Cunliffe David: Crown Retail Deposit Guarantee Scheme Bill — First Reading Second Reading In Committee 
Cunliffe David: Crown Retail Deposit Guarantee Scheme Bill — First Reading Second Reading In Committee 
[Volume:657;Page:6099] 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 Debate on the commencement and title—by convention as you have said Mr Chairperson—is an opportunity for a relatively broad-ranging discussion of the key themes of the Crown Retail Deposit Guarantee Scheme Bill. 
I will start with the commencement clause. The commencement date of the bill is 31 December 2011 which is the date the existing guarantee scheme continues until. That carries on from the earlier date of 12 October 2010. We have said that the decision to extend this commencement date to cover a period similar to the Australian legislation is appropriate because it avoids the risk of the flow of funds to Australian institutions. We have also said we think that the amount of time spent scrutinising the bill has been inappropriate. There has been no select committee consideration and the time in the House has been under urgency. That time will be half a day and it will be all New Zealanders will hear. 
Many thousands of New Zealanders will be worried about their funds. As my colleague Lianne Dalziel has said people want to know whether their fund is covered. They might want the opportunity to look it up on the Treasury website. Of course they will not find the answer because this bill is only framework legislation. It does not even vest the whole policy; that has to be promulgated by the Minister through the  
Gazette  
and regulations. The public does not have an opportunity to see how this scheme affects them. We know that for many investors particularly those who have been burnt in the finance company collapses this can be a matter of huge personal consequence. So the commencement date matters and it matters because there really was time—and I think the Minister of Finance alluded to this when he took a call at the end of the debate on Part 1—if we had been pushed to have a contracted select committee process. It is a disservice to the public that that process was not allowed and I invite the Minister to take a further call. Perhaps he would be willing to change his mind at this point and allow a further process of some kind perhaps some further consultation with the public before he promulgates his regulations under the  
Gazette 
. That might be a compromise. 
With respect Mr Chairperson I say that if the rest of the Part 2 debate had been allowed we would have touched on the fact that the Minister has not taken any calls since Part 1. He has not taken a single call to defend the two key issues: why we are leaving the banks out; and when the non-banks are in why we are setting the threshold at BB. BB is an uncomfortable middle ground in some ways is it not? For many particularly smaller finance companies the cost and difficulty of process of going to a rating agency and getting a rating would be prohibitive. Some will not make the BB cut. I am not saying that the Minister is wrong to have signalled BB but how would the public know? The Minister has not deigned to take a call and defend that key issue. The public deserves to know from the Minister why the rating is BB. Why not BB+ BB- or BBB? It is sub-investment grade but it is only just below. I ask the Minister whether that is the rationale. The public would like to know because people will be worried about their own schemes and where they fall on the rating scale. 
Hon Darren Hughes 
: He’s good at schemes! 
Hon DAVID CUNLIFFE 
: He is good at schemes as my colleague has said. 
Another thing the public will want to know is why the maximum threshold was set at $500000 per institution deposit or $250000 per non-bank institution deposit. Why bring it down from $1 million which was the previous institution limit? Why contract that? To be fair to the Minister I say that there may be an argument about weaning the public and the finance sector off the guarantees but again it would be proper for the Minister to take a call to explain the logic. This is his policy. He signalled it a week ago but he has not been subject to parliamentary debate on the very heart of this issue. It is appropriate that he takes a call because this bill is the framework bill that gives the Minister the power from Parliament to the executive to promulgate those or any other regulations to manifest his policy. 
Hon Darren Hughes 
: It’s important enough for urgency! 
Hon DAVID CUNLIFFE 
: If it is important enough for urgency it is important enough for the Minister to say to the public of New Zealand why the figure is $500000 and not $1 million why the rating is BB and not BBB and why he is doing it this way with no select committee process and not giving the public an opportunity to talk. 
The Minister is not hugely known for wanting participatory public processes. There was an earlier comment that he was desperate to shut down the parliamentary banking inquiry. The poor old National members on the Finance and Expenditure Committee had proposed an item of business to hear from the finance and banking sector around the more narrow issue of the pass-through of official cash rate cuts into retail short-term rates. They put up the motion and then if hearsay is to be believed a week later under pressure from the Minister they voted against their own motion leaving the public to wonder what on earth was going on and what could be the motivation for that backflip. The public believes that somehow the Minister roared like a lion in Parliament about protecting the public from voracious banks. But then after a couple of phone calls from the chairman he rolled over and forced his own MPs to stymie the banking inquiry. His office has been flat out on the phone. We have not been able to get a phone line into the Minister’s office for the last 3 weeks. The staff were on the phone the whole time trying to stop banks and finance institutions from turning up at the inquiry. Well tough luck. They missed out: there were 50 submissions and a dozen very substantive briefings. 
What did we learn? We learnt first that banks have been after all is said and done inappropriately failing to pass through cuts to the official cash rate. It is hard to put an exact number on it but it is between 0.5 percent and 1 percent of somebody else’s money. Mr Boscawen will take note because he is very strong on those issues and good on him. It is 0.5 percent to 1 percent of someone else’s money with no reasonable explanation in the data despite some acknowledged increases in costs—but not enough to count. 
Even more important—and this is where it comes back to the coverage of this bill—we are unearthing terrible difficulties with the impact of the official cash rate on the monetary system because every time it is raised hot money is sucked in which expands credit and lifts demand and has the exact opposite impact of what we wanted it to do which was to cool off the housing bubble. It leaves us with an underlying problem that the Minister we hope will address in some way when his Tax Working Group reports and that problem is what we do about preventing the next housing bubble. The commencement and title of this bill are about debt securities and in Part 2 we heard that the total volume of debt securities is now 140 percent of New Zealand’s GDP rising at 10 percent per annum with 90 percent of it funnelled through the banks into the property sector. That is where the money that this bill will cover goes. The point is is it good for anybody? Is it good for our manufacturers? No. Is it good for our exporters? No. Is it good for the real economy? No. New Zealand will not pay its way in the world by speculating real estate. It cannot be done. We have a trade deficit and we have a current account deficit of which two-thirds to three-quarters is the bleed from the banking sector of offshore repatriation of profits. How big are the profits? They are bigger than the profits the entire NZX50 makes. That is how big the problem is. That is the context within which this bill fits: a financial system that is fundamentally misaligned to the needs of New Zealand. 
What is the Government doing to address it? Why does the Minister not take a call? If he will not address this bill he should tell us what his plans are to address that misalignment. New Zealand’s future depends on getting capital to people who make things build things sell things and export things so that we can earn our way in the world. 
Paul Quinn 
: It’s a pity you didn’t understand that for 9 years. Where were you when we needed you? 
Hon DAVID CUNLIFFE 
: Now the Government benches are getting excited because we are getting a bit close to the truth. 
Budget 2009 was an idea-free zone. What was the Minister doing for 9 long years in Opposition if he came into Government without a clue what to do and had no new ideas in his first Budget? Not one. Oh sorry I missed one: to suspend superannuation payments for a decade. That was it. His solution to the recession was to ruin superannuation. Nobody in New Zealand believes that this Government can maintain entitlements without pre-funding superannuation. It has wrecked it for a decade. 
A member points to the bill. If we had had more time on Part 2 we would not be having such a broad-ranging debate on the title would we?