Willis NicolaNICOLA WILLIS (National): This bill in the current context simply adds to the Government's confused messaging regarding monetary policy. Various speakers in this debate have reminded us about the 1980s and the context in which an independent Reserve Bank was born. I'm reminded by my colleague Simeon Brown that of course he wasn't even born when that happened. It is instructive to recall the context in which the Reserve Bank has had its powers developed but it's also very significant that we look at the more recent history and that's what I intend to do in this contribution. As the Minister of Finance the Hon Grant Robertson outlined at the outset this is one of three bills relating to the institutional arrangements of the Reserve Bank of New Zealand that this Government has introduced. Of course in passing any legislation of this sort the balance that is required to be struck is that between democratic oversight of the Reserve Bank's functions and the need for its operational independence. The very fact that we are standing here debating the frameworks in which the Reserve Bank makes its operational decisions underscores the fact that this Parliament has an incredibly significant role in setting the institutional frameworks for the Reserve Bank and that those are distinct from operational decisions. And of course this is important because the very cute conceit that the Minister of Finance has tried to run in more recent weeks is that somehow any gesture towards actually thinking about what the Reserve Bank does is somehow Muldoonist and interventionist. I would put to you that the very fact we are debating the frameworks in which the Reserve Bank operates makes it very clear that in fact these sorts of debates can be had.In 2018 we had the first step away from the formal independence with the introduction of the maximum sustainable employment goal and the creation of the monetary policy committee (MPC). Concerns about that were well canvassed at the time and there are commentators today who would put to you that that extension of the goal around maximum sustainable employment has potentially contributed to some of the issues we're seeing in the housing market now. But this bill in particular looks at the governance and accountability arrangements. Our main concerns are about the blurring of the lines between the governor the monetary policy committee and the board. And of course we need to be very clear: this new board that's being introduced isn't some completely independent entity; the board members are to be appointed by the Minister. Now we are very hopeful on this side of the House that the Minister of Finance will be very careful with who he appoints to that board and the way in which those appointments are made. But of course it would be very wrong for us not to raise the risk that those appointments could become incredibly political and could thus erode—Hon David Parker: You mean like Don Brash? Dr Brash— NICOLA WILLIS: —the independence of the Reserve Bank. It is vital that we note this because it is quite a shift in structure and I don't see—Hon David Parker: —the man who was governor and negotiated a place on the National Party list.NICOLA WILLIS: —in this bill as it currently sits—and you're welcome to point the measures out to me the Hon David Parker that provide safeguards that would ensure that there wouldn't be politicisation in the appointment of that board.Now the second issue that we see and that we are concerned about in this bill relates to the financial policy remit issued by the Minister of Finance. Again the financial policy remit being issued—this is something that has not existed previously in the way that the bank operates and it does provide potentially for a much larger influence. The bill in many ways actually increases Treasury influence and of course Treasury is the department that operates at the behest of the Minister of Finance reports to him and goes to him for their daily bread—with all respect to Treasury advisers reading the Hansard. So Treasury will now have a much-expanded role with regard to the Reserve Bank; it's both an observer on the monetary policy committee and it's a formal monitor of its duties—a formal role as a monitor. So again we raise our concern about the influence that Treasury will have on the independent way in which that group of people are able to make decisions and the potential for this again to be an arm through which the Minister influences the decision making of the Reserve Bank.Coming back to the new financial stability objective to protect and promote the stability of New Zealand's financial system that replaces the existing requirement to take regard of the efficiency and soundness of the financial system. So this is a significant change. To remove that language around efficiency does change the framework within which the Reserve Bank is making decisions.But as I said earlier a key concern that we have apart from these three levels of decision-making accountability—governor MPC board—and the potential for interference is the context in which all of this is happening. I want to put on the Hansard the record of what we have been seeing in recent weeks in relation to the conduct of the Reserve Bank and the Minister of Finance's influence on it because it is absolutely pivotal to the way in which this bill will operate. So just a few weeks ago Andrew Bayly National's spokesperson said that he was concerned about the Reserve Bank's funding-for-lending programme—$28 billion to be pumped into the economy in order to keep things going—and he said Well wouldn't it be better if that went towards productive uses rather than simply into housing?" and he gave some example of where that had been the case offshore. The Minister could suggest this through a letter of expectation. Now what we then had was this huge overreaction from the Prime Minister saying that that was Muldoonist which it strikes me as very relevant to this debate because here we are changing the very institutional settings in which the Reserve Bank operates allowing the Minister of Finance to appoint a new board to change its remit and to change the way it operates and yet the National Party through suggesting a letter of expectation are somehow the ones that are encroaching on independence. So then what we had from Grant Robertson the Minister of Finance was that actually this all got a bit embarrassing for him because as members of this House know house price inflation in New Zealand is completely out of control and so he wrote to the Reserve Bank Governor and he said that he was looking at the remit of the monetary policy committee and that he would be making a suggestion around change specifically to b(ii) which at the moment requires the Reserve Bank to avoid unnecessary instability in output interest rate and exchange rate. Now there is a lot of debate in the financial community about what this part of the remit actually means in effect at all as it is. So when the Minister of Finance suggested "Well let's add into this house prices" there really is a question about what effect that would have at all. So then we had the slightly unedifying situation in which the Reserve Bank Governor then shoots back a letter in which he politely highlights that in fact it is the Government through its regulatory and fiscal settings that has the most influence on house prices—that actually if we were to look at the underlying issues with land constraint in the Resource Management Act then that would be a better way of addressing these issues.Now we're yet to hear the final say from the Reserve Bank on the suggestion from the Minister of Finance. We're yet to see where the Minister of Finance will land on any final changes. The reason that I put all of this on the record of the Hansard is that here we are in 2020 making significant changes to the governance arrangements of the Reserve Bank and we are doing so in the context of a tit-for-tat back and forth letter exchange between the Minister of Finance and the governor about the very core purpose role and functions of the Reserve Bank in relation to arguably New Zealand's most significant current public policy challenge: that of house price inflation. So is it any wonder that in that context members on this side of the House think that we need to be both careful and judicious and consider very deeply the potential that these changes have to allow the Minister to further encroach on the independence of the Reserve Bank?So this bill in its current context adds to the Government's confused messages regarding monetary policy. It proposes fundamental changes to institutional arrangements and we in the National Party will be listening very hard indeed in the select committee because we believe that the independence of the Reserve Bank is critical."