Volume 687 Week 33 - Thursday 14 February 2013 
Text is incorporated into the Bound Volume 
Volume 687 Week 33 - Thursday 14 February 2013 
[Sitting date: 14 February 2013. Volume:687;Page:7863. Text is incorporated into the Bound Volume.] 
Thursday 14 February 2013 
Mr Speaker 
 took the Chair at 2 p.m. 
Prayers 
. 
Business Statement 
Hon GERRY BROWNLEE (Leader of the House) 
: 
 When the House resumes on Tuesday 19 February the Government will look to progress the Privacy (Information Sharing) Bill the International Finance Agreements Amendment Bill and the third reading of the Corrections Amendment Bill with other bills as time permits. Wednesday is a members’ day. 
Motions 
Aboriginal and Torres Strait Islander Peoples—Recognition as Australia’s First People  
TE URUROA FLAVELL (Maori Party—Waiariki) 
: 
 I seek leave to move without notice and without debate a motion in relation to Australia’s recognition of Aboriginal and Torres Strait Islander peoples as its first people. 
Mr SPEAKER 
: Leave is sought for that course of action. Is there any objection? There appears to be none. 
TE URUROA FLAVELL 
: Kia ora tatou. I move  
That the House congratulate Aboriginal and Torres Strait Islander peoples for achieving the unanimous recognition of the Australian House of Representatives as Australia’s first people the acknowledgment of their continuing relationship with their traditional lands and waters and respect for their cultures languages and heritage. 
Motion agreed to. 
Human Rights Discriminatory Legislation—Rights of All People to Privacy and Dignity 
CHARLES CHAUVEL (Labour) 
: 
 I seek leave to move members’ motion No. 7 in my name without debate 
Mr SPEAKER 
: Leave is sought for that course of action. Is there any objection? There appears to be none. 
CHARLES CHAUVEL 
: I move  
That this House note with grave concern both proposed legislation in Uganda which would increase the penalties imposed in that country for certain consensual sexual activity between two adults in private; and the legislation under consideration in Nigeria which would criminalise freedom of association and advocacy for same-sex couples and organisations; and state its hope and expectation that the New Zealand Government will urge other governments to uphold the rights of all people to their privacy and dignity in accordance with international law. 
Motion agreed to. 
Points of Order 
New Zealand - Australia Reciprocity—Leave to Table Document 
Hon PHIL GOFF (Labour—Mt Roskill) 
: 
 I seek the leave of the House to table the national interest analysis of 2001 on the New Zealand social security agreement which says that the measures taken by Australia to restrict future access to benefits and citizenship for New Zealanders living in Australia were outside the bilateral agreement contrary to what the Prime Minister said yesterday. 
Mr SPEAKER 
: Leave is sought for that document to be tabled. Is there any objection? Yes there is objection. 
Questions to Ministers 
Schools Partnership—Official Information Act Requirements and Accountability 
1. 
GRANT ROBERTSON (Deputy Leader—Labour) 
 to the  
Associate Minister of Education 
: Why has he proposed exempting charter schools from the requirements of the Official Information Act 1982 something that the Ombudsmen have described as being “catastrophic”? 
Hon JOHN BANKS (Associate Minister of Education) 
: 
 I am advised that the Ombudsman’s submission to the Education and Science Committee yesterday did not—did not—use the word “catastrophic”. The Government respects the Office of the Ombudsmen. However it would be inappropriate to extend the jurisdiction of one of the Ombudsmen to partnership schools. They are not Crown entities; they will be private organisations. They are similar to the 5000 licensed early childhood education and care centres independent schools private training establishments and industry training organisations which are not subject to the Official Information Act and the Ombudsmen Act. 
Grant Robertson 
: Why should charter schools be less accountable to parents and the community than other schools? 
Hon JOHN BANKS 
: Charter schools are going to be more accountable to the community. Let me tell the member who has not read the legislation and does not understand it that the ultimate safeguard notwithstanding the obligations under the contract between the sponsor and the Ministry of Education is that the Secretary for Education can at any time request any information from any partnership school and that information is subject to the Official Information Act. 
Grant Robertson 
: Is he aware that the Ombudsman found that violence and bullying at Hutt Valley High School were inadequately dealt with through Ministry of Education and Education Review Office processes and fully came to light only as a result of an Ombudsmen’s investigation and why is he prepared to put the safety of children at risk by not having charter schools subject to the Official Information Act and the Ombudsmen Act? 
Hon JOHN BANKS 
: It is interesting that he should raise that high school in the Hutt South electorate the home of a former Minister of Education from the Labour Government. I have on reliable advice been told that it was Anne Tolley a former Minister of Education in the National Government who fixed the problem. But to answer the substantive question the health and safety of children is of the highest importance at all schools—at all schools. There will be a higher level of obligation on partnership schools than on other schools—a higher level of obligation. The Government will ensure the health and safety of all children at partnership schools through a specific statutory duty that will be enforced through partnership schools’ contracts and all information sought by the Ministry of Education sought and given will be subject to the Official Information Act. 
Grant Robertson 
: What is he so scared of in his charter school model that he will not allow it to be held to account by the Office of the Ombudsmen as the Ombudsman requested at the select committee yesterday? 
Hon JOHN BANKS 
: Simply because as I said in the answer to the original question over 5000 licensed early childhood education and care centres are not subject to the Official Information Act independent schools are not subject to the Official Information Act private training establishments are not subject to the Official Information Act and industry training organisations are not subject to the Official Information Act. Why partnership schools? I ask the member why partnership schools? 
Grant Robertson 
: In light of that answer is the Minister aware that private prisons are subject to the Official Information Act and why is it that private prisons should be subject to the Official Information Act but not partnership schools? 
Hon JOHN BANKS 
: There are no matters regarding prisons in the legislation. There are no matters regarding it. Why does the member not read the legislation? The ultimate test for that member is that the Secretary for Education can ask for any information at any time from any partnership school which would be subject to the Official Information Act. Why do you not give partnership schools a chance? Twenty percent of kids are failing. 
Chris Hipkins 
: I raise a point of order Mr Speaker. 
Mr SPEAKER 
: Point of order. [ 
Interruption 
] Point of order. A point of order has been called. 
Chris Hipkins 
: That was a very animated answer which did not address the question that my colleague Grant Robertson asked. 
Mr SPEAKER 
: It certainly did address the question. It was a very animated question about why the Minister is scared of something. 
Grant Robertson 
: I raise a point of order Mr Speaker. That question was whether or not Mr Banks was aware in light of his answer to the previous question that private prisons were— 
Mr SPEAKER 
: And I think he very adequately answered the question in a very lengthy process. It was very hard for the members to hear the answer—I was listening carefully—and that was because of a very excessive amount of noise coming from the member’s own benches. Are there further supplementary questions? 
Rt Hon Winston Peters 
: I raise a point of order Mr Speaker. The problem with that answer was that it contained a series of questions of the person who was asking the question in the first place which is not allowed here. 
Mr SPEAKER 
: I think that again with respect Mr Peters it was the previous answer given where the Minister asked a question which is not exactly appropriate I agree. But in this case it was a robust exchange. Are there further supplementary questions? 
Catherine Delahunty 
: I raise a point of order Mr Speaker. I am sorry Mr Speaker. We could not hear Mr Banks’ answer. We would like the question again because it is impossible to hear him. 
Mr SPEAKER 
: You are not getting the question again but it would certainly be helpful if when the Labour member asks a question his own side could refrain from the level of interjection we were receiving. 
Grant Robertson 
: I raise a point of order Mr Speaker. I respect the fact that we need to ensure that members can hear answers. The problem we had was that Mr Banks was not answering the question— 
Mr SPEAKER 
: That is now questioning a ruling that I have made. I have categorically stated that in my opinion Mr Banks adequately answered the question particularly given the tone in which the question was asked. 
Hon Clayton Cosgrove 
: I raise a point of order Mr Speaker. Could I simply ask you then to review the tape after this session because I think it may be of assistance to you— 
Mr SPEAKER 
: On this occasion for the benefit of the member I will review the tape. 
Grant Robertson 
: Is the Minister’s own experience in refusing to allow his witness statement on the Kim Dotcom investigation to be released under the Official Information Act influencing his decision to make sure that charter schools are not accountable under the Official Information Act? 
Hon JOHN BANKS 
: There is no information in the bill before the select committee that has got anything to do with Kim Dotcom or any of his cronies. 
Grant Robertson 
: I raise a point of order Mr Speaker.  
Mr SPEAKER 
: Point of order Grant Robertson. [ 
Interruption 
] Order! There is a point of order being sought by Grant Robertson which should now be heard in silence. 
Grant Robertson 
: My question did not ask anything about a bill before the select committee. 
Mr SPEAKER 
: I accept that. Would the member please repeat his question. 
Grant Robertson 
: As close as I can get to it. Is the Minister’s own experience with withholding his witness statement given around the Kim Dotcom donation affair influencing his decision to make sure that charter schools are not accountable under the Official Information Act? 
Hon JOHN BANKS 
: The problem with the Official Information Act is that it is a reactionary process towards a question being asked to the statutory authority. What we are doing with the legislation is getting in front of that with robust contracts for partnership schools with the Ministry of Education. That means that at any time the Secretary for Education can ask for information which then is subject to the Official Information Act and I am supportive of that. And all my experience around the Official Information Act said that that is a good way to work. 
Grant Robertson 
: I raise a point of order Mr Speaker. We could try for third time lucky but that did not answer the question. It was a fairly simple question on whether he was being influenced in the decision about charter schools by the fact that he has withheld information around the Kim Dotcom affair. It is quite a simple question. I have not had it answered. 
Mr SPEAKER 
: I accept that point. The only way we can attempt to get the answer is by attempting to do it for a third time. I invite the member to ask the question. 
Grant Robertson 
: Is the Minister’s own experience of withholding his witness statement in the Kim Dotcom affair around donations to his mayoral campaign influencing his decision that charter schools should not be held accountable under the Official Information Act? 
Hon JOHN BANKS 
: No no. 
Wage Rates—Growth Minimum Wage and Parity with Australia 
2. 
JOHN HAYES (National—Wairarapa) 
 to the  
Minister of Finance 
: What reports has he received on wage increases in New Zealand? 
Hon STEVEN JOYCE (Associate Minister of Finance) 
 on behalf of the Minister of Finance: Everybody’s own circumstances are of course different but average movements in wages across the economy are shown in the quarterly employment survey the latest release of which came out last week. It showed that average hourly wages rose 2.6 percent in the last year compared with inflation of around 0.9 percent. Average weekly wages rose by even more—2.9 percent—and the average wage is now over $53000 a year before tax. So it is quite clear that on average wages in New Zealand are rising considerably faster currently than the cost of living is. 
John Hayes 
: How does the minimum wage in New Zealand compare with the average wage? 
Hon STEVEN JOYCE 
: The minimum wage is currently $13.50 an hour in New Zealand which is half the average hourly wage of $27. The OECD’s database shows that this proportion is in fact the highest in the developed world and that on this measure our minimum wage is therefore the most generous in the developed world as a proportion of the average hourly wage. In all other countries the minimum wage is under half the average wage—for example in Canada it is 40 percent of the average wage; in the UK it is 38 percent; and in the US it is 28 percent. 
John Hayes 
: Do any industries stand out as having higher than average wage increases? 
Hon STEVEN JOYCE 
: Yes a few industries do stand out. One of them is the manufacturing industry where average weekly wages rose 4.1 percent over the last year and that is actually not a short-term thing. Over a longer period wages in manufacturing have also grown faster than average. Over the last 4 years average weekly wages in the manufacturing sector have risen 18 percent compared with 13 percent in the economy as a whole. No doubt that fact has been brought up and discussed at the Opposition’s manufacturing inquiry. 
Hon David Parker 
: Has the wage gap between New Zealand and Australia grown larger over the last year; if so will he be providing milestones for National’s promise to close the wage gap with Australia given that it is growing rather than closing? 
Hon STEVEN JOYCE 
: I do not have that information to hand but I do know that the member is very careful to talk about the wage gap rather than the after-tax wage gap which people actually experience. But again if the member wants to talk about the differences between here and Australia fundamentally the main difference is the investments made in Australia in the resources sector over the last few years. That is the fundamental difference. If the member would like to reverse his party’s ambivalence towards the investment in the resources sector in the New Zealand economy I am sure we could have a good discussion. 
John Hayes 
: By how much have wages risen since September 2008? 
Hon STEVEN JOYCE 
: The best measure over a longer period of time is of course growth in after-tax wages because that takes into account factors like changes in income tax and GST. Since September 2008 the average wage after tax has increased by a total of— 
Hon David Parker 
: And GST—how does it take into account GST? It doesn’t. It ignores GST. 
Hon STEVEN JOYCE 
: Just wait you will find out. Since September 2008 the average wage after tax has increased by a total of 22 percent from a bit over $36000 a year to a little bit over $44000 a year. Inflation over the same period has totalled 8.5 percent. So it is a total of 22 percent in after-tax wages versus 8.5 percent inflation over the same period. Again everybody’s circumstances are different but it is clear that on average working New Zealanders have had a sizable increase in their standard of living over the last 4 years. 
Hon David Parker 
: In light of his answer to my last supplementary question has the after-tax wage gap between New Zealand and Australia grown larger over the last year? 
Hon STEVEN JOYCE 
: I do not have those figures to hand— 
Hon Members 
: Oh! 
Hon STEVEN JOYCE 
: —I said that previously—but I am very suspicious because the member is talking about only the last year and we know that what he likes to do is go through series and series of data and find the little bit that he can do to get his story. The reality is that in this country the cost of living has gone up 8.5 percent over the last 4 years and people’s incomes after tax have gone up 22 percent. 
Manufacturing Sector—Jobs and Performance 
3. 
Hon DAVID PARKER (Labour) 
 to the  
Minister for Economic Development 
: Does he agree with the Prime Minister’s statement that “I would go back to the most rigorous form of measuring employment in the economy and in relation to the manufacturing sector. That is the household labour force survey”; if so what was the net change in persons employed in manufacturing in the HLFS in the year to December 2012? 
Hon STEVEN JOYCE (Minister for Economic Development) 
: 
 Yes I do agree with the Prime Minister’s statement. It is the most rigorous. But as he has often also said it is also a survey and different measures can be contradictory. For example the household labour force survey last week said there was a net loss of full-time jobs in the last quarter—sorry jobs overall in the last quarter actually and an increase in full-time jobs—while 2 days earlier the quarterly employment survey which the member is sometimes fond of quoting said the number of filled jobs had increased over the same period. Turning to the second part of the question the net change in persons employed in manufacturing in the household labour force survey in the year to December 2012 is 17200 people. It is worth pointing out that in the 2010 year the number of persons employed in manufacturing increased by a similar amount while in the 2011 year the number was static. 
Hon David Parker 
: I raise a point of order Mr Speaker. He mentioned a figure but he did not say whether that change was up or down in respect of the 17000 figure he quoted. 
Mr SPEAKER 
: I think to clarify can I ask the Minister just to repeat the second part where he spoke to the specific second part of the member’s question. 
Hon STEVEN JOYCE 
: I will try to be helpful on that Mr Speaker. Turning to the second part of the question the net change in persons employed in manufacturing in the household labour force survey in the year to December 2012 is as the member asserts a decline of 17200. As I said it is worth pointing out that in the 2010 year the number of persons employed in manufacturing increased by the same amount around 17000 while last year the 2011 year the number was static. 
Mr SPEAKER 
: Thank you. I appreciate that. 
Hon David Parker 
: Does he agree with  
The Economist  
that “Deindustrialisation and slow manufacturing productivity growth hurt a country’s ability to export and eventually lead it into balance-of-payments difficulties. As for tradable services they too depend in the long run on a strong manufacturing base.”; if he does not agree with that why not? 
Hon STEVEN JOYCE 
: I obviously have not seen that particular quote even though I am an ardent reader of  
The Economist 
 but can I point out to the member that what he is referring to has actually been occurring in the Western World for many years including in this country. In fact since the 1970s the number of people working in manufacturing in this country has declined as it has in the agricultural industry since it created mechanised tractors. That is actually— 
Dr David Clark 
: So what are we doing about it? 
Hon STEVEN JOYCE 
: Well if the member would like to pretend we can stop the world and go back to steam engines he can go right ahead and present that to the New Zealand public but actually productivity in the New Zealand manufacturing sector has grown at a faster rate than in many countries in the world and if you just look today the optimism in the manufacturing index today has gone to a 54 point positive which is a positive thing for the manufacturing sector. 
Hon David Parker 
: Given his reference to the manufacturing index in that last answer why is it a good-news story when the employment indicator of the manufacturing index shows that manufacturing which has lost 17000 jobs over the last year is in its eighth straight month of employment contraction? 
Hon STEVEN JOYCE 
: Well the manufacturing sector—the Performance of Manufacturing Index that I referred to—shows manufacturing activity up 5 points from December to 55.2. He is correct in saying that employment is still in a negative indicator in this particular survey but again the member pretends as he often does that the reality is that manufacturing jobs declining as productivity increases is a new phenomenon. It actually goes back 40-something years. It is tough for the individuals involved—I absolutely acknowledge that—but anybody who suggests he can stop that is trying to sell a snake oil solution. 
Hon David Parker 
: Given the Minister’s preference to refer to value rather than jobs in manufacturing why does he continue to claim the manufacturing sector is growing when the real value of manufacturing exports outside the primary sector has declined by 10 percent since 2008 and 5 percent in the last year? 
Hon STEVEN JOYCE 
: The member is being incredibly disingenuous. The manufacturing sector includes a whole range of things including the primary sector such as food processing—which was actually when I went to school in manufacturing. The member is constantly trying to find himself a little statistic that tries to backfill the fact he claims that there is a manufacturing crisis. The reality is that it is difficult in every industry because of the challenging world conditions but New Zealand businesses are doing a good job in growing the New Zealand economy. 
Hon David Parker 
: Did National promise 170000 more jobs at the last election? 
Hon STEVEN JOYCE 
: Well I think the member was in the House yesterday when this question was asked. The answer is of course yes and that was the Treasury forecast at the time. According to the quarterly employment survey we have had 54000 new jobs over the last 2 years. 
Asylum Seekers—Australian Detention Centres 
4. 
JAN LOGIE (Green) 
 to the  
Prime Minister 
: Does he stand by his statement in regard to the Australian Government’s detention centres for asylum seekers that “the camps would be at the world standard we would expect from a developed economy like Australia”? 
Hon GERRY BROWNLEE (Leader of the House) 
 on behalf of the Prime Minister: Yes. 
Jan Logie 
: How can he call them “world standard” when the United Nations High Commissioner for Refugees has found that the conditions in the Manus Island Detention Centre are “harsh” and “inadequate”? 
Hon GERRY BROWNLEE 
: During discussions on the weekend during which New Zealand indicated to Australia that we would take 150 asylum seekers assurance was sought from the Prime Minister of Australia that the facilities on Nauru and Papua New Guinea are consistent with international standards and she confirmed that. 
Jan Logie 
: Why is he simply accepting Julia Gillard’s word that the camps are “world standard” when politically neutral organisations like Amnesty International have described the conditions in the Nauru Detention Centre as “cruel inhumane and degrading”? 
Hon GERRY BROWNLEE 
: Because Julia Gillard is an honourable person. 
Jan Logie 
: Are the conditions in this photo I am holding taken by Australian Green senator Sarah Hanson-Young in the Manus Island Detention Centre showing tightly packed tents and flooding in a malaria hot spot “world standard”? 
Hon GERRY BROWNLEE 
: I think we need to realise that these people are desperate. They have come off very very bad conditions in what are often very dodgy boats. It is a fact that they do have access to sewerage to water to health services to mental health services to the ability to practise their religion and to stay fit. That is the assurance we have received from the Australian Government. 
Gareth Hughes 
: I raise a point of order Mr Speaker. It was a very simple question: whether the conditions in that photo were “world standard”. The Minister did not even attempt to address the photograph or the conditions therein. 
Mr SPEAKER 
: I do not accept that point from you Mr Gareth Hughes. I thought the Minister gave a very satisfactory answer to that question. 
