Norman Russel William: Financial Markets (Regulators and KiwiSaver) Bill Auditor Regulation and External Reporting Bill — First Reading 
Norman Russel William: Financial Markets (Regulators and KiwiSaver) Bill Auditor Regulation and External Reporting Bill — First Reading 
[Volume:667;Page:14301] 
Dr RUSSEL NORMAN (Co-Leader—Green) 
: 
 I rise to speak on the Financial Markets (Regulators and KiwiSaver) Bill and the Auditor Regulation and External Reporting Bill. 
It is an interesting day in the House when we have bills before us that seek to reintroduce some degree of regulation to the financial markets. It is paradoxical that at a time when the ACT Party is collapsing internally the ideology that sat behind ACT requires overturning after the catastrophic effect that that ideology has had on the New Zealand economy. These bills in some respects try to address some of the huge problems that were left by the embrace by the right wing of National and of Labour through the 1980s and 1990s of the ideology of laissez-faire and a low level of regulation. It seems to me that we are having to clean up after two decades of disaster as a result of that embracing of the ideology of laissez-faire—of letting the market decide everything and believing that we do not need proper regulators. After maybe two decades of catastrophe as a result of that embracing of the ideology that underpins ACT which underpinned part of the National Government and the Labour Government in the 1980s and 1990s we are having to try to fix it up here today. 
The Financial Markets (Regulators and KiwiSaver) Bill seeks to restore investor confidence and to promote fair efficient and transparent markets. It pulls together functions and roles currently dispersed amongst several agencies and takes a more integrated approach. It is important that KiwiSaver schemes in particular are monitored and risks minimised as so many people rely on these for their long-term financial security. Many are still under the misapprehension that the schemes are Government-guaranteed. 
It is clear that the deregulation of the 1980s and 1990s was a failed experiment. It has done serious harm. Very few people would not have a war story whether personal or of a family member or friend of being caught up in the financial collapses that resulted from the deregulation of the late 1980s and 1990s. Deregulation opened up the way for greed. It was an opportunity for some people to exploit and gain from the less well-informed trusting people—who often were persuaded by celebrity endorsements—and sheer financial stupidity. The Greens will support this bill as it is a useful mechanism to give some comfort to investors and potential investors. 
The bigger picture is that in New Zealand and globally investor confidence and indeed the confidence of those not directly participating in the financial markets have been seriously undermined and that confidence is unlikely to return as people realise that more is broken here than inadequate regulation poor oversight and sharp or often outright corrupt practice. There is a much more profound flaw at the base of our economic system and that is not a problem that is amenable to mending by any single bill as important as it is that we amend some of it. 
Tim Jackson the Economics Commissioner for the UK Sustainable Development Commission has outlined the deeper-seated problem in his report  
Prosperity without Growth 
. The report highlights the inherent structural flaws of the economic system predicated as it is on the assumption of continued and unending economic growth. He says: “The market was not undone by rogue individuals or the turning of a blind eye by incompetent regulators. It was undone by growth itself.” He demonstrates that the dominant economic model was always ecologically unsustainable and has now proven to be economically unsustainable as well. He also on a more positive note makes the point that the economic crisis and its ongoing effects also present us with a unique opportunity to invest in change to put aside the short-term and limited thinking and to look for means and practices whereby we can still survive and flourish but also reduce our material impact on the planet. 
The Greens will be hosting an economic seminar later this year—and we look forward to the participation of members from other parties in the House—where some of the possibilities for positive change can be proposed and debated. A debate starting from first principles on the purpose and form of our economy and the base assumptions underpinning it needs to occur as a matter of urgency if we are not to soon discover that remedial measures like those proposed in this bill while necessary and useful in the interim are far from sufficient. 
I will speak now on the second of the two bills before us tonight the Auditor Regulation and External Reporting Bill. In similar fashion to the Financial Markets (Regulators and KiwiSaver) Bill this bill has a worthwhile purpose and as such we will support it but it also shines some light on an industry that needs to come to terms with the realities of international and increasingly local expectations about the profession’s scope and the potential for it to make a more holistic contribution to a successful and sustainable economy. 
The bill to some extent acknowledges the age-old dilemma of who will guard the guardians. A great deal of trust has been placed in auditors and this bill sets out to strengthen the regulatory regime within the Financial Markets Authority or FMA with the authority charged with overseeing a new licensing system for auditors and being responsible for monitoring the adequacy and effectiveness of the industry’s regulatory systems and processes for overseeing auditors. This response to the financial crisis will also contribute a degree of investor confidence in our financial markets. 
It is interesting to read in the bill’s explanatory note the comment that “self-regulation is no longer within the range of international acceptability.” Yet self-regulation of course has been the ideology of New Zealand Governments since 1984 through to 1999. It is incredible what a failure that ridiculous experiment in self-regulation has been. It has resulted in catastrophe and suffering for tens of thousands of New Zealanders who have lost their savings because the ACT Party ideology became the official ideology of the National and Labour sides of the New Zealand Parliament for so many years. Despite regulation being somewhat antithetical to the National Government’s core philosophical position it is bowing to international pressure to better and more actively regulate in this area and let us hope it does it well. 
It is unfortunate that the Government seems unable or unwilling to go further and to take the opportunity to encourage or even over time oblige the practitioners the chartered accountants to adopt what is emerging as best practice internationally: to bring together not only financial but also environmental and social information into accounting standards and practice. After all what does it matter if we have great accounting standards if they lead us to destroying the planet on which we depend for our very survival? 
The profession has always measured and reported upon the flow of money through a business an organisation or indeed an economy. The New Zealand Institute of Chartered Accountants among others has over time looked at the various mechanisms and models for extending accounting and auditing practices to measure the whole of a business’s activity and the effect of that activity—measuring and reporting the environmental and social costs and benefits of business and so giving a much clearer and more complete picture of its real value and its real influence. A genuinely integrated transparent form of accounting is becoming commonplace in many countries and sustainability reporting has been adopted by some of our largest and most successful companies locally as part of their regular cycle of reporting. Not only does this make a positive contribution to brand value; it gives our exporters a means to protect themselves against claims from other producers closer to the market that we are not able to compete in terms of the sustainability of our products and services. The present Government’s distaste for the word “sustainability” is well documented but in this instance it would do well to acknowledge and accept the inevitable; to be at least a follower of the international trend to whole cost accounting and to facilitate the development of expertise and acceptance of the new models within the profession. This is after all the 21st century not the 19th century. 
These bills are useful in terms of repairing some of the shortcomings of our current approach to finance and economy. The challenge now is for the Government to display some courage and willingness to recognise that some things cannot be fixed and to adapt to new realities and new demands on a finite planet. Substantive and fundamental change in our economy is inevitable. We can choose to lead and work to manage the transition and seek to achieve the most positive outcomes socially environmentally and economically or we can passively wait for change to roll over us.