Turia Tariana: Crown Retail Deposit Guarantee Scheme Bill — First Reading Second Reading In Committee 
Turia Tariana: Crown Retail Deposit Guarantee Scheme Bill — First Reading Second Reading In Committee 
[Volume:657;Page:6051] 
Hon TARIANA TURIA (Co-Leader—Maori Party) 
: 
 Tena koe Mr Assistant Speaker. Tena tatou katoa. This is a very good time to be introducing certainty into any discussion about the retail deposit guarantee scheme. In the space of 24 hours three surveys have been released that provide us with confidence about the possible scenarios in which the proposed legislation will be received. The first survey is the New Zealand Roy Morgan consumer confidence rating survey. This survey shows that confidence has risen to its highest level in early September since March 2008 which was the first quarter in which New Zealand entered its recession. One of the clearest indicators of confidence arising from the Roy Morgan survey was the finding that 43 percent of the respondents said they thought that now was a great time to buy major household items. That is an increase of 6 percent from the previous survey. 
The next survey was from UMR Research which has been following public attitudes on the global crisis. It found that 61 percent of people were concerned about the impact of the crisis on New Zealand’s economy. That may still sound significant—and it is at the very least cautious—but it is also a big gap compared with the figure of 72 percent of those questioned 2 months earlier. Another dramatic finding from UMR Research was that the numbers of New Zealanders who believed that the crisis had impacted adversely on standards of living had fallen from 54 percent in June to 48 percent in August which is the lowest level of concern since October 2008. 
The third in the line but in no way the least was a survey conducted by a parenting website of over 500 families. In that survey one-third of families had changed their dinner habits as a result of the economic downturn. The website’s online community revealed that there was considerable synergy around participants’ desire to save money in an economic downturn. So ways of old suddenly turned gold and people began bulk buying when items were on special and freezing supplies for future use particularly meat. Name brands were being overlooked in preference for the plain-packaged model fish and some premium cuts of meat were making it to the table less frequently and bargains were filling the supermarket trolleys as shoppers planned around catalogue-advertised specials. These may not appear to be “breaking news” findings but they demonstrate the fundamental change that many households have taken on in their attempts to introduce certainty. 
In this context then the Maori Party is pleased to welcome the Crown Retail Deposit Guarantee Scheme Bill which at its very essence is about creating certainty and stability in the banking and finance sector. Many New Zealanders will breathe a collective sigh of relief in learning about this deposit guarantee scheme and about a bill that would probably better be described as the “about time” bill. New Zealand individuals businesses and investors will be saying that it is about time they can benefit from a form of insurance that basically ensures continuing depositor confidence in New Zealand given international financial market turbulence. 
We are all aware that markets are hungry for certainty given the circumstances of the downturn. The concern has been about the future of the guarantee and it is simple enough to understand why: a scheme that guarantees approximately $128 billion of deposits and approximately 3.5 million deposit accounts is a sizable investment by anyone’s estimation. The legislation we are addressing today and will be addressing under urgency is about ensuring that the whole Parliament is accountable for the decision to extend the scheme and to better manage Crown risk. 
The focus of this bill then is to extend the scheme by 14 months until 31 December 2011. The legislation has been described as being more or less the transition path back to normality. Normality we assume will be when we actually exit from this scheme to exist in a normal business environment with all the attendant risks. A permanent guarantees scheme is not desirable because it underprices risk and leads to increased risk-taking. 
What this bill does is put in place a vital stopgap measure to help maintain confidence in New Zealand’s financial institutions. The measure bears a direct relationship to the collapse of several major banks in the United Kingdom United States Ireland and other countries. As banks collapsed Governments were called on to bail out those institutions in an effort to create a sense of global comfort about the health of the financial system. As we all know however the collapse of those major banking institutions had a ripple effect in terms of setting up other concerns that other banks may also collapse. This was domino territory given the possibility that the original banking collapse would provoke further collapses and in turn depositors would cease depositing or even try to withdraw their deposits en masse before their own banks collapsed. The effect was such that the volatility in one area could have sent more banks under and further destabilised the financial system. In many ways we had little alternative but to also play our part in creating stability in our own financial institutions and even though our banking system had been seen as stable up until that point there was always the fear that as the rest of the world adopted retail deposit schemes to provide a type of insurance for depositors if we did not also introduce such a scheme depositors might withdraw from our shores to invest in a country that did have a guarantee. 
We welcome this extension to the retail deposit guarantee scheme. We think it balances the imperative for certainty for investors in financial institutions while taking into account the impact for taxpayers and we will therefore support the bill. But it would be remiss of us not to table two significant concerns. The first is that it was entirely unsatisfactory that it was not until this morning that we had actually laid our eyes on this bill. It appears unfathomable that such a significant investment in financial stability was presented to Parliament at the eleventh hour. 
The second concern emerges from the fact that part of the new terms and conditions will mean that depositors will need to reapply to the scheme. Roll over is not automatic and it is voluntary. However details of the terms and conditions of eligibility will not be released until next week. Knowledge of the details in sufficient time to consider let alone consult our constituency is a principle that we take very seriously when we look at any legislation that comes before the House. It was therefore very disappointing to be prevented from taking on a full and robust process in regard to this extension of the retail deposit guarantee. Kia ora.