Willis NicolaSecond ReadingHon NICOLA WILLIS (Minister of Finance): I move That the Reserve Bank of New Zealand (Economic Objective) Amendment Bill be now read a second time. Well members opposite need to make up their minds; is the bill bad or does it do nothing? Because it can't be both and the confusion apparent on the opposite benches is I think indicative of the kind of Government we had over the past six years—it couldn't really decide if it was coming or going or what it was doing from one day to the next. So some questions have been asked and I am prepared to educate the members opposite. So the first is this: are we a Government that cares deeply about jobs and well-paying jobs? Yes we are. But are we also a Government that understands that the foundation for good jobs is a strong economy? Yes we are. And are we also a Government that is economically literate enough to know that price stability is the essential foundation on which maximum and sustainable employment can be built? Yes we are.And so members opposite have asked Why do this Act? Why make these changes to the Act?" Well let me spell it out clearly: without amending the Act the monetary policy committee would still be required to have regard to two separate objectives. As well as price stability they would also be having to weigh maximum sustainable employment. And as the regulatory impact statement notes there is value in amending the Act to signal a greater focus on price stability than that which could be achieved through mere tweaks to the remit alone. We are a Government that is making our intentions crystal clear. We know that without low inflation without price stability we will not achieve the economic objectives that New Zealanders share with us.So then we've had this second set of questions about whether or not there is any benefit in doing it this way. Well actually it provides benefits in clarifying how the monetary policy committee is expected to operate because there are potentially rare circumstances in which the two objectives could be misaligned and we wish it to be clear that price stability is the objective. We had a comment from the member Chlöe Swarbrick that the remit would still have reference to having regard to employment and I want to clarify for that member that that is incorrect. We will have one operational objective in the remit and as has been the case in previous remits it will be in pursuing that objective that will have regard to financial stability and other matters.There have been questions about the timing. Well actually I thought this was most amusingly digressed on by the member Grant Robertson—the Hon Grant Robertson—because actually we want to make this simple clear change as soon as possible so as not to create more confusion in the market about what we are doing or what our intentions are. And as my colleagues have so eloquently expressed we have been making it clear for several months our intentions in relation to the Reserve Bank of New Zealand Act. And actually quite a few New Zealanders voted not only just in the knowledge but in the expectation that we would be making this change and we are going to be a Government that delivers on those commitments and meets the expectations of our voters.Finally I do want to make the point with reference to the regulatory impact statement that members opposite are wrong to dismiss perception when it comes to the way we manage inflation. Perception does matter. And as the regulatory impact statement acknowledges the dual mandate has impacted the perceptions of the effectiveness of monetary policy. And I read for the members point No. 7 in the regulatory impact statement: "Expectations can have a significant impact on inflation outcomes. When the dual mandate was introduced"—the failed dual mandate was introduced—"the 2018 Regulatory Impact Statement noted that 'the risk that market participants … interpret the Reserve Bank's new employment objective as weakening its focus on inflation.' " And I point to the data and the data shows that it was on the watch of the members opposite with their new experiment that we have had 2½ years of inflation outside the band. And I would put to you that the market has priced in its expectation that inflation would remain out of control. So onward we have further advice here that clearly explaining and justifying monetary policy decisions is imperative in retaining credibility. We also note that there has always been this issue that there is a real question about how you measure full employment and policy errors from measurement issues associated with targeting less well measured objectives can be problematic.Which is all to say we had a lot of hot air over here about their sudden new-found concern with regulatory impacts statements and their concern with process and urgency and a whole bunch of arguments but actually the official advice here that we have shared with the House is clear: there are benefits to being crystal clear in your objectives when it comes to monetary policy. The regime of the former Government has failed and I know it hurts for them but this is the change New Zealanders voted for. And inflation we're coming after you and the Reserve Bank's on our side."