Reserve Bank of New Zealand Amendment Bill Racing Amendment Bill — Third Readings 
Reserve Bank of New Zealand Amendment Bill Racing Amendment Bill — Third Readings 
[Volume:634;Page:6102] 
Reserve Bank of New Zealand