Adams AmyHon AMY ADAMS (National—Selwyn): Thank you Mr Assistant Speaker. I am happy to come down of course and take a call on this first stage of the Reserve Bank of New Zealand (Monetary Policy) Amendment Bill and I want to just start by acknowledging the Minister of Finance. This is an important area as he said in his speech. It's an area that has been traditionally and importantly independent of politics and it is important of course that we ensure the bank continues to operate in a way that is not subject to the cut and thrust of three-year terms of Government.I'm actually happy to acknowledge that it is timely to review the Reserve Bank of New Zealand Act and I've said as much to Mr Robertson and I want to acknowledge that Mr Robertson has been very good at including me along steps in appropriate ways making sure that I was informed. We are certainly going to reciprocate that approach from this side of the House being constructive. It doesn't mean of course that we will always agree as I have signalled to Mr Robertson and there are areas where we don't agree and on balance we won't be voting for the legislation as I've previously told the Minister of Finance. But I think that there is a lot in this legislation and in the review that is certainly commendable and worth supporting. So I want to be very clear that our opposition is not in totality. There's a lot in here that we find very useful and worthwhile and I look forward to working with the Minister on the second stage of the review as that continues to progress.I want to deal reasonably briefly with the monetary policy committee because that is an area where we see a lot of merit in what has been proposed. Of course we want to go to the select committee and see what comes in and we may well find issues that need exploring but at this stage I think the monetary policy committee makes good sense. The Minister has obviously looked at the Rennie report which came out and then his own independent advisory panel went through a number of the recommendations in that and the Minister has run through in his speech the core issues for the committee.A couple of small points that are worth getting on the record: we do now have a very senior Treasury adviser sitting in on that committee in a non-voting role and while I understand the way it's being presented which is that it's important that there is an understanding at the Reserve Bank of what happens at Treasury I am concerned at the increasing linkage that creates between Treasury and the executive and the Reserve Bank. Similarly of course with the external members of the committee those are appointed and dismissed by the Minister. So there will have to be I think a high degree of probity and transparency around the management of both of those offices to ensure that they don't become subject to a criticism of any improper political interference.Of course the Minister has described the fact there will be a charter for the committee. That is important and we look forward to seeing the draft of that and understanding in better detail exactly how that committee will operate how they will work to reach a consensus share views and how that will be described and distributed. Equally I have raised with the Minister the importance of ensuring that the members of that committee are very high-calibre people with appropriate skills and don't become some of what could be described perhaps unkindly as the usual fodder of political appointments. This is a critical role and it deserves people of the right calibre with the right skill set and I would very much like to ensure that we make that appointment process a bipartisan one.Turning to the dual mandate—and this is the area where we have on balance decided that we won't support the legislation at this stage—I do want to pick up on a couple of the things that have come through in this. The first as I said is that this was certainly pitched in the Rennie review. When the Reserve Bank themselves responded to that review they made the point—and I agree—that there is no demonstrated problem that we're trying to solve here in reviewing the mandate. In fact when you talk to the Reserve Bank—as I have and as others have done in public session—about the concept of this imposing dual mandate the response has always been Well broadly it won't make any difference to the way we make our decisions. We'll continue as is." So the question then becomes "Well what is the need to do it?"I raised the point at question time today that there has been no example in the history of the Reserve Bank of New Zealand Act where inflation and unemployment have been in some sort of contest and that this direction would have been useful. Not only is there a question then of "What is the problem we are trying to solve?"; there is no guidance or clarity around if there was a tension between the two how the Reserve Bank should resolve that tension. I would suggest that we're creating a lack of clarity around exactly how that would operate in a situation where there's no recognised need to do it.I think it's well-known that monetary policy isn't able to drive maximum sustainable employment over the long term. In fact the departmental disclosure statement says exactly that. It says monetary policy has relatively little influence on the long-term or sustainable level of employment which is more influenced by factors such as the level of skills and labour market laws. I think that's absolutely right.Now I want to be really clear of course I would expect a Reserve Bank or a central bank to be considering factors like employment prosperity economic growth well-being—all of those terms as part of their decision making. They do already as the Minister and I have discussed. In fact the way the Minister has framed his interest in seeing employment considered in the current policy targets agreement reflects that that is already very possible in our framework. So there is nothing wrong at all with a Minister of Finance entering into a new policy targets agreement with the governor as this one has chosen to do and expressing that he would like the governor to pay particular attention. But to do it in a way that elevates the issue of maximum sustainable employment to the same level of price stability creates I would suggest a confusion and a tension which is unresolved and unnecessary.I am concerned that given that the major levers that drive maximum sustainable employment in the long term are in fact fiscal policy and microeconomic settings there is a far greater risk that the Government which controls those levers will instead look to either put pressure on the Reserve Bank or sheet home responsibility to the Reserve Bank should there be a decline in employment or job creation when in actual fact the control for those matters sits squarely and almost entirely within the control of the Executive. So I think there are questions that need to be asked about why it's needed how a tension would be resolved and whether there has ever been any example of such tension applying.The other matter I wanted to raise is reference to other countries in the world because it's true that other countries do have mandates which go beyond price stability. What's interesting is that when you read through them very few of them pick out only employment because the Reserve Bank will say—and does in many occasions—that in reaching their decisions around monetary policy and where they set the official cash rate and how they deliver on their objective of price stability they already do consider a range of wider economic outcomes of which employment is one. That's absolutely appropriate. But I can't see why the Government has pulled out through this legislation just one of those economic criteria without reference to any of the other basket of criteria that matter equally.The Minister in his speech referenced the purpose of the bill which he is amending—and I support actually the wording of the purpose clauses he's written—which talks much more extensively around wider economic benefit. It talks about prosperity and well-being and a sustainable and productive economy. That's the sort of language actually that other countries have used when they've included that wider basket of economic objectives in their mandate. But in this instance the Minister hasn't copied that international experience. He hasn't reflected the purpose of the legislation as he's written it. He has instead chosen to pull out just one of those criteria of economic objectives and elevate that to a level where it is equally as important as price stability. Price stability and the need to maintain a low and stable level of inflation is a critical part of our monetary policy settings.So I do think there are those questions around the confusion that's created and the reason that we now have these mandate provisions not reflecting the very purpose of the bill. I think those are serious issues that we want to work through as we work through the select committee process.The last thing that I wanted to note in my concluding time on the bill is in the regulatory impact statement on the bill when it talks about the benefits and why you would do this—so I had a look at that thinking well what is the reason that the Government is giving as to why we need this dual mandate? And in fact the section that talks to the benefits of the proposal only refers to the benefits of the monetary policy committee and we agree there's benefit in that.So my question again remains what is the problem we are trying to solve? How do we think this solution will solve it? Why have we differed from the very purpose clause that the Minister is introducing? And why have we not followed the international example which reflects that whole basket of economic conditions that the Reserve Bank has already taken into account? So I do look forward to this going through select committee. I've given my assurance on behalf of the National Party that we certainly want to work constructively. I think it is helpful if we can get to an agreed position. But for the interim we won't be supporting the bill because of the reservations that I've expressed at the stage."