considers “reasonable” to mean. There is some detail in the bill about that but we are considering a very very important question given that we seem to have one rule for utility operators on the one hand and another rule for workers in other legislation on the other hand. 
If I may—and without getting on to the Gas Act—I would like to talk about the amendments being made to the Railways Act. Again it was a very interesting discussion during the select committee process because there was quite a lot of conflict between railway corridor operators and utility operators. The utility operators seemed to believe that KiwiRail and ONTRACK were deliberately blocking access to their land. 
I thought that a very very important point came through to do with safety issues in rail and to do with workers’ safety and particularly to do with the safety of the public. I had a lot of conversations although I cannot remember whether the railway union came and talked to us. The previous speaker may remember. Certainly people from KiwiRail came and talked about the importance of workers’ safety. 
I have to put on record my concern about railways workers’ safety under the 90-day fire-at-will bill. I ask which workers on the railways would raise a safety issue under the provisions that they have because their jobs would be on the line. There is absolutely no doubt about that. The amendments to the Railways Act 2005 are important and I am absolutely pleased about those. 
Paul Quinn 
: Darien what bill are we on? 
DARIEN FENTON 
: I am talking about clause 38 in Part 2 if the member would like to get out his copy of the bill and read it. It talks about the amendments being made to the Railways Act. In fact if that member had been on the select committee then he would know that safety was one of the very very important considerations that we talked about but he probably still would not have listened or taken any notice. I am raising an issue of deep concern to members on this side of the Chamber about the safety not only of the public but also of workers under these provisions and under other proposed provisions of this Government. Thank you. 
CAROL BEAUMONT (Labour) 
: 
 Likewise I rise to speak on Part 2. The thing that is very interesting about this part—and I am sure that people have been riveted so far on this discussion on the Infrastructure Bill—is that Part 2 amends a number of different Acts. During the course of the considerations of the Transport and Industrial Relations Committee it was very interesting to analyse the differences between the Acts concerned which are of course the Telecommunications Act 2001 the Electricity Act 1992 the Gas Act 1992 and the Local Government Act 1974. 
The consistency we were looking at was around reasonable access to transport corridors. I have to say I did not know a great deal about this issue at the start but it became very clear just how important those corridors are in terms of ensuring we can install the suitable services—gas electricity broadband—we will need to grow the economy and serve the people of this country. So consistency around reasonable access to transport corridors is important. 
Consistency and clarification around allocations of costs are important when utility operators are required to move assets which of course they can be required to do in these circumstances. Also consistency around issues like time periods for notification and response is important. In addition as the previous speaker my colleague Darien Fenton has just said Part 2 amends the Railways Act 2005. The Government Roading Powers Act 1989 is also mentioned again in terms of providing time frames for responding to requests for access to rail corridors and motorways and requiring controlling authorities to publish criteria on which they will base their decisions to grant access. 
So Part 2 contains a series of provisions around each of those Acts looking at issues like the criteria for setting reasonable conditions. Mr Hughes referred to the issue about whether the operator will be required to increase the amenity values rather than merely maintain them. One thing that was quite interesting in the select committee was a debate around the term “fittings” and whether we would use that term. Members will be interested to know that the committee decided not to go with the term “fittings” and replaced it with “lines cabinets other appliances and associated equipment”. 
The question that Ms Fenton raised about health and safety is important and in relation to the rail corridor the select committee had a very interesting conversation. One cannot move trains around a bit of work that is going on to ensure that they are out of the way while work is being undertaken whereas with a road one can use detours and those sorts of things. We had a good robust conversation about the health and safety component. 
In that respect I would be lax if I did not also refer to a number of the changes that are going on led by the Prime Minister in the workplace area. We are under real threat through the sort of negative cost-cutting approach that this Government is taking where workers’ rights are being undermined. There is a real risk that health and safety will be compromised for workers in this country. Let me give members an example of how that might be the case. With the extension of the 90-day “no rights at work” trial to all workplaces people will be unwilling to even raise questions of health and safety for fear that they may be sacked. 