Jan Logie 
: How can he simply accept Julia Gillard’s politically motivated advice when respected independent organisations like the United Nations Amnesty International and numerous other observers have repeatedly criticised the centres as substandard? Is this yet another example of the Prime Minister choosing to see no evil and hear no evil? 
Hon GERRY BROWNLEE 
: Politics is littered with people who have differing opinions such as the senator who sent you that photograph. 
Jan Logie 
: Given the overwhelming evidence of the substandard nature of the centres will he now commit to personally visiting the Nauru and Manus Island detention centres before he considers sending asylum seekers arriving in New Zealand to such centres for processing; if not why not? 
Hon GERRY BROWNLEE 
: The New Zealand Government has agreed to take 150 asylum seekers from facilities in Australia. That is going to be good for those people. I cannot commit the Prime Minister to visiting anything. 
Rt Hon Winston Peters 
: Given that this is a sovereign nation why has the Prime Minister sold this country down the drain to the extent that Australia is now in control of the policy to do with our refugee programme? 
Hon GERRY BROWNLEE 
: That statement is just as outrageous as some others that have come out of his caucus in recent days. 
Rt Hon Winston Peters 
: I raise a point of order Mr Speaker. 
Mr SPEAKER 
: Is it a point of order? 
Rt Hon Winston Peters 
: Yes a very obvious point of order. It would have occurred to you that he is required to tell us why the Government typically has sold the country down the drain with the Australians now controlling our refugee programme. Diversions do not work here. 
Mr SPEAKER 
: Order! If the member would like to reflect on his own question and the tone in suggesting to the Prime Minister that our policy or our sovereignty have been sold down the drain he should expect the sort of answer he got back from Mr Brownlee on behalf of the Prime Minister. 
Rt Hon Winston Peters 
: I raise a point of order Mr Speaker. Mr Speaker your job is to find a question acceptable or not acceptable. It is not for the Minister to determine the question’s quality; it is yours. That is what you are there for. So if you found it to be insubstantial or wrong you should have said so. You did not and therefore it requires a proper answer. 
Mr SPEAKER 
: And I think it got an answer commensurate with the quality of the question. It was a very marginal question to be honest. 
Jan Logie 
: I seek leave of the House to table this photo from Sarah Hanson-Young the Australian Greens MP. 
Mr SPEAKER 
: Leave is sought by Jan Logie to table the photograph. Any objection? There is objection. 
Jan Logie 
: I seek leave of the House to table the  
Nauru Camp: A Human Rights Catastrophe With No End in Sight 
 report from Amnesty International. 
Mr SPEAKER 
: Is it a publicly available report? 
Jan Logie 
: It is on its website but not that easy to find. 
Mr SPEAKER 
: Then it is already available to every member to search for if the member wants to. I will not put the question. 
Jan Logie 
: I raise a point of order Mr Speaker. I would just actually like to question that last ruling because if you do not know the right search— 
Mr SPEAKER 
: Order! There is now a well-established convention here that if material is available on a website then it is available to every member without the need to table such a document. I do not intend to put leave for documents such as that that are so freely available. 
Jan Logie 
: I seek leave of the House to table the report of the United Nations High Commissioner for Refugees  
Mission to Manus Island 
. 
Mr SPEAKER 
: Again is that publicly available to members? 
Jan Logie 
: Yes. 
Mr SPEAKER 
: I think then the member is now starting to trifle with the Chair by continuing to seek to table documents that are freely available. 
Gareth Hughes 
: I raise a point of order Mr Speaker. I urge you to reflect on your ruling today because a number of reports be they from the OECD or another United Nations body are regularly posted to the internet. I think it would have a stifling impact on MPs’ ability to access information if you defined this so broadly. 
Mr SPEAKER 
: I accept that the member has—[ 
Interruption 
] I do not need any assistance. If the member has asked me to reflect on that decision I will do so and make some ruling on Tuesday next week. 
Cycle Trail—Progress and Economic Benefits 
5. 
SCOTT SIMPSON (National—Coromandel) 
 to the  
Minister of Conservation 
: What progress is the Department of Conservation making in partnership with the New Zealand Cycle Trail to deliver the network of Great Rides as initiated by the Prime Minister Rt Hon John Key? 
Hon Dr NICK SMITH (Minister of Conservation) 
: 
 Fantastic progress is being made with new cycle trails being opened practically every weekend this summer. In January were the openings of the Old Ghost Road Trail near Westport the Tasman Great Taste Trail near Nelson and the Homestead Run near Hanmer. This weekend the Alps 2 Ocean Cycle Trail is being opened near Mount Cook and in a fortnight the Queen Charlotte cycle trail is opening. Later in March the spectacular Timber Trail through the Pureora Forest Park will be opened. That is a total of up to 960 kilometres of new cycleways. 
Scott Simpson 
: What evidence has the Minister seen of economic benefits flowing from the Prime Minister’s cycle trail initiative? 
Hon Dr NICK SMITH 
: There is strong evidence of the economic benefits in both official reports and in regions’ experiences. In the member’s own Coromandel electorate the local council reports that the Hauraki Rail Trail was bringing in an average of $108 per rider and that in the month of January—January alone—there were 10000 cyclists on that route. I also know of two new businesses in my own Nelson electorate that have opened as a consequence of the cycle trails: a new cafe in Brightwater which has been so busy that its staff now number 10 and a new cycle ferry business that has opened up in Mapua to provide a service for cyclists over to Rabbit Island. 
State-owned Energy Companies Sales—Progress 
6. 
Hon CLAYTON COSGROVE (Labour) 
 to the  
Minister for State Owned Enterprises 
: Does he have confidence that the Government’s asset sale programme is on track; if so why? 
Hon TONY RYALL (Minister for State Owned Enterprises) 
: 
 Yes because it is important that we control our nation’s debt given the world’s intensifying debt crisis. However the member might like to ask me the same question after a certain court ruling comes out. 
Hon Clayton Cosgrove 
: Why when the chief executive of Contact Energy has announced the sacking of 100 staff because as he stated: “electricity demand remains weak.” is the Government still proposing to sell off at least two State-owned electricity companies this year at the bottom of the market? 
Hon TONY RYALL 
: Of course the Government is selling a minority stake or looking to sell a minority stake in these businesses. The Government has always made it very clear that we will consider each of those individual sales in light of the market circumstances at the time and the advice that we are receiving from our advisers is to continue preparing for sale. 
Hon Clayton Cosgrove 
: Given that answer does he stand by the statement he made on the  
Q+A 
 programme on 17 June 2012 that “If the Government doesn’t get a good price the Government isn’t going to sell.” and does he agree with Brian Fallow who said recently: “It is folly to press on full steam ahead with partial privatisation of the State-owned power companies …”? 
Hon TONY RYALL 
: Yes the Government has always said that all of these decisions will be made in light of market conditions. Certainly the whole market already understands what the likely future demand for electricity in New Zealand is. Our country has been growing in the last 3 or 4 years and it is expected to continue growing. I am optimistic about those prospects. 
Hon Clayton Cosgrove 
: Will he give an assurance to the employees of Mighty River Power Genesis Energy and Meridian Energy that there will not be significant lay-offs following any partial privatisation of those State-owned electricity companies as has occurred with Contact Energy a former State-owned enterprise which was sold off by a former Government of which he was a member? 
Hon TONY RYALL 
: As I am not their employer I cannot give any undertakings in respect of that. But what I can say to that member is that the State-owned electricity power companies will report their half-year results in the very near future and the member may want to pay attention to these results to get an insight into how those companies are performing. 
Hon Clayton Cosgrove 
: Does he still have confidence in the Chair of Genesis Energy the Rt Hon Dame Jenny Shipley former National Party Prime Minister given she resigned as a director of Mainzeal Property and Construction just prior to its collapse and further that she has offered no explanation as to her involvement in that collapse but rather has hired former journalist Bill Ralston to act as a spin doctor to manage her reputational risk? 
Hon TONY RYALL 
: Yes and as the Prime Minister has already noted we have not seen anything that challenges Dame Jenny Shipley’s leadership at Genesis. 
Fines and Reparation—Amounts Owed and Collected and Improvements to Processes 
7. 
KATRINA SHANKS (National) 
 to the  
Minister for Courts 
: What progress was made in 2012 in recovering court fines and reparations? 
Hon CHESTER BORROWS (Minister for Courts) 
: 
 The year 2012 was very good for the collections department. It brought in $225 million in outstanding fines by way of fines enforcement. The outstanding balance for fines at the moment sits at $576 million which is down from $800 million when we came into Government in 2008. The amount of fines that are overdue now sits at 43 percent—although worrying this is much less than the 56 percent that it was when we came into Government in 2008. These situations and improvements continue to reflect the importance of a robust fines system within our criminal justice system. 
Katrina Shanks 
: How did new initiatives such as credit reporting of overdue fines contribute to these results? 
Hon CHESTER BORROWS 
: Credit reporting of fines has netted $7 million over the past 12 months that would otherwise have been unpaid. Data sharing with other agencies which was projected to bring in $15 million in its first year actually brought in $64 million in 2012. Stopping fines dodgers at the airport stopped almost half a million dollars from leaving New Zealand and equipping our bailiffs with portable eftpos machines brought in another half a million dollars. 
Richina Pacific—New Zealand House Project and Financial Position 
8. 
Rt Hon WINSTON PETERS (Leader—NZ First) 
 to the  
Minister of Foreign Affairs 
: Did any of the reports referred to in his response to Question for Written Answer 09873 (2012) include the governance and financial position of the Richina Pacific group of companies? 
Hon CHRISTOPHER FINLAYSON (Attorney-General) 
 on behalf of the Minister of Foreign Affairs: No. 
Rt Hon Winston Peters 
: What was his reaction and what did he do when Richina Pacific was first described as a “surrogate Government agency” by the University of Auckland business school given that the company was deleted from the NZX in 2009 due to inadequate corporate disclosure and huge financial losses; or second when the Richina Pacific chief executive officer Richard Yan announced in September last year that Prime Minister John Key would open New Zealand House Shanghai within 2 months when as of 5 November 2012 in the written question that he has got according to him as Minister no decision had been made on the property in Shanghai? 
Hon CHRISTOPHER FINLAYSON 
: No decision had been made and what Mr Yan had to say was for Mr Yan but it did not accurately represent the facts of the matter. The Ministry of Foreign Affairs and Trade in conjunction with New Zealand Trade and Enterprise was looking at a property given that the lease of the current property expires on 31 October this year. They were looking at a number of options. Mr Yan approached them and they were looking at such matters as the site the structure of the building and so on but it was a long way away from getting anywhere near what the member has said in his question. 
Rt Hon Winston Peters 
: So we are to believe that a man called Richard Yan has been making all sorts of statements internationally and widely broadcast and he as the Foreign Minister did nothing at all; or for example that when Richina Pacific chief executive officer Richard Yan asked Jenny Shipley to step down from the board of Mainzeal in December last year did he find out what the reason for Mrs Shipley’s departure was given the association with the Shanghai building that Mr Yan had been widely publicising? 
Hon CHRISTOPHER FINLAYSON 
: Well that is a very convoluted question but what I will try to do is— 
Rt Hon Winston Peters 
: What’s the answer? 
Hon CHRISTOPHER FINLAYSON 
: Well I will give the member the answer to his rather scrambled question and it is this: the Minister of Foreign Affairs cannot be responsible for any statements that Mr Yan may make. I have said to the member that what was going on was that the Ministry of Foreign Affairs and Trade and New Zealand Trade and Enterprise—and it was happening at an officials’ level—were looking at alternative premises in Shanghai. 
Rt Hon Winston Peters 
: Well what did he do as Minister when the Minister of Maori Affairs said that “New Zealand house [in Shanghai] is an enormous and generous gesture.” or when for example as Minister he became aware of the enormous and generous gesture Mr Richard Yan had given to Mr Sharples? 
Hon CHRISTOPHER FINLAYSON 
: It is Dr Sharples actually and that would have been an aspirational statement by the Minister of Maori Affairs when he looked at the property. But the situation is that as I said officials were looking at the property in Shanghai from a cost and construction point of view and all other questions relating to Mr Yan or his company’s financial solvency would have come much further down the line. 
Rt Hon Winston Peters 
: I seek leave to table a copy of Dr Sharples’—or Mr Sharples’—electoral return. 
Mr SPEAKER 
: Well again it is something that is pretty freely available to all members but it is over to the House. Leave is sought by the Rt Hon Winston Peters to table that document. Is there any objection? There appears to be none. It can be tabled. 









Document by leave laid on the Table of the House. 
Prescription Co-payments Increase—Impact 
9. 
Hon MARYAN STREET (Labour) 
 to the  
Minister of Health 
: What reports if any has he received on the impact of increasing prescription charges? 
Hon TONY RYALL (Minister of Health) 
: 
 Including articles letters ministry reports and such like as well as other documents I have received a number of reports—too many to detail here. The $2 increase per item or a maximum of $40 a year per family is the first increase in 20 years which has helped fund cost pressures and new investments in the health service. 
Hon Maryan Street 
: Is he aware of a University of Otago report last year that said that 276000 adults were estimated to have found cost a barrier to picking up prescription items even at $3 an item; and how did he factor this information into his decision to increase charges to $5 an item? 
Hon TONY RYALL 
: Yes I am aware of that survey. I am also aware that it did not have any comparative information from earlier years. There have always been some people who do not pick up their pharmaceuticals and that is disappointing because support is available. In fact almost one-third of all prescriptions filled in New Zealand are done so without any charge to the patient. 
Hon Maryan Street 
: Is he aware that the chaos surrounding the prescription charge increase and the pharmacy contract with district health boards has meant that pharmacists are now charging anything from $5 to $10 a week for blister packs on top of the new charges so that a pensioner who has written to me recently in Christchurch and who requires 10 medicines daily now has to pay an extra $6 a week to get his medicines in this usable and reliable form and that means forking out in excess of $300 per year extra for his medicines as a result of these changes? 
Hon TONY RYALL 
: In this question the changes in respect of the prescription charge are unrelated to the other parts of the member’s question. The fact is that the increase in the prescription charge was implemented quite smoothly. What is important for people to realise with the prescription charges is that there is a maximum extra cost to any family of $40 a year. Once a family gets a prescription subsidy card it needs to pay for nothing extra over 20 items. This information is available in pharmacies general practices and on the Ministry of Health website. 
Hon Maryan Street 
: Does he understand that the fee paid to pharmacists for dispensing medicines is linked to patients’ co-payments—that is the $5 charge—and does he therefore acknowledge that it is costing people more than simply the $2 increase per item to pick up their scripts? 
Hon TONY RYALL 
: I do not think the member’s description has validity in light of the new transitional arrangements that we have in the pharmacy sector. But what is important to remember is that if members have constituents who feel that they are under pressure with the increased prescription charges those patients should be advised to talk to their general practitioner or their pharmacist or to make sure they can be in touch with Work and Income which can provide support. 
Hon Maryan Street 
: How does he reconcile the recent prescription charge increase from $3 to $5 an item with his statement of 11 September 2008 his guarantee of 30 July 2009 or his statement of 11 June 2011 that under National there would be no change to prescription charges that the Government was not considering such an increase and that that position would last for the term of the National Government; or is this another of National’s broken promises? 
Hon TONY RYALL 
: I certainly think that that undertaking did stand for that term of that National Government. The fact is that the extra charges and the revenue that is being collected from these contributions are being reinvested in the health service in more services for cancer patients more preventive health care and expanding free after-hours doctors’ visits for kids under the age of 5. If any people are having difficulty meeting their prescription charge they should talk to their general practitioner their pharmacist or Work and Income New Zealand. 
Anzac Day Centenary—Commemorations at Gallipoli 
10. 
Dr PAUL HUTCHISON (National—Hunua) 
 to the  
Minister of Veterans’ Affairs 
: What progress has been made towards planning for the Centenary Anzac Day commemorations at Gallipoli? 
Hon MICHAEL WOODHOUSE (Minister of Veterans’ Affairs) 
: 
 I can advise that following a recent review of the Anzac commemorative site by the Turkish Government visitor numbers for the Anzac Day services at Gallipoli in 2015 have been set at 10500 people. Of this number 2000 places will be set aside for New Zealanders 8000 for Australians and 500 for those from Turkey other countries and dignitaries. This 2000:8000 split is based on the approximate ratio of New Zealand and Australian casualties from the 1915 Gallipoli campaign. I want to record my gratitude to the Turkish Government for its ongoing support and generosity in planning for the commemorations and its recognition of what Anzac Day means to both New Zealanders and our Australian cousins. 
Dr Paul Hutchison 
: How will New Zealand’s 2000 places be allocated and how can people apply? 
Hon MICHAEL WOODHOUSE 
: As attendance in 2015 is expected to be well oversubscribed places will be allocated through a ballot system in both Australia and New Zealand. There has been extensive public consultation. I am working with Veterans Affairs New Zealand to finalise details on how the ballot will be conducted including how any weighting for specific groups might be given. I am hoping to announce those details before Anzac Day as well as further information about how New Zealanders will be able to apply for one of the 2000 places. 
Question No. 9 to Minister 
Hon MARYAN STREET (Labour) 
: 
 I seek leave to table some items. I meant to do it at the end of my last question. I seek leave to do that now. 
Mr SPEAKER 
: Could you briefly describe the items. 
Hon MARYAN STREET 
: Certainly. I seek leave to table a photo of uncollected scripts piling up in a Porirua pharmacy because people cannot afford to collect them; Fairfax dated 28 December 2012— 
Mr SPEAKER 
: This is easily resolved. Leave is sought. Is there any objection? Yes there is. 
Hon MARYAN STREET (Labour) 
: 
 I seek leave to table the December edition of  
Pharmacy Today 
 which is not a magazine that is readily available. 
Mr SPEAKER 
: And this is easily resolved. Leave is sought to table that document. Is there any objection? Yes there is. 
Hon MARYAN STREET (Labour) 
: 
 I seek leave to table two Treasury documents released under the Official Information Act. The first is: “Free and Frank advice on increasing the pharmaceuticals co-payment”. 
Mr SPEAKER 
: And the other? 
Hon MARYAN STREET 
: The other is dated 18 January “The cost implications of changes to patient prescription fees”. 
Mr SPEAKER 
: Is there any objection to those two Treasury documents being tabled? There appears to be none. They may be tabled. 







Documents by leave laid on the Table of the House. 
Hon MARYAN STREET (Labour) 
: 
 I seek further leave to table an email from a Christchurch resident to Megan Woods MP concerning $300 extra per year required to be paid because of changes to prescription charges. 
Mr SPEAKER 
: Leave is sought to table a document to Megan Woods MP. Is there any objection to that being tabled? There appears to be none. It can be tabled. I am sorry there was objection. 
Broadband Pricing—Unbundled Bitstream Access Services 
11. 
CLARE CURRAN (Labour—Dunedin South) 
 to the  
Minister for Communications and Information Technology 
: Does she agree with Chorus’s assertion that the Commerce Commission’s draft decision on pricing for unbundled bitstream access (UBA) services could reduce annual earnings by up to $160 million? 
Hon STEVEN JOYCE (Minister for Economic Development)  
on behalf of the Minister for Communications and Information Technology: Yes that figure is broadly consistent with the advice she has received. 
Clare Curran 
: Will she rule out the wholesale price cuts to broadband over copper which the Commerce Commission is recommending? 
Hon STEVEN JOYCE 
: What she has done is rather than take the action that the member is asking about bring forward a couple of reviews that will address the whole issue of the regulatory environment in this sector and obviously therefore the pricing matters as well. Those are the telecommunications service obligations review which was planned for around this time and also the review of the wider legislative and regulatory framework which was due to start at some point over the next few years. She has done that to create further certainty in the telecommunications sector. 
Clare Curran 
: Why does she think New Zealanders should pay more for their phone and broadband connections than they otherwise need to in order to boost the bottom line of a private company by $160 million? 
Hon STEVEN JOYCE 
: I think that member is characterising it in a way that does not actually relate to reality. Of course what applies at the moment is the regulatory framework set up under the previous Labour Government for unbundled bitstream access pricing. The draft decision by the Commerce Commission would apply if it was taken through to its conclusion from 2 years hence. What the Minister has decided in light of the draft determination is to bring forward the other two reviews that were due to happen and actually resolve all matters at once to get the regulatory certainty as we proceed into the very exciting fibre network technology that the Government has endorsed and invested in. 
