Goldsmith Paul: Public Finance (Fiscal Responsibility) Amendment Bill — Second ReadingText is incorporated into the Bound VolumeGoldsmith Paul: Public Finance (Fiscal Responsibility) Amendment Bill — Second Reading[Sitting date: 25 June 2013. Volume:691;Page:11251. Text is incorporated into the Bound Volume.]PAUL GOLDSMITH (National):It is my pleasure to speak on the Public Finance (Fiscal Responsibility) Amendment Bill. I must say that I am disappointed that the Opposition could not rise above daily politics and find it within itself to support this bill. I do hope that it will reconsider over the next stages. Certainly that earlier generation of Labour Party leaders would not have gone down such a line on such an important bill.There is no question that the public reporting and transparency provisions of the Public Finance Act 1989 have served New Zealanders well for the last two decades in keeping the focus on maintaining low Crown debt levels. New Zealanders have not forgotten the horrors of the past when after each election the true state of the nation’s finances was revealed—in 1984 and in 1990. It was the same with Mr Caygill. So the Fiscal Responsibility Act 1994 which was later folded into the Public Finance Act was one of Ruth Richardson’s greatest achievements. That was followed by 15 years of Budget surpluses something totally unthinkable in the 1970s and early 1980s. People could not believe that it was possible to get back to surplus and we did.New Zealand’s reputation has changed from being a basket case of a country to a place of quality public policy. And successive Governments have focused on maintaining low or prudent public debt levels. It is true that the Labour Government maintained those surpluses for its first two terms. But it is also true—and it is sometimes forgotten by members on the other side—that it did leave the country pregnant with debt for the next 10 years according to the projections that it left behind. That is what we have had to grapple with in this Government and that is why this sort of legislation is so important.Why is fiscal responsibility important? Because quality public policy and practice and sound financial management bring confidence and it is confidence that is so important for the private sector to be able to invest and to create jobs. Conversely the absence of fiscal responsibility leads to a lack of confidence a lack of investment and alack of growth. We see that all around the world today and New Zealand is lucky that we are not in that circumstance.There are a number of new principles brought out in this bill. The first one is that Governments should formulate fiscal strategy with regard to its interaction with monetary policy. There was a fair bit of debate about this during the course of the select committee and we heard some submissions on this point. There were changes made during the select committee process. So to avoid misinterpretation of the intent of this new principle the bill is reworded so that it requires Governments to formulate fiscal strategy with regard to the interaction between fiscal policy and monetary policy. The committee was concerned that there could be a mistaken impression that the relationship was only a one-way one and that fiscal policy should take monetary policy into account but not the reverse and so the changes that the select committee brought in are meant to clarify that.The Labour Party has gone further and we do not agree with its changes. As we heard from Mr Parker earlier the Labour Party focused on this issue of saving. I cannot quite understand why Labour would say that we need to increase saving in this country and at the same time talk about introducing a capital gains tax which is essentially a tax on savings. How would you be encouraging saving if you were introducing a capital gains tax which actually takes all the benefit from saving away from you? And if you say that we have got a savings problem but your policies are all about allowing just a little bit more inflation by softening the approach of monetary policy—I have just been reading the new biography of Margaret Thatcher and she pointed out quite strongly in the 1970s that it is inflation that robs the savings of the thrifty—why would you be encouraging saving but at the same time doing a little bit more to have a little bit more inflation when money is no longer counted as the store of value?The Greens are very keen to water down the milk by debasing the currency. Maybe they have changed their minds on that but I do not believe it. If money can no longer be counted as a store of value then savings and investment are undermined. That is why it is so important that we have a good strong sound system of fiscal responsibility and that is why this bill and these changes to the Public Finance Act will I have no doubt improve the standing of New Zealand’s financial management and will benefit the country as a whole. So on that basis I commend this bill to the House. Thank you.