I go back to the criteria for setting reasonable conditions. The sorts of factors that are included in those reasonable conditions in Part 2 are around the safe and efficient flow of traffic the health and safety of the people likely to be affected directly by the work the need to lessen damage and compensation that may be payable. An important measure in new section 24A(1)(e) in clause 30 is the criteria around the need to lessen disruption to local communities including businesses. It is really important when we are looking at this kind of work and upgrading our infrastructure that we do it in a way that minimises disruption to the community. 
The CHAIRPERSON (Lindsay Tisch) 
: I ask that the level of discussion on my right be kept at a lower level. It is quite distracting. 
DAVID SHEARER (Labour—Mt Albert) 
: 
 I will take a quick call on Part 2 of the Infrastructure Bill which we are discussing tonight. Part 2 as others have said amends a number of different Acts and makes those Acts able to coordinate in a much more consistent way so that our infrastructure can move forward and develop much more effectively. The bill amends the Telecommunications Act 2001 the Electricity Act 1992 the Gas Act 1992 and the Local Government Act 1974. The idea is to try to provide some consistency around reasonable access to the corridors and the allocation of costs when utility operators are required to move assets. It will also address the time notification and response that those operators will need to provide to make their operations much smoother and more coordinated. 
I think we have all been in the situation—and I know many definitely have been in the Auckland area—where we have seen roads dug up and inadequately put back together again by for example various utility operators This bill will enable us to ensure that we are well notified about disruptions that work goes ahead in full coordination with many of the other operators as well and that we have the minimum amount of disruption particularly in the Auckland environment where there is so much pressure on roads and so much pressure on the ability of services as Auckland expands. Auckland is expanding at the rate of one Wellington city every 8 years. It is an extraordinarily quick and fast expansion. I think this bill will address many of the arising from Auckland’s expansion to be more effective and more efficient. There is another example that this part speaks to. Contractors who were laying pipes in Auckland City found that they had different dimensions when they went out to connect up with pipes from Waitakere City. This legislation will be helped by the fact that Waitakere City and Auckland City will be one super-city and certainly I hope that some of those things will be remedied. This bill will go a long way to try to restore some of those efficiencies we need. 
It is worth mentioning as others have that work on this bill started in 2007. It has been quite a long time coming—more than 3 years. It was started under the previous Labour Government which recognised the need for this legislation and began working on it. Given the fact that this Government has made so much of the need for improved more efficient and more effective infrastructure it is surprising that here we are 2 years into this Government’s term and only now are we in the Committee of the whole House stage of this legislation. As I said the work began under the previous Labour Government. Utility operators such as electricity telecommunications sewerage drains and gas say that there has been an inconsistent application of reasonable conditions when seeking to exercise their right to access roads in particular because that is where most of our services tend to run. On the local authorities’ side they are concerned and I am sure are under pressure from residents and ratepayers about the poor quality of reinstatement of roads by utility operators. There is also concern about the inconsistencies between statutes. Therefore some operators are able to afford some advantages over others. This legislation particularly Part 2 will go a long way in terms of ensuring that all of those utility operators are operating under a standard format. Thank you. 
MOANA MACKEY (Labour) 
: 
 I am happy to stand and speak to Part 2 of the Infrastructure Bill. I think it is important to reiterate that this work started under the Labour Government. We are 2 years into the National Government’s term and still passing Labour legislation. That is all right we prefer to pass more Labour legislation and a little bit less National legislation if possible so we will not complain about that. 
Part 2 is incredibly important because access to the transport corridor varies so greatly. It varies greatly across different local government jurisdictions. It varies greatly across all the different statutes and of course as time has gone on we have ended up in a situation whereby communities that were previously not connected to reticulated water and waste water are now connected so that infrastructure has stretched out further and further. It is affecting more and more communities. Once upon a time electricity infrastructure was the only infrastructure that went out to a lot of these communities; now there is so much more. We have broadband infrastructure apparently according to the Government. We do not know whether we will see it. When we do see it it will probably go only to people’s streets not to their houses. That seems to be a waste of infrastructure. I certainly hope that that will not be the case. But if we are going to extend and add more and more infrastructure it makes sense to start to regulate and try to bring together in a coherent way access to that infrastructure. 
