Robertson GrantHon GRANT ROBERTSON (Minister of Finance): It's a pleasure to take a call in this debate and respond to some of the questions that have been raised by members of the Opposition.The first thing I'd like to say is there is a bit of a logical flaw in the questions that have been asked which is either—this is something in terms of the monetary policy objectives—considering maximum sustainable employment alongside price stability is something the Reserve Bank is already doing or it's a total catastrophe that is going to end the world. Those arguments are being advanced in the same speeches tonight by Opposition members and so it is a little difficult to unpick that particular logical flaw.What we are trying to do here in terms of broadening the objectives of the bank is ensure that the thing that has indeed served New Zealand well over many years—the fact that we have a greater level of price stability than we would if we didn't have a clear objective in the principal Act to maintain price stability—is added to by what as we've already heard from members tonight has in fact been part of the practice of a flexible inflation targeting approach which is to take into account the impact of monetary policy on the real economy. What we're interested in doing is codifying that and ensuring that it is part of the objectives of the bank lest there be any doubt that monetary policy does have an impact on the real economy.We only needed to see in the wake of the global financial crisis—and one of the earlier speakers on the other side asked where the calls for this were coming from. In the wake of the global financial crisis right around the world people began debating the role of monetary policy in a situation where the economic cycle turns the way that it did. We picked up on that and it is vitally important for all members of the House and those listening tonight to understand that New Zealand in taking on a second objective for our Reserve Bank of New Zealand Act is actually doing what the United States does what to an extent Australia does and what to an extent Norway does among others—countries that have been perfectly able through their monetary policy to balance these two objectives.A question asked by a couple of members has been Well how do we do that? How does that happen?" That is dependent on the circumstances of the time and the ability of the bank and its decision makers. It again is somewhat contradictory because it's asking us as politicians to say "How do we do that?" That would be interfering in the independence of the bank if I were to sit here and say "This is the way in which it will be balanced." It is up to the Governor of the Reserve Bank and the monetary policy committee (MPC) to make those decisions. One of the pieces of work that we looked at when we were preparing this policy was a study done by the Reserve Bank of Massachusetts I think it was who looked at who was better at controlling inflation: those countries with a dual mandate or those countries with a sole mandate. And actually it turned out that countries with a dual mandate were generally doing better at controlling inflation than those with a single mandate. So I don't believe that the concerns being raised on that are at all legitimate.Rt Hon David Carter: Rubbish.Hon GRANT ROBERTSON: No it's not rubbish. I'll get the Rt Hon David Carter a copy of the report. I might have this wrong but I think the author's name was Eric Rosengren and so I will get hold of a copy of the paper for David Carter so that he can rest assured on that.We want to make sure that maximum sustainable employment is part of the decision-making process. Just as with price stability that gets defined in time by in the previous incarnation the policy targets agreement; in this incarnation the remit that will be agreed. What we know and what is fully acknowledged in all of the documentation building up to this bill is that the role of the Reserve Bank is to help through its monetary policy influence maximum sustainable employment. There's a reason why we didn't put a rate of employment or a rate of unemployment in this bill because we absolutely recognise that the direct control of that does not lie entirely in the hands of the bank. But by signalling that maximum sustainable employment—not the same thing necessarily as zero unemployment because it's about a number of factors in the economy being weighed against each other. By making sure that when we have sustained periods of unemployment when there are times in the economic cycle when there is pressure on those areas that being considered openly and outwardly in the decision making of the Reserve Bank is I believe a very very important thing for us to do.The other major set of concerns being raised by members of the Opposition in their questions is around the question of independence. It is vitally important we maintain the independence of the bank in making the decisions it makes on monetary policy. That has been an important part of the stability of our economy and it's maintained by this bill. What this bill does is set up a committee to make the decisions for monetary policy—again completely commonplace around the world and in fact something the Reserve Bank itself again in practice has been doing internally inside the bank.This is actually a change welcomed I think pretty much across the board perhaps apart from the Opposition. In terms of the way people are appointed to that committee if there's somehow a suggestion that the Minister of Finance making those appointments on the recommendation of the board is somehow a terrible outrage in terms of independence of the bank that's exactly the process for appointing the Governor of the Reserve Bank right now.Hon Ruth Dyson: Is that new?Hon GRANT ROBERTSON: No it is not. It is not new. It has been in place for the whole time that the Reserve Bank of New Zealand Act has been there and so if there's some huge problem with the role of the Minister in appointing the MPC it's the same process as appointing the governor and I'm sure members of the Opposition are not arguing that the Reserve Bank Governor is somehow or other not independent or beholden to the Minister when they are quite clearly not.The other issue being raised is the question of the Treasury observer on the monetary policy committee. To be clear that observer has no voting or decision-making rights. They are there to be able to contribute to the discussion to be able to make sure that the different parts of economic policy the fiscal policy and monetary policy are communicating with one another. The Bank of England does this. It is again a perfectly normal way of ensuring we've got better communication and more understanding of those two parts of the way in which our economic policy works. It is a guarantee that there will be the governor who will be the chair of the monetary policy committee the deputy governor and two members of the Reserve Bank staff on the monetary policy committee—that is a guarantee that is written into Part 1 of this bill—and three external appointments. So the majority decision-making remains but we get diversity of voice at the table. Again when we go to places like Australia and visit the Reserve Bank of Australia they make the point that the diversity of voices at the table makes for better decisions. It connects the Reserve Bank better to the real economy and I think in time we will see that with the protection of the fact that the majority of members of the committee are those inside the board.So I think I've answered the questions that have been raised. It's quite clear that the scaremongering here around independence has absolutely no basis whatsoever and if that argument has been advanced then perhaps the Opposition should be proposing wide-ranging amendments to the Reserve Bank Act to change the way the Governor's appointed if they think that this somehow or other limits the independence.These are amendments that modernise the operation of our monetary policy. Something done in 1989 isn't necessarily completely and fully still the best thing we can do in 2018. We do have to make sure we modernise monetary policy while maintaining the important independence that has been put through under the Reserve Bank Act. This piece of legislation maintains that balance."