Clare Curran 
: Why should Kiwi households have to forgo price drops in their monthly phone and internet bills in order to keep Chorus afloat? If Chorus cannot do the job under its current contract within the very regulatory and legal environment developed by her predecessor Steven Joyce 2 years ago then should not she be asking whether it is up to the job—or should she be asking whether he was up to the job? 
Hon STEVEN JOYCE 
: I think the Minister would choose to answer the last of those legs of the question and say of course he was up to the job. 
Wage Rates—Parliamentary Support Staff and Minimum Wage 
12. 
JULIE ANNE GENTER (Green) 
 to the  
Minister of Finance 
: Would he support Budget 2013 including funding for Vote Parliamentary Service to ensure that parliamentary cleaners and other support staff are paid a living wage of at least $18.40 an hour? 
Hon STEVEN JOYCE (Associate Minister of Finance) 
on behalf of the Minister of Finance: Any considerations around Budget 2013 as the member is aware are confidential until the Budget is delivered. But I would point out to the member that the Speaker is the Minister responsible for Vote Parliamentary Service. If the member has any questions about how money in that vote is spent or could be spent in that vote she should direct those to the Speaker. 
Julie Anne Genter 
: Why would his Government not show leadership and support a pay rise that would give the cleaners in Parliament a living wage and lift 37 families out of poverty when it would cost less than the salary of one Minister? 
Hon STEVEN JOYCE 
: I think it is important to note that everybody I think wants to see real wages grow in the New Zealand economy for New Zealanders and their families. It is absolutely something that we are all—I think most people in this House—are very passionate about. But of course for that to occur we have to do the things that allow that to become affordable. We have already noted earlier in this House this afternoon in question time the growth of the minimum wage in the New Zealand economy and the fact that the minimum wage is a relatively high proportion of average wages. But fundamentally for Governments and organisations and companies to be able to afford further increases in wages that involves further productivity increases more investment and for companies more sales. It is those things that the Government is very focused on assisting with in order to enable wages to continue to grow and our record in this matter is actually pretty positive. 
Julie Anne Genter 
: I raise a point of order Mr Speaker. I appreciate that the Minister said that everybody would like to see wages grow but I did not hear an answer to my specific question about the Government showing leadership and why the Government would not show leadership on this specific issue of the parliamentary cleaners’ wages. 
Mr SPEAKER 
: There are two difficulties with your question. Of course one is that it is not the Minister’s responsibility. Vote Parliamentary Service comes under the auspices of the Speaker. The second difficulty with your question is of course given in the first answer from the Minister: he is not at liberty to discuss Budget issues at this stage. 
Julie Anne Genter 
: Is it fair and reasonable to back huge pay rises for the chief executives of our State-owned energy companies while ignoring the needs of those who clean the Minister’s office for the minimum wage? 
Hon STEVEN JOYCE 
: Obviously there are a range of questions in there and none of them are actually directly the purview of the Minister of Finance because the State-owned enterprises make their own decisions about how they pay all of their employees and of course as I pointed out previously in respect of the vote that the member is interested in that is the responsibility of the Speaker. But in a more general sense we of course want to see wages continue to grow. This Government has a reasonably good record in the context of the global financial crisis of seeing wages continue to grow—of real wages growing considerably faster than the cost of living. We would all like it to happen more and the way to do that is for the New Zealand economy to work better. That is why the Government is working on more investment in the economy improving productivity and improving the skills of the economy. Those are the things that can make a real difference. 
Julie Anne Genter 
: Does the Minister stand by his comments last night on Radio Live that some employers are unwilling to pay more than the bare minimum in wages because they are greedy; should not the Government set an example and take a lead on this issue? 
Hon STEVEN JOYCE 
: I am obviously not aware of what the Minister may or may not have said on the radio last night and therefore would have to give him the opportunity to see the transcript. 
Julie Anne Genter 
: Has he read the wealth of literature some of which was summarised recently in  
The Economist  
magazine that shows increasing wages for lower-paid workers does not result in job losses and actually can increase productivity increase consumer demand and therefore lead to more employment? 
Hon STEVEN JOYCE 
: I appreciate that there is obviously a range of views on this matter but actually it stands to reason of course and in fact is supported by the Government’s advice around lifting minimum wages that each time wages go up that does put pressure on job losses in the economy. The question is by how much and of course we do tend to place the minimum wage higher every year. But we do all have to understand that there are trade-offs in terms of the number of people employed in the economy. The other side of the House spends a lot of time understandably encouraging the Government around job growth and there is a balance in that space. 
Julie Anne Genter 
: I seek leave of the House to table the  
Report of an Investigation into Defining a Living Wage for New Zealand 
 which shows that hundreds of thousands of Kiwi workers— 
Mr SPEAKER 
: What is the source of that document? Is it available to members via the website? 
Julie Anne Genter 
: It was prepared by Peter King and Charles Waldegrave— 
Mr SPEAKER 
: Is it publicly available and equally— 
Julie Anne Genter 
: I am not aware of whether it is publicly available. I have a copy of it. 
Mr SPEAKER 
: The easiest way is to put the question. Is there any objection to that document being—[ 
Interruption 
] There is. 
Julie Anne Genter 
: For the benefit of the Minister I seek leave to table some of the research from  
The Review of Economics and Statistics 
 which shows that the minimum wage has actually— 
Mr SPEAKER 
: The source of the document? 
Julie Anne Genter 
: It is from the journal  
The Review of Economics and Statistics 
. It is behind a pay wall. It is an academic journal. 
Mr SPEAKER 
: The easiest way to resolve it is that I will put the leave. Is there any objection? There is no objection. That document can be tabled. 









Document by leave laid on the Table of the House. 
Mr SPEAKER 
: That concludes questions for oral answer— 
Rt Hon Winston Peters 
: Supplementary question. 
Mr SPEAKER 
: Supplementary question. I apologise to the Rt Hon Winston Peters. 
Rt Hon Winston Peters 
: Apologies accepted. Would National provide a pro rata contribution from its parliamentary funding as New Zealand First has offered to do so these hard-working cleaners working at Parliament no less sometimes with two jobs just to get by can receive a decent top-up to a living wage; if not why on earth not? 
Hon STEVEN JOYCE 
: Of course I have to defer in all these matters to the members who have been in Parliament a heck of a lot longer than I have and have had many opportunities over the years to address these issues. But of course unfortunately—or fortunately depending on your perspective—the Minister of Finance does not get to determine the allocation of parliamentary parties’ funding. 
Rt Hon Winston Peters 
: I raise a point of order Mr Speaker. I did not ask him about the Minister of Finance’s determination. I am asking him would the National Party provide a pro rata funding top-up as my party New Zealand First has offered to do? He can answer that question can he not? 
Mr SPEAKER 
: Well no he cannot because he has no responsibility for it. Vote Parliamentary Service comes under the responsibility of the Speaker. 
Financial Markets Conduct Bill 
Second Reading 
Debate resumed from 25 October 2012. 
JONATHAN YOUNG (National—New Plymouth) 
: 
 I am very pleased to stand in the second reading of the Financial Markets Conduct Bill. It is wonderful to have our sound system back in operation. The 560-page Financial Markets Conduct Bill is the result of a comprehensive review of securities law and takes into account the work of the Capital Market Development Taskforce the effects of the global financial crisis and the failure of finance companies. 
The bill seizes a once-in-a-generation opportunity to— 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: Order! Order! Would members leaving the Chamber please do so and show some consideration to the member who is trying to address the House. Courtesy is contagious. Thank you. 
JONATHAN YOUNG 
: This bill seizes a once-in-a-generation opportunity to rewrite our securities law which has been subject to decades of ad hoc reform and brings an integrated and coherent manner to those pieces of legislation. It will play a crucial role in restoring investor confidence by providing better information and protections for what are termed as mum and dad investors as well as setting clearer rules for companies looking to raise capital. The reform of our securities law has been subject to extensive public consultation including the release of a discussion document and an exposure draft bill to ensure that this legislation provides a robust and enduring framework for our capital markets. 
 As I mentioned in the first part of this speech which was interrupted the backdrop to this bill was the global financial crisis and the collapse of finance companies. This had a traumatic effect on the lives of many New Zealanders and impaired the confidence of investors in our financial markets. This bill largely completes a comprehensive programme of reforms in the financial sector that this Government has implemented over the last 4 years. These reforms include the introduction of the financial advisers regime the licensing of trustees and statutory supervisors and the establishment of the Financial Markets Authority. 
The Financial Markets Conduct Bill completes this comprehensive suite of reforms of financial market regulations. The bill will replace the financial markets conduct regulation contained in a number of statutes including the Securities Act the Securities Markets Act the Unit Trusts Act and the Superannuation Schemes Act and aspects of the KiwiSaver Act 2006. This will allow a more coherent regime. The intent is to facilitate the development of a fair and efficient and transparent financial market that will in turn promote confidence and the informed participation of businesses investors and consumers in those financial markets. 
This bill seeks to achieve this by reforming the regulation of how financial products are created promoted and sold and the ongoing responsibility of those who offer deal and trade in them. I am very happy to commend this bill to the House. There is a tremendous amount of detail in it—as you can imagine with 560 pages—as we look at the different financial products covered by the bill: debt equity management investment products discretionary investment management services derivatives and so forth. So as we proceed through this debate and this bill no doubt we will see some of these matters expanded upon. Thank you. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 It has been said that those who do not learn the lessons of history are doomed to repeat them and the lessons of history in the case of financial markets regulation are all too obvious. The doyens of the free market brought to us the circumstances that led to the great crash of 1929-30 and brought to us again the global financial crisis of 2008-09 and the signs in hindsight were there for all to see. 
In the United States a family pet could get a mortgage for a home. Mortgages could typically be up to 120 percent of the value of that home—that is you could take out a mortgage for more than the value of your home and get 20 percent cash as well. That toxic real estate debt which was founded on the fallacy that markets always move in an upward direction was magnified by blending with collateralised debt obligations and then expanded by multiples of hundreds through the use of derivatives that were insufficiently or inadequately regulated in that jurisdiction. 
That malaise that contagion spread across the globe and caused the near freezing of financial markets and the failure of some of the United States’ largest investment banks—Lehman Brothers Bear Stearns and the one that John Key used to work for Merrill Lynch—and the European markets followed very soon afterwards. New Zealand Iceland Ireland and many other countries were not immune. We escaped a Great Depression like the one of the 1930s by the merest whisker. But the ideas that led to that were there for all to see for some time based on the writings of amongst others Milton Friedman and their adoption in Ronald Reagan’s America and Margaret Thatcher’s Britain and in Roger Douglas’ and Ruth Richardson’s versions of liberalisation in New Zealand. The fallacy that unregulated financial markets lead to the best of all possible worlds has now been exploded. 
This bill the Financial Markets Conduct Bill has bipartisan support. It is an attempt—perhaps not a far-reaching enough one but an attempt none the less—to re-regulate those financial markets where there was inadequate regulation that contributed to that great recession. The work was started under the Hon Lianne Dalziel in the latter years of the previous Labour-led Government it has been continued I think by the current Government and it has the bipartisan support of members of this House. It has this support because it attempts to re-regulate derivatives to provide increased transparency for financial markets to regulate financial products according to their economic substance and not just their name tags and to model itself on the more thorough processes of our Australian regulators the Australian Securities and Investments Commission and the Australian competition watchdog. 
It seeks to protect retail investors it will have duties on issuers for ongoing disclosure it will set common governance requirements that will apply to all managed investment schemes and importantly it will introduce new criminal penalties in relation to serious breaches by directors of the obligation to act in good faith. These are not simply academic matters. Thousands of senior New Zealanders in particular have lost their life-savings and sometimes their homes because of fly-by-night charlatans who are now household names and their phoney investment companies which have taken money off decent New Zealanders and sold them down the river. The directors and the officers of those companies have the global jet-set lifestyle while ordinary New Zealanders have suffered seeing their life-savings taken off them and frittered away based on business models that could never have worked—on the one-way model that markets will always appreciate and that therefore the debt will always be covered by securities that are worth more and more. Nobody in their right mind not even members opposite believes that markets always act like that. 
That behaviour in future will quite likely fall subject to the criminal penalties that are now incorporated in this bill and that have been strengthened by the Commerce Committee. Much of this work comes from the Capital Market Development Taskforce set up in 2008 by the previous Labour-led Government. It developed a blueprint and an action plan for the development of New Zealand’s financial system to enhance the integrity of those markets to enhance the competitiveness of those markets and to provide more confidence for New Zealanders and it is there to seek the win-win of a capitalist system that is adequately regulated in the public interest. We in the Labour Party do not believe that markets are always bad but we believe that laissez-faire capitalism is doomed to fail to eat its own young to cripple its own markets and in the process to take down the interests of ordinary New Zealanders. And the evidence? Sixty-one New Zealand finance companies have failed in the last 4 years the latest of which—well not quite the latest now—was South Canterbury Finance which failed to the tune of $1.6 billion. When the full story is public—about what happened at South Canterbury Finance and the ministerial involvement of Bill English Steven Joyce and others John Key included who turned away a recapitalisation deal that would have limited the taxpayer to a loss of $500 million in exchange for a catastrophe that cost $1200 million; that is a $700 million stuff-up by those Ministers—heads will roll. It may have been convenient for the Christ’s College mafia but it was not convenient for the New Zealand taxpayer. The Government is on notice that the next Labour-led Government will thoroughly open the books on that disgusting case of South Canterbury Finance. And it is just one albeit the largest one of 61 finance company failures that have sadly taken the life-savings from too many New Zealanders. 
I want to acknowledge the bipartisan work of the Commerce Committee led by Jonathan Young and on our side by the Hon Clayton Cosgrove which has in a number of respects strengthened the draft bill that is now before the House. In particular I wish to commend the new general offence of giving false or misleading statements based on section 377 of the Companies Act plus new specific requirements for market operators of domestic financial product markets and amendments that extend the current bans on persons banned from operating in financial markets. The select committee has done what it could to put even more spine in this legislation but this work is not finished. Vigilance is required and as we speak one of the factors that led to the credit bubble of the last 5 years has already started again. In the face of inadequate 20th century monetary policy as we are hearing from the manufacturing inquiry we have a property roller coaster that once again is rolling down the tracks—or we might say for now rolling up the tracks. How convenient that might seem for a Government that is worried about opinion polls for middle New Zealand until it reaches the top of the track and starts screaming down the other side. Because one thing is for sure: those who do not learn the lessons of history repeat them. And if there is one lesson of financial markets it is that what goes up must come down. What goes up must come down. The property market is no exception. 
We commend this bill. It is good as far as it goes—all 500 pages of it—but vigilance is required because it is in the interests of everyday New Zealanders to know that their life-savings will be safe and secure and subject to laws that guarantee that the criminal and negligent behaviour of fly-by-night financiers will be caught that they will be prosecuted and that they will be sent to jail. That does not come too soon for the New Zealanders who have fallen foul of those lessons of history. Thank you. 
Dr RUSSEL NORMAN (Co-Leader—Green) 
: 
 This bill the Financial Markets Conduct Bill is an attempt to deal with some of the challenges of the out-of-control growth of the financial services sector over the last couple of decades. But of course it is a longstanding problem. As the previous speaker referred to the global financial crisis has drawn to the forefront the issue of how we regulate the financial services sector—not just the banking sector but more generally the financial services sector. The issue that stood behind the global financial crisis was fundamentally one of the expansion of money supplied by the private banks. There was a phenomenal increase in global supply created by the private banks and financial institutions in the lead-up to the financial crisis. That was part of the financial cycle that eventually led to the bust that we have seen most recently. The Bank for International Settlements in its recent working paper No. 395 looking at financial cycles tried to analyse what stood behind the financial cycle that we have seen just come to a bust looking particularly at the expansion of money supplied by the private banks. 
What we have seen since then is an attempt to try to constrain the ability of that dramatic expansion that we saw and there are strong grounds if you like—there are strong theoretical grounds—for the basis for constraining the expansion in the supply of money by the private banks. It goes a long way back. Henry Simons who was of course one of the fathers of the Chicago school—the Chicago school is what you might think of as one of the neo-liberal or quite far-right members of the economic theory constellation—said: “in the very nature of the system banks will flood the economy with money substitutes during booms …”. Simons is very clear that the nature of fractional reserve banking means that during the booms the banks and other financial institutions will flood the system with money. He did not see this as a good thing and of course the OECD— 
Peseta Sam Lotu-Iiga 
: I raise a point of order Mr Speaker. I understand where the member is going with this but this has got nothing to do with the bill at hand here. I suggest the member comes back to talking about the Financial Markets Conduct Bill. 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: The member has not been going very long but it is a narrow debate and I would ask the member to just try to bring it into context. 
Dr RUSSEL NORMAN 
: It is unfortunate that that member does not understand the connection between the Financial Markets Conduct Bill and the regulation of the financial markets. That says an awful lot about the Government. 
So how do we try to constrain those financial markets? That has been the challenge for Government after Government. Henry Simons—unfortunately the member does not realise—is a very prominent economist who has been very important in economic theory and stands behind a lot of the thinking that sits behind this bill because that is what economic theory is about. But I would not expect the Government to know about that. Simons said why it was important to constrain the financial services. He said: “Private institutions have been allowed too much freedom in determining the character of our financial structure and in directing changes in the quantity of money and money substitutes.” So what Simons was trying to say was that we need greater regulation and that has become very clear of course during the last decade. Could it ever become clearer in New Zealand with the collapse of all the finance companies? Of course it is a larger problem than just the finance— 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: Order! I am sorry to interrupt the honourable member. There is a member on my right and one on my left and they are actually interjecting on each other and neither of them has the floor. It is not permitted. 
Dr RUSSEL NORMAN 
: This bill is trying to deal with some of those issues in some ways but the question is whether it fundamentally deals with some of the outstanding issues we have to address. It works in combination with the financial markets regulators which is important. 
So as part of looking at this bill we have been looking at what the Financial Services Authority in the UK has been saying—Adair Turner Lord Turner who is the departing chair of the Financial Services Authority in the United Kingdom. What has been so interesting about the debate around the regulation of financial services has been the development of how we regulate the growth in private sector money what the role of public sector money is and the creation of public sector money which of course has gone under the term of quantitative easing and all sorts of other names globally. So Adair Turner who is the chair of the mirror regulatory agency of the one that this bill works alongside has been making some rather extraordinary statements in recent times about the regulation of it. Essentially he is saying—and Martin Wolf who is the lead commentator in the  
Financial Times 
 has also been making this argument—that although it is fine through fractional reserve banking to allow the private sector banks to create money there is also a case in certain circumstances for the public to be allowed to create money for public good as well. 
What Martin Wolf has been talking about in particular is infrastructure investment. He says it is fine to allow the private sector banks to create money for private benefit but in terms of the creation of money by the public sector—for infrastructure for example—that also is a legitimate purpose. This is of course what the Green Party was proposing with the use of quantitative easing to help pay for the rebuild of Christchurch. The regulation of the financial services sector which this bill is part of has cracked open a very large and interesting debate about the best way to regulate the sector in terms of trying to limit the growth of credit that is coming out of the sector. 
But it has also cracked open I think a fascinating debate which we are struggling to have in New Zealand about what the role is for public sector - created credit or printing money as the Government likes to call it. That debate I think is one of the defining debates of our era because of course of the problems that have come out of the private sector. So this bill is part of trying to regulate some parts of that sector. It goes alongside the debate we have been having about monetary policy—and clearly there is an overlap between the two—and it goes alongside the debate that Mr Cunliffe also referred to which is what to do currently in terms of some of the problems in the New Zealand economy. We have another housing boom. How do we control that housing boom without interfering with some of the other financial services in the operation of the economy? For those of you who have not seen it the Swiss central bank has just announced that it is going to require private banks to keep extra capital on hand for their loans to the property sector. The Swiss also have a housing boom problem so they are requiring extra capital to be put aside in order to try to take some of the heat out of their housing boom. All of these little pieces of the puzzle—this bill around monetary policy reform and how to deal with the housing asset bubble—are all parts of the picture. Of course the exchange rate and how to deal with the high New Zealand dollar is the other part of the picture. 
