Cosgrove Clayton: Reserve Bank of New Zealand (Covered Bonds) Amendment Bill — In Committee Third ReadingText is incorporated into the Bound VolumeCosgrove Clayton: Reserve Bank of New Zealand (Covered Bonds) Amendment Bill — In Committee Third Reading[Sitting date: 19 November 2013. Volume:695;Page:15012. Text is incorporated into the Bound Volume.]Hon CLAYTON COSGROVE (Labour): Like my colleague we note that we will support the Reserve Bank of New Zealand (Covered Bonds) Amendment Bill because in essence opposing it of course will not prevent the issuance of covered bonds. It will merely leave New Zealand without regulation and at a competitive disadvantage particularly with Australia as covered bonds already exist there. I have to say like my colleague Dr Clark and others on this side who have spoken in respect of this bill that we do have a reservation in respect of the unfairness that is created with a two-tier system whereby in the event of a collapse of course the banks get far better coverage and get to essentially secure their shirt and others do not.You could make an argument—and there is a bit of precedent for this—in respect of the big end of town being looked after. There are precedents with this Government in terms of looking after the big end of town whether it be those in the film industry or whether it be a negotiated disaster with Skycity where Skycity effectively took the negotiators and the Government to the cleaners but the big end of town tends to get looked after by this Government. The small folk those at the other end of the scale tend to have a different set of rules a different set of parameters and a different set of safeguards. As my colleague said we are mindful for instance in respect of Mainzeal Property and Construction Ltd where the big end of town was first in and those subcontractors and others even struggled to get their tools out of the construction site let alone the age-old problem of getting paid.So although we support the bill we have reservations in respect of it. I wonder like Dr Clark whether the limit of 10 percent of a bank’s asset base is indeed too high and whether that should not be brought into line with the 8 percent that exists in Australia. Why we would have a different system—why we would have a different tier? I do notthink has been adequately explained by the Minister in the chair the Minister of Internal Affairs. We would look forward to some explanation in respect of that. Why is there a difference? Why did the Government put in a different level and a 10 percent limit as opposed to other jurisdictions like—Dr David Clark: Very keen to hear what the Minister has to say about that.Hon CLAYTON COSGROVE: Indeed. Dr Clark says that he is very keen. I know the learned Minister in the chair will be all over this legislation. He would have examined it in great detail last night knowing that he was coming into the chair today but—Hon Shane Jones: Stu Nash knows the answer. Stu Nash.Hon CLAYTON COSGROVE: Stu Nash does know the answer. I look forward to Stu Nash providing us with that answer when he re-enters the fray in here in a matter of months as the incumbent has raised the white flag of surrender—“Custer’s last stand”. It is all over and various vermin are deserting various ocean-going vessels as it were. So I look forward to Mr Nash giving us a very good dissertation in respect of this. But it is a serious point.This legislation at its essence gives preference and a preferred status to banks. There are some reasonable rationales behind that. There are also some large risks and unfairnesses behind that especially when everybody else sits in the second row as it were in terms of the hierarchy if there is a collapse. So that being the case we will support this bill because covered bonds already exist. As I have said opposing it would not stop that but not having an appropriate regulatory framework and safeguards around it would put us at a disadvantage.I come back to this point. Why is it—and I would like an explanation for this so the Minister may want to consult the learned officials—a two-tiered threshold? I think people are getting quite weary of the fact that if you are a big multinational corporate—say Rio Tinto—anything is possible for you. Money rains from the sky and other places in order to help the big boys out. I think Rio Tinto made $4.3 billion last year—those poor souls who are scratching for every dollar they make. I think it was about $4.3 billion or thereabouts. Yet the Government went and gave it a big chunk of dough—$30 million of course. The Government threw money at it as if it was growing on the proverbial trees.Hon Shane Jones: Tossed it away.Hon CLAYTON COSGROVE: Tossed it away. [Interruption] Yes I am coming back to it. And the point I am illustrating is in respect of covered bonds where there is a two-tiered preference system where the big end of town stands ahead of others. Returning to my Rio Tinto point as an illustration of that what did we get for the $30 million? Maybe Mr Bennett could tell us. We were told that there would be job security for those folks.The CHAIRPERSON (Lindsay Tisch): Order!Hon CLAYTON COSGROVE: Indeed—job security for those folks never materialised because the Minister never asked. As the Chair quite rightly suggests there may well be a linkage to that in this bill. But the point is this: in the case of Rio Tinto and in the case of this bill preference is given to the big end of town. I would suggest there are probably some more palatable reasons as to why that is the case to some degree in this bill but certainly not in the case of Rio Tinto certainly not in the case of the film industry certainly not in the case of Skycity—Hon Shane Jones: Chorus.Hon CLAYTON COSGROVE: —and certainly not as my colleague points out in the case of Chorus where there is a simple solution and that solution is not a preference. That solution is an enforcement of a contract in the same way as a contract would beenforced in the private sector. It is real easy. If you negotiate a deal and the other party is not smart enough to outsmart you in negotiating the deal and you get the better deal that they cannot deliver on you enforce the contract. You do not run around with a begging bowl as happened with Rio Tinto and start throwing dough at it because the other party messed up. That is the point.So there is a body of evidence now over the last 12 months that National looks after those big corporates those mates up and down Queen Street yet when it comes to mums and dads they will be in the second row in respect of preference with this bill. We know over recent days that mums and dads have taken a bit of hammering out of this crowd because mums and dads were promised all sorts of things in respect of Mighty River Power and Meridian Energy. They were promised all sorts of things and they never eventuated. So the mums and dads will be sitting in the second row in the cheap seats—as the big boys the banks get the covered bonds and the preference—hoping that their investment positions and their financial positions are maintained.If you were an observer outside this place you could get the impression pretty quickly that National is concerned about only those in the skyscrapers and those behind the mirrored glass up Queen Street and a few other places. It is a bit like the bill we discussed last night the Financial Reporting Bill which I will not go into apart from the theme which was to practise what you preach and walk the talk. High standards outside are required of other parties but there are low standards in this place.So I say to the Government that we will support this but I think it is worth it for the record that the Minister gets on record an explanation a detailed one for the difference in the limit of the bank’s asset base which is 10 percent as opposed to the 6.75 percent limit in Australia. Why the difference? I think it is a simple question. The officials will be able to tell him if he does not know. I think for the record as we go through this legislation that that is very important. This legislation will have a benefit for some. Hopefully it will provide another mechanism for financial stability. But there will be those left wondering why that preference exists and why that difference in the limits exists in respect of Australia.I say in conclusion that we look forward to the Minister providing some detailed explanations specifically on that matter. If he chooses not to provide those explanations can I say to him that that would be quite telling in terms of his stewardship of this legislation.