Scott AlastairALASTAIR SCOTT (National—Wairarapa): Thank you Mr Speaker. Well the previous contributor Duncan Webb talked about democratic legitimacy democratically enabling the Minister to appoint his favourite buddies to this committee. I would call it political interference. It takes away the independence that exists in the Reserve Bank of New Zealand (RBNZ) today. And it's interesting when this previous contributor talked about independence. He says It is independent but"—"It is independent but"—and that only means that the independence is gone and that it is the democratic legitimacy according to his words that enables the Minister to appoint his or her people on that committee. This bill is redundant. It is a total waste of the House's time. It demonstrates once again the sanctimonious attitude that comes from that side of the House. They've got nothing better to do than make up rules that are just quite unnecessary. The wheel is spinning just fine. The targets for the RBNZ are set and there is absolutely no need to interfere interrupt confuse and cause conflict by setting an employment target or a full employment target. What does that mean in any case? What does full employment mean? Does it mean 69 percent 70 percent or 71 percent worker participation? We thought we had full employment last year but employment continues to rise. So what is full employment?The Government's sanctimonious attitude is already demonstrated by bringing in legislation again prior to today where it is not necessary and the consequence of doing it has other repercussions—unintended consequences in other words. I'm not going to go into any depth but I can talk about the removing of the tenancy fees. That was brought up in question time today: the unintended consequences—or the pretty foreseeable consequences of that.SPEAKER: Order! Back to the bill thank you.ALASTAIR SCOTT: Sure. And of course in this way this employment target is like picking a winner. It's highlighted—to us at least—the priority that the Government has around employment. But that is not necessarily what we need to have a stable and enduring and growing economy. At the end of the day we want people's standards of living to rise day after day after day. A certain level of employment is not necessary for that to occur. The Governor of the Reserve Bank already has a tough job of targeting inflation and has a price stability concern. We've seen that in the last—well in the last Parliament I was on the Finance and Expenditure Committee and we had the Governor of the Reserve Bank reporting in regularly about those two things and they at the time had a difficult situation. We had a raging asset price increase in housing but at the same time we had a very soft and falling inflation rate. In fact the predicted inflation rate was continually supposed to rise on the back of cuts and on the back of reduced immigration but it didn't happen. But the asset prices continued and so we can see the difficult situation the RBNZ was in. Should they cut interest rates further to kickstart inflation only to stimulate further the asset price bubble that was in the Auckland housing market? So already the governor has a very difficult job in balancing those two things: inflation and price stability. Putting another spanner in the works if you like is just going to make the job more difficult. Employment is not influenced to any real degree by interest rates. Employment is all about enabling the employer to employ the next person. The employers employ employees. It's not the RBNZ; it's the marketplace. And it's for this House to set in place structures to enable it to be easy for an employer to employ the next person. Interest rates are almost irrelevant. It's to do with labour laws. It's to do with 90-day trials. It's to do with the ability of employers to take on part-timers or full-timers. Hon Chris Hipkins: Cost of capital. ALASTAIR SCOTT: Cost of capital is—what's your point Mr—Mark Patterson: The exchange rate. We're an exporting country.ALASTAIR SCOTT: That's right. All those things—exactly. I'll agree with that member. I'll agree with that New Zealand First member. It is not just interest rates that affect employment. So are we going to go for a fixed exchange rate to satisfy the whim or the demands of New Zealand First for example because that is part of their policy? But again imagine trying to juggle all those balls in the air. So the point here is that putting employment as a target is only going to create conflicts. So other than all those other things the stability and the policy that the Government sets that is what is going to drive employment up or unemployment down whichever way you want to talk about it.I know it is difficult and it's always a difficult decision to employ another person. I have my own small business and it is always a concern because one must take on the responsibility of an employer when taking on the next person; to be sure that their business will continue to grow to be sure with a reasonable degree of certainty that the economy will perform as you hope and expect. These things are not related to interest rates. So putting in a target for the RBNZ—and they can obviously influence interest rates—just confuses the situation that they find themselves in. For example we have a situation right now where we have high employment. We have high employment and we have high asset prices but inflation continues to be low.Imported inflation—that is the inflation that is caused by the strength of our currency as mentioned; the cheapness of the goods that are brought in from offshore; the price of petrol—continues to drive down our headline inflation our Consumers Price Index. So what is the Governor of the Reserve Bank to do about that? Should he or she cut interest rates to focus on the inflation aspect but knowing that employment is already very high and asset prices are very high? And so the obvious can occur. We could have imported inflation where oil prices are high costs are going up inflation is at 4 5 6 percent but we could still have a low employment rate. We could still have a sloppy asset price market. So should we be cutting rates or increasing rates? And so that is the conflict that this Reserve Bank has already got in the two targets that it has set but now with a third it is just going to be making things much more difficult. I have talked very briefly about the independence of the RBNZ and the importance that the perceived independence of the RBNZ remains. Perception is reality. So by allowing the Minister of Finance to cut across the independence of the RBNZ governors for the purpose of democratic accountability—apparently according to the previous speaker Duncan Webb—just removes some of that independence. It increases the perception of political interference and that is not a good thing. The RBNZ wheel is spinning. It ain't broken. Why are we trying to fix it? It has done an excellent job of maintaining inflation at its target level. It continues to do so. I see no reason to create an issue where there will be debate about the importance of interest rates compared to employment compared to asset prices and it's completely unnecessary—remembering of course the point I started with at the beginning; that the interest rates can be set by the RBNZ but the RBNZ is not the person or the entity that determines the level of employment. It is the marketplace and it is the employer that determines the level of employment."