Goldsmith PaulHon PAUL GOLDSMITH (National): Thank you Madam Assistant Speaker. I don't like to be unkind to the previous speaker—Rt Hon David Carter: To the Professor".Hon PAUL GOLDSMITH: —"the Professor" as we call him but his grasp of history is not very good at all. The Reserve Bank was not instituted 30 years ago; it has been around for many decades and this legislation that came in which he now wants to modernise by taking it back closer to where it was before 30 years ago shows the strange logic that they've got on that side of the House.Look this bill proposes to do two things. One is set up a committee to make the decisions around interest rates and while you can argue about that until the cows come home I don't think that they have built a particularly strong case for why we need to change what has a been a pretty successful model in New Zealand. But it won't be the end of the world if we move to a committee and so we will be interested in working through that in the select committee process.But the second thing that this bill does is bring in what we call a dual mandate. At the moment the Reserve Bank is focused solely on inflation and using monetary policy to target a low inflation rate between 1 and 3 percent. Now the proposal is to come up with a dual mandate and say they should focus on price stability and maximum sustainable employment. Now we don't support that and we haven't seen any strong case brought to justify that. There's a couple of issues with it. Firstly there's a question of principle and that is if you want to have more than one policy objective—price stability and maximum sustainable employment—then in general you need to have more than one policy instrument and at the moment the Reserve Bank only has one policy instrument which is monetary policy—to control using monetary policy. It doesn't have access to fiscal policy or all the many other policies that you need. So to try and deal with more than one policy objective with only one policy instrument is a flawed approach in principle.Secondly the idea that somehow a little bit more inflation will lead to more employment has been debunked a long time ago. It's true that monetary policy can lead to a short-term impact on employment and that is why it was so dangerous in the hands of politicians—and we're going to have to go back far into even the National Party's history with Robert Muldoon to say that if you drastically reduce interest rates particularly at a time of high inflation then you can get a short-term burst in economic activity and an improvement in employment.ASSISTANT SPEAKER (Poto Williams): Except I wouldn't be doing that.Hon PAUL GOLDSMITH: Sorry—the nation or the policy makers. But it doesn't last and there's no evidence that you get a long-term effect on employment by the use of monetary policy. Nobody can really claim that. So why we would have as a dual mandate of the Reserve Bank to use monetary policy to somehow influence maximum sustainable employment doesn't make much sense. So if you struggle with that concept that a little bit more inflation does not lead to higher employment in the long term then what would you be trying to achieve?So the problem that we have with this proposal is that if you have this dual mandate where both of them are equally important and that's what this bill is suggesting—it's not that we go from price stability and try and do what we can to manage maximum employment; it's that both are equal objectives—then of course eventually at some point those two objectives will be in conflict and then the Reserve Bank will be in a hopeless position. I think we've got a pretty good arrangement that has served this country well and I don't understand the rationale for changing.A number of Government members will say "Well everybody else in the world does it. Lots of other countries have all these mandates." Well the answer to that I would have thought is that New Zealand actually has a good clear simple single-objective piece of legislation that many other countries would wish to have. Most of them developed more than 30 years ago at a time when people actually did believe that a little bit more inflation could lead to more employment but that has subsequently been debunked. So it's really taking us back to a position where we were more than 30 years ago and I don't see how it's going to benefit the country in any way shape or form.Now if you are indeed interested in improving employment then of course there are—ASSISTANT SPEAKER (Poto Williams): Of course I am.Hon PAUL GOLDSMITH: Sorry. If the nation and politicians are interested in increasing employment then there are many things that can be done well beyond the realm of monetary policy. That of course is just basic good government. The most important thing that any Government can do is deliver strong stable and predictable Government leading to higher business confidence and consumer confidence leading to investment and when you get investment that's where you get jobs and growth. Unfortunately we're getting a case study of how not to do that from this current Government which by introducing so much uncertainty into the minds of business people around the country—uncertainty through tax policy where nobody knows. Who's going to make an investment if they don't know in two years' time whether they're going to be paying a capital gains tax on that investment for example. There's so much uncertainty around our immigration policy—the Government campaigned on slashing it and now it's not quite clear. There's so much uncertainty on foreign investment rules.Hon Ruth Dyson: This must be 10 minutes up by now.Hon PAUL GOLDSMITH: No—nowhere near. Nowhere near. There's so much uncertainty on industrial relations policy and also uncertainty following the strange manner of Government decision-making that we've seen particularly in the oil and gas process where a major industrial policy can be made without reference to any evidence or actual decent advice.So when you combine all those things that has led to and contributed to falling levels of business confidence. Many would-be investors who could invest in hiring a new person building a new plant starting a new business taking a new risk are right now keeping their hands in their pockets because looking out they're not sure where things are going. So if the Government's interested in employment then that's what they should be focusing on with all the many many levers that Governments have available to them and do the right thing. But somehow suggesting that by encouraging the Reserve Bank to just give a little bit more inflation—that's not the way to go about it. So on that basis we will not be supporting this bill."