Cunliffe David: International Finance Agreements Amendment Bill — First Reading 
Text is incorporated into the Bound Volume 
Cunliffe David: International Finance Agreements Amendment Bill — First Reading 
[Sitting date: 08 May 2012. Volume:679;Page:2012. Text is incorporated into the Bound Volume.] 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 Embedded in the last sentence from the member who has just resumed his seat the Hon Nick Smith were the words “rational” and “conservative” sitting alongside each other. The central tenet of the Labour Party’s view is that those words do not belong in the same sentence because there is nothing rational about economic conservatism when you are already in a recession but I will come on to that in the second half of my remarks today.  
Let us first consider what is the purpose of this International Finance Agreements Amendment Bill. I will repeat at the outset that Labour will be supporting the bill going to the Finance and Expenditure Committee but we will assess then our final position. The reason for that is that on the one hand we support the need to increase contributions to the International Monetary Fund first because it is our responsibility as a member country and second because international events have proven as if there was ever any doubt that we are one interdependent global economy and that confidence in that economy requires countries to be able to join together to stand behind its core institutions. However we oppose the power grab by the executive opposite that says that any future changes can be made by regulation-making power and do not require reference to Parliament. When the total cost of this subvention is $3 billion you had better believe that taxpayers think their representatives ought to be able to debate it. So our position is yes we do want to be responsible members of the global community; no we do not want to write a blank cheque to the current executive or any executive—even us in 2 years—because we think that this is a matter of significant substance and it deserves Parliament’s time.  
Let us just quickly recall what this bill is about. In substance it will amend the International Finance Agreements Act of 1961. That is the Act that allows the Government of New Zealand to meet its obligations to the International Monetary Fund. This particular bill increases our contribution to that from $1518 million special drawing rights to $1592 million. That is approximately $2.9 billion to $3 billion and that is a lot of money.  
The first question that must be asked is why New Zealand is contributing besides the fact that we are obligated to. The answer to that is very very clear. If it was ever in doubt that the global economy is interdependent one need only look at the events of 2008-09 and subsequently with the collapse of many global finance and derivative markets and many merchant investment banks and the near freezing of global credit. We missed by a whisker a rerun of the Great Depression and it was only because of the concerted intervention of central banks and of global financial institutions like the International Monetary Fund and the European Central Bank that we avoided catastrophe. Near catastrophe has not been that great because we face a decade of deleveraging—the so-called new normal. I guess the good news is that it put the lie to the Washington consensus that we are all neo-liberals now because we are not and this side of the House clearly is not as I look around. That was never the fact but the myth has been busted.  
However international cooperation is now more needed than ever. One need only look at the current crisis in Europe which has caused enormous volatility in international equity markets—up about half a percent today down 2 percent just on Friday—and enormous change from day to day and week to week. The issue that we have seen in the last week in Europe has been really important. Greece has had an election. It has not been able to form a new centre-right Government because the Greek Parliament overwhelmingly is opposed to the European austerity plan. In France the neo-liberal conservative president has been thrown out and the first socialist president elected in two decades and with that there is a clear message that France no longer accepts the tenets of austerity economics. Today on Stuff’s website there is an excellent article by Nobel laureate economist Joseph Stiglitz who says: “seldom is it explained how to square the circle. How can confidence be restored as the crisis economies plunge into recession? How can growth be revived when austerity will almost surely mean a further decrease in aggregate demand sending output and employment even lower? This we should know by now: markets on their own are not stable. Not only do they repeatedly generate destabilising asset bubbles but when demand weakens forces that exacerbate the downturn come into play.” How right he is. No wonder he got that Nobel Prize. But of course this is not a foreign issue. We know we have to contribute to provide strength to the European Central Bank and the IMF in this case. We know that collective action to head off the consequences of that burst financial bubble are essential and that is why we are putting in $3 billion of New Zealand taxpayers’ money. It is our underwrite.  
But the lessons also come closer to home and here I want to refer again to the Hon Dr Nick Smith thinking that conservatism was rational. What is rational about chasing your fiscal tail down a long dark tunnel where every move you make reduces tax revenue and you have to come back to the country to reduce expenditure making unemployment worse taxes worse and growth worse? You know it takes a long time to work one’s way out of that long dark tunnel and New Zealand has been down there before. It was called the Forbes-Coates coalition in the 1930s and it ended in the election of Michael Joseph Savage just like in the US the Humphrey experiment ended with Franklin Delano Roosevelt and the New Deal—and he did not muck around. That was a crisis. He came in and said: “We’ve got to put people back to work. Let’s plant some trees.” and they had the Civilian Conservation Corps. They froze banking transactions because they were in the middle of a crisis they underwrote the banks and they got moving from there.  
We are not in quite that world now but the point remains that if reliance had been placed on free markets acting on their own in 1932-34 the US would not have stabilised and been ready to fight World War II. Also in New Zealand we would have had a longer darker recession had Michael Joseph Savage and the first Labour Government not restored hope restored growth restored direction and in modern terms restored strategy for the New Zealand economy.  
That is what is lacking today: a clear plan. Even the business community is expressing its disappointment about the current Government’s lack of direction and plan and its tendency to become mired in one-off deals for favoured mates. It is now getting its head around the fact that there is likely to be a change in Government in 2½ years’ time. So business is now once again talking to the Labour Opposition in the most serious terms about what our alternative programme will look to. In other words— 
David Bennett 
: No they’re not. 
Hon DAVID CUNLIFFE 
: In other words Mr Bennett the smart money has already moved. The member from Remuera sitting behind you knows what that means. He knows what the smart money moving means. That means a vote of no confidence in this Government and that vote of no confidence is well and richly deserved.  
But this is an international bill and it is about our contribution to a very important international institution the International Monetary Fund which is not known as a hotbed of socialism. Yet the International Monetary Fund over the last 5 years has reminded all member Governments that austerity economics will make the crisis worse and it has advised them to invest for growth and jobs. That is what we need to do in New Zealand: invest for growth and jobs. We need a systematic partnership between Government and business that will lift employment lift output lift tax revenues and therefore lift our Budget balance. We cannot continue to chase our economic tail down a long dark tunnel of austerity economics. It will not work it does not work and as the voters of France have just shown it will not last.