Curran Clare: Auditor Regulation and External Reporting Bill — In Committee 
Curran Clare: Auditor Regulation and External Reporting Bill — In Committee 
[Volume:672;Page:18295] 
CLARE CURRAN (Labour—Dunedin South) 
: 
 I would like to return to Part 1 of the Auditor Regulation and External Reporting Bill and one of the major issues I would like to address is financial literacy. As my colleague Stuart Nash has just said the bill is about enhancing confidence in New Zealand’s financial markets and the absolute importance of doing that. But one of the things we have to do to get that confidence in the financial markets is to actually ensure that the people who are investing know what they are investing in and have an understanding and knowledge of the financial markets. That is the bit that is really missing in this bill and in all of the accompanying bills. The question has been put to the Minister in the chair the Minister of Defence about financial literacy. I would not mind hearing an answer from him on this issue which has been raised in all readings of this bill and in all the other bills that have accompanied it. The importance of financial literacy is critical because it is not just about the way the markets operate. Markets do not operate on their own—somehow out there in the ether somewhere. It is actually people who invest in these markets. How people invest in the markets and their understanding of them is one of the reasons why the Financial Markets Authority has been established—to try to create more fairness in the system. But the bit that is missing as I have said is about the understanding people have of how the markets operate and the trust they can have in the information they are being given. In order to have that trust they need to understand more about how the markets work. 
I would like to read out some of the work the Retirement Commission has done because I think it has a reference to Part 1. The commission has done quite a lot of work around this issue and if the Minister in the chair the Hon Paula Bennett feels moved to respond that would be quite good in terms of the thinking that the Government has in this area. The Retirement Commission initiated the National Strategy for Financial Literacy in November 2010 so it is quite recent. It states: “With involvement from many individuals and organisations across the public private and voluntary sectors New Zealand’s National Strategy for Financial Literacy was launched in June 2008. The strategy sets the direction for improving financial literacy in New Zealand. It provides a range of approaches that will achieve this improvement. Its focus is on developing the quality of financial education and extending its delivery sharing what works and working together. These strategies together will help achieve our goal of a financially literate population.” It would seem to me that if we have a financially literate population and have good laws in place which are strengthened by the establishment of the Financial Markets Authority by this bill and by all of the other bills that accompany it then we are starting to cook with gas so to speak. 
As I said the bit that is missing—and it has been put across on so many occasions in every speech that has been given on this bill particularly by members on this side—is that we could have the best legislation in the world and can have good intentions but we can still have dodgy practitioners out there who are trying to work their way around it and we have a population that is not necessarily hugely financially literate. I know that in a previous speech on this bill my colleague the Hon David Parker talked quite a lot about this issue and the complexity of this sort of legislation—and coming from a legal background he would know all about that. He talked of how the legislation is so complex and the legislation that accompanies it so complex that it is extremely difficult for the ordinary mum and dad investor or person in the community who has a bit of money—the number of them is declining right now—and wants to invest to understand it. The other issue that has been touched on as well is about the truth-in-advertising issue which was brought up again and again in the Commerce Committee where there is celebrity endorsement of financial products and ordinary people trust the celebrities and what they are saying. When a company is found to crash and people lose all their money this is an extremely difficult issue for the ordinary person. 
I will go back to the National Strategy for Financial Literacy because I would like to know what the Government thinks actually thinks about it whether it is committed to it and what it is doing to support it and how important this is in terms of an adjunct or a complementary strategy that must go with this legislation. Government members said that the worldwide economic downturn in finance company collapses in New Zealand has highlighted the importance of financial literacy and that it is high on the agenda in New Zealand and internationally. Well it might be high on the agenda in New Zealand when we have organisations like the Retirement Commission which is a pretty important organisation turning up to the select committee and saying it is important. But I would like to see where the Government thinks this is important and what it is doing to support it. Around the world they say that the impact of the crisis on ordinary people has created what we call a “teachable moment” for financial literacy. People are more aware that they need to manage their money well but unfortunately their knowledge of how to do it is patchy. Although they say that the ANZ Retirement Commission’s financial knowledge survey in 2009 showed some improvement over the same survey in 2006 it is a reminder that we still have much to do. There was little change in the number of New Zealanders with a low level of financial knowledge. I say to the Minister that that is critical. If there is no change happening on the financial literacy side of the equation where will we see an improvement in this issue? People are important I guess is the message here. 
The survey also highlighted gaps in knowledge in areas for improvement with low income or less education not necessarily being predictors of low financial literacy levels. The take-up of financial education is varied at school level and beyond. We have to ask ourselves why that is and whether it is because it is not being taught or there is not enough emphasis on it and the importance of this issue is not flowing through into the rest of society and through our economy. Evaluation of what works best in terms of delivery is still being developed and as we look for ways to help New Zealanders understand more about the increasingly complex and challenging financial environment it provides the strategy to ensure it is relevant today and I would like to know what the Government is doing about that. I think one of the really good examples of that is the evidence of loan sharks and the impact they are having in Auckland and how with reference to Part 1 this underpins the importance of this legislation and why we are having it. Although financial reporting is hugely important to investors regulators and other financial market participants in the way resource allocation decisions are made there is also an extremely important issue around financial literacy for New Zealanders. 
The question was put that the amendments set out on Supplementary Order Paper 239 in the name of the Hon Simon Power to Part 1 be agreed to. 
Amendments agreed to. 
Part 1 as amended agreed to.