Peters Winston: Reserve Bank of New Zealand (Amending Primary Function of Bank) Amendment Bill — First Reading 
Text is incorporated into the Bound Volume 
Peters Winston: Reserve Bank of New Zealand (Amending Primary Function of Bank) Amendment Bill — First Reading 
[Sitting date: 17 October 2012. Volume:684;Page:5940. Text is incorporated into the Bound Volume.] 
Rt Hon WINSTON PETERS (Leader—NZ First) 
: 
 I move  
That the Reserve Bank of New Zealand (Amending Primary Function of Bank) Amendment Bill be now read a first time. 
 I nominate the Finance and Expenditure Committee to consider the bill. In 1989 when Parliament passed the Reserve Bank of New Zealand Act it was hailed as a watershed moment in New Zealand’s political and economic history. In fact it represented a major ideological shift in the way monetary policy is implemented. 
Paul Goldsmith 
: Thank goodness for that. 
Rt Hon WINSTON PETERS 
: Not only did it result in a new interest rates - centred framework but also the Reserve Bank was given full operational independence from the Government for the first time—and if anybody says “Thank goodness for that.” well if his predecessors had not unleashed the dogs of inflation so bad were they that the overnight rate at three times the lending rate went past 1100 percent on 3 different nights. The proponents argued that this was a fundamental step change necessary to lift New Zealand out of the depths of social— 
Paul Goldsmith 
: It took you a whole minute to come up with that. 
Rt Hon WINSTON PETERS 
: —no this was when you were running around in school pants—and economic despair by conquering the greatest evil of all: inflation. In fact controlling inflation became an end in itself. They told us this would lead to a more efficient more productive more stable and more prosperous economy. We were all going to be better off. They based this on the belief that raising or lowering interest rates can create price stability without any long-term costs and all but a few of us believed it. The fact is that they were wrong and 23 years later we are grappling with the consequences. 
The purpose of this bill therefore is to challenge those failed monetarist ideas. The belief that inflation should always take precedence over other critical macroeconomic factors is not only absurd but also reckless in the extreme for a nation like ours. The biggest side effect of all has been a high and volatile exchange rate—the most volatile in the world. We are seeing it right now. The dollar is at US83c and climbing. This has put enormous strain on the tradable sector the engine room of the New Zealand economy where real wealth—and I emphasis that: real wealth—is created. Since 2008 a total of 40000 jobs—where people are concerned the human factor and families as well—have been lost in the manufacturing sector alone. On average that is almost 100 per week—not foreigners and aliens but New Zealanders and New Zealand jobs being lost—and those numbers continue to increase. In the last month there were 100 jobs lost at Tiwai Point 120 redundancies at Solid Energy’s Huntly East mine and up to 100 job losses at the Kawerau mill not to mention the 400 jobs on the line at Spring Creek— 
Hon John Banks 
: How will this bill help it? 
Rt Hon WINSTON PETERS 
: —or the many other foreclosures and redundancies that go unreported in the news media. It is great to see someone has turned up at last to hear an economic lesson he should have learnt a long time ago when he used to say that he represented provincial New Zealand. Some of us remember the facts; some do not of course. Meanwhile the latest Statistics New Zealand data confirms that the real economy is still not recovering from the economic downturn of 2007. There those members were boasting just 2 months ago about the outcome of the latest figures. That was a blip and we are back going down again. The Manufacturers and Exporters Association estimates that the overvalued dollar has cost the sector up to $10 billion over the past 3½ years—$10 billion. Ten billion dollars; 40000 jobs. 
Maggie Barry 
: How many? 
Rt Hon WINSTON PETERS 
: Again for the horticulturalist—$10 billion; 40000 jobs. And I tell you if you are in the kiwifruit industry and in horticulture or in the flower industry all this is crippling and damaging. 
We can no longer continue to ignore the cost. It is enormous. The context is the global financial crisis which has had a profound effect. The recession it has triggered with the collapse of US financiers and bankers Lehman Brothers and Merrill Lynch and others is still with us and the consequences of the financial and economic crisis are still being felt. You know I would not laugh when the fact is that very soon those members are going to be gone. I would not giggle about that because I know what the polls are saying and it is goodnight nurse for you. The global economic crisis is not over and indeed the end is not yet what they would be getting when they get into their private moments. 
