Goldsmith Paul: Reserve Bank of New Zealand (Amending Primary Function of Bank) Amendment Bill (No 2) — First ReadingText is subject to correctionGoldsmith Paul: Reserve Bank of New Zealand (Amending Primary Function of Bank) Amendment Bill (No 2) — First Reading[Sitting date: 13 November 2013. Volume:694;Page:63. Text is subject to correction.]PAUL GOLDSMITH (National): It is always a pleasure to follow the member who used to be the member for Tauranga Mr Peters. We do need to remember that he came into Parliament in the 1970s. I am not saying that there is anything wrong with that. Parliament should have experienced people. He is the same age as my father. I am very fond of my father and I listen to him and I receive his wisdom and that is quite right. But it is interesting to note that Bata Bullets are making a comeback at the moment—the Bata Bullets are making a comeback. Mr Peters is from the same era but of course he never went away. He has been here the whole time so he cannot make a comeback. But it is interesting that he is still promoting policies from that era from the 1970s when monetary policy was run by the Minister of Finance his good friend Mr Muldoon. They would sit around in their crimplene suits they would work on their typewriters they would drink their gin and tonics at 3 o’clock in the afternoon and they would figure out what to do with monetary policies. It was all essentially about—Rt Hon Winston Peters: I raise a point of order Mr Speaker. It would be very obvious to you what was against parliamentary rules and Speakers’ rulings. I shall tell you what it is.Mr DEPUTY SPEAKER: Order! I have got the member’s point of order. [Interruption] Order! The member was casting a slur upon members with implications of imbibing. I would ask the member to withdraw that comment and continue.PAUL GOLDSMITH: I withdraw that comment.In essence it was all about a little bit more inflation and so when the economy was struggling the Minister of Finance would turn the monetary taps on and the result would be more inflation down the line. The consequences of all that policy that Mr Peters is now supposing we should return to was that the savings of the hard-working people of this country were destroyed by inflation. The savings of a generation were destroyed. They would work hard all their lives they put their money in the Post Office Savings Bank at 3 percent interest locked away for 10 years and then they found that that money was worth nothing compared with what it had been because of inflation because of these sorts of policies. This political control of monetary policy fuelled the industrial relations nightmares that we had in the 1970s. It fuelled the speculation in asset prices around housing and eventually it led to high interest rates. We reaped the whirlwind of those polices in the 1980s when people who were trying to buy houses had to pay interest rates of up to 22 percent in Auckland. Just imagine how you could have survived. [Interruption] It was under the Labour Party which had to deal with the pent-up inflation that had been built up over generations built up over the decades of high inflation policies that now Mr Peters espouses.The strategy of the 1970s which we are dealing with here again today was to steadily lower the value of the dollar. We started off at the start of the decade where US$1 bought about NZ$1.25 so we had a stronger currency than the US dollar and over the decade we were lower and lower and lower. I have never quite understood the logic of what Mr Peters is saying that somehow the road to prosperity for New Zealand is to have a lower dollar so we can get rich by making our currency weaker. That is a very strange policy. What you need is an economy that can sustain a strong currency. Itis true that overall people argue that the New Zealand dollar may be a little bit overvalued and it swings through circumstances. But you do not go around getting prosperity by lowering your currency in the long term. Did exporters do so well back then when we supposedly had this high-inflation policy and a lower dollar? Well all the exporters relied on supplementary minimum prices for their sheep and subsidies for their exports. Fletcher Building which I wrote a history of in 15 years never paid any income tax because of the export subsidies that it enjoyed. So how was that good?Now we have got a strong export economy. Let us look back over the past 5 years or at least let us just take a broader issue. The idea that has been supposed by Mr Peters is that something is drastically wrong with the New Zealand economy. Well let us just look over what we have achieved in the past 5 years. Since 2008 when this Government was brought in it was guided by two goals. One was to give New Zealanders a sense of security in difficult times and the second was to set the economy on a growth path. When we looked around we would tackle the issues that were holding New Zealand back before the global financial crisis began. So under this Prime Minister’s strong and decisive leadership we have seen good progress and we are heading in the right direction finally. The economy grew by 2.5 percent in the past year and the forecasts are for growth around that level and perhaps a bit higher over