Cunliffe David: International Finance Agreements Amendment Bill — In Committee 
Text is incorporated into the Bound Volume 
Cunliffe David: International Finance Agreements Amendment Bill — In Committee 
[Sitting date: 19 February 2013. Volume:687;Page:7966. Text is incorporated into the Bound Volume.] 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 It was going to be one David or another. 
The CHAIRPERSON (Lindsay Tisch) 
: Three Davids. 
Hon DAVID CUNLIFFE 
: Almost certainly—in triplicate. I rise to support the amendment proposed by my honourable colleague David Parker to remove the right for the executive by Order in Council to pass amendments to our contribution. One has only to go to the total liabilities which total NZ$1.8 billion in terms of New Zealand’s liabilities to the IMF to understand that this is a serious matter that requires proper parliamentary scrutiny. There has been a tendency for the Government to dispose of little matters like parliamentary scrutiny—to shuffle things through the Cabinet process—as is proposed in clause 4 of this International Finance Agreements Amendment Bill. This clause is fundamentally unnecessary. It is inappropriate given the size of our liabilities and it is inappropriate given the international importance of the institution that we are talking about the International Monetary Fund. 
In that regard may I provide some context which I am sure my colleagues will have noted in their earlier contributions but as this is my first opportunity I wish to raise it now. That is to note that the IMF has fulfilled its role not only as a lender of last resort to developing and distressed economies but also as a contributor of record to international economic debate. What has been remarkable is the way the nature of the IMF’s advice has changed during the last decade in the run-up to during and in the wake of the global financial crisis. I can do no better than to point to this book—which has been provided by my colleague David Parker— 
In the Wake of the Crisis 
 which is edited by Olivier Blanchard the chief economist of the IMF. I refer also to two IMF working papers which I will later seek leave to table—one on growth forecasts and fiscal multipliers and one on the basic mechanisms and appropriate policies for dealing with the global financial crisis. 
What is remarkable about these papers is that the IMF has shifted its views. The IMF is now saying that too much austerity prolongs recession and will inhibit the global recovery from the global financial crisis. In other words its traditional mantra of “Cut costs run surpluses” has been rescinded. And what it explicitly recognises is that fiscal parameters must be seen in relation to what economists call the output gap. Is there sufficient spending power sufficient demand in the economy from mums and dads from private businesses and from the Government to keep everybody working and paying taxes and to keep the ball rolling as it were? What the IMF argues cogently in this paper is that if there is insufficient demand because Governments retrench too quickly that can become a self-fulfilling prophecy. Governments get less tax revenue because there is less economic activity and they then run bigger deficits and fail to make their fiscal targets. They chase their own cuts down a fiscal drainpipe and that is— 
John Hayes 
: It’s not happening here. It’s not happening here David. 
Hon DAVID CUNLIFFE 
: The financial genius in the back row is saying that it is not happening here but in fact it is because the Government’s revenue targets have reduced over the last year and it has had to increase revenue through a new fuel tax a fuel excise. Even so the Government is only just if at all going to meet its surplus target for 2014-15. And you will notice that both Mr English and Mr Key are backing off their earlier categorical language about that. They are finding out if you like the hard way what the IMF has been saying to the world in these papers: do not cut your own throat. The job of a Government is not just to balance its own books; the job of a modern Government is to balance its country’s books to provide jobs and to provide turnover to ensure that the economy is healthy that it can balance its external accounts and that it has an appropriate monetary policy. 
If I might turn to this contribution by the IMF chief economist he has said: “We have moved from a one-target one-instrument world to one where there are many targets and many instruments.” Well why has nobody told the Governor of the New Zealand Reserve Bank? Mr Wheeler’s early comments much as we respect the independence of his office I have to say sound like he is going back to Reaganomics. We need a modern monetary policy and the IMF is telling us that a multi-policy multi-target multi-instrument framework is best practice not the single focus on inflation with the single tool of the official cash rate. 
Finally in that regard I would note that history is repeating itself all over again. We have flagging productivity growth high unemployment and a runaway property market. And what is the Government’s monetary policy response? One day we will do nothing; another day we might raise the official cash rate. But there is nothing that is sector specific no use of macro-prudential tools like loan-to-value ratios or reserve asset ratios nothing that shows that it is learning the lessons published by the IMF but it is happy to rescind the right of this Parliament to comment on a billion dollars plus in financial liability to the same organisation. How is that right? 
Support Mr Parker’s amendment remove clause 4 maintain the right of this Parliament to oversight on our liabilities to the IMF give the people of New Zealand the opportunity to hear why we do it in the first place and make sure that we are a proper global citizen. We are fortunate that the IMF has changed its tune that it is playing a role in fundamentally shifting the international economic debate from 1980s monetarist orthodoxy—high-class neo-liberalism if you like—to something that is a little more balanced. That is not to say that the IMF has gone to finishing school with Karl Marx—that ain’t gonna happen—but at least it is more moderate than it was. So in conclusion support Mr Parker’s amendment strike clause 4 maintain oversight of our contributions to the IMF and take seriously the billion-dollar liability—it is almost as big as the Government has spent on South Canterbury Finance.