One of the big issues has been the difference in treatment for different utility operators. That has created a large amount of tension. It is not tension that is necessarily going to be legislated away by this bill although I do think that this legislation will be a good start in trying to bring some consistency to that. But the fact is that when we have so many different local authorities all doing different things for a single organisation for example that has to work with every single local authority across every single statute that relates to infrastructure we can imagine how difficult that becomes. 
I will mention because no one has mentioned this yet the impact on the public of this legislation. One of the things that really annoys the public is when they drive down a road that is being dug up because something like a water main is being replaced and 6 weeks later they drive down exactly the same piece of road and it is being dug up for something completely different. 
David Bennett 
: That doesn’t happen now. It only happened under you. 
MOANA MACKEY 
: Oh David Bennett and his usual excellent contribution to the House! I will not bother to even repeat it; it is not worth it. If he was listening to what I was saying he would know that I was pointing out that one of the things that I hope this legislation will result in is a far more coherent approach to when this work is being done. If all infrastructure operators know that a certain piece of road or rail corridor is going to be open for work that traffic will be diverted and that the road will be dug up then they know that if they have maintenance work that needs to be done on electricity or broadband infrastructure it makes sense and it is cheaper to do it at exactly the same time. That reduces the amount of time when the public is being inconvenienced by major works being carried out. 
This seems relatively simple but of course none of this has been brought together before because none of these organisations were able to work with each other effectively in this way; because of a lack of coherence that has not been happening. I think that sometimes when we deal with legislation that is very technical like this bill we forget the public in that process. When it comes to the development and the maintenance of infrastructure the public are an incredibly important part of that. Part of the reason we have ended up in a situation where local authorities are resistant to allowing access to a corridor is because they come under enormous public pressure from their voters who say to them that they are sick and tired of their roads constantly being dug up for no reason. So they start to put more stringent requirements on those utility operators. 
Utility operators have to be able to get in. They have to be able to do the maintenance work because if they do not do that it is far more expensive in the long term. But when they are constantly up against a city council that is having to try to pull together all of these groups that has to try to deal with utility operators that are working in a huge number of different local government areas and under a huge number of different rules and regulations that is where the public start to be left out of the equation. It is where we start to see the public being disadvantaged far more than they need to be. That issue is not something that many people have talked about but resolving it would be a very good outcome from this legislation—a very very good outcome. 
Hon DARREN HUGHES (Labour) 
: 
 I will make just a very brief contribution to finish off the points that Labour members have made on Part 2 of the Infrastructure Bill. My comments are in relation to clause 38 of the bill in Part 2 the amendments that we are making tonight to the Railways Act 2005. The next part that we are moving on to concerns matters about rail as well which we are very keen to explore in the Committee of the whole House this evening. It is an example where common sense has prevailed with respect to the definition of those who were captured by the provision of this clause. The bill as it was originally introduced to the House by the Minister for Infrastructure required that all licensed access providers had to publish criteria for access to their corridors on a publicly available website. If we go to clause 38 of the bill we see that it sets out there how it was originally worded: “Every licensed access provider and every railway premises owner … must…” and on it goes in new subsection (1A). But that has since been altered by the select committee. The recommendation of the select committee was picked up by the Government in quite a helpful way so that the Minister will declare by notice in the  
Gazette 
 which of those railway premises owners or licensed access providers are required to be the ones who publish their criteria for access on a publicly available website. That is pretty important. 
As the select committee report notes there are 80 such rail providers. They range in size from very small voluntary organisations that we all have in our community right through to some of those industrial rail operators and then to KiwiRail itself or the New Zealand Railways Corporation as it is known from a legislative point of view. What probably surprises me most about that is that there are only 80 of them. In New Zealand there are a lot of railway enthusiasts who take their great love of trains and of rail to try to provide in their own communities some form of service or tourist attraction or even fun rides for children either on a regular weekend basis or for fairs fetes galas and so on and so forth like that. 
Moana Mackey 
: Fete? 
