Parker David: International Finance Agreements Amendment Bill — In Committee 
Text is incorporated into the Bound Volume 
Parker David: International Finance Agreements Amendment Bill — In Committee 
[Sitting date: 19 February 2013. Volume:687;Page:7948. Text is incorporated into the Bound Volume.] 
Hon DAVID PARKER (Labour) 
: 
 My understanding is that the title debate—is this clause 1 the title debate? 
The CHAIRPERSON (Eric Roy) 
: Correct. 
Hon DAVID PARKER 
: Thank you Mr Chairman. This is our opportunity to make some more general comments which I will come back to also. 
This International Finance Agreements Amendment Bill comes about because there have been changes in the relative economic weight of different nations in the world. The International Monetary Fund bails out countries when they get into difficulty but because of those changed economic circumstances of some countries that have grown more rapidly than New Zealand in recent times—the likes of China—they can be brought into the international fold and can contribute in a way that they were not able to in yesteryear and accordingly the percentage that New Zealand contributes to the International Monetary Fund decreases as a percentage of that greater pool. At the same time the amount that is being drawn in respect of each percent is increasing because the International Monetary Fund has needed to draw upon more funds than it did previously. So the overall effect for New Zealand is that while the percentage of the total pool that we contribute to goes down because the overall pool is larger the overall effect is actually not that much for New Zealand in that the total amount that we contribute to that larger pool is not greatly affected. 
This points to a number of things. Firstly it shows that relative to growth rates in the rest of the world New Zealand has not done as well as the average has been in the rest of the world including developing countries in recent decades. In my opinion that is largely because our settings have not allowed our export economy to prosper. Indeed I think that the Minister of Finance was on record at the time he came to power as saying that this was one of New Zealand’s problems: that the economy was too weighted towards consumption in New Zealand and not enough towards either savings or the export of our goods to the rest of the world which enabled us to pay for our imports and interest. Of course when a country does not cover the cost of its imports and interest from its exports it suffers a current account deficit which means that effectively we are drawing down on the balance sheet of New Zealand except to the extent that that current account deficit relates to capital expenditure which improves the net wealth of our country. For decades our current account deficit has not been related purely to capital improvements in New Zealand. It has been a diminution in our balance sheet and that is effectively one of the reasons why our relative share of the world contribution to the IMF is going down. 
The Labour Opposition is voting in favour of this bill but there is one area where we would prefer it was differently structured and that relates to the ability to change schedules in the future by Order in Council. The effect of these measures can have a significant fiscal effect on New Zealand because the amount that can be required pursuant to the international agreement under which the IMF operates—changes to the percentages—can change the amount that New Zealand taxpayers are either liable to guarantee or liable to pony up with in real money. In the Labour Party we would have said that those changes are better made by way of a parliamentary change to this framework so that we bring parliamentary attention to this change in the amount that New Zealand has to contribute to the IMF. It does not happen very often that these percentages change and we do not think that that should be able to be done by Order in Council. 
I know that the countervailing argument which is well covered in the report back from the Finance and Expenditure Committee is that under the agreement we are effectively bound as an international citizen to go along with changes that are proposed once a certain percentage of the countries that belong to the IMF agree to the changes because you will never get absolute unanimity amongst all countries in the IMF that the IMF percentages or total amount should change. We agree that that is an appropriate process for the IMF because it is unrealistic to expect unanimity and we also agree that as a general rule New Zealand should go along with those international agreements because we benefit from a world that is made better by international cooperation through the likes of the International Monetary Fund. 
But that to us is a different question as to whether those changes should come back to Parliament and that we have the opportunity to discuss them. If for example New Zealand was suffering the consequences of bullying behaviour in respect of the large economies as a consequence of manipulating their exchange rates to the detriment of our exchange rates and this was a serious and long-term problem there may come a point at which Governments in New Zealand or Opposition parties or this Parliament want to express their displeasure at some of those international behaviours by actually taking the chance when we have something like an IMF amendment to the rules to actually say: “Well if you want us to go along with these international treaties there has to be a bit of fairness coming the other way.” in respect of issues that affect the New Zealand economy in an unfair way. 
So for those reasons and also because these things are pretty rare we think that these sorts of amendments ought to be by way of Parliament amending the primary legislation rather than leaving it to the Government by Order in Council to change the provisions that apply to our contribution through the International Finance Agreements Act 1961 which as I understand it has been changed in this way only every decade or so since it was originally enacted. I do not think that is too onerous for this Parliament. I do not think it is so regular as to fall within the formulaic sort of action that should be by way of regulation rather than parliamentary enactment. 
Just on one point there is an amendment that Brendan Horan has been proposing. Thank you for that amendment on Supplementary Order Paper 175 Mr Horan. We did consider it and you might find it somewhat inconsistent that I argue against the regulation-making power and then not support Mr Horan’s amendment which is to put some limit on the date on which the relevant section can come into effect which currently is open-ended and comes into effect when the Order in Council is passed. Although we oppose this being done by regulation we recognise that if it is to be done by regulation it is difficult in practice to have an end date to the date on which that regulation will take effect because the Government through no fault of its own does not know when it is that a sufficient number of member countries in the IMF will have ratified the changes in order for them to come into effect. So although we would prefer this to not be done by regulation if it is to be done by regulation then it is impractical in our view to have a date such as was proposed in good faith by Mr Horan because it really depends on the actions of other countries to ratify the changes that are being proposed. It would apply once ratified by 85 percent of the countries by value which effectively means the United States—I think it is the standout country that has to ratify—and we really cannot control when the US does or does not ratify. If that date is delayed because of events that we cannot currently predict we would still want New Zealand to be able to give effect to the changes that have been agreed at the IMF because we think they are wise and necessary. Thank you.