Fitzsimons Jeanette: Reserve Bank of New Zealand Amendment Bill — First Reading 
Fitzsimons Jeanette: Reserve Bank of New Zealand Amendment Bill — First Reading 
[Volume:632;Page:4232] 
JEANETTE FITZSIMONS (Co-Leader—Green) 
: 
 The real issues around our banking system go much deeper and are much more significant than the ones covered in this bill but perhaps it is a good idea to have a look at the state our banking system is in now. Ninety-eight percent of New Zealand’s banking assets are owned overseas. That means that the profits which are very substantial occur to investors in other countries. Brian Gaynor has described banking as by far the most profitable business in New Zealand. The net earnings of those banks which go straight out of the country from the pockets of all New Zealand borrowers and depositors were $2.63 billion in the last year. It is a major reason for our current account deficit. In fact on top of that $2.63 billion that leaves the country right away there is the additional borrowing of Australian banks overseas. When we add the two together the sum is in excess of $4 billion a year which is almost 30 percent of our current account deficit. So that is a very considerable contribution to what is perceived to be causing the instability of the New Zealand economy which is that extremely high current account deficit. 
It is not only money that goes overseas but jobs are also following particularly with more outsourcing and more centralising of functions in Australia at parent companies. Functions like credit assessment internal audit accounting data processing information technology management and risk management are being outsourced. Jobs in the New Zealand banking system have decreased while profits and turnovers have increased. 
It is hard to see how a country has much economic sovereignty at all if it has zero control over its own financial sector. I guess the question is whether this Reserve Bank of New Zealand Amendment Bill will make the situation better or worse. It is quite hard to tell. The history of New Zealand’s merging with Australian regulators has not always been to New Zealand’s advantage. We have often been treated as an eighth state of Australia rather than as an independent sovereign State. I think particularly of food safety regulation where New Zealanders really have no say on what is in our food; it is all decided by a trans-Tasman agency. I think of problems we have had in the past in trying to set energy efficiency standards. If Australia did not set the same standards then under the Trans-Tasman Mutual Recognition Arrangement products could not be restricted in New Zealand either. So we have to be careful in terms of joint regulation. 
I appreciate that the bill does not go as far as the Australians initially proposed with a single regulatory body and that is good. Instead the bill requires the Reserve Bank where reasonably practicable to cooperate with the prescribed Australian financial authorities and avoid action that is likely to have a detrimental effect on financial stability in Australia just as Australian authorities are required to avoid actions that will have a detrimental effect on our financial stability and that includes their outsourcing arrangements. 
It is quite hard to tell the impact on New Zealand of tying the hands of the Reserve Bank in its prudential oversight of trading banks. Is the New Zealand economy large enough for an action our bank might want to take to be deemed as having a detrimental effect on financial stability in Australia? I do not think we know that. I do not claim to know that. But if for example the bank wanted to use one of the very few tools available to us to do something about New Zealanders’ extraordinary capacity to borrow and raise the total capital requirements would it be prevented from doing that? If it wanted to get rid of the bias towards the residential housing market where only 50 percent of housing borrowing counts towards the 8 percent capital requirement could it be stopped from doing that? I do not know the answer to that either and I think we need to hear the submissions and the debate in the select committee before the Greens will have a view on how we will vote in the final stages of this bill. 
On the positive side though there are some protections here. The moves by the Reserve Bank to set in place some systems to control the risks posed by outsourcing are necessary. In Australia banks are outsourcing around the globe. Call centre work is going to Mumbai for example where there have been terrorist attacks recently. Could the wiping out of call centres have a major destabilising effect on New Zealand’s financial situation? The Reserve Bank here is responsible for securing financial stability in New Zealand; it is hard to do that if most of the functions undertaken by the banking sector are happening overseas. So we support moves by the Reserve Bank to control the risks of outsourcing and we are pleased that outsourcing is included in this bill. 
New Zealand has lost much of its economic sovereignty. We have only two New Zealand - owned banks—Kiwibank and the Taranaki savings bank. Between them they have less than 8 percent of banking assets. We must take steps to limit the impact of decisions made by other countries on our financial stability but we have concerns about where that might end. We know that some New Zealand businesses are looking for a single banking system between New Zealand and Australia. We were warned very clearly with statements on this bill by Dr Cullen and Mr Costello whose words are still ringing in our ears that these measures will remove barriers on the way to a single economic market. That is not where the Greens want to go. It is actually not about our banknotes as Gordon Copeland has suggested; it is about economic sovereignty itself. It is about self-determination. Cooperation with Australia? Yes absolutely. A takeover? No!