Hon DARREN HUGHES 
: The member says “Fete?” but at St Josephs School in Levin our gala was called a fete and that is a very good thing to know. It is a very cosmopolitan primary school. At St Josephs in Levin we had our own fete—very European. That was before they were popular; this was before the fall of the Berlin Wall. We were really quite avant-garde at St Josephs School in that respect. 
Carol Beaumont 
: Great fashions at country prices. 
Hon DARREN HUGHES 
: They certainly do. So we have limited that right down so that it will be only the big players who will be required to do that. I think that is important. I had an opportunity during the parliamentary recess to visit Kawakawa with my colleague Kelvin Davis the Labour spokesperson for tourism who took me to see the— 
Paul Quinn 
: Looking for a new electorate? 
Hon DARREN HUGHES 
: Paul Quinn should be the last member of Parliament to talk about looking for new electorates. That man would be defeated in any seat he stood in. They could put him up in a blue ribbon seat—he would lose Taranaki - King Country! There would be a socialist flag elected to the Taranaki - King Country seat if Paul Quinn were the National Party candidate there. There is a reason why there is a big whip-round amongst National MPs and Labour MPs to ensure that he stands against Trevor Mallard in Hutt South and it is that at least there is a bit of a laugh involved in that. There are so many times when that man should resist the temptation to speak out loud but probably in that sense all I am doing is echoing generations of schoolteachers who wrote that in his school reports. I suspect he was a bit too busy with the candyfloss at the fete in that respect. 
Kelvin Davis took me to see the vintage railway people there at Kawakawa who are trying to develop a jigger service to go through the town. They are having some difficulties getting that past KiwiRail and the New Zealand Transport Agency but it was a reminder to me that there are many local groups who access parts of the rail network that are still able to be used but no longer have either commercial passenger or freight services running on them. It would be preposterous for the Bay of Islands Vintage Railway Trust to have to publish on a publicly available website the criteria for accessing their piece of rail so I support that provision in the bill. I think that is a good idea and I am sure Bill English was responsible for it. 
The question was put that the amendments set out on Supplementary Order Paper 115 in the name of the Hon Bill English to Part 2 be agreed to. 
Amendments agreed to. 
Part 2 as amended agreed to. 
Part 3 Amendments relating to New Zealand Railways Corporation 
Hon DARREN HUGHES (Labour) 
: 
 Thank you Mr Chair. 
Chris Tremain 
: He’s keen tonight. 
Hon DARREN HUGHES 
: I am very keen I say to the chief Government whip. The Infrastructure Bill is an excellent bill. The Opposition feels as though it not only has to explain its difficulties with the bill but also has to explain what the bill actually does to the people who have been tuning in for the last 2 weeks to Parliament TV only to see a green screen and music playing with a message saying we would be back on 20 July. People have tuned in tonight and they would not know from the Government what this bill is about even though just a few months ago Bill English the Minister in the chair said this was an important bill for the Government’s economic programme. 
But we know on this day of all days how quickly the Government is keen to abandon its long-held principles as it did today on the mining of schedule 4 land an issue that trickled and trickled right the way through. 
Hon Bill English 
: That upset you. 
Hon DARREN HUGHES 
: Mr English says that upset us but we agree with the decision not to mine that land because our principles had not changed on that issue. The only thing that is galling about it is that there is a back-down purely for political reasons yet it is dressed up as being something to do with a letter from a mayor in Northland who has asked the Government to look around there to see what it can find. That has then become the basis for a shift in the entire Government economic policy. But those issues are outside Part 3 so I turn to the issues that are in it. 
So far we have debated and passed Part 1 with amendments and we have done the same with Part 2. Here we are in Part 3 on which there will be agreement as well. It must be a very long time since Mr English has united so many people around him. I would have thought that he would be up every 5 minutes to speak about it and bask in that sort of glory but obviously the penance he is still doing for his transgressions of earlier times is weighing too heavily on him to allow him to get out of the chair tonight. 
