Goldsmith PaulHon PAUL GOLDSMITH (National): The National Party will support this motion. We do so however with some misgivings which I'll come to later. But we certainly need a strong Reserve Bank in this country in order to perform the important roles that it has around price stability and latterly its focus on employment and certainly the stability of the financial system at a time when the economy is weak and where we entered the COVID recession already in recession with a slowing economy. We now face an enormous increase in our public debt and the need for households in New Zealand to pay back that debt over the next few years—an extra $80000 per household of debt has been signalled in Budget 2020. So we have a critical period in the economic life of our country coming up and it certainly requires good economic management from the elected officials—and we'll be outlining our case for that over the next couple of months—but it also requires strong financial institutions and the Reserve Bank is one of those. So it should be appropriately funded as it has here.One area of concern though is it is a very substantial increase in spending. In the 2018-2019 year the bank spent $76 million. So it's increasing it 50 percent up to $115 million as outlined in this agreement. A 50 percent increase in your spending is fairly substantial and if that was the general pattern across the public sector we would be in a terrible financial situation. It worries me somewhat that the Minister of Finance has been so ready to agree to the scale of this increase and it certainly behoves the Governor of the Reserve Bank to justify that carefully. We've seen significant increases in staff and significant increases in the social media team from five to 14. We've seen a substantial increase in communications now up to 17; and the overall staff numbers are going from 250 up to 468—a colossal increase in staff numbers in the Reserve Bank. We'd like to hope that all of those are justified but we worry that there might be an element of elephantiasis emerging.Certainly we would normally expect the Reserve Bank to lead by example in the public sector. If we go back to the earlier period say when Bill English drew up this agreement from 2010 to 2005 what was envisaged was a 1 percent increase per year. Now we're in an era of 50 percent increases. Well of course what does it matter? Money grows on trees as some people would think. But it doesn't actually grow on trees. So before you increase things by 50 percent you have to have very good justifications.Now there is some justification in the extended remit of the bank and the further supervisory work that it needs to do. And that again is something that needs to be carefully watched. I mean every year the IMF and other people will say we need to do X Y and Z. But it is a concern of ours on this side of the House that the greatest growth industry in this country in recent years has not been exports has not been food produce it's not been rockets or anything like that it's actually been compliance. Compliance has been the greatest growth industry in this economy for a long period of time. The Reserve Bank has been very much at the forefront of that. Some of that is justified but some of it needs to be questioned because ultimately it's consumers that pay for all the compliance that is added right across the banking sector in those areas regulated. Some of it absolutely is justified but we'd be expecting the Reserve Bank to be watching that very closely.What we've also seen is the extension of the bank's work. The Reserve Bank of New Zealand Act gave the bank enormous powers in terms of it being independent to conduct monetary policy. So it's unusual and unique across the public sector in that it's given a bunch of money and it is independent and doesn't answer to Ministers in the normal way. The deal was that politicians didn't have a control over monetary policy in the lead-up to elections which we were worried about. There were some examples where the temptation was for Ministers of Finance to reduce interest rates to have a short-term boom in the year before the election to get through. Now we have a similar concern around a Minister of Finance having $20 billion in a potential slush fund in an election period—that's equally of concern. But in terms of interest rates that's why we had an independent Reserve Bank.Now the question is if the mandate starts to expand it's expanded into employment under this law to focus on not just price stability but also to influence employment—that's OK. But it does seem to be extending further and further into climate change. So this bank has substantially increased its focus on climate change and a bunch of other issues that haven't traditionally been regarded as the core preserve of a Reserve Bank which has been focused on price stability. I suppose the warning or the concern that I'd like to express is that the further a reserve bank goes away from a very narrow focus on price stability the more it will start to draw into question the absoluteness of its independence as it goes into more areas where there's much more dispute. If you talk about climate change policy for example there is much more dispute—the Greens will have a very strong view we'll have a strong view and that's fine. That's appropriate. That's democratic. But it's not necessarily the appropriate preserve of an independent institution such as the Reserve Bank. So I'd signal that warning and some of the extra funds that have been consumed by the Reserve Bank relate to these areas such as climate change which are not necessarily what people would ordinarily associate with the focus of the Reserve Bank. So I'd ask them to bear that in mind and also to focus on the expansion of the overall workforce in the bank.So look I'd be very keen to know and will be pressing the Reserve Bank Governor at the next opportunity about what percentage of the increased budget is necessary in terms of the price stability objective what percentage of it's necessary in terms of the financial regulation objective and then what percentage relates to climate change and other activities that are not core activities of the bank in the narrow definition that I articulated earlier.Then in terms of the $60 billion that the Reserve Bank—of course the topical element is that it's moved into this quantitative easing. I would be supportive of extra resources being in place for the bank to do rigorous and proper analysis and to release that. There's a lot of material if you read the material from the bank—a huge amount of material about openness and transparency and the way that they go about doing business. It is important that we have real clarity around their understanding of the costs and benefits and risks of the $60 billion of quantitative easing that it's carrying out at the moment and the bonds that it's buying and what the timeline is and what the process is for returning its balance to pre-COVID levels. What is the plan to get it back? Now if they put the $60 billion into the system what is the exact plan to unwind that? If you look around the world it's not obvious how that works very effectively. And are there any lines in the sand that the bank won't cross in terms of direct funding of Government debt? At the moment it's purchasing debt on the secondary markets and there's plenty of international activity of that sort. But does it cross the line further into direct funding of Government spending or indeed private sector spending? That is a widespread concern.All in all National Party supports this motion. We support a strong and independent Reserve Bank. We are worried that the country is entering a time of economic crisis. We are not confident in the overall political direction that we're seeing. We're seeing a Government which seems to think the economic plan is to spend whatever it takes to get its polling numbers up to the election and spending whatever it takes to get to the election and then sending the bill in terms of higher taxes. They may not necessarily agree with the wealth taxes proposed by the Greens but we'll wait and see. What we need is a Government that has a focus on growing the economy and enabling private sector investment which will be the core to getting New Zealand out of the economic jam that we're in. That party hasn't delivered too much on that side but the National Party will in the next few days. So thank you Madam Speaker.