Hon John Banks 
: How will printing more money help? 
Rt Hon WINSTON PETERS 
: I did not talk about printing money at all. I have not said that and it is not in the speech either. Indeed the end is not yet in sight. China’s prodigious growth is slowing. Europe is in the grip of crisis. In the US the recovery is faltering. Internationally there is a pervasive air of uncertainty. Under these conditions a persistently overvalued exchange rate is destructive. All around the world central banks are actively intervening to trade against their own currencies. Governments from the UK to the US to Japan and to Switzerland Singapore Taiwan and Malaysia are all using competitive devaluation as a tool of monetary policy so why are we not? Or is it that Mr Carter and Mr Banks are smarter than the Chinese and the Malaysians and the Singaporeans and the Taiwanese? Do they think they are smarter than these people because their economies are going that way and ours is going that way? The high dollar is crippling New Zealand’s international competitiveness at a time when the competition is intensifying. 
We have entered a new economic era in the belief that central banks should focus on only one goal. It is pure outdated ideology. Our exporters do not live in the world of economic theory. They are in the world of harsh economic reality and one day soon they will wake up around this country to just who it is that is their financial oppressor. Inflation is important but it is not everything particularly at a time when inflationary pressures are historically low. Mind you they are not as low as when I was the Treasurer when they were the lowest since 1975. That is our record. What is theirs? Since 1975 it was the lowest in those 3 years. Our priority must be the productive economy—exports economic growth employment and jobs. After all the tradable sector is where real wealth and jobs are created. This has to be the focus of monetary policy in 2012 so why is it not? Now just about everyone from the IMF to the Governor of the Reserve Bank acknowledges the problem and concedes we have a seriously overvalued dollar. 
Hon Dr Nick Smith 
: No they don’t. 
Rt Hon WINSTON PETERS 
: Oh yes he did. You see that is Nick Smith. So blind is he to his ideology his ears are not even open. Yes the IMF and the governor did say that. All manner of people—Blanchard Stiglitz—are saying it. Lee Kuan Yew says it. [ 
Interruption 
] No no Nick Smith from the badlands of the top of the South Island knows better. How arrogant can you get? Back in March the Reserve Bank warned the dollar was too high. It said this was preventing the rebalancing of the economic growth of this country 6 months ago. Now it is soaring past US80c US83c with no signs of falling. It has reached the point where many financial analysts say it is no longer a question of if but when New Zealand reaches dollar for dollar parity with the US. Oh that will give those members a jolt and they will still come out with their measly excuses that “We cannot do anything.” That would be disastrous. So why are they not taking action? 
When the dollar was at US76c in 2007 the bank took action resulting not only in a lower dollar but also a $411 million profit. That is a fact. This demonstrated back then that the Reserve Bank does have the ability to act when the dollar is overvalued. It has had a foreign exchange intervention policy since 2004. Section 16 of the Act provides for the bank to deal in that fashion. Section 17 provides for the authority of the Minister of Finance to direct the Reserve Bank governor like the Chancellor of the Exchequer directs the equivalent English bank. They do it but no no no Mr Carter and Mr Nick Smith are smarter. Thus the legal framework for intervention already exists in the principal Act. What is holding them back? Well Mr English could do something tomorrow if he would but he will not unless this bill gets through. 
Hon John Banks 
: Oh that’s not much likely. 
Rt Hon WINSTON PETERS 
: Oh it will be a fact one day—maybe not today because of the narrow blind ideology of people like Mr Banks whose political career is so successful that his party is going to oblivion and he can hold any caucus in a telephone booth. Around about then I would think “My policy is a bit out of date.” would you not? I would. I would think “My policy is a bit of a problem. I can’t fill a telephone booth.” [ 
Interruption 
] Oh no New Zealand First packs halls all over this country. That is a sign of consumer demand. That is a sign of market share. It is a sign that our policies on monetary policy are relevant and people are wanting them. I might say as the Bible says the numbers are growing and they are becoming legion and one day those members will be gone. 
The time for dithering delay and indecision over the exchange rate has to end now. It could pass tonight. It could become the fact very very shortly but all we are asking for is all sides of the House to give it a select committee hearing. Let all New Zealanders have their say—those for and against. It is called democracy and why would the Government be against that unless it is too scared to have its shibboleths exposed to the light of day?