the next couple of years. That sounds modest by historical standards but it would leave us amongst the world’s strongest developed economies.Businesses are more confident than they have been for a while and that is important for rebuilding investment intentions. Last week we saw unemployment coming down further against a background of increasing participation in the workforce which is pleasing. However unemployment is still higher than we would like. We believe that families and households have shown considerable resilience over recent years and the indications are that confidence is picking up. They are enjoying low interest rates—still the lowest in 50 years—relatively low costs of living and moderate wage increases and this is starting to show through in growing consumption. The Government is getting its own books in order. We are on track for surplus in 2014-15 and we will have choices once we get to surplus about repaying debts and other priorities. New Zealanders are getting better public services with improving results in difficult areas like educational achievement and in welfare dependency where this Government in the past 5 years has done more than anything that Mr Peters has achieved in 30 years in Parliament for vulnerable children and law and order. When we look at the ledger of what has been achieved in welfare reform in the past 5 years it is magnificent.We are now in a position where over the next 2 or 3 years we have the opportunity to test how much more we can improve on those indicators of a healthy community. How many more young people we can get across the line for National Certificate of Educational Achievement level 2 how many more vulnerable children we can put into early childhood education how many more vulnerable families we can keep out of welfare and get into work and—Rt Hon Winston Peters: I raise a point of order Mr Speaker. This is the first reading of a very important bill and if you examine that speech particularly this part now this member has never addressed one part of the bill at all.Mr DEPUTY SPEAKER: Order! That is a debating point. It is not a point of order.PAUL GOLDSMITH: I cannot expect a person of his seniority to understand the complex argument that I am building here. The complex argument I am building is that ultimately there is no foundation for this Reserve Bank of New Zealand (Amending Primary Function of Bank) Amendment Bill (No 2) which is being put forward. The fundamental idea of this bill is that there is a major problem to be fixed. What I am trying to outline to the member and I appreciate that I have to be a bit careful and slowin my articulation is that this Government is doing an exceptionally good job in the economy in difficult times. If you have got that situation why would you then leap off into this wild area of speculation and return to the policies of the 1970s?Let us just see what this bill proposes. This bill proposes that—[Interruption] It chokes me up just to think of it. The bill proposes that the Reserve Bank of New Zealand Act 1989 should be amended to ensure that the primary function of the Reserve Bank is broadened to include other critical macroeconomic factors such as the rate of growth export growth the value of the dollar and employment as well as price stability. I can tell you what that means. What that means in code is let us just have a little bit more inflation and somehow that is going to fix all our problems. Somehow if we just allow a little bit more inflation everything will be solved. As we saw in the 1970s that does not work.Can I just outline some of the risks that were highlighted to the New Zealand economy today by the Reserve Bank in theFinancial Stability Report. Although this Government has made good progress in difficult times it would not be a good idea at this moment when as the Reserve Bank has articulated today we have an imbalance in the housing market which is a risk to financial stability. We have high levels of external debt particularly in the dairying sector. There is external indebtedness. There are risks of a downside in the global economy. We have only to look at whether or not the Chinese economy will continue to be as robust and as strong it has been. There is further financial stress in Europe. There is a sharp increase in long-term interest rates and a transition to a higher tighter global monetary policy. There is also the risk of political intransigence in the US surrounding the public debt ceiling negotiations. So would this be in any logical outline a good time to change course on what we are doing at the moment and leap off into some retro Bata Bullets - style policies of the 1970s as has been proposed by Winston Peters? I do not think so.I think that is why drawing to a conclusion where we have got to in this speech the National Party does not support this legislation and does not support what Mr Peters is trying to do. We do encourage him in the strongest possible terms to read his history and to look back over the experience of New Zealand in the past and realise that it is one thing to live it and it is another thing to understand it to realise what went on in New Zealand and to rethink this bill and in fact to withdraw it. We will not be supporting it. Thank you.