Parker David: Reserve Bank of New Zealand (Covered Bonds) Amendment Bill — In Committee Third ReadingText is incorporated into the Bound VolumeParker David: Reserve Bank of New Zealand (Covered Bonds) Amendment Bill — In Committee Third Reading[Sitting date: 19 November 2013. Volume:695;Page:15029. Text is incorporated into the Bound Volume.]Hon DAVID PARKER (Deputy Leader—Labour): The Labour Party aware of the caution that is needed around this issue does support the bill the Reserve Bank of New Zealand (Covered Bonds) Amendment Bill. As earlier speakers have said one of the problems in New Zealand is that covered bonds which create a class of deposits thatare lent to New Zealand banks give the people who have the benefit of that covered bond a preferential interest in the assets of the bank in the event that it goes broke. The amount that is left for people who are outside that covered bond arrangement is less and they wear a more than proportionate share of the loss in the event that there are not enough assets when the bank is wound up to cover the amount that has been deposited in the bank. The problem we have got in New Zealand at the moment is that that is allowed to happen but it is an unregulated activity and the Reserve Bank has not had a direct tool to control the level of those covered bonds. So on balance we in the Labour Party accept that it is necessary to regulate covered bonds so that there is a clear limit on the amount that can be covered ahead of other unsecured depositors in the bank.I agree with Russel Norman that it is unfortunate we have got to the point in New Zealand that we are so reliant on foreign capital that we have had to legitimise covered bonds and create this differential between the rights on wind-up of those who have the benefit of covered bonds compared with those who do not. I also agree with the Hon Shane Jones that the long-term key to overcoming this and perhaps backing out of covered bonds is having a more effective New Zealand economy. The capital part of that is reliant on increases in productivity—sorry I should not have said it in quite that way. All of the factors of achieving that better economic outcome are interlinked but an important part of achieving the increase in productivity and increasing the wealth that we need is to improve the pool of New Zealand investment capital that is going into the productive economy.The two most important ingredients of that have been completely ignored by this Government. The Government refuses to make KiwiSaver universal—a compulsory scheme like they have in Australia which has stood them in good stead. Indeed no one should forget that National railed against KiwiSaver voted against it and has tinkered with the details of it since it came into Parliament as the Government in 2008.Hon Shane Jones: And the Cullen fund.Hon DAVID PARKER: KiwiSaver needs to be made universal. National does get all these big calls wrong when it comes to the long-term wealth of our country. As Shane Jones has said National also ceased contributions to the Cullen fund at a time when borrowing rates for Governments were at historic lows and it was obvious following the clean out in the global financial crisis that returns on equities in the future from that low base would be higher than the Crown cost of funds. Despite that Bill English ceased contributions to the Cullen fund and as a consequence that fund or the New Zealand Superannuation Fund as it is more properly called is some billions of dollars smaller both in terms of contributions that were not made to it and also earnings that would have been made in addition on those contributions. So that is the second bad call.The third one that impacts upon this is not getting the tax signal right so that we encourage too many people in New Zealand to put their investment money not into a bank deposit or into a share both of which can improve the productive economy but into residential rental investment which drags money out of the productive economy—Dr David Clark: Too many vested interests.Hon DAVID PARKER: —and also at the same time increases the demand for money to come from offshore into New Zealand banks to feed that appetite for more borrowing for mortgages. As Dr Clark just intervened there one of the reasons they do that is that they are determined to protect the vested interests of those who do not want the relative value of property assets in the rental market to change relative to the value of investments in the productive economy. They are happy to continue preferring the interests of speculators over the productive economy and as a consequence we have just had another report to show that New Zealand does not get as much in terms of returnsfrom tertiary education because we do not invest enough capital in our productive enterprises.All of these problems are interlinked. This bill in so far as it goes is a bill that we are supporting but it does not cure the underlying problems that have led to its need.