Cunliffe David: Crown Retail Deposit Guarantee Scheme Bill — In Committee Third Reading 
Cunliffe David: Crown Retail Deposit Guarantee Scheme Bill — In Committee Third Reading 
[Volume:657;Page:6110] 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I appreciate the opportunity to take a quick call on this discussion on the bill’s title and commencement. I will pick up on a couple of themes that my colleagues have raised. My colleague Lianne Dalziel has rightly raised the issue of process and the lack of consultation and she was very effective in that regard. I also realise that we have had some important discussion by the Hon Lianne Dalziel and the Hon David Parker around collective investment vehicles and the fact that they are excluded from the coverage of the bill. 
The Labour caucus has had particular concern about the status of bonus bonds. Many hundreds of thousands of New Zealanders have bonus bonds. They are an important part of investment for many small investors—rational or otherwise. Bonus bonds are excluded because they are a form of collective investment vehicle. The analysis of the bill is that 70 percent of the underlying securities are covered through various means by the intended legislation. But none the less we considered introducing an amendment to specifically list them. However we decided that it would do too much damage to the structure of the coverage and we moved away from an amendment. But I say particularly to bonus-bond holders that the Labour Opposition has specifically considered their case. 
Craig Foss 
: Declare your interest. How many bonus bonds do you have? 
Hon DAVID CUNLIFFE 
: The member will be pleased to know that I have no particular investments in New Zealand whatsoever in order to avoid just those questions. 
I will touch on a very serious theme which my colleague David Parker raised—that is the concentration of risk. There are two aspects. The first is the concentration of risk in entities that are equal to or greater than a BB rating. That will cut from the market those smaller institutions that cannot make a BB rating. We welcome the Minister back into the Chamber. Many of those investment holders will move to larger institutions primarily the banks. The big banks will increase market share at the expense of small companies. Big banks already hold 95 percent total market share as reflected in the premium stream. That is the first aspect; that is one side. 
The second aspect of concentration of risk is the source of the funds. Ten years ago about the time I entered Parliament inbound foreign investment to New Zealand came roughly equally from five sources—Australia the United States the United Kingdom Asia and all others. Now 80 percent of it— 
Hon Lianne Dalziel 
: I raise a point of order Mr Chairperson. I am sorry to interrupt my colleague but I thought the Standing Orders require the Minister responsible for the bill to be in the chair when he or she is in the Chamber. 
The CHAIRPERSON (Hon Rick Barker) 
: I call on the Hon David Cunliffe to continue. 
Hon DAVID CUNLIFFE 
: Thank you. We welcome the Minister to the chair. He has checked his numbers this morning and found they are still there which is good. It must be a trying time for his camp but we wish him well. 
Ten years ago investment was from five sources; now 80 percent of it comes from one source: Australia. That situation has pros and cons. The pros are that we are fortunate that the Australian banking system is the soundest in the world. A large share of the world’s triple A rating banks reside in Australia. That is a good thing. 
Craig Foss 
: Most sound. 
Hon DAVID CUNLIFFE 
: The Australian banking system is the most sound in the world as my colleague says which is to be welcomed. I am not going on a roo hunt here but I am worried about strategic concentration of risk wherever that risk came from. When one has all one’s eggs in one basket one becomes rather more dependent on the basket. The fact is that when 80 percent of our inbound foreign direct investment comes from one country we run the risk of what they call in economics the marginal market phenomenon. They are much more important to us than we are to them. 
In the banking inquiry a very interesting fact came to light which was that approaching 30 percent of the book debt of the four big banks in Australia is now denominated in New Zealand dollars or New Zealand securities. It is the old phrase that when one owes the bank $100 one has a problem and when one owes it $100 million the bank has a problem. Surprise surprise! Australia is starting to worry about the systemic risk of its investments in New Zealand. That is why in the last 2 weeks we have had the call from Australia from Ralph Norris to merge our regulators and to have the Australian Prudential Regulation Authority take over financial supervision in New Zealand and we have had John Key fly the kite of a common currency. Make no mistake: when the Prime Minister says that we want to adopt someone else’s currency he is not doing it by accident. He did not wake up one morning with a rush of blood to the head.