We welcome this bill. There is a lot of good stuff in this bill. We still however remain concerned around the issues of criminal liabilities for directors of finance companies. Essentially this bill weakens the current provisions. There is no other way to look at it I do not think in that the strict liability provisions that currently apply to the directors of finance companies and have resulted in a number of directors of finance companies going to jail are essentially weakened by this bill. I think the Commerce Committee did a good job in terms of strengthening the bill in terms of criminal liability and I welcome the changes there. But in terms of the strict liability for the actions of the directors of finance companies that has been taken away. 
People will be surprised by this. So if you are one of those people who lost money in the finance companies and then you said “Oh well at least those characters got sent to jail.” the chances are that there is less likelihood that they would be sent to jail under the current bill in front of the House than in the existing legislation because of the bill getting rid of the strict liability regime. Should the New Zealand Parliament be passing a law that essentially weakens the strict criminal liability regime that currently applies to the directors of finance companies? That essentially is what we are doing. The bill of course is a lot more than that and to characterise the bill by just that one element would I think be unfair. There is a lot of really good stuff in this bill but none the less when you look at that one element of it there is I think no question that essentially what it does is weaken that provision and make it less likely that the directors of finance companies would end up in jail if they misled investors. 
The response from those who support that bill is to say: “Oh well you can get some of your money back in civil damages.” The problem with that is that a lot of the directors of these finance companies will hide their assets in trusts and it would be very difficult for investors to get their money back from the directors of these companies. Clearly there needs to be some work done to fix up the trust regime—the legal framework around trusts. But it means that under this current Financial Markets Conduct Bill for those who say “Oh well you can always sue the directors to get your money.” actually the directors will not necessarily have enough money and the money will be hidden away in trusts so it will be hard to access. Thank you. For that reason we will not be supporting this bill. 
Peseta SAM LOTU-IIGA (National—Maungakiekie) 
: 
 Malo le soifua. Good afternoon. I rise to support this the second reading of the Financial Markets Conduct Bill. I support it because it is part of a suite of reforms that this National Government has put in place to regulate financial markets. Although I hear the cries of Mr Cunliffe opposite saying that all sorts of things have gone wrong with our finance companies that man in 9 years of a Labour Government sat on his backside and watched while finance companies burned. He says now after being a Crown Minister that we need to regulate but when the members opposite had the opportunity to regulate this industry and to put it in perspective and put it on the right track they neglected their duties as a Government. 
What is the suite of reforms? Well it is the Financial Service Providers (Registration and Dispute Resolution) Act 2008—Mr Chauvel was part of reforming that area of financial markets and we acknowledge the work that was done across this House—and the Securities Trustees and Statutory Supervisors Act. We also reformed the Financial Markets Authority to give it the resources not just to enforce the regulations that we are putting in place here with this bill but also to enforce regulations across the finance sector. 
Why is it important? Not one person today has told us why financial markets and capital markets are important. Businesses in order to grow need to access capital. When businesses grow in this country we get more jobs we get more opportunities for people and our standard and quality of life across this country improve and get better. That is what economic growth is about. That is what this bill is about. That is why we are reforming the finance sector with this legislation. 
Mr Cunliffe also referred to how this bill would put into jail directors who were negligent. Negligent directors do not go to jail. Reckless and fraudulent directors go to jail but certainly I have not seen in any jurisprudence across this world negligent directors being put in jail. It is in this bill—and I will just talk quickly because I am limited for time about some of the measures. 
We are replacing the requirement for issuers to prepare a prospectus and an investment statement with a requirement to prepare a single product disclosure statement. That is about producing efficient means of raising capital. It is about bringing compliance costs down which is what businesses out there are telling me on the factory floor that they want better access to capital. They want more efficient ways of raising capital. They want to be able to produce jobs through having a Government that listens to what they say and that will do some of the things in order to promote growth in this country. So I support this bill along with my colleagues. It is a very good bill. It promotes efficiency it promotes jobs and it promotes opportunities for our communities in this country. 
ANDREW WILLIAMS (NZ First) 
: 
 I take a call on behalf of New Zealand First on the second reading of the Financial Markets Conduct Bill. New Zealand First will be supporting this bill as we noted at the first reading. Certainly we are in full support of this extensive bill—some 561 pages a huge amount of legislation here—which has been put together in order to get New Zealand back on the right track in terms of our financial markets and oversight of our financial institutions. 
It is somewhat disappointing that it has taken so many years for this bill to be brought through to Parliament. What a shame that this sort of legislation was not in place perhaps a decade or more ago and then we would not— 
Peseta Sam Lotu-Iiga 
: Whose fault is that? 
ANDREW WILLIAMS 
: —well National was in power in the 1990s and did not do anything about it. 
Peseta Sam Lotu-Iiga 
: You said “A decade ago.” 
ANDREW WILLIAMS 
: “A decade or so ago.” I said. What a shame that through the 1990s and through the 2000s this legislation was not in place because many very very good hard-working New Zealanders thousands and thousands of hard-working New Zealanders perhaps would not be in the situation they are in today having lost their life-savings or large amounts of their life-savings because of the shysters and the shenanigans that have gone on in our financial markets in recent years. What a shame it is that many of those affected by those shenanigans that have gone on are the very ones who need the support of their finances now having retired having been in a situation where they were looking forward to a safe and secure retirement with their life-savings only to find that some real shysters in the industry have diddled them out of their life-savings. That is a great shame. It is a sad day. It is a sad period in New Zealand’s history that this did occur. It is very disappointing that many of those involved were able to get away with it and to this day have not been held to account for their actions. 
The fact that 61 companies went bust in our financial markets was a very very poor reflection on the New Zealand cowboy financial market that was operating. The fact that 61 finance companies could take so much money out of this economy so much investment out of this economy perhaps is a reflection of why there is so much distrust today in investment in parts of the New Zealand economy. This bill does serve to return a level of security to the New Zealand financial economy so that people can once again feel that their life-savings can be put somewhere that perhaps can be trusted and know that when they do require them in the future in their retirement they will have been safeguarded. 
 Therefore it is good to see that the penalties have been greatly increased for individuals—between $500000 and $2.5 million in terms of the penalties for individuals—and also for corporates and that there are jail terms of up to 5 years for individuals for misleading the public providing misleading statements or providing misleading financial information. That is good but it is something that New Zealand First has always been on about. As I said it was back in the 1990s when the Rt Hon Winston Peters exposed the wine-box saga. He exposed much of what was going on at the time and how in that period of the 1990s we saw the start of this sort of activity going on. The Rt Hon Winston Peters and New Zealand First exposed the wine-box saga back in the 1990s. It is just a pity that more of this could not have been exposed during the last decade. 
In terms of this bill New Zealand First is supporting it through its next stages. We hope it will not take too much longer for this bill to be enacted through this Parliament. It was first brought to Parliament in October 2011. We are now in February 2013. Like everything it does take some time through this Parliament but the longer it takes to actually be enacted and be put into place the longer New Zealanders—good hard-working Kiwis—are put at risk. So we urge all members of this House to support the bill. We are disappointed to hear that the Green Party is not supporting it but we know that it does have the numbers to be put through this House. We would urge that it move with haste and that the Finance and Expenditure Committee move at pace with this. We would welcome this bill coming back to the top of the parliamentary agenda as soon as possible so that we can move on this and safeguard the interests of New Zealanders and their financial investments. New Zealand First is supporting this bill. 
KANWALJIT SINGH BAKSHI (National) 
: 
 Sat sri akaal Mr Speaker. Thanks for the opportunity to speak in support of this Financial Markets Conduct Bill at its second reading. This bill is another bill that is going in the right direction giving confidence to investors and the financial market. 
This Government has been working hard to bring all this legislation that can build the confidence of investors and the financial market. Investors and the financial market are both important to this economy because businesses look for investments and the small savers the mums and dads look for a financial market where they can invest their money. It is important that we have all those measures in place so we can have that confidence. 
I would like to touch briefly on the NZX50 which had been constantly dropping since 2007. As soon as National took over as Government in 2008 under the leadership of the Rt Hon John Key the financial market has been constantly going up. Last month we saw that it has come back to the same level that it was at 5 years ago. That shows the financial market has confidence in the work of this Government which is placing all the policies to ensure that we have got a good system in place so that these financial markets can help. I support this bill and I hope that the other bills that are coming on the Order Paper will also create more confidence in the financial market. Thank you. 
CLARE CURRAN (Labour—Dunedin South) 
: 
 I would like to speak to the second reading of this bill the Financial Markets Conduct Bill with pleasure. This bill is an example of a select committee in this House in this Parliament doing its job and ensuring that it is putting in place solid legislation. And believe me this piece of legislation is pretty solid. It would probably be one of the most solid pieces of legislation in physical terms that has passed through this House. I would like to know whether there is another bill that is bigger and if so how long it took to get through the select committee process. 
Before I go on I would like to acknowledge all of my colleagues across the House who sat on the Commerce Committee particularly those from the National Party my colleagues in the Labour Party who did the grunt work at the select committee and certainly the officials who did an extraordinary amount of work on this bill. I would like it noted that I do not say that about every piece of legislation that comes before this House that I have had some input into but I must say that there was an extraordinary amount of work that went into it. 
I think it is also important that we have a look at where this bill came from and what led to it. It may have taken a long time to get to this House—probably too long—but it did come from the work that was done by the previous Labour Government which set up that financial markets reform process. I will say that every time I speak on one of these bills in the House because that was the genesis of the work that has been done that has brought this bill before us today. The fact that it is not being supported by the Green Party I think is a great shame because no bill is perfect—no bill is perfect. Certainly there were things that probably could have been improved but it is a damn sight more of an improvement than what has been the case in this country for far too long. 
As my colleague David Cunliffe said earlier we must remain vigilant—we certainly must. If we do not pass this bill in this House hopefully in the next week or so what would we be doing to address the major issues that have led to those 61 financial companies collapsing in this country and the thousands and thousands of ordinary New Zealanders who have had their lives disrupted in such terrible ways? 
I will go back to that financial markets reform process that happened under the previous Labour Government. My colleague Lianne Dalziel set up the Capital Market Development Taskforce in 2008. That was 5 years ago. It is a long time for this bill to get to this point to develop that blueprint and action plan for the development of our financial system. Out of that even under a National Government in the last term of Parliament the Commerce Committee did an awful lot of work conducting an inquiry into those financial company collapses. We have seen these people these thousands of New Zealanders who have been so badly affected come before that select committee. We have seen the whites of their eyes and the tears in their eyes as they told us the effects that the collapses had had on them. 
One of the effects one of the things that I want to address that is in this bill is the criminal liability regime that has been put in place which is an enormous step forward. It may not have gone far enough. In fact we have argued that it has not gone far enough. My colleagues Lianne Dalziel and Charles Chauvel have recently said that people who are convicted of offences like burglary tend to be treated much more harshly than those who destroy huge amounts of wealth through reckless and dishonest business practices. Through this piece of legislation what we need to see is that the people who are behaving in such terrible ways the white-collar criminals who have been getting away with the practices that have led to these collapses no longer get away with them. We need to see not only those people being fined extensive amounts of money but also some people being taken before the court and sent to prison as a result of it. That will be the deterrent for these sorts of practices. 
Although this bill replaces a number of pieces of legislation including the Securities Act the Securities Markets Act the Unit Trusts Act the Superannuation Schemes Act and the non-tax part of the KiwiSaver Act—there is an enormous amount of detail in this bill—I want to talk about one particular part of it. It is around the liability regime the criminal liability where the key change in the bill is to make the offerers of products and the directors of companies criminally liable for inaccurate statements about products and disclosure documents. There has to be fairness in every piece of legislation. I think everybody would agree with that. Therefore in order to prove that the Crown would have to prove a guilty mind. But the fact is that—and this was an issue very dear to my heart in discussing this bill—one of the things that we heard from those people who came before us in the financial services collapse inquiry was that it was the people fronting these companies the people who went on television and vouched for these companies who were basically providing trust for people who were making these investments. The investors trusted these people because they were so-called respected members of our community they were celebrities. They were people who were promoting the companies and therefore getting the investments. I wanted to be reassured that those people would also be accountable—they would also be accountable. They may be making a large amount of money for getting before a TV camera for a television advertisement and saying: “This is a great company. You should invest your money in it.” and then they are able to get away with it if that company collapses. I wanted to be reassured that that would not be the case because it was that kind of advertisement that was leading people to make these investments. Well that is in this piece of legislation. It may not be immediately apparent to someone who is wading through it but it is in this piece of legislation. It is incumbent on people—celebrities former politicians or whoever gets up and takes money from these financial companies—that they should know that they are also liable should they make false promotional statements about the veracity of the information that they are providing to the public and about the brand that they develop for these companies. That is one of the critical aspects of this bill for me and that is because of the interface between the public—the mum and dad investors the ordinary people of New Zealand who are investing in these companies—the directors of these companies the people who should ultimately be held accountable and often the people who get up and use their name their celebrity status to actually promote them. 
There are many many other parts to this legislation and no doubt as we get through the Committee stage we will be able to get into the detail of it. About 13 main changes were made to this bill through the select committee. It is important that the public of New Zealand know that it exists because the other major issue is financial literacy and the fact that people also have a need to improve their financial literacy in order to understand what they are actually investing in. 
This side of the House certainly does support this bill. We know that it is not perfect but we think it is a very very important improvement on what has not been there before. We want to see the accountability in the courts for some of these practices. I commend this bill to the House. 
MARK MITCHELL (National—Rodney) 
: 
 It is a pleasure to take a call on this Financial Markets Conduct Bill. It will be a short call. I would just like to say that I also acknowledge my colleagues who were on the Commerce Committee. I listened very carefully to my colleague David Cunliffe’s speech. I think you are guilty of oversimplifying a very complex matter— 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: Order! You are bringing the Speaker into the debate. 
MARK MITCHELL 
: I am sorry you are right Mr Assistant Speaker. 
I also listened to the comments made by Andrew Williams. I found it quite incredible when he started criticising both National and Labour Governments especially in light of the fact that his own leader was a member of the Labour Government—a senior member who could have had the opportunity to address these sorts of issues—but that is probably in line with the ill discipline in the New Zealand First caucus. 
National has stepped up to restore investor confidence. This bill helps achieve one of National’s four priorities in its second term which is to build a more competitive and productive economy. I am very happy to stand in support of this bill. Thank you. 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: I call the honourable member Dr David Clark. 
Dr DAVID CLARK (Labour—Dunedin North) 
: 
 It is a pleasure— 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: The Rev. Dr David Clark. 
Dr DAVID CLARK 
: Very kind of you. It is a pleasure to take a call in the second reading debate of the Financial Markets Conduct Bill. Unlike the previous speaker Mark Mitchell I will speak for a while because there are important matters in the background to this bill that require the time and attention of this Parliament. The proper functioning of markets is essential to New Zealand’s future economic prosperity. By that I do not mean the kind of hands-off approach favoured by this Government in other legislation. I mean more the proper functioning of properly regulated markets. 
Before I get into the substance of the bill I also want to join other colleagues in congratulating those who have put in the work over a very long time indeed. This bill as I understand it was kicked off back in 2008. Lianne Dalziel was instrumental in setting up the Capital Market Development Taskforce which developed a blueprint that forms the basis of this legislation. Colleagues Curran and Cunliffe who have already spoken and others were on the select committee that did the work and Mr Mitchell I believe as well. There have been many members of the National caucus who have contributed too. 
This is a piece of legislation that has been developed as I have said over a lengthy period of time. For those who are watching the debate at home the bill itself takes up a substantial number of trees. You will see that Parliament has kindly double-sided the copies that we have to use otherwise it would be a fatter piece of legislation. It is surely one of the chunkier pieces that has gone through this Parliament. 
Why is this legislation important? Well in my view it is important because it is about creating the set of circumstances that will lead to efficient functioning of markets. The correct kind of legislation will ensure transparency will ensure accountability and will ensure consequences for those who do not follow the correct set of rules. When all those conditions are in place we see that investment flows. When the incentives and sanctions for ill behaviour in the market place are clear when there is transparency and where there is accountability investment will flow and that is good for our economy. 
It is not the kind of hands-off approach that this Government has favoured in other legislation where the market is left to its own devices. We have seen the failure in the housing market in New Zealand and we have a Government that says: “Well you know the market will sort it out.” It has not sorted it out. We know that good proper regulation has its place and that is why Labour will be supporting this bill. We recognise the hard work that has gone into it and we recognise the endeavour to make sure there is proper regulation in place. 
Of course it is only part of the picture. In order to have a successful economy we actually need a vision for economic growth and that will also involve pro-growth tax reform. We need the kind of tax reform that the OECD Treasury and the IMF recommend: a capital gains tax which every other country in the OECD has except for Switzerland Turkey and New Zealand. We also need to give the Reserve Bank the monetary policy tools that it needs to ensure an export-led recovery. Inflation targeting was very important in the 1980s. This Government seems content to sit with 1980s economics generally but actually the world has moved on. So we need to give our Reserve Bank the tools to make sure that New Zealand can compete in international export markets. 
Of course we also need proper savings policy. We know that the Government cut back on KiwiSaver then it increased KiwiSaver and it has had more positions on KiwiSaver than the Kama Sutra. Labour will be very very clear that KiwiSaver should become more universal. It has always tried to get towards that position and Labour will make genuine progress in that direction. We also know that we need pro-growth procurement policies and if that has not become any clearer to the Minister of Revenue over time it surely should be after the OECD report that came out yesterday showing that the kind of tax policy that New Zealand and other countries have that is out of date needs updating to ensure a level playing field so that multinationals are not distorting investment decisions through taking advantage of tax regimes which means that overall the world is worse off in terms of investment flows. 
It is important also to talk about Labour leadership in respect of this bill because Labour started the financial markets reform process and as I have said earlier we are very pleased that the Government has continued this work. It is good work. The Capital Market Development Taskforce set up in 2008 by Lianne Dalziel set the blueprint and the action plan for development of New Zealand’s financial system. We are pleased that the Government is starting to act on those recommendations. 
One of the things that really sped up the need and showed the urgency for this kind of reform of course was the finance company collapses. We on this side of the House have some concern that not all the lessons have yet been learnt from that—that the legislation might perhaps have been further enhanced if an inquiry had taken place into the Crown Retail Deposit Guarantee Scheme and the way it was implemented. On this side of the House we have concerns that it was not properly monitored by Treasury and the Auditor-General has raised similar concerns. It seems to us on this side of the House that it would have been very good to have a look at the way in which that scheme was implemented because we are talking about tens if not hundreds of millions of dollars of taxpayer money that appears to have slipped between the cracks when the Crown Retail Deposit Guarantee Scheme bailed out firms that continued to take on risky loans long after the scheme was introduced. The risk to taxpayers rose in quite a dramatic fashion. One company had its loan book increase tenfold in a matter of 3 or 4 months. South Canterbury Finance’s loan book increased 25 percent in just a short period of time. That is because it was not being properly monitored. Treasury took its eye off the ball. The Reserve Bank which could have supplied it the data was not requested to do so and so the taxpayer liability grew. 
We have seen that Government members on the Finance and Expenditure Committee blocked an inquiry into South Canterbury Finance and the others that were supported by the Crown Retail Deposit Guarantee Scheme so we will never know—at least not in the term of this Government it seems—just how much taxpayer money was lost by poor management of the scheme under this Government’s watch. But as I said before that could be hundreds of millions of dollars. One estimate has it as high as $500 million of taxpayer money that has been lost because of poor Government oversight. 
The answers we got out of the Minister of Finance and others on this when they were before the Finance and Expenditure Committee were unsatisfactory. Treasury and the Minister responsible have refused to investigate this in order to see where in future lessons could be learnt. They have refused to quantify just how much taxpayer money was lost as a consequence of the implementation of the Crown Retail Deposit Guarantee Scheme. It was a good scheme do not get me wrong—do not hear me wrong. This backed up the banks to stop the flow of money to the run on banks. Australia gave us a day to implement it and we did. But its monitoring was inadequate and as a consequence there has been taxpayer cost. This Government has failed to step up to quantify that to investigate it and to learn how much taxpayer money has been lost. We think that that kind of investigation could have further strengthened this legislation because it would have been a good case study a recent case study and would have given some insight into the way markets work when they go wrong. 