The changes made in this part to the New Zealand Railways Corporation are reasonably minor but I want to make a couple of points to the Minister. This is really a drafting issue I suspect but the Minister may be able to correct me. Clause 43(2) amends the New Zealand Railways Corporation Act by omitting the words “Minister of Railways” and substituting in each case “Minister”. The reason for that amendment is pretty obvious: there was a time when New Zealand Governments always had a Minister of Railways. I suspect that the last Minister to have a portfolio with that name might have been the Hon Richard Prebble. But that is enough of that as my colleagues look at me askance. The amendment changes that wording so it is just a generic reference to the Minister. It does not say “Minister of Transport”; it just says “Minister”. That Minister will presumably be whichever Minister is designated by the Prime Minister to have responsibility for rail matters. That is all fine. 
We then come to clause 44(2) which substitutes for the existing section 4(6) of the Act the following: “The Minister and the Minister of Finance may jointly at any time and entirely at their discretion”—that is slightly dangerous—“remove any director from office.” I am not sure whether that amendment was specifically put in as a form of utu so that Mr English could seek revenge on the Rt Hon Jim Bolger. We all know about Mr English’s famous temper; he was not at all pleased when Mr Bolger decided to serve New Zealand as chair of KiwiRail. That amendment could be there entirely for that reason. But that is not the point I wanted to raise which is to ask why that amendment specifically names the Minister of Finance. If the bill is trying to get away from naming a portfolio Minister in clause 43(2) and (3) why in clause 44(2) does it specify a portfolio Minister? 
This is not an esoteric point. It is an important point because we went through a period in New Zealand when we had both a Minister of Finance and a Treasurer. The senior portfolio Minister in the economic area was called the Treasurer. That was another old Tory deal in order to get power but again most of the Government members will not know about that. 
David Bennett 
: You carried it on though. 
Hon DARREN HUGHES 
: No that is not true. 
David Bennett 
: Yes you did. 
Hon DARREN HUGHES 
: That is not correct. 
David Bennett 
: You did so. 
Hon DARREN HUGHES 
: When was that? 
David Bennett 
: When Winston was there. 
Hon DARREN HUGHES 
: He was not the Treasurer. 
David Bennett 
: No but you gave him a deal though. 
Hon DARREN HUGHES 
: Poor old David Bennett! I should not have even responded to his interjection. As always it turned out to have been about absolutely nothing. 
Hon Bill English 
: You got Owen Glenn to make a donation to him. 
Hon DARREN HUGHES 
: Sorry? The Minister of Finance spoke and I am keen to know what he said. He has changed his mind now. He was using the open mike which was very very bad of him. But I do not mind; that is at least one way of eliciting information. When National went for New Zealand First and had the position of Treasurer that became the senior portfolio in the economic area. In fact this Minister— 
Amy Adams 
: Is this going anywhere at all? 
Hon DARREN HUGHES 
: I am referring to clause 44 in Part 3 if Mr Tremain had deigned to read it. Mr English knows about this himself because he has been both the Minister of Finance and Treasurer at a time when both portfolios existed. In fact he was the Minister of Finance the last time that superannuation was cut in New Zealand—and I have no doubt that given a chance he would do that again. 
I would like to know why the portfolio is named in clause 44(2). If there is a coalition deal in the future—this may easily happen—and the portfolio of Treasurer is created again would that require new legislation to amend this legislation? If the whole bill which the Minister was formerly very proud of is such an important thing to bring together because there had been confusion why does he allow that confusion to take place? Why does the bill not say the “Minister and the shareholding Minister” for example? That could be a way of getting around it. Perhaps the Minister for Infrastructure could take up that point because it seems to me that it could be easily addressed. He could change that so that we do not hold ourselves up. 
The other point concerns what is not in Part 3. There are clauses in respect of rail that should be in Part 3 given that this is an infrastructure bill. The Government has had the opportunity within KiwiRail to substantially build locomotives in New Zealand within the $500 million budget that the Government has set aside for the Auckland rolling stock. The Government put up $500 million just as the previous Government did and the economic study said those things could be built using New Zealand infrastructure— New Zealand producing and manufacturing infrastructure—in a way that would have actually assisted our country and kept the money put aside for that in our country to be spent at the workshops at Woburn in the Hutt Valley and at Hillside in Dunedin. 
Progress reported. 
Report adopted. 
The House adjourned at 9.55 p.m.