Key John: Third Readings 
Key John: Third Readings 
[Volume:634;Page:5723] 
JOHN KEY (National—Helensville) 
: 
 On behalf of the National Party I rise to support this omnibus legislation—the Securities Amendment Bill the Securities Markets Amendment Bill the Takeovers Amendment Bill and the Fair Trading Amendment Bill. I start by saying that I spent the better part of 20 years in the financial markets so I feel I have at least some capacity to comment on some of these issues. Some of the things the Government is trying to achieve here have a degree of merit. There is no doubt that New Zealand requires very strong capital markets if we are to develop and grow as a country and deliver the prosperity that I think all New Zealanders would want to enjoy. 
In a sense the legislation is an important milestone in terms of taking New Zealand forward in this area and that is because in the late 1980s New Zealand had a reputation—maybe not necessarily warranted—as being like the Wild West and we relied very heavily on offshore capital markets. Yesterday the Government announced an $11.5 billion surplus. I think the public of New Zealand know that some of that money should be returned in the form of tax cuts. But what was really interesting was the scenario that the Government was really hogging the cash of hard-working New Zealanders. On the back of that New Zealanders have borrowed an additional $60 billion in the last 6 years alone—$40 billion in the last 3 years. That capital has come from offshore. We are the most indebted nation in the OECD in terms of our offshore borrowings. We are hugely reliant on them and that is one of the very concerning matters about our 9.7 percent current account deficit. 
One of the reasons why we really need confidence in our capital markets is that we rely very heavily on that capital. Interestingly enough one slightly unique feature of our current account deficit is that it is heavily made up of an equity portion as opposed to a debt portion. So in other words it sometimes reflects as it has with the widening of the current account deficit recently that returns in New Zealand have been greater. It shows just how reliant New Zealand is on foreign capital markets. So in that regard we kind of support this legislation. 
The second point I want to make if I may is in relation to insider trading. New Zealand is dominated by a number of fairly large domestic financial services players. They are often owned offshore. For the sake of the House I will not bother naming those firms but I can tell members that they already adopt global standards. I spent quite a large period of my time with Merrill Lynch. When Merrill Lynch operated in New Zealand for instance it adopted the global standard and that is the case today. I think the New Zealand public can take quite a high degree of confidence that even without this legislation there is already embedded in our systems some pretty strong stuff around the declaration of people who are trading around directors’ disclosure and around the onus on advisers not to prejudice their firm. So I think we can take quite a lot of good faith from that. 
The interesting thing about this legislation though—and the point that I want to spend the rest of my time discussing—is that when one looks to try to build confidence into the market one sees it is incumbent on a number of players. It is incumbent on financial advisers if one likes—those who are out there giving financial advice—that they do not interrupt or prejudice the New Zealand financial markets by somehow using information that is inappropriate and therefore give the market a bad name. It is hugely reliant on directors of companies who do have inside information that they do not act in a way that will obviously be not only outside the law but give New Zealand a bad name. It is also important that the Government plays its role. 
One might ask why that is important. Well the Labour Government that was elected in 1999 has done tremendous damage to confidence in the New Zealand financial markets. It started with a Prime Minister who did not understand the issues of insider trading herself. The Government owns 82 percent of Air New Zealand and the Prime Minister was so ignorant of the legislation that operates around this area that she did not know when she told the people of New Zealand “don’t sell your shares” that that was a form of insider information and a form of tipping. She was ticked off for that. That was the first of a number of examples we saw where this Government was completely clueless when it came to securities legislation in New Zealand. 
A few months ago we saw an extension of that cumbersome and quite inappropriate behaviour when David Cunliffe the Minister of Communications went on to a Bloomberg newswire—a wholesale news service—and started giving a directive about what Telecom’s dividend profile should be. This is the same man who was responsible for legislation that was being introduced to the House that could have involved the physical separation of Telecom. He went on to say that if Telecom did not act in the way that the Government liked then he would deem that to be a pretty negative position. 
That was a completely inappropriate action by a Minister of the Crown. But maybe most interestingly of all the Government decided for purely political reasons it would turn the largest company on the New Zealand stock market—Telecom—into its little political plaything. We are not arguing on this side of the House about whether local loop unbundling should occur. But the Prime Minister of this country took a very unusual step in giving Telecom the largest company in New Zealand a public kicking because she thought it might be a reasonably good way to shore up a couple of votes. Unfortunately when she did that she wiped $3 billion worth of market capitalisation off that company—$3 billion! It was a bit like: “How do you make a large company into a small company? Give it to Helen Clark to look after for a while.” She wiped $3 billion off that company and every New Zealander in the country paid for it. Every single New Zealander knows that Helen Clark cost them money. The reason is that one of the largest shareholders in Telecom of course is the New Zealand Superannuation Fund—the people who are managing money on behalf of the taxpayers of New Zealand. So Helen Clark for purely political gain decided she would put the boot into Telecom because that made her feel good and she might win a few votes and on the back of that it cost that company’s market capitalisation $3 billion. It cost the hard-working taxpayers of New Zealand who have been saving for their retirement a whole lot of money. 
She did one other very interesting thing when she did that and it was done in a purely politically driven way. We have seen an exodus of offshore fund managers come to New Zealand with one simple message: “We are getting out of New Zealand. We are withdrawing our capital from New Zealand. The reason we are doing that is we don’t understand the rules of the game out here anymore. We don’t understand the regulatory environment and the way that’s interpreted. We don’t understand the situation where on a Monday the Government can give a policy directive as to what it wants to occur in terms of investment in lines companies such as Vector—something that sent the stock price of Vector up 10 percent—and on the Wednesday it could be sent down 10 percent because the Commerce Commission then put it under price control.” They do not understand why the Prime Minister of New Zealand thinks it is really good to wipe $3 billion worth of market capitalisation off the value of that company. They do not understand why the political process is one where the Prime Minister of New Zealand thinks the way to win votes is to get inside this kind of information. 
This legislation goes some way to improving the private sector and its involvement in this country. It will give more surety and confidence to the financial markets. But I predict that the confidence of the financial markets will never return under a Labour Government led by Helen Clark. It will never return under a woman who herself was an insider trader—in my opinion—when it came to the pledge card and the inappropriate use of $760000 worth of taxpayers’ money. It will never return under the standards set by a Labour Government. The only way confidence will come back into the financial markets is not with the changes National is supporting here today but when a decent Government is elected by the people of New Zealand. That I can assure you Mr Speaker will be happening sooner as opposed to later.