We will overall be supporting this legislation because as I said at the beginning of my speech at the outset it is generally good regulation and it is ensuring that there is transparency accountability and consequences for those who supply products into the market and that is a good thing. 
LOUISE UPSTON (National—Taupo) 
: 
 My colleagues on this side of the House have spoken very well to the Financial Markets Conduct Bill so I am proud to support it. 
A party vote was called for on the question  
That the Financial Markets Conduct Bill be now read a second time. 
Ayes 105 
New Zealand National 59; New Zealand Labour 34; New Zealand First 7; Maori Party 3; ACT New Zealand 1; United Future 1. 
Noes 15 
Green Party 14; Mana 1. 
Bill read a second time. 
The result corrected after originally being announced as Ayes 95 Noes 15. 
The ASSISTANT SPEAKER (Lindsay Tisch) 
: Just one moment. There is a question as to the counting of the votes so I will ask the Clerk to just check that. Honourable members I will correct the record. The Ayes are 105 and the Noes are 15. The record will be corrected. 
Fisheries (Foreign Charter Vessels and Other Matters) Amendment Bill 
First Reading 
Hon NATHAN GUY (Minister for Primary Industries) 
: 
 I move  
That the Fisheries (Foreign Charter Vessels and Other Matters) Amendment Bill be now read a first time. 
 At the appropriate time I will move that the Fisheries (Foreign Charter Vessels and Other Matters) Amendment Bill be referred to the Primary Production Committee with an instruction that the committee presents its final report on or before 21 June 2013. 
First of all I want to thank the Hon Paul Swain Neil Walter and Sarah McGrath of the Ministerial Inquiry into Foreign Charter Vessels panel who have delivered the comprehensive and thorough report that has led to this bill. I want to also thank my predecessor as Minister for Primary Industries the Hon David Carter who led the Government’s response along with the Hon Kate Wilkinson as the Minister of Labour at that time. Both did a sterling job in getting this legislation through to where it is today. I was also involved myself as Minister of Immigration at that time. I would also like to thank Andrew Hill and his team of officials for supporting the inquiry panel to produce a report of such a high standard. I also acknowledge the officials from the Ministry for Primary Industries the Ministry of Business Innovation and Employment Maritime New Zealand and the Ministry of Foreign Affairs and Trade who provided robust advice to Ministers on the inquiry’s recommendations. 
The Government set up the ministerial inquiry into the use and operation of foreign charter vessels with the main objectives of protecting New Zealand’s international reputation and trade access maximising the economic return to New Zealand from our fisheries resources and ensuring acceptable and equitable New Zealand labour standards on all fishing vessels operating in New Zealand’s fisheries waters within the exclusive economic zone. 
 Following serious allegations of mistreatment and underpayment of foreign crews working on some foreign charter vessels the inquiry made a number of legislative and non-legislative recommendations to improve agency coordination and monitoring and compliance of foreign charter vessels. The non-legislative measures are currently being implemented as we speak. I am confident that most foreign charter vessels have significantly improved their actions since these changes were brought about. 
To complement these measures further legislative amendments are proposed through this bill. These amendments improve the management of vessel safety employment and fisheries management matters on board foreign charter vessels and provide New Zealand with full jurisdiction to enforce New Zealand standards. 
From 1 May 2016 foreign-flagged fishing vessels will no longer be able to legally operate in New Zealand waters. Over the next 4 years all foreign charter vessels will be required to reflag to New Zealand. The 4-year transition period will enable the fishing industry and the Government to adjust to the new regime and the Government is working closely with the industry to help facilitate changes to existing business practices. It is my understanding that some vessels will reflag this year which is a very positive move indeed. 
The decision sends a clear message to the world that New Zealand is serious about the fair treatment of fishing crews the safety of vessels and sustainable fishing practices. Reflagging will further strengthen compliance with New Zealand laws and provide greater transparency around the operation of foreign-owned vessels. Once vessels are flagged to New Zealand the full range of New Zealand law including employment relations and workplace health and safety law will automatically apply and be enforceable. Reflagging will provide greater protection to the crews as they will be employed by a New Zealand - based party under a New Zealand employment agreement. If breaches of labour law occur such as an underpayment of wages or illegal deductions the Ministry of Business Innovation and Employment will be able to investigate them and I expect swift action will occur. 
The bill also expands the range of tools available to the Government. Risks posed by all vessels can now be managed in a more responsive manner through the introduction of new powers to suspend or cancel the registration of fishing vessels and thereby withdrawing permission to fish. The bill includes a robust process to ensure that these powers are used only in exceptional circumstances and that there are opportunities for the industry to make submissions to the Director-General of the Ministry for Primary Industries before these suspensions take effect. Agencies with responsibility for employment vessel safety and fishery laws will continue to use existing tools to ensure compliance with those laws in the first instance. 
The bill strengthens the powers of the Director-General of the Ministry for Primary Industries to consider a wider range of matters when consenting to the registration of both domestic and foreign-owned vessels. These matters are extended from fisheries management matters to include employment and vessel safety conditions. These measures enable the director-general to act upon intelligence gained through improved coordination and communication with other agencies if necessary. The bill also extends the functions of observers to collect information on these matters and allows for the new functions to be cost recovered or directly charged to operators through the making of regulations. 
Finally I want to stress that our improved management of foreign charter vessels is not limited to the changes proposed in this bill. The Government is already implementing a number of measures that have improved our monitoring and enforcement of fisheries management vessel safety and labour issues on board foreign charter vessels. 
Overall this bill is about making sure New Zealand has a world-leading fishery system with high standards on employment and safety. It sends a strong statement that the Government takes ethical issues in the fisheries sector very seriously. I look forward to the industry and other interested parties engaging in the select committee process to have their say. I commend this bill to the House. 
Hon DAMIEN O’CONNOR (Labour—West Coast - Tasman) 
: 
 Firstly I would like to congratulate the Minister for Primary Industries; I think this bill the Fisheries (Foreign Charter Vessels and Other Matters) Bill will be his first bill in the House as the Minister for Primary Industries. It is fairly obvious actually because he has given so much praise to his officials. I am sure that down the track he will not place so much faith in all the advice that he gets from them particularly in this area because it is an area that has been fraught over the years. 
I acknowledge—and it is through this Opposition party supporting the bill—that this is a good piece of legislation. It is well intended it is necessary and perhaps it is overdue. It is always very difficult for me to get up here and praise the Government—and in doing so can I say that I hope it does not happen too often—but I am just concerned about the framework. 
The Minister has correctly outlined all the provisions in the bill and I think that is great but he said that foreign charter vessels have vastly improved their operation since the inquiry. Well I am not sure that that would be the case. I know in fact that this bill will be necessary to make the changes because there is a culture on foreign charter vessels that has been allowed to continue for too long in spite of warnings—to us in Government as well—and officials have been denying the reality of the conditions on those boats. It has taken us too long to sort this out. 
 I applaud the Government. I would like to acknowledge our former colleague Paul Swain who chaired the inquiry. The report was a good one. It correctly identified the problems that we have perhaps known about. We have investigated. In fact I do not think the member was a member of the Primary Production Committee but we had an inquiry back in the early 2000s when another piece of legislation came through the system. 
We knew things were not right. We brought the officials in. We sought information assurance. We were given it. I am sure Mr Ardern as a member of the select committee at the time will remember the assurances we were given—quite wrongly in fact—that all was well and that we could enforce fair conditions and fair protection for workers on foreign charter vessels. Well we could not and we did not. I guess we have to apologise to all the workers of those vessels over a number of years who have been effectively slaves for many many reasons. My colleague in the Lyttelton and Port Hills electorate has met many of them as we all have. 
I would like to just go back to a bit of history to 1997 when the fisheries bill went through—1996-97. In fact it was our former colleague Graham Kelly who insisted at that time that anyone working on a boat catching New Zealand fish should be paid at New Zealand rates of pay and get New Zealand conditions. It was agreed to at that time—somewhat reluctantly by the National Government I have to say but it was agreed. Then there were a lot of fingers crossed in the hope that we could in fact carry that through and enforce that. 
Why I have some concerns is because again the Minister for Primary Industries in his speech to the House today says that this will ensure that we have fair payment at New Zealand rates and that we have fair protection. We cannot do that onshore. We cannot do that in some of the businesses around Auckland and around the country now. So it is going to be a big ask to be able to ensure that that occurs on boats a long way offshore around this country. It is with good intention that we have laws to protect workers in this country working onshore but we cannot guarantee it—we should. 
What I say to the Minister is that although good intents are worthy and noble we need proper enforcement. The Department of Labour has shown in the past its inability to enforce the legislation around health and safety and around fair employment conditions. The Government needs to put greater resource into enforcement to follow this piece of legislation through otherwise we will end up with where we have been for too long. 
Again back in the 1990s we had a commitment by the New Zealand fishing industry to “New Zealandisation”. That was that we would move to have New Zealand - owned and controlled vessels and New Zealanders catching what is an incredible resource. One of the biggest fishery zones in the world is here on our doorstep—beautiful fish; protein that the world wants. We had committed as a country and with the industry to “New Zealandisation”—that is that we should own and control it invest in it and get the best value from it. 
Well we moved in that direction but foreign charter vessels have stopped that progress. They have been in place for too long. The requirement now to reflag is I think a good step. I hope that we see fewer of those vessels in our waters and that we have more of our own. There is an argument put forward by the industry that it needs these contract vessels to catch the lower-value species. Well the lower-value species dare I say can be higher-value species over time. I think we have underestimated the value of wild fish. Protein grown and nurtured in the Pacific Ocean in the Tasman Sea is in my view worthy of premiums in the world market and I do not know whether we have extracted the best we can from that incredible resource. So we must move forward with that. 
This legislation is one step that will add cost to some fisheries companies and I say “tough”. We demand that we have standards and payments to workers in this country that are fair at least above minimum wage so they can survive. It is up to the companies to work together to get better value for that incredible resource. So Labour does support this bill. 
I ask a few questions because although it is progress the Minister himself said in another quote that the suspension of registration will occur only in exceptional circumstances. So the question I ask is how many of the fishermen and fisherwomen out there will have to be underpaid before the Minister steps in and deregisters a boat. 
Hon Nathan Guy 
: Director-General. 
Hon DAMIEN O’CONNOR 
: Well the Director-General; yes I appreciate that—the Director-General. The Minister will not intervene at all of course. That is the Government’s kind of mandate—“We do not intervene we do not do anything we hand it all over to other people.” The issue here is—[ 
Interruption 
] I hate to remind the House of the Government’s policy but anyway can I say that the question will remain. When will— 
Hon Maurice Williamson 
: Every weekend Damien on the high seas. 
Hon DAMIEN O’CONNOR 
: I know that Minister would not. Look at leaky homes. That is a great example of that Minister’s inaction. Can I say that with good legislation we need the ability to intervene to police it and to follow it and carry it through. 
I ask a question of the Minister. He got up and said that there would be four key objectives and he named three of them. I am wondering what the fourth objective was for the fishing industry. I acknowledge and I applaud those objectives and I think it is important that he clarify the four of them. 
There are other questions coming out about the transition period of 4 years and why indeed the Government is allowing that. There are some people who believe that 2 years is a fair transition time to ensure that we have people working for New Zealanders in New Zealand and being paid at least the minimum wage. That is a fair expectation but this piece of legislation proposes to allow that to roll-out over 4 years which in our view is too long. 
In summary this is a good piece of legislation. It puts us on the right path but there are many issues and I am sure the Primary Production Committee will tease them out because we have heard many of the debates many of the excuses I guess in summary put before us over a number of years. We want to get this right. We need to ensure we have a fishing industry with a good solid sustainable future. We cannot have New Zealand companies who are paying proper wages and providing proper conditions competing with slave labour on boats that are decrepit and unsafe and that is the situation at the moment with foreign charter vessels. The question will be for the coalition partner of the Government the Maori Party to ensure that it can hold fast and make sure that these conditions are supported through legislation. 
SHANE ARDERN (National—Taranaki - King Country) 
: 
 It is a pleasure to rise in this debate on foreign charter vessels with foreign crews. The Minister for Primary Industries has spelt out very clearly—and I also congratulate the Minister on his new appointment; it is wonderful to see that we have got another farmer in the primary industries sector willing to step forward and be part of this process—and pointed out in the early ministerial statements in this debate that the objective is to ensure that crews on foreign vessels have fair pay and conditions. It is also true what the Labour Opposition spokesman said about these conditions having been well below standard for some time. 
It is welcome that the Labour Opposition is supporting the Fisheries (Foreign Charter Vessels and Other Matters) Amendment Bill but not surprising in the sense that my first introduction to this topic was actually when Graham Kelly had a member’s bill drawn out of the ballot and it came to the Primary Production Committee. What I was surprised about at the time though was how under a Labour Government that bill got kicked for touch. One of its own member’s bills did not progress as well as it could have. I was a little bit surprised about that I have to say at the time. I also say that like others I think the former member the Hon Paul Swain has done a very good job of the inquiry into what the situation is. 
I think we need to recognise at this point that this is a substantial industry and a growing industry with $1.5 billion worth of exports and the opportunity to double and triple that over time in a sustainable way. But reputation is everything when it comes to marketing products around the world. The fact that we may have had some activity going on in the industry that would not hold us in good stead as far as our reputation goes is something that those in the industry themselves should be concerned about. No doubt during the select committee process we will hear all the pros and cons of the debate on foreign charter vessels versus New Zealand - owned ships and already we know what some of that debate will be about. 
It is about being able to manage quota for a very short season. It is about low value in some quota fish etc. and being able to capture that where we may not be able to commercially capture that if we could not have foreign charter vessels. It is not about suggesting to the industry that it cannot use foreign charter vessels; it is just about making sure that those who work on those boats and the conditions that they work in are up to the standard that New Zealand would expect and up to what would normally happen in New Zealand. Being able to reflag those ships in New Zealand waters so that New Zealand law will apply in that regard is I think a great step forward. I look forward to the bill coming to the Primary Production Committee where we can hear from those in the industry and work through those concerns one by one. Thank you. 
MOANA MACKEY (Labour) 
: 
 As my colleague Damien O’Connor has said we will be supporting this bill the Fisheries (Foreign Charter Vessels and Other Matters) Amendment Bill. It is perhaps long overdue. Often in this House we find ourselves passing legislation in the wake of a tragedy or an unfortunate event and of course this bill was brought about because of the loss of six lives on a South Korean foreign charter vessel in New Zealand’s exclusive economic zone. That is a tragedy that I am sure everyone in this House regrets and it is a shame that far too often we are dealing with issues after the event instead of perhaps—with the benefit of hindsight—realising that some of these tragedies could have been avoided. 
Certainly there is no question that there has been a spotlight on the activities and the practices aboard foreign charter vessels for a long time. In recent years in particular it has become a particular kind of focus of investigative journalism and I think all New Zealanders will be shocked to have seen many of the stories the photos and the documentary evidence coming off these vessels of violence of physical and sexual abuse of slave labour—things that are absolutely unthinkable in New Zealand but have unfortunately been occurring under our laws and have been occurring on our watch. 
So we do welcome this legislation. We hope that it will be the beginning of a new era in terms of the treatment of those workers who are on board these foreign charter vessels and hopefully we will not see those tragedies like the one that we saw with the South Korean vessel that had the loss of six lives. 
This bill is an important step forward and the Government is to be praised for the step it has taken which was to its credit beyond what the inquiry actually called for. The Government has decided to go further and require that these vessels be flagged in New Zealand waters which means that they will be subject to all New Zealand laws including those of health and safety whereas before they were subject only to the Minimum Wage Act and to food safety legislation and then for everything else they were subject to the laws of the country in which they had registered or flagged their vessel. 
New Zealand again unfortunately—this is not a world-leading kind of movement. We are one of the few countries in the developed world that actually has not taken this step already. I think only Namibia and Brazil still allow foreign charter vessels to be flagged in other countries so this really brings New Zealand into line with where the rest of the world has already moved to. 
One of the questions I would ask the Minister for Primary Production is that I assume that this will also bring our foreign charter vessels into New Zealand taxation laws so that these vessels will not only be subject to health and safety legislation the employment legislation and the environmental legislation of New Zealand but also be required to pay the same taxes that New Zealand fishing vessels pay—for example the carbon charge that is on fuel under the emissions trading scheme. I know it has been difficult for New Zealand vessels that they have been subject to that particular charge but the foreign charter vessels that they are in direct competition with have not been subject to that same taxation excise tax GST and the many other taxes that we have. So I am assuming that this legislation in requiring vessels to be flagged in New Zealand waters will also bring those foreign charter vessels under New Zealand taxation legislation which provides a level playing field with our own operators in New Zealand of course. 
I want to pick up on a point that my colleague Damien O’Connor made because I think it is a really critical one and that is that you can pass all the legislation in the world but it will not make a blind bit of difference if it is not able to be enforced. And we know how difficult it is to enforce legislation in parts of New Zealand it is easy to get to and parts of New Zealand it is easy to monitor so when we are talking about hundreds of kilometres out in our exclusive economic zone I think what we are going to want to hear from the Government at select committee is how it is going to be enforcing New Zealand laws aboard these ships. If we do not get an answer to that question then passing this bill will not do anything. 
It is that enforcement aspect that will determine whether or not this legislation is successful and it is not good enough to kind of say we will see how it goes or that we already have current Department of Labour processes in place. We are dealing with a very very different environment and a very very different set of circumstances when we are talking about fishing vessels in the exclusive economic zone than when we are talking about young workers at McDonald’s for example and ensuring that they are getting paid the minimum wage and that their health and safety and their rights are being looked after. So that issue of enforcement and of how we are going to monitor and ensure that this legislation is being adhered to and is being followed is going to be the critical point I think at select committee for members of the Labour Party. 
We also have concerns around the ability of the New Zealand fishing vessels to compete with these foreign charter vessels and I know that one of the concerns has been the issue around when fishermen are out there fishing their quota and suddenly for example there is a native bird caught in the set line and often the fishery can be shut down. This happens not infrequently and it is a real frustration for local fishermen. They come to you and say that every single time this happens it is not them doing it. They get shut out their fishery gets shut down they lose income and they lose the ability to fish their quota because someone out there has not shown the environment the respect it deserves and has not shown the wildlife the respect it deserves—something that our fishing fleet in New Zealand does do; to its credit it does that. It takes its commitment to protecting the wildlife and the environment that it is working in very very seriously and in fact the entire ecology of the system because it is reliant on it for its very income. 
So those fishermen’s frustration is that in their experience it is always foreign charter vessels that are capturing these birds that are causing these incidents and that are causing the fishery to be shut down and there is nothing that they can do about it. They do everything right and then they get punished for the actions of others who are not subject to the same laws and who are not subject to the same conditions as they are. And I really hope that this piece of legislation will start us down a track to rectifying that and to ensuring that the ability of New Zealand fishing operators to carry out their activities does not continue to be hampered by the actions of a few who do not take the protection of New Zealand’s wildlife and the protection of our marine environment seriously. 
Hopefully we will be able to hear from the New Zealand operators as to whether or not they believe that this legislation goes far enough in ensuring that a level playing field and a fair situation are created for what is left of our domestic fishing fleet. And unfortunately there is not a lot left of it. I think we are seeing the results of what I know the Ministry of Fisheries thinks is a really great thing—that we now just have a lot of really big quota owners instead of a whole lot of little ones. 
But I think the flip side of that has been what we have seen with these foreign charter vessels which is that instead of having the families who have done the fishing who have had that quota who have passed it on from generation to generation who care about the environment and who understand and respect the lifestyle we have gone to this very corporate model with unfortunately operators who do not show that same level of respect. And it might be efficient for the Ministry of Fisheries to have a few really big quota holders but I think we have seen the environmental damage of that and we have seen the impact on the workers in that industry which would indicate that perhaps that change is not nearly as efficient or positive as perhaps the Ministry of Fisheries would lead us to believe. 
We think that there is a missed opportunity in this legislation and we will be pursuing that at select committee. We think that there is actually an opportunity here to encourage maximum participation of New Zealand fishing operators within the industry by moving towards a minimum of 50 percent New Zealand crew on any vessel fishing within New Zealand’s exclusive economic zone. We think part of the solution to this problem has to be building up the capability within our own domestic fishing industry and we do not think that there is anything wrong with a Government saying that we want to see a minimum of 50 percent New Zealand crew on these vessels. 
I will tell you what else that would do. It would go a long way towards ensuring that that monitoring and enforcement function that I discussed earlier is actually carried out. Having those eyes on board is something that perhaps removes part of that problem that we discussed earlier around how we make sure that this legislation is actually enforced. So we will be pursuing that at select committee because we think we have a real opportunity here—a real opportunity—to support New Zealand’s local fishing industry and to make the implementation of this bill easier. 
The only other point I would raise is that we think the 4-year transition period is far too long. We think this could be in place within a year or—if not—two. Four years provides a big window of opportunity for more abuse to happen for more tragedy to occur and we want to see that time frame whilst being realistic— 
The ASSISTANT SPEAKER (Lindsay Tisch) 
: I am sorry to interrupt the honourable member. 
STEFFAN BROWNING (Green) 
: 
 I rise to speak to the Fisheries (Foreign Charter Vessels and Other Matters) Amendment Bill. This bill implements decisions on the regulation of foreign charter vessels following the allegations and then the recommendations of the ministerial inquiry that followed. It requires that all vessels are flagged as New Zealand ships from 1 May 2016. We think it should be a little bit quicker but the bill is a move in the right direction. It strengthens the chief executive’s power to consider a wide range of matters when consenting to foreign charter vessel applications. These matters extend from fisheries management matters to employment and vessel safety conditions. Bringing together those different aspects is very important and it is a very timely move. 
The bill extends the functions of observers—and I will talk about that a bit more—on foreign charter vessels to collect the information on employment and vessel safety conditions. It begins with a phase-out of foreign charter vessels in New Zealand waters which is a good thing. It unfortunately takes a few years as I have said to get to that point. There are some gaps in the bill and we will be looking forward to the select committee hopefully addressing some of those. The crew of foreign charter vessels their pay their health safety conditions all need to be lifted in terms of this bill. Although the breaches will be more readily reported this bill fails to address many of the issues raised in the inquiry. 
Migrant fishing crews working on foreign charter vessels fishing in New Zealand waters have been exploited over two decades. Research reveals human rights abuses forced labour exploitative and appalling conditions coupled with an absence of accountability despite legislation. The National Party’s links with the fishing industry should be looked at as well. 
Hon Simon Bridges 
: Oh come on! Look at the party next to you. 
STEFFAN BROWNING 
: In response to the noise from the other side maybe I need to repeat that. The crews come to New Zealand with the goal of earning a decent income. Instead they become victims of forced labour by fishing companies associated with others in this House. If decisive action had been taken when accounts of fishing crew exploitation first emerged in the 1990s recent shocking incidents of abuse that have been in our media could have been avoided. 
Globally the fishing industry is home to some of the worst examples of abuse in the workplace and it is to our shame that New Zealand waters have been the scene of some of this abuse. Countries such as Indonesia provide a ready pool of impoverished migrant workers to our fishing industry. The nature of the employment itself—fishing vessels operating at sea for months on end with little if any regulatory oversight—means transparency and accountability is problematic. The New Zealand Ministry of Business Innovation and Employment must also take responsibility for poor enforcement of our weak laws. In 1999 a case initiated by over 100 crews from three vessels went to the Court of Appeal and despite a series of investigations the Department of Labour undertook no prosecutions. The question has to be: who was it taking instruction from? 
The exploitation of foreign fishing crews has been a feature of the New Zealand deep-sea industry for decades unfortunately. New Zealand fishing companies began using foreign charter vessels in the late 1970s to help them develop the deep-water fisheries and many of them are crewed by migrant Asian workers particularly as I said Indonesians. In 2004 over 150 foreign crew abandoned their vessels leading to yet another investigation by the Department of Labour which reconfirmed the appalling exploitation of foreign workers. Subsequently a non-binding code of practice was introduced in 2006 and an auditing programme was introduced 2007 but of course the problems in this industry just continued. Codes of practice—yeah right. Things just carry on. 
Many crews in our waters come from impoverished regions of Indonesia and we will talk about that. These crews become victims of forced labour at the recruitment stage. They are misled into providing guarantees in securities to a staffing agency and may also have to pay a cash bond before they are allowed to sign their employment agreements. They are then required to hand over birth certificates family identity documents and education certificates to these agents. Many have flown to New Zealand with the cost of visa fees and transportation at an inflated level deducted from future wages. This happens after signing employment contracts that lock them into a form of slavery. Crew on these ships are required to sign blank time sheets. Work by New Zealand researchers has also found wage fraud. 
The dreadful treatment meted out to the crew of the  
Shin Ji  
is the most recent example of how these workers have fared in New Zealand waters. After months of exploitation these fishermen walked off the job seeking help from our authorities. What did we do? We kicked them out of the country. These crewmen feared returning home because of the agents who hired them. Their removal from New Zealand came despite the calls the Greens and Labour made that they be allowed to stay to assist the inquiry that investigated the slave labour conditions suffered by around 2000 mainly Asian men working on foreign charter vessels. A study by the University of Auckland business school found inhumane conditions and abuse on foreign charter vessels. These men had been hired by Indonesian agents for as little as two sixty a month. The money was to go into a bank account in Indonesia. According to some crew they were paid only 5000 for 22 months. I have to ask who was actually gaining from this in New Zealand. We really need to be looking at those people. 
Crew claimed that they were subject to sexual abuse with claims that the younger male crews nightly were made to massage the captain. Others claim to have been assaulted. Sixteen-hour days were expected and one man spoke of working 30 hours straight. Sick leave or rest days were unheard of. After fleeing the boat the crew stayed at a motel but ran out of money and food and had to appeal for help. They got some from unions but none from the people tasked with enforcing our regulations the Department of Labour and I question the people who benefit from their slave labour. Some I am aware of anecdotally ended up painting a house while they were being put up. It was somewhere to actually be until things were sorted out for them. 
Colin King 
: That was in Samoa wasn’t it? 
STEFFAN BROWNING 
: No it might be wee bit closer to you than you realise. The story of foreign charter vessels in our waters exposes the failure of New Zealand’s elected representatives and Government officials to decisively root out forced labour over the last two decades. [ 
Interruption 
] Do not tempt me. In 1996 Parliament was told that we had closed our eyes at home to those abuses occurring under our noses. We cannot have a commercial fishing industry developed on the backs of Third World exploited labour. Little had changed by the time the abuses of the  
Shin Ji 
 were discovered. Fishing operators continued to ignore the law the Department of Labour continued to take a benign approach to enforcement and crews continued to be exploited and mistreated. 
The Green Party will be supporting this legislation because it does make some changes. However we consider for this industry to be cleaned up the Ministry of Business Innovation and Employment must beef up its enforcement capabilities and it must act with a firm hand. We cannot allow these abuses to occur in our waters. 
Part 2 of the bill is a very important part too. It is fantastic that there is an increase in observers. However the increase in observers will not go far enough for protection in terms of labour or for the benefits we expect for the conservation of biodiversity and for managing fishing quota. There has been a minimum of one observer on all foreign chartered vessels. Two observers have been placed on vessels deemed to be of high risk to ensure 24-hour coverage. How the hang is that meant to work when factoring in shift changes breaks meals health issues etc? We definitely need more than two observers to ensure that there is a 24/7 coverage and that must be provided. That hopefully will be rectified through the select committee process. 
We have to look at what has been spent on observers on fishing boats and how that compares with each of the last 5 years. In this last period where this has come in spending on observers is actually lower in the 2011-12 period than in the previous year because no observer coverage was provided to inshore fisheries. We still need coverage there as well despite the fact— 
The ASSISTANT SPEAKER (Lindsay Tisch) 
: Sorry to interrupt the honourable member. His time has expired. 
COLIN KING (National—Kaikoura) 
: 
 This Fisheries (Foreign Charter Vessels and Other Matters) Amendment Bill is very important legislation. It protects human rights and it also protects New Zealand’s reputation as a high-quality food producer. Having said that the business model of having charter boats or foreign charter vessels will remain a legitimate business model for the very reason that quite often a quota holder will catch his quota in a short period of time and there is no profit in having a boat tied up at the wharf. 
The Primary Production Committee is looking forward to listening to the submitters who will come forth on this bill. But again it is a Government that is addressing the issues that reflect and that have put a spotlight on New Zealand and we certainly need to tidy up. So it gives me great pleasure in supporting and commending this bill to the House. 
RICHARD PROSSER (NZ First) 
: 
 I am pleased to rise on behalf of New Zealand First to take a call on this the first reading of the Fisheries (Foreign Charter Vessels and Other Matters) Amendment Bill. I would also like to join with my colleague the Hon Damien O’Connor in congratulating the Minister for Primary Industries on bringing this bill to the House. 
New Zealand First agrees with the broad aims of this bill and we are pleased to support its referral to the Primary Production Committee where some of the minor concerns that we do have may be addressed. In addition we hope that during the select committee examination of this bill and the submissions that it will undoubtedly attract there may be an opportunity to include the prohibition of shark finning within the bill’s ambit as we feel this is a very necessary addition to the New Zealand fisheries management that is not covered elsewhere in the law. At present the finning of live sharks that is the removal of fins from sharks that are still alive is not permitted within New Zealand’s jurisdiction. But there is no prohibition on the practice of removing fins from dead sharks and then returning the remainder of the carcass to the ocean. New Zealand First regards this practice as incredibly wasteful particularly so in a world of growing populations and shrinking resources. Whether sharks are caught deliberately as a target species or as bycatch from other fishing activities we believe the entire animal needs to be harvested and made use of. We feel the best way of achieving this is to require sharks to be brought ashore with fins naturally attached as is the best practice advocated by New Zealand Shark Alliance and others. 
Hon Tau Henare 
: Why is he speaking in our House? 
RICHARD PROSSER 
: Because this a democracy that allows free speech Mr Henare. There is some resistance we know from within the fishing industry due to constraints on boat space and the limited market that currently exists for some shark species. But it is our belief that the adoption of this methodology will allow for both the better utilisation of the resource and the minimisation of the risk of live finning which although illegal still has the potential to be carried out out at sea beyond the view of our limited number of inspectors and observers. 
In general terms New Zealand First salutes the decision to require all vessels operating in our fishery to be New Zealand flagged. 
Hon Tau Henare 
: He should leave this House. 
RICHARD PROSSER 
: I am quite sure Mr Henare you will be leaving the House before I do. 
Hon Tau Henare 
: You should leave the House. 
The ASSISTANT SPEAKER (Lindsay Tisch) 
: Order! Order! These interjections across the cross benches—tone it down. I am calling Richard Prosser I would like to hear what the member has to say. 
Hon Tau Henare 
: You’re the only one in New Zealand Mr Speaker. 
The ASSISTANT SPEAKER (Lindsay Tisch) 
: Order! [ 
Interruption 
] Order! That is an attack on the Chair. I will ask the member to refrain from such comments. 
RICHARD PROSSER 
: Thank you Mr Assistant Speaker. In general terms New Zealand First salutes the decision to require all vessels operating our fishery to be New Zealand flagged. We applaud this as the central plank of this bill and we are pleased that it will mean that crews working on boats within our jurisdiction will receive the protection— 
Colin King 
: Hey Richard just speak a bit slower. 
RICHARD PROSSER 
: —of New Zealand’s labour laws and the benefits of wages guaranteed at New Zealand domestic rates. Thank you Mr King. At present too many vessels operating in our waters do not meet our standards of health and safety. Too many crews suffer under conditions that we would describe as manifestly insufficient—working for wages which as other members have alluded to border on slavery. This bill will address those realities in a very tangible way and we applaud its construction and intent with regard to that but we do question that it will take another 3 years for these changes to come to pass. 
We salute the direction that this bill is taking the New Zealand fishing industry in but we struggle to comprehend why it will be 1 May 2016 before all fishing vessels operating in New Zealand’s waters are New Zealand flagged and subject to New Zealand laws. For three more years what are currently largely foreign crews on the largely foreign-owned charter fishing vessels that dominate our fishery will continue to have to suffer under the inadequate conditions as they exist. New Zealand First asks why it should take this long for the changes to be implemented. We hold genuine concerns that the real reason may be pressure from within the fishing industry itself which puts economic concerns the cost associated with additional wages and the upgrading of vessels ahead of the welfare of crews. We are concerned by that. We would be very concerned if that were indeed the case. We certainly hope it is not and we look forward to having this issue examined in the select committee. 
We also have a concern that although the regime initiated by this bill will vastly improve conditions and pay for the crews involved the reality is that a majority of those crews will still be foreign citizens and the bulk of the increased pay that they receive will still disappear overseas. New Zealand First is very keen to promote the “New Zealandisation” of the fishing industry and we would very much like to see an industry where the majority of boats operating are New Zealand - owned and are crewed by New Zealand citizens. We realise however that the demands of deep-sea fishing and the requirement to follow the tides and the weather rather than a fixed working-week calendar mean that in some cases it is not always going to be possible to find New Zealand residents to fill crew requirements. 
 We wonder whether this is one of those cases where a degree of targeted immigration may be necessary and indeed desirable in order to provide our fishery with the pool of skilled labour that it requires. I would add that my Labour colleague Moana Mackey’s suggestion of a 50-percent minimum quota sounds very much like an elegant partial solution to this problem. New Zealand First sees this as being one more way in which a maximum return from our fishery resource may be retained in New Zealand. 
Lastly New Zealand First is eager to hear the views of the public the fishing industry and other interested parties on these concerns and on other aspects of the bill. We are pleased to support its timely allocation to the Primary Production Committee where it can be examined progressed and adjusted as and where necessary under the fine stewardship of Mr Ardern. New Zealand First is pleased to be voting in support of the first reading of this bill. Thank you. 
IAN McKELVIE (National—Rangitikei) 
: 
 I firstly want to congratulate Minister Guy on his elevation to what I consider to be the most important ministry in this Government. I also want to congratulate the Labour Party on supporting this bill the Fisheries (Foreign Charter Vessels and Other Matters) Amendment Bill despite the member for West Coast - Tasman touting for work as a fisheries observer. 
This bill is at the heart of what we stand for as a country. It is important that we have an international reputation for food production of the highest quality including sustainable fishing practices and good safe work conditions including reasonable pay and excellent health and safety records. This bill plays an important role in ensuring that the fishing industry in New Zealand can hold its head high internationally alongside our other key industries the red meat industry and the milk industry—or food industries really. The European horse meat scandal may be far removed from us in New Zealand but it does point strongly to the need for integrity in all forms of food production and food-related products. Of course NAIT Ltd will gain significant credibility as a result of that. 
I have no problem commending this bill to the next step. I think it is a great step for us to take and certainly will tidy up something that has been very untidy in our fishing industry for a number of years. Thank you. 
RINO TIRIKATENE (Labour—Te Tai Tonga) 
: 
 Kia ora Mr Speaker. It is my pleasure to make a contribution at this first reading of the Fisheries (Foreign Charter Vessels and Other Matters) Amendment Bill. As my colleagues have expressed in their contributions we support this bill. We do welcome it. It is a long time coming. We know that it has been brought about through some unfortunate circumstances in particular the terrible tales of exploitation exploitative employment practices and tragedies that have occurred on the high seas with foreign charter vessels such as the  
Oyang 70 
 around about 2 years ago. There was the Ministerial Inquiry into Foreign Charter Vessels which followed that tragedy. It is very good to see that of all the recommendations expressed in this bill the Government has gone further than what the ministerial inquiry recommended. There was a bit of a toss-up between whether it would continue with bareboat charters or go to complete reflagging of vessels. Following consideration by the ministry and its recommendations the ministry advised and the Minister for Primary Industries has taken on board that all foreign charter vessels operating within New Zealand waters will be reflagged come 2016. 
That is an issue that I would like to take up because following the ministerial inquiry conducting its work—and it heard submissions up and down the country and heard many submissions right across the industry—the panel said in its conclusion: “[We have] concluded that urgent corrective action is required in the way New Zealand regulates the activities of foreign charter vessels in its exclusive economic zone.” Well urgent corrective action—waiting for another 3 to 4 years for this reflagging to be implemented is not that urgent. We know that some leading figures in the fishing industry have made calls for bringing that requirement forward to say 2 years a 2-year time frame. But alas the Government has decided that it wants a 4-year lead-in so that companies can prepare and can alter their commercial or contractual charter arrangements or indeed find a new catching capacity so they can bring in new foreign charter vessels under the new regime. So it will take a while before the full force of this legislation is going to be felt but at least it is a good step forward that these measures are being put in place. 
I guess we have heard and from looking at the submissions you know everyone in the fishing industry loves to fish obviously. Fishermen love to fish. They love to catch lots of fish and obviously they want to catch them profitably and make a good return on their invested capital whether it is in their vessels or on their property rights with their quota and annual catch entitlements. I know that there were calls from the Maori investment in fisheries—and obviously Maori are significant stakeholders in the fishing industry through Te Ohu Kaimoana and Aotearoa Fisheries and all of the assets that are owned within those companies like Sealord’s 50 percent shareholding and also the property rights that are held by iwi directly through their allocated shares by the Maori fisheries settlement. I know that there has been concern expressed from those elements of the Maori fisheries sector that they did not want to see the introduction of too much of a compliance regime for foreign charter vessels because of the potential increased costs that it will impose on the industry and the resulting loss in value of their property rights. In terms of the iwi groups around the country many of them have actually had quite good business relationships with foreign charter vessel companies by virtue of the fact that they could run at a lower cost than other industry players—other domestic industry players that is—because they were exploiting their labour. It was operating in a false economy. But on the flip side of that the resource rentals or the returns that could be paid to the iwi quota owners were a lot higher than what say the prevailing market will be—we shall see—with the more consistent regime that will apply through this piece of legislation. 
So not everyone will be happy but there is a 4-year lead-in time so no fishing boat owner will want to have their boat tied up. Wherever they are around the world there is a lot of excess fishing capacity and I suspect it will not be too hard for existing companies or charter operators to find new commercial arrangements or indeed to just tweak their current commercial arrangements with their foreign boat owners to ensure that they meet the grade and can operate to consistent levels right across the board. We do not want to see more of the horrific stories about abuse and exploitation that have occurred. 
I have been on one of those charter vessels. They are—and this one in particular was—usually very very big and very old over 50 years old at least and they have been through multiple owners. They are what we call old dungers in the industry—very sturdy but very unsafe. They are not cut out for big guys like me—6 foot 4. You have to sort of duck to get around like in any rabbit warren in these big old vessels. That is why they are crewed largely by small crew many of them sourced from Indonesia—good friends of our mate Mr Prosser over there we hope. But they are good hard-working crew and it is great to see that we can raise their standard so at least they can be on a consistent level with all New Zealand fishers. [ 
Interruption 
] Just continuing on—they draw crew from all around the world. 
I would just like to refer to the Government’s objectives in relation to foreign-owned flagged vessels which the Minister mentioned in his speech and one of those objectives is to “Ensure that acceptable and equitable New Zealand labour standards … are applied on all fishing vessels operating in New Zealand’s fisheries waters”. This legislation does achieve that albeit that it will not kick in for another 3 years’ time. But what that objective does not alas include is securing opportunities for Kiwi workers. So it is great that there will be fair and acceptable equitable labour standards but it would have been great if the Government had gone a step further and also made sure that in relation to the labour on those vessels the opportunities are there for Kiwi workers. Labour’s policy is to have a progressively built-in 50 percent requirement that if all the crew are on a consistent level under New Zealand law then we get a larger proportion of those workers up to 50 percent being Kiwis. That is what we want to see. I am sure that is what Maori want to see. Those Treaty rights that were recognised through the fisheries settlement were for Maori to get into the business and activity of fishing. So it would be great to see more Maori crew on those boats and getting fairly rewarded for a hard day’s work. 
I would also like to say that fishing is more than just food because now we are seeing our major companies diversifying into nutraceuticals and into fish oils. In fact there is a lot of extra value. A low-value fish can be turned into a high-value fish. We just need the research and development investment to go into those companies and hopefully Labour will give those incentives so it can turn that $1.5 million industry much higher. Kia ora tatou. 
SIMON O’CONNOR (National—Tamaki) 
: 
 I want to acknowledge the Minister as others have as this bill the Fisheries (Foreign Charter Vessels and Other Matters) Amendment Bill is the first bill he has introduced as the Minister for Primary Industries. 
My contribution will be short. I just wanted to acknowledge that a few weeks ago I was talking to constituents in the great seat of Tamaki who have worked their way through the fishing industry from being deckhands to now being owners who are very supportive of this bill and its intentions. I think that is the key that we are as a House supportive of this and we welcome getting it to a select committee and of course eventually passed. 
Mr DEPUTY SPEAKER 
: Is the next call a split call? 
Hon Ruth Dyson 
: It is a split call—that is correct. 
Mr DEPUTY SPEAKER 
: Right 5 minutes. 
Hon RUTH DYSON (Labour—Port Hills) 
: 
 Can I begin by congratulating the Minister for Primary Industries and say that this bill the Fisheries (Foreign Charter Vessels and Other Matters) Amendment Bill is an excellent bill to have as your first bill in a new portfolio. I am sure the Hon Nathan Guy will be justifiably pleased that it has fallen into his hands to present to the House and I am really pleased that Labour is supporting it. 
I want to make just three points about the bill but before I do can I say that the issue of foreign charter vessels and the abuse of crews has been a very real issue for me as the member of Parliament within whose electorate is the Port of Lyttelton. We have a large number of foreign crews in our electorate and the stories of abuse are shocking. They really upset people. I want to pay tribute to the people of Lyttelton and Sumner particularly who have literally taken foreign crew into their own homes to support them in the way that we would want New Zealand to be regarded as supporting people who come to our shores to work. 
The first point I want to make is that this bill requires New Zealand flagging and that has been an issue of considerable debate actually since day one of my time in the House. I think it is a move whose time has certainly come. Not only will it improve the ability of the officials to know what is going on because there is always some debate about what regulation and what legislation applies to different vessels but for absolute clarity the Ministry of Business Innovation and Employment will be able to monitor all the legislation and regulation as if each vessel was a totally New Zealand - owned and operated business. That clarity is going to be really helpful for our officials. I want the officials to know that they will have the backing of all parties in this Parliament if they see any abuse of workers because not only is it terrible for the workers involved to be treated so badly but also it really damages New Zealand’s reputation to have our name attached to the abuse of workers. I do not think anyone in the House would like to see that. So the first point is the most important part of this bill which is the fact that all ships will be New Zealand flagged. 
The second point I want to make is about something the bill does not do and I hope the Primary Production Committee is able to remedy it. It does not do anything to address the other issue that is of concern at any time but of course more so in times of high unemployment as we tragically have now under the do-nothing hands-off National-led Government. The displacement of jobs that New Zealanders could take but that are currently being filled by these foreign crews is something that I think the select committee ought to address. We have a large number of young people who I think would thrive if they were in that environment. It is a hard life. It requires a lot of discipline but I know that many of our young people particularly would respond very well to that opportunity. So hopefully the issue of jobs for New Zealanders on these charter vessels will be looked at as well. 
The third point I want to make in my contribution to this debate is the length of time before this legislation is going to be implemented. I cannot recall any bill that has had a waiting time of 4 years. That is nearly the time from a baby being born to starting school. It is a large amount of time and it is totally unnecessary. It means that we are condoning bad practice although the whole of Parliament is admitting that it exists and agrees on the solution. The bill will go through a select committee process and may be tidied up but then we are saying that we will wait for 4 years to implement it. I do not understand that. It is one of the very few issues on which the maritime lawyers and the maritime union are totally as one. They say that it is too long as well and I would want to be hearing from the officials at the select committee and perhaps even from the Minister during the Committee stage if the select committee does not fix this up some justification for this taking so long. 
As I said at the beginning it is a real pleasure for me to be part of the Labour team which is standing in support of this bill. What it does is excellent and it will make a real difference to people who are actually in very vulnerable situations. When you are on the other side of the world your job is on a ship and you cannot necessarily speak the first language of the country whose port you are in you are in a very vulnerable situation. So we are saying that we are standing beside those workers. We want to improve their conditions. I hope we also make opportunities for New Zealanders to have jobs as well. 
GARETH HUGHES (Green) 
: 
 Kia ora. Nga mihi nui ki a koutou. Kia ora. I rise to speak in support of the Fisheries (Foreign Charter Vessels and Other Matters) Amendment Bill. The Green Party supports this bill. It supports the intent of this bill. This is something we have been calling for for years even when Labour was defending the practice during the 2000s. For years we have been calling for an end to this abhorrent practice and it is a good day as our Parliament is finally getting around to this dealing with and hopefully addressing and stopping this abhorrent practice which has happened on our high seas for far too long and has impacted on far too many foreign workers in our name and for our profits in New Zealand. 
First up I want to acknowledge those people who put it on Parliament’s agenda who put it on the nation’s agenda and who put it on our conscience. We have got the likes of the Service and Food Workers Union. We have got the  
Sunday Star-Times 
 which ran a long campaign trying to highlight the injustices. We see in particular Darren Coulston whom I have met a number of times and who has tirelessly worked to raise this issue in the country’s consciousness. He has done a good job. 
This is an old issue—a very old issue. Listening to the Government members you would think it was something new that they have only just discovered happening in our waters but this exploitation has been happening for decades. I need not remind members that only in 1999 we had over 100 crew go to the New Zealand courts to the Court of Appeal yet it was the Department of Labour that sat on its hands and did not act. It is clear that this has gone on for too long. We have been skimping on wages we have been skimping on conditions and we have been skimping on costs but the New Zealand quota owners have been feasting on the profits and the sweat of these foreign workers. It is terrible that it has dragged on so long but it is good that we are finally addressing it. The history goes back to the “New Zealandisation” debates we had in the 1970s which were about how we go out and exploit—in the language of the time—the deep-sea resources that were being discovered mostly by foreign exploratory vessels. New Zealand did not have a deep-sea fishing fleet so the agreed plan at the time was that we would bring in some of the foreign capital expertise and vessels and we would use that foreign assistance to develop our own industry. 
But instead what we have done is get hooked on skimping on wages and conditions with the foreign charter vessels. We have had of course the terrible impacts that we have seen on those real human lives but also the country has missed out. There are around 2000 foreign workers I understand employed in the sector. These are 2000 jobs that Kiwis could be doing at a time when the unemployment rate is as bad as the last time the National Party was in Government. This is a big issue—7.3 percent or 2000 jobs is not something to be sniffed at. We have missed out on all that tax revenue and ACC contributions. The whole country has lost by the policy to date. It is good we are changing it but disappointing we are waiting for 4 years to finally implement the phase-out of foreign charter vessels. Hopefully this can bear and face some good scrutiny at the Primary Production Committee and hopefully it can be changed because as everyone agrees as we have heard from numerous Labour Party members 4 years is far too long. There is no justification. 
I am not sure whether any other members did but I researched my case and I submitted to the Ministerial Inquiry into Foreign Charter Vessels. In researching and talking to fishermen as preparation for that process what I learnt was that there were absolutely horrible conditions. We know that foreign workers were beaten on the ships and that they were forced to work for days but it was not just the working conditions; it was the ships themselves—absolute rust buckets and unsafe conditions. We saw the workers and heard that they were not being paid appropriate wages. Of course everyone who knows the law said they had to get paid the minimum wage but everyone knows that was not happening in part because of the agents and in part because of the process. We very clearly heard that it was akin to slavery what these Indonesians Malaysians and other people from developing nations went through. We have seen the dumping of fish and tragically we have seen the fatal consequences most prominently when that 31-year-old rust bucket the  
No. 1 In Sung 
 from Korea sank in the Ross Sea with 22 lives lost. 
It is disappointing that the Government is addressing only six of the 15 recommendations of that ministerial inquiry but we welcome this bill. We support the intent. We will be supporting it through the select committee process. We hope people will make submissions. 
 Ultimately what we are talking about is the future of our fisheries. Let us learn the lessons and learn from the mistakes of the last couple of decades. Let us focus on a sustainable brand-based fishery so we can maximise those economic opportunities. Let us get those premiums from the high-end export market which cares about issues such as Maui’s dolphin becoming extinct which cares about issues like slavery when we are catching our fish and which cares about the fact that as we saw in the news last night we are killing dozens of endangered sea lions 300 fur seals and around 70 common dolphins every year in our trawling fisheries. They care about the way we are fishing. So let us make the most of it let us learn the lessons and let us have sustainable fisheries. Kia ora. 
TIM MACINDOE (National—Hamilton West) 
: 
 We have had some very intelligent and thoughtful contributions to this debate from all members in the House this afternoon. I would like to thank them for that constructive engagement. I am sure that members of the Primary Production Committee will apply themselves with equal good sense to the work ahead and I wish them well in that task. 
Bill read a first time.  
Bill referred to the Primary Production Committee. 
Hon CHRIS TREMAIN (Minister of Internal Affairs)  
on behalf of the Minister for Primary Industries: I move  
That the Primary Production Committee report the Fisheries (Foreign Charter Vessels and Other Matters) Amendment Bill to the House on or before 21 June 2013. 
Motion agreed to. 
Reserve Bank of New Zealand (Covered Bonds) Amendment Bill 
Second Reading 
Hon Dr JONATHAN COLEMAN (Associate Minister of Finance) 
 on behalf of the Minister of Finance 
: 
 I move  
That the Reserve Bank of New Zealand (Covered Bonds) Amendment Bill be now read a second time 
. I want to begin by thanking the members of the Finance and Expenditure Committee for their prompt handling of the Reserve Bank of New Zealand (Covered Bonds) Amendment Bill. The committee received six submissions and heard from four submitters. 
The bill amends the Reserve Bank of New Zealand Act 1989 to establish a legislative framework for the issuance of covered bonds. This framework aims to provide legal certainty as to the treatment of cover pool assets in the event that an issuing bank was to be placed into statutory management or liquidation. The bill also enhances the Reserve Bank’s supervision of covered bond programmes. 
This bill is important as it will improve the access of New Zealand banks to offshore covered bond markets. Covered bonds have proven to be an important source of finance for New Zealand banks over recent years when funding markets have been volatile. Banks have been able to issue covered bonds at a reasonable cost when it has been difficult to issue other forms of debt. Further covered bonds provide New Zealand banks with a source of long-term funding which is important to reduce the vulnerability of the New Zealand economy to sudden changes in investment sentiment. This helps to promote overall financial stability and as such benefits all New Zealanders. 
The committee has recommended some minor drafting changes to the bill but I will highlight the more substantive changes now. These changes are largely in the nature of clarification. The main obligations imposed by the bill remain the same. The definition of “issuer” in the bill has been redrafted to make it clearer as to whom the bill applies. An issuer is a registered bank that issues intends to issue or guarantees covered bonds. The definition has been amended to cover the situation where a bank that is the issuer of a registered covered bond programme has its bank registration cancelled. Such an entity would continue to be treated as an issuer unless and until it transferred all the rights and obligations under the covered bond programme to another issuer. 
The first step towards providing legal certainty is requiring the registration of covered bond programmes with the Reserve Bank. An issuer commits an offence if it issues covered bonds other than under a registered programme. The committee has widened the scope somewhat by making it an offence for the issuer to permit the issue of a covered bond other than under a registered programme. This is to address the situation where the issuer is not issuing but is guaranteeing the covered bonds. 
The bill gives the Reserve Bank the power when registering a programme to designate the covered bond programme to particular programme classes based on the assets in the cover pool. This power has been amended so that the designation can take into account assets that are yet to be transferred to the cover pool. In order to be registered the programme must meet certain registration requirements. The committee has added an express registration requirement that the issuer maintain a register of the cover pool assets that are owned by the special purpose vehicle or SPV. The issuer must also have prescribed certain internal controls in the programme to ensure that this register is accurate and that it is consistent with any asset class designation. 
It is also a registration requirement that a cover pool monitor be appointed to the covered bond programme. Although the appointment will be under contract the committee has made some clarifications to the bill to specify the respective duties of the issuer and the cover pool monitor. Firstly the bill has been amended to clarify that the onus is on the issuer to ensure that reporting requirements in the bill are met. Secondly the issuer is required to keep the register of cover pool assets up to date and the contract must require the cover pool monitor to assess the issuer’s compliance with that requirement as well as the issuer’s associated internal controls. Thirdly the cover pool monitor is now required to assess compliance at a given point in time rather than at any point in time as the committee did not consider that the intention was to require continuous assessment. This does not change the frequency of the cover pool monitor’s reporting from the original requirement in the bill as introduced. 
The bill also imposes ongoing requirements on issuers of covered bonds—in particular reporting requirements. The committee has introduced a new provision to clarify that in the event of issuer default the issuer’s obligations end and the special purpose vehicle is then required to provide the Reserve Bank with any information it requests regarding the covered bond programme. Once registered the covered bond programme can be removed from the register only once certain conditions are met. An amendment has been made so that the Reserve Bank can remove a covered bond programme from the register if the security interest over the cover pool has been enforced subject to the consent of the relevant bond trustee and security trustee. 
The second step to providing legal certainty in respect of registered covered bond programmes is clarifying the application of the law in relation to the assets held by a covered bond special purpose vehicle in the event the issuer is placed into statutory management or liquidation. The bill as introduced did not address the statutory management regime in the Insurance (Prudential Supervision) Act 2010 so the committee has recommended an amendment to make it clear that a covered bond special purpose vehicle is not an associated person or subsidiary of an issuer for the purpose of the statutory management regime in that Act. 
 The bill includes a transition period that delays the application of the bill to existing covered bond programmes to allow time for amendments to be made to the programmes to meet the registration requirements. The committee has recommended extending the transition period from 6 months to 9 months to take into account 60 working days allowed for the Reserve Bank to consider applications for registration. 
I note that the committee discussed the appropriateness of the issuance limit for covered bonds that is currently imposed by the Reserve Bank. The limit set by the Reserve Bank by condition of registration limits the assets of the bank encumbered in favour of covered bond holders to 10 percent of the total assets of the bank. The committee considered that this limit provides an appropriate balance between the benefits of covered bonds in terms of reducing the risk of bank defaults in New Zealand by improving the ability of New Zealand banks to source long-term funding against any risks to unsecured creditors in terms of covered bond holders having priority over cover pool assets in the unlikely event that the bank failed. 
Once again I would like to thank the committee members for the work that they have undertaken on this bill. It has been significantly enhanced through the committee process. This bill will improve the resilience of the New Zealand financial system to volatility in international markets. I commend this bill to the House. 
Hon DAVID PARKER (Labour) 
: 
 I thank the Associate Minister of Finance for his contribution on the Reserve Bank of New Zealand (Covered Bonds) Amendment Bill and for that lucid description of what covered bonds are and why the Government deems them necessary. The Labour Party wishes that we did not need covered bonds in New Zealand but it is wishful thinking to say that we do not need them. We have them and they are pretty hard to unwind at the moment particularly in the face of a current account deficit that means that New Zealanders are reliant on increasing lines of credit coming through the mainly Australian-owned banks via overseas lenders to those banks. Some of this credit these days is through these covered bond vehicles. I will come back to the issue of why the necessity for this is made worse by New Zealand’s current economic setting which may lead to a prolonged and entrenched current account deficit that is not going to be cured under current economic settings. 
As the Associate Minister has fairly acknowledged the effect of covered bonds is to create a class of lenders to banks who have a security over some of the assets of the bank namely some of the lending securities that the bank has. For example if the bank borrows money—they might be borrowing it from an overseas bank or from an overseas sovereign fund or from some group of bondholders overseas—and the bank then lends that money to New Zealand borrowers and it is a significant loan generally the bank has a form of security that is either a mortgage or a debenture. The security that that bank has is available to be used in the event that the New Zealand borrower does not repay what the bank has advanced to them. 
Until we had covered bonds in New Zealand all of those securities were available. In the event that a bank that had deposits from those overseas lenders as well as New Zealand depositors went belly up everyone was ranked equally. If the bank went belly up because it had got into financial difficulty and made some unwise loans then everyone stood in the same position. If there were not enough assets to go around when the bank went bung everyone took a haircut and everyone took the same haircut. What we are doing through this legislation is we are saying that there should be a class of lenders to banks who have a priority right to some of the assets of the banks. So some of those mortgages and debentures rather than being available to all depositors will effectually have a “gotcha” over them in respect of these international lenders who have lent through this covered bond market. 
Until the global financial crisis there were no covered bonds in the New Zealand market. There have been covered bonds particularly in Europe for a long time. Indeed in some of the European banks there are high levels of covered bonds meaning that a lot of the lending is matched with a “gotcha” over the securities of the bank. This means that the pool of assets that is available to people who are not in those covered bonds but are effectively unsecured depositors in the bank is smaller. All other things being equal if one of those banks goes belly up then the covered bond holders are effectively protected from getting much of a haircut and the other depositors wear the adverse consequences of that. The consequences of insolvency are concentrated upon them and they suffer more of a loss—they take more of a haircut. That is the effect of covered bonds. 
Dr David Clark 
: Some of us have more hair to lose than others. 
Hon DAVID PARKER 
: Thank you Dr Clark. The effect— 
Hon Clayton Cosgrove 
: That’s unparliamentary. 
Hon DAVID PARKER 
: No that was a compliment to me and insult to him—at least to those who are looking across at me rather than down from the top. 
So the effect of covered bonds is to change that arrangement and to change it dramatically. Following the global financial crisis when banks were hard-pressed to renew some of their credit lines the New Zealand banks found that they had to meet their obligation to repay some of their older borrowings and refinance them so that they could lend money out to the people they had loaned to in the New Zealand market. In order to do that they had to enter into the covered bond market. 
There has been a benefit to that in New Zealand because if it did not happen then it may have been the case—we will never know with certainty but it may have been the case—that those banks would not have been able to meet their obligations to the people who had lent them money either overseas or in New Zealand. Some of those banks could have been under pressure and that would have led either to a failure of the bank or to an increase in New Zealand interest rates—both of which could have been problematic for New Zealand. So I have no criticism of the banks actually in the face of what happened there. They having expanded credit in the earlier years into New Zealand I can see why they chose to pursue the covered bond market. 
Nevertheless there is something in the criticism from Emeritus Professor Geoff Bertram formerly from Victoria University an economist and others who are severely critical of the New Zealand regulator allowing these covered bonds to arise. The fact that they were not used in New Zealand did not mean that they could not be we found. Under the existing legislation it was possible for banks to issue covered bonds because there was no prohibition against them. So they did and then the Reserve Bank came along after it had happened and said: “Look we’re going to impose a limit on that through their banking licence or the conditions of their registration as a New Zealand bank.” 
 So reluctantly we have come to the view in the Labour Party that this is necessary. I would like to think it will not be necessary for ever and that one day when New Zealand is in a stronger economic position and our banks source even more of their funding from local sources we can revisit this and give New Zealand depositors equal priority over all of the assets of the bank rather than having part of those assets put out beyond their reach through the covered bond mechanism but at the moment it is necessary. 
I want to come to the question of the rate. There is a proposal that the limit be 10 percent of the bank’s assets at all times. The Australians have a rule where the limit is 8 percent of the bank’s assets as at the date of issuance. I personally would have preferred the Australian model. We have gone along with the Reserve Bank advice but I do not see why we are getting different rules in New Zealand compared with Australia. It is just adding levels of complexity at a time when CER is meant to mean we have similar rules across both sides of the Tasman. It is unlikely that if you had 8 percent at the time of issuance it would rise to more than 10 percent of the bank’s assets. For that to happen there would effectively have to be a 25 percent decrease in the size of the bank. If that is happening well there could be problems in that bank anyway. So I prefer the simplicity of the Australian model. 
