Joyce Steven: Motions — Reserve Bank—Ratification of Funding AgreementText is incorporated into the Bound VolumeJoyce Steven: Motions — Reserve Bank—Ratification of Funding Agreement[Sitting date: 04 June 2015. Volume:706;Page:4346. Text is incorporated into the Bound Volume.]Hon STEVEN JOYCE (Associate Minister of Finance)on behalf of the Minister of Finance: I move That pursuant to section 161(2) of the Reserve Bank of New Zealand Act 1989 the House ratify the funding agreement entered into by the Minister of Finance and the Governor of the Reserve Bank of New Zealand pursuant to section 159 of that Act on 26 May 2015 and presented to the House on 3 June 2015. The Reserve Bank’s operating expenditure is funded from its gross income and apportioned under a 5-year funding agreement. This funding agreement applies from 1 July 2015 to 30 June 2020. The Act provides that funding agreements apply for 5-year periods. The current agreement expires at the end of this month. The Reserve Bank makes a profit each year and a dividend is expected to be paid to the Crown after allowing for the bank’s capital requirements. Since 2008 the Reserve Bank’s responsibilities have expanded in a number of areas including prudential supervision of insurers and anti - money-laundering compliance as well as developing its macro-prudential policy capabilities and tool kit. Having acquired and invested in these capabilities a period of consolidation is planned for the next 5 years without compromising the quality of core outputs. The agreement reflects the bank’s recognition of the tight fiscal position.This agreement sees the Reserve Bank’s core operating expenditure profile which excludes the cost of issuing banknotes and coins increase marginally from $49 million in 2014-15 to $49.6 million in 2015-16 then increase to $52.1 million by the final year of 2019-20. The increase in core operating expenditure over the 5 years is modest averaging about 1 percent per year and below the target rate of inflation. Cost growth will be minimised as a result of cost-saving initiatives including a restructuring of the workforce and operational expenditure that commenced in February of this year. There are limited new initiatives included in the agreement and limited provision is made for contingencies to allow for unforeseeable priorities that are not of a scale to warrant seeking a revision to the funding agreement. The agreement includes funding for issuing banknotes and coins including the provision of an additional $35 million in total to upgrade the country’s banknotes. This would ensure New Zealand’s banknotes keep up with technological advances in security features. The transparency costs associated with issuing banknotes and coins are classified separately from core operating expenses.Over the course of the current agreement the Reserve Bank has continued to strengthen its performance developed a more integrated approach to policy and enhanced its infrastructure and risk management. The Government expects it to deliver excellence in outcomes while providing leadership across its entire range of activities. The governor understands the need to use the resources he has available to best effect. The Reserve Bank faces a full agenda in the years ahead to help position the New Zealand economy for sustainable expansion while maintaining price and financial systems stability. Ratification of this new 5-year funding agreement is evidence of a commitment by Parliament that the Reserve Bank remains operationally independent and that it is equipped to fulfil the range of roles that Parliament has given it. I therefore ask for the House’s support in ratifying this new funding agreement.