Mallard Trevor: International Finance Agreements Amendment Bill — In Committee 
Text is incorporated into the Bound Volume 
Mallard Trevor: International Finance Agreements Amendment Bill — In Committee 
[Sitting date: 19 February 2013. Volume:687;Page:7957. Text is incorporated into the Bound Volume.] 
Hon TREVOR MALLARD (Labour—Hutt South) 
: 
 Labour is supporting this bill the International Finance Agreements Amendment Bill although Mr Chairman as you will have heard there is a discussion to go on as to whether the particular part that deals with the matter of regulation is to be supported or not. This bill amends the International Finance Agreements Act of 1961 and it does allow the Government to meet its obligations as a member of various financial institutions including both the International Monetary Fund and the International Bank for Reconstruction and Development. 
The amendment bill provides for New Zealand to recognise the changes to the articles of agreement of the International Monetary Fund which were agreed to by the IMF governors in 2008 and 2010. I think that in 2008—and I am subject to correction here—one of the governors was the Hon Dr—now Sir—Michael Cullen and I think that the Hon Bill English has continued that role. New Zealand has quite properly played an active role in the IMF and unlike a number of the other international financial organisations where Associate Ministers have been delegated to do the representation New Zealand Ministers of Finance have seen the IMF as a very important organisation and one that has senior representation at the governor level. I think in fact that in the history of the previous Government there was only one occasion when the Minister of Finance himself was not able to make it. 
The 2008 and 2010 agreements doubled IMF quotas and shifted voting power towards the dynamic emerging market in developing countries and effectively did a shift from countries that were overrepresented to those that were under-represented. It was not a massive shift; it was about a 6 percent shift in the balance of power. What results from that is a more representative IMF executive board with advanced European countries reducing their representation in a way that I think it is fair to say is an indication of changes that have occurred certainly from a period well before the IMF and the relative power of Europe and the rest of the world in financial matters. The 2008 and 2010 agreements are separate from the discussions on the G20-backed US$430 billion IMF firewall which has been proposed in recent months. So this is something that predates that sort of arrangement. This legislation will increase New Zealand’s quota commitment to the IMF. However members of the new arrangements-to-borrow programme including New Zealand have agreed that they will take a corresponding decrease in their commitment to that programme. Overall this means that our commitment to the IMF remains relatively constant moving only from 1518 million of the drawing rights to 1592 million. So it is a change from approximately NZ$2.9 billion to NZ$3 billion. 
One of the issues that we have with this bill is the regulation-making power so that in future updates can be made by regulation. This power simplifies the process but in doing so takes away from the Parliament something that has been a traditional right and that is where there is potential expenditure the right of parliamentary control in this case not through a Budget process but through a treaty-making process. What we want to make sure is that as the IMF goes through its quota formula it is also scheduled to complete the 15th general review of quotas by 2013. These changes are not expected to be accompanied by any changes to the articles of agreement. Governance reviews which do imply changes to the articles of agreement are usually completed every 8 years although we have seen with the 2008 and 2010 changes that on occasion this sort of legislation is called for on a more frequent basis. And of course there is no secret to the fact that the global financial crisis contributed to the need for the pretty rapid reaction—or very rapid reaction for the IMF—in 2010 well in advance of the expected 2016 review. 
Since the International Finance Agreements Act 1961 came into force in that year when Keith Holyoake would have been the Prime Minister of New Zealand it has been amended seven times—in 1966 1968 1975 1976 1992 1998 and 2007. Of the seven amendment Acts four amended the articles of the IMF—those in 1968 1976 1992 and 1998—and the three other amendment Acts gave effect to New Zealand’s membership in other financial institutions. It is important to note that once the requisite majority of members have accepted any amendments to the articles these changes are applied to us whether or not we have passed our legislation. So we are in a relatively unusual situation where there is the possibility of our having an obligation that has not been recognised in New Zealand law. Members on this side of the Committee think that it is important if we can to as far as possible align New Zealand law with the obligations that are put on us. 
There are additional reasons here because leading up to the 2008 reforms and then again for the 2010 reforms—and the 2008 reforms are already in effect—we supported both those sets of reforms. Therefore unless there is a very good reason for the Parliament not doing it I think it is appropriate for Parliament to ensure that the reforms that we have supported internationally are then reflected in New Zealand law. It is a matter I think of keeping our word and honouring our international obligations. Of course there are a lot of countries around that do not do that. In fact probably the lead country with international obligations in this area the United States is the country that is one of the worst at fulfilling its obligations in other areas—the United Nations for example. But New Zealand is a country where I think there is a—probably multipartisan but certainly—bipartisan approach that where you give your word to an international organisation or where you are a member of an international organisation and there are obligations you meet them. Of course if Parliament did nothing or if it disagreed with these changes then the changes would nevertheless come into force for New Zealand with effect from the date that they come into force for all IMF members. 
The point that a number of members have made and we will get to—I just want to do an overview of it—is that we are very very concerned about the suggestion that future updates will be done by regulation. There is a matter of balance in this.