I understand the Reserve Bank has its own reasons for the 10 percent model and we can go along with it because there is not a huge difference. Canada has a 4 percent limit and we thought about whether that was an appropriate limit. But the advice that we had from officials was that that was too low a limit for New Zealand because it meant that in respect of our smaller banking institutions the size of issuance that they could have into the covered bond market was so small that there would not be interest in the covered bond market. Internationally they are rather large tranches of money and 4 percent of some of our smaller banks like Kiwibank would mean that they were closed out of that market when their competitors—the big Australian banks—would be able to access that market. We do not want to create competitive disadvantage for smaller banks in New Zealand in respect of this because I personally do not want to prefer the interests of the bigger banks over the smaller banks and I am sure that is a view that might be held by others in this House as well. 
One issue where we do disagree quite strongly with the Government is that this limit should not be easily changed. We do not think this is something that should be delegated to the Reserve Bank and be within its discretion to change. We think the Reserve Bank should have to come to the Government and say: “Hey we think this should be changed.” There is a policy decision that then should be taken by the Government—not delegated now to the Reserve Bank—as to whether that should be the case. So we oppose discretion being given to the Reserve Bank to allow changes to that 10 percent level in the future without recourse to either the executive or Parliament. Indeed you could argue that that sort of thing is so serious that it should come to Parliament. But we thought well at least there should be some executive responsibility for a decision such as that rather than delegation to the Reserve Bank. 
I am just about out of time so I am going to say one more thing. That is that the greatest problem that this exemplifies is our current account deficit. Our current account deficit is funded only one way every year. It is from more borrowing from overseas most of it through the banking channel or asset sales to overseas owners. Every year we do that the balance sheet of our country continues to get worse. That problem was going to be cured by this Government; it was one of its promises. It said it was going to increase the percentage of exports as it rebalanced the economy towards the export economy. It has not done so. It has failed because it will not pull on levers like capital gains tax addressing monetary policy or compulsory universal KiwiSaver. 
TODD McCLAY (National—Rotorua) 
: 
 It is a pleasure to speak on this bill the Reserve Bank of New Zealand (Covered Bonds) Amendment Bill in its second reading. I want to thank members opposite and Mr Parker for the way that we were able to work constructively together on the Finance and Expenditure Committee on this legislation. Although for those who are listening— 
Hon Simon Bridges 
: That’s not what David Bennett told me. 
TODD McCLAY 
: No I said David Bennett did not work constructively in the select committee; I did not say Mr Parker! Anyway I will get back to this important issue. 
Although for those who may be listening or will read about this in the newspaper it is not the most exciting piece of legislation it is none the less quite important. It has the ability to have great effect upon banks those who borrow from banks and the cost of their borrowing to some degree. It sets up a legislative framework for the issuing of covered bonds. The covered bonds market in the world is worth some $2 trillion every year which is a very large amount of money. Some would say it is the amount that New Zealand would come close to owing if we did not have a National Government and if the Labour Party was in charge. Thankfully that is not the case. 
The reason it is so important for us to have this legislation is because banks in New Zealand are already entering into covered bonds borrowing around the world and they are doing so without the legislative framework to control the borrowing that they undertake. This also gives legal certainty to rights and responsibilities. 
I think from memory there are four banks in New Zealand as we heard at the select committee that have borrowed covered bonds and they have done so through contractual agreements or relationships. What that means is that in so far as giving preference should a bank fail heaven forbid—I do not believe that will be the case with the larger banks in New Zealand—through their contracts the banks that have loaned the covered bonds to them will already have the ability to have the first chance to get a return on their loans. 
So what this legislation really is doing is bringing this issue within the ambit of the law creating a statute to control it and in turn giving legal certainty to those that would lend to our banks under the covered bonds scheme. I think that brings us into line with almost every other country in the world including Australia which put in place this legislation in 2010. 
I think at the Committee of the whole House stage there will be an opportunity to go into some of the detail of the issues that Mr Parker raised. I very much look forward to that. But I want to pick him up on one point that he spoke of which is around the percentage that banks in New Zealand could borrow under the covered bonds scheme that would be covered compared with their assets. We did agree that it should be set at 10 percent. Indeed already the Reserve Bank has ensured that it is 10 percent and we have decided to put that in legislation. 
The challenge with looking at our lower rate which other countries may use is that the assets of banks in New Zealand compared with the assets of many overseas banks are relatively less significant. Therefore the ability of our banks to borrow from some of the more important covered bonds markets in Europe America and elsewhere would be limited. I understand that in Europe as an example some covered bonds lenders have limits as to the amount and our banks would miss out. 
So I think this is an important piece of legislation and we will have a chance to talk about it much much more. I want just to say at this stage to the submitters who came before the select committee that it was useful for both sides of the House to be able to delve into some of the detail of this bill to a greater degree. I am grateful to some of the experts who had much more knowledge than we initially did before we started on this process. Thank you. 
Hon CLAYTON COSGROVE (Labour) 
: 
 I think my colleague David Parker provided a good encapsulation of where we sit on this side of the House in respect of this bill the Reserve Bank of New Zealand (Covered Bonds) Amendment Bill. We will support it. We support the legislation but with some reservations as Mr Parker outlined in respect of the fact that this bill now does change the hierarchy of security from ordinary deposit holders having an even playing field and being treated equally to those lenders who are the holders of covered bonds having preference over those ordinary depositors. 
But I want to just touch on a point that was made by I think Mr Hayes as Mr Parker resumed his seat. Mr Parker was providing the evidence provided by the IMF the Reserve Bank of New Zealand and the Minister of Finance’s own department Treasury which notes and projects that New Zealand at the moment sorry has the second-worst current account deficit in the world beaten only by Greece. And the IMF the Reserve Bank and Treasury of course note that we are projected at some point in this period to take the gold medal—that is to be No. 1 in the world ahead of Greece—for having the worst current account deficit on the globe. There was an interjection I note by Mr Hayes who said “Oh!” and something about Labour borrowing—you know all we do is borrow. Well could I remind that genius “Dr Dolittle” over there that at the peak of this Government’s borrowing—at the peak of this Government’s borrowing Mr Hayes—$380 million was being borrowed not per year not per month but every 7 days by those guys over here. That is 380 million bucks a week. That genius has the audacity to say to us that we are sort of borrow-and-hope merchants when of course I note that our economic track record—sadly Mr Hayes does not remember this or has a convenient memory loss; maybe it is the bow tie or the flash haircut—when we left office— 
Hon Member 
: At least he’s got hair. 
Hon CLAYTON COSGROVE 
: —OK I apologise; it is not a flash haircut—was 9 years of surpluses from our Government and record low unemployment. Need I go on? Net Crown debt was zero. That was the legacy of our Government which was bequeathed to Mr Hayes’ party and then of course it at its peak is borrowing $380 million a week. That is a lot of bow ties and a lot of haircuts—that is a lot of bow ties and a lot of haircuts for “Dr Dolittle” over there “Mr Magoo”. 
But I want to come back to this bill and I agree with Todd McClay. This is an important—[ 
Interruption 
] I apologise. I may be in the process of agreeing with some of Mr McClay’s words and therefore destroying his career—that was the point. But this is an important piece of legislation. It is about securing banks. But I want to touch on the last points Mr Parker made. We disagree in terms of an acceleration of the 10 percent limit that this should be delegated to the Reserve Bank. In the select committee report on page 7 for Mr Hayes’ benefit—there is only one paragraph on there in case he is confused—it says that “The majority of [the committee] however considered that the current arrangement provides an important element of flexibility which would prove advantageous in any financial crisis when rapid responses to market developments are likely to be needed.” It is true that in a financial crisis rapid responses are required. It is a bit like when we in Government after the Australians rang us up and said that they were having a retail deposit guarantee scheme had to move immediately to ensure that there was no trans-Tasman slippage in terms of depositors’ funds. 
But I would just simply argue this: where is the problem with a lack of flexibility in having the Government of the day make that decision? What it requires is a high price. It requires some efficient analysis and decision-making some rapid decision-making which still provides any level of flexibility one would want but it actually requires the Government to take responsibility for that analysis and for its decision making unlike when these guys got in when in terms of the Retail Deposit Guarantee Scheme the Minister of Finance the Governor of the Reserve Bank and Treasury did not talk to one another. We got gamed to the tune of hundreds of millions of dollars which we should have inquired into had it not been for Mr McClay Mr Bennett “Dr Dolittle” and a couple of others on the Finance and Expenditure Committee who blocked our request for an inquiry into that. And it was Mr Hayes of course—it was Mr Hayes of course—who coined that interesting phrase when I think Dr Clark was raising the issue. Hundreds of millions of dollars got gamed out of the pockets of taxpayers because the finance Minister did not have his eye on the ball and Mr Hayes’ response in the committee—and I invite him to deny it—was to say “Small change.” That is small change. Hundreds of millions of dollars that we know of or it could be $500 million or it could be $800 million and Mr Hayes’ greatest contribution to the body politic was to describe that to taxpayers as “Small change.” Well there endeth the lesson in respect of Mr Hayes—game over. That is what he thinks as a custodian in Government of the taxpayers’ purse. 
So we would argue that the decision to alter the limit and the scheme of arrangement around it should be one taken directly by the Government of the day. It is after all a major policy decision. It does not reduce flexibility at all in terms of the process but instead of sort of bumping responsibility to the Governor of the Reserve Bank so that this crowd could wash their hands of it and say: “It wasn’t us. Don’t blame us. The governor’s independent. He can do it.” they should actually up the ante take our suggestion on board and ensure that it is a policy decision where the Government of the day bites the bullet and makes the call. After all that is why these geniuses are paid sort of quarter of a million bucks a year have a ministerial car and a house and all the sort of— 
Andrew Williams 
: Which geniuses? 
Hon CLAYTON COSGROVE 
: The ones across the aisle Minister Bridges being the newest of them. I am sure his backside is enjoying sitting on the grey leather in the BMW and the bank account has swelled I am sure. But the problem is that Mr Bridges should stand up and say that as a Cabinet Minister he is prepared with other colleagues to take this critical policy decision. As Mr Parker outlined— 
Andrew Williams 
: He’s building bridges. 
Hon CLAYTON COSGROVE 
: Building bridges indeed. He has given up clamping for Lent I am told. That was his last portfolio—“clamping” was the word I was using. 
So where we are at is a 10 percent limit which is higher of course than Australia’s at 8 percent and of course Canada’s as Mr Parker pointed out at 4 percent. And as we go through this bill in the Committee stage it would be helpful if the Minister would tell us as to why he feels he has got to kick the can down the road towards the Reserve Bank house and delegate the decision to the Reserve Bank. It is a major policy decision and that is why those guys over there get paid the big bucks. 
It is a concern as I say that we will be moving from a situation of an even playing field for ordinary depositors; now we will be changing that hierarchy to give preference to those who have the facility of covered bonds. That is a concern. But we acknowledge that on balance this is appropriate legislation bearing in mind the points we have made. And we would encourage as I say the Government as we facilitate the passage of this legislation to outline issues in respect of decision making. 
But I conclude where I began by noting that this Government in terms of current account deficit—you know Bill English will have an achievement this year. We will be No. 1 worst in respect of our current account. In the Western World that will be a historic achievement and it is laid at his feet directly because he refuses to take the advice of the IMF the Reserve Bank and Treasury. He knows something apparently that everybody else including his own department does not. They say the current account deficit is heading for the rocks. Mr English says the IMF the Reserve Bank and Treasury are wrong and he is right but he has no evidence to back up—no evidence to back up—those assertions. He refuses to consider any other measure because he is philosophically opposed to a capital gains tax superannuation measures and other measures that we have put forward and that manufacturers and others have put forward. His view like the Government is to do nothing: cannot do anything will not do anything. They are out of ideas: “The market will sort it. Hands off. We will just take our money and run. We will just take our pay and abrogate our responsibilities.” 
Dr RUSSEL NORMAN (Co-Leader—Green) 
: 
 I stand on behalf of the Green Party to speak to the Reserve Bank of New Zealand (Covered Bonds) Amendment Bill. What this bill does in a nutshell is facilitate and regulate the ability of the New Zealand banks to borrow from overseas. That is the essence of the bill. And that should be a worry. For people who are concerned about the increasing indebtedness of the New Zealand economy as a whole what this bill is a reflection of is that the New Zealand banks are having to go further overseas in order to borrow more money to fund our current account deficit. 
But before I get on to the general problem around the current account deficit I wanted to start with some of the specific concerns why depositors in banks should be interested in this bill. If you have a deposit in a New Zealand bank the reason you should be interested in this bill is that it means that if the bank goes belly up other people will get access to the bank’s assets before you. That is what a covered bond means. When the banks want to borrow from overseas what they will be doing is going to overseas lenders and saying that they want to borrow some money. The lenders will say: “OK we will lend you money but what is the asset?”. What is the mortgage if you like against which they will lend the bank money? What the New Zealand bank will do is put up an asset or some of its assets which are basically going to be housing loans and say: “Look we will borrow money off you and if we go belly up you get this asset.” What that means however is that if the bank goes belly up the New Zealand depositors are not first in the queue to access those assets. That is fundamentally what a covered bond means. It gives priority in the queue of creditors to whomever loaned the money to the bank for this covered bond. That means that the depositors are not first in the queue to access those assets if the bank goes bad. That is a significant development. 
What we found out in the course of the Finance and Expenditure Committee inquiry is that this is already happening. Speaking for myself I was unaware of it. The covered bond market is already developing in New Zealand. The banks are already engaged in this practice. So in some respects we are regulating a practice that has already started. 
We are going to be supporting the bill because we think it is essential that we do. But I think it is important to understand what is happening here. We are so far down the debt track as a country—I am not talking about the fiscal position of the Government; I am talking about the country as a whole—that now we are advancing into these new ways of borrowing money from the rest of the world to fund our current account deficit. But that means that if the banks go belly up depositors will not be first in the queue to access the bank’s assets. So it does put depositors’ money at risk as a result. Of course it does facilitate the banks accessing this money and so it does add some stability to the banking system in that respect but there is a downside to it and we need to be aware of it. It is important that there is a limit on what proportion of the bank’s assets it can borrow through the covered bond market because whatever that proportion is—and it is set at 10 percent currently by the Reserve Bank—that is the proportion of the bank’s assets that depositors will not have access to if the bank goes belly up and we try to fix it. 
I think the bigger policy issue that sits behind this bill of course is the problem of the current account deficit. The reason why the banks are continually going to the international market to borrow more and more money is that we are running a large current account deficit. Over the last decade basically the banks have been borrowing money overseas and shuffling it through to the private housing market. Aside from the credit the New Zealand banks have created themselves they have also been borrowing from overseas and they have been passing that through into the housing market. We have seen a dramatic expansion in the housing market in New Zealand fuelled by this cheap credit. The price of housing in New Zealand doubled between 2002 and 2007 and that housing market inflation is one of our problems. It is one of the reasons we are borrowing all this money and it is also part of the bigger picture of why we continue to have a current account deficit. 
The current account deficit is predicted to increase to 6.5 percent of GDP by 2017 according to Treasury. That is a very large and very unsustainable current account deficit. So if we do not have the policies in place to address that current account deficit we will need not just the Reserve Bank of New Zealand (Covered Bonds) Amendment Bill; we are going to need a whole stack of measures to borrow more and more and more money from the rest of the world to fund our current account deficit as a country. The Government seems pretty happy about that. Originally when it first got into office it was not happy about that. It said we had to rebalance the economy. There are many metrics for rebalancing the economy but probably the single key metric is the current account deficit. So initially Bill English quite rightly said we need to deal with this problem. Of course since he has been in Government the problem has only got worse because the current account deficit continues to grow. It went very high during the Labour Government and that was a huge problem. Then it dropped dramatically during the global financial crisis and now it is steadily rising again. 
As we undermine the export and tradable sector with our very high currency which the Government insists it must do nothing about that very high currency is creating tremendous problems for our exporters and manufacturers and that means that our current account deficit is going to get worse. If we cannot trade our way out because our currency is overvalued—the IMF says the currency is overvalued by 15 percent; it is probably more than that by now—then our current account deficit will only get worse. The high New Zealand dollar also means that imports are cheap so we buy lots of imports. It also means that businesses in New Zealand that are competing with imports are being driven out of business. As we knock out these businesses that are fundamental to our tradable sector we are making our current account deficit worse and that means that we have to borrow more and more money from the rest of the world or sell assets to the rest of the world. There are only two ways to fund a current account deficit—short of quantitative easing there are only two ways—and they are by borrowing from the world which this bill facilitates or by selling assets whether it is the Crafar farms or whether it is the one the Canadians recently bought. You can sell your land. 
 Essentially when the Government says it is happy with its current policy settings what it means is that it is happy selling more and more land and assets into overseas ownership to fund the current account deficit. What the Government is saying is that it is happy with a situation where we are borrowing more and more from the rest of the world in order to fund the current account deficit. The problem with the Government’s strategy in that respect is that once you borrow the money you have to not only pay back the original the money that you borrowed but also service the loan the interest payments which adds yet more burden on the export sector which is the one that has to pay this interest. Once you sell all these assets the profits that come out of the assets whether they are the farms or other kinds of assets go overseas to the owners because that is why they bought those assets. The foreign owners were interested in buying those assets in order to access the profits that come from them. Those profits then travel overseas and add to your current account deficit. So it becomes an ever more difficult problem to solve the longer you run a large current account deficit. The problem for New Zealand is that we are going further and further down that track. 
We have this bill in front of us which at one level is a rational response to the situation we are in. We are trying to facilitate and regulate borrowing more money from overseas via the banking system through covered bonds. It is a rational response to the immediate situation we are in. The Greens will support it for that reason. It is not a rational long-term solution to the challenges facing the New Zealand economy. So the Government might get this bill through or whatever and say: “Oh well we will carry on. People can still afford cheap flat-screen TVs.” but the way that we are affording cheap flat-screen TVs is we are borrowing the money and we are selling our assets to the rest of the world. I tell you that is not a sustainable strategy. That is why the Greens have been pushing unorthodox—in New Zealand—policies such as lowering the official cash rate and using loan-to-valuation ratios to control housing inflation so we can have a lower official cash rate to put downward pressure on the exchange rate and unorthodox policies like quantitative easing in order to pay for the Christchurch rebuild because we think it is critical that we deal with the problem of the current account deficit. Anyone who wants to have a glib debate about printing money or all the rest of it—which is all we have really got from the Government or Shamubeel Eaqub who is the Government’s favourite economist—those people who want to have that glib debate are not dealing with the real fundamental challenges that are facing us. If we do not deal with the current account deficit we have no choice but to borrow more money. We have no choice but to sell further assets. A Government that does not want to deal with that problem is a Government that is not working in the long-term interests of New Zealand. 
We will support this bill because it gets us through where we are now but let us be absolutely clear: we need solutions to the problems we face. 
JOHN HAYES (National—Wairarapa) 
: 
 While Labour the Greens and New Zealand First are trying to talk our economy down and promoting money printing and more taxes the National-led Government is getting on with the job of responsibly managing the country’s finances and helping build a more competitive and productive economy. The last Labour Opposition speaker—that little fellow with the huge ego and no hair who got thrown out of his electorate at the last election and is still sitting here on the list—has not worked out that this economy grew at 2 percent in the past year which puts it in the top 10 percent of the OECD. 
Interest rates are low. A family with a $200000 mortgage is now saving about $200 a week in interest. Our public finances are improving so we can return to surplus and get on top of debt. Look at this chart here: this is how we are getting on track with Government spending and returning to surplus. The policies proposed by our opponents including printing money increase the supply of money and increasing it will only increase inflation. That means that interest rates will go up so your mortgage costs will go up and so your business costs will go up. This will reduce real wages. It will cut jobs. It means that on top of everything else you buy the price of petrol would go up. 
Here are a couple of views of commentators. Since the last speaker mentioned Shamubeel Eaqub he rubbished the idea saying “printing money is a policy of last resort and it would not necessarily stop manufacturing and jobs going offshore. It might be free money in the short term but in the long term it would lead to higher inflation.” That reduces the standard of living for most people and the impact tends to be much greater on low-income households rather than higher-income households. The Employers and Manufacturers Association Chief Executive Kim Campbell says “fiddling with the currency is no quick fix.” If one thinks there is a magical printing press in the sky that solves all our problems there is nothing further from the truth and it is extremely dangerous thinking. 
Debate interrupted. 
The House adjourned at 6 p.m.