Woodhouse Michael; Salesa JennyHon MICHAEL WOODHOUSE (National): Thank you Madam Speaker. I thank the Minister for his acknowledgment of the very good work that the Finance and Expenditure Committee has done generally but particularly on this bill. And I want to join him in thanking the officials who work very hard to try and articulate the Government's preferences and in some cases I think their own for improvements to the Reserve Bank Act; also to the 21 submitters who made submissions on the bill. This is quite technical but I agree with the Minister it is extremely important. Certainly I think there are pieces of legislation where when there are changes and reforms being made to them it is desirable that that has bipartisan support across the aisle. I regret that National did not support at first reading this bill—and I'll explain why and what's happened since—and cannot at second reading.One of the things I didn't have the time or the opportunity to do prior to the first reading in I think December was to go back and have a look at the Hansard of the things that were being discussed when the Reserve Bank of New Zealand Bill was introduced some 32 or 33 years ago because it's quite illuminating to see what the objectives of the bill and the Act that has actually I think stood the test of time. When it was first introduced it was moved by the Minister of Finance the Hon David Caygill in the fourth Labour Government. I'm just going to quote a bit from the Hansard because I think it's quite telling in respect of what the goals for the Act were and whether or not—I want to consider whether or not some of the changes that we're making to the bill in this bill the Act in this bill are actually commensurate with those initial goals. He said in his first reading It will place the Reserve Bank on a more independent basis to improve the credibility consistency and effectiveness of monetary policy." He went on to say that it "places the bank on a more independent but also more accountable legislative basis" than it was at that time. He said "The Reserve Bank is required to have regard to the efficiency and soundness of the financial system"—note the term "efficiency" was initially a goal of the legislation—"and to advise and consult the Government and others … Therefore the bill provides that the bank can be diverted". Oh and then it went on to talk about clause 11 of that bill which is about changes to and the degree to which the Government could direct the Reserve Bank in implementing other things apart from monetary policy.But it was quite clear to the original architects of the legislation that if those changes were to take place it had to have a level of parliamentary scrutiny. Mr Caygill said "Therefore the bill provides that the bank can be diverted from its price stability objective only by Order in Council" which was the instrument that would have been used at that time. I think that's quite telling.He did go on I think to say which is something quite interesting and I'm not quite sure he's right but we're going to find out in the future I think: "The continued maintenance of stable prices"—which is effectively inflation and one of the principal goals of the Reserve Bank—"will in turn enhance the Government's ability to fight its other major economic problem—unemployment." Now that's quite an interesting nexus. What Mr Caygill was saying back in the late 1980s was as long as we maintain price stability we will maintain optimal employment levels. Now as the Minister of Finance of today has just told us part one of the trilogy was actually not to trust the process but to provide this Government with an ability to add an extra task of the Reserve Bank that is sustainable employment. Now the original architects basically said that you maintain prices and unemployment should be kept under control. Now I'm not quite sure they were right but I'm also not sure that specifically mandating the dual roles of price stability and maximising sustainable employment is actually achievable just by dint of remit.So we opposed this bill in the first reading regrettably. We were somewhat concerned that we didn't have bipartisan support for such an important legislative thing but we were certainly open to being able to be convinced to support it at remaining stages. The biggest concern we had was the reach of the Government into what was the independence of the Reserve Bank by some of the changes that were being made. And I regret to inform the House that rather than making changes in the bill to maintain the independence between the Government having set its remits and its financial strategy and then leaving the Reserve Bank to do its job something of the opposite has happened. Indeed these changes were made after the submissions on the original bill had been heard. Officials apparently of their own volition but I think the quiet hand of the Minister of Finance who decided that even the interference and the fingers in that he was seeking when the bill was introduced wasn't quite enough actually made more changes to quietly increase his influence over the ability of the Reserve Bank to do its job. It's for that reason rather than maintaining the independence that was initially foreseen by this Act and actually that has stood the test of time we are quietly eroding that independence.I'll give the House examples of those concerns. So the Minister has mentioned that the governor is now going to be a member of the board. Now I'm not opposed to the strengthening of the governance provisions of the Act but I am generally not a fan of executive members of boards in a commercial sense; certainly not in this situation because what it does then is it gives the Minister the quiet influence over the governance and—through the fact that the governor is a member of that governance board—some influence over the things that the governor should have sole prerogative to determine not the least of which is interest rates and monetary policy more generally. So we have a bill that then closed the independence gap and then closes it further after the submissions were heard. We are very concerned about that. Now I go back to the term "efficiency" that Mr Caygill referred to. I am quite surprised that the Government doesn't see fit to maintain efficiency as a core function of the Reserve Bank. It kind of dismisses it as if to say "Well you know because we have these other remits efficiency isn't necessary". But as I've just pointed out the Reserve Bank must have regard to efficiency and soundness of the financial system. That was its basic premise. The officials told us that they were unable to provide a clear sort of definition of "efficiency". Well I'm sorry pick up a dictionary. I don't want to sound critical of officials but it's not that difficult to work out and I don't think it's inconsistent with the other changes that we're making to maintain efficiency in the banking system. So we oppose that change. The third significant change that we oppose is the ability of the Minister to add functions. Now firstly we support the issue that if the bank comes and asks for more functions; that's an appropriate response. Thirty years ago when the Act was first passed no one had heard of cryptocurrency. Now the bank has the sole prerogative to print currency but actually we now know that digital currencies are very much going to increasingly come into an aspect of our economy. If the bank went and requested that the Minister give them functions in order that they manage that I think that's appropriate. But he's also after the bill was considered given himself the ability to issue a monetary policy committee remit for example at any time whether or not any remit advice has been given. And that remit would not have the scrutiny of this House. We believe that was the original intention of any change to bank functions and we think that a disallowable instrument or some other Order in Council process that does bring it before the House is appropriate. We will be moving motions amendments to the bill in the committee of the whole House to the effect that it will improve I think the independence and objectivity of this Act. But I don't hold my breath that they will be supported.ASSISTANT SPEAKER (Hon Jenny Salesa): The question is that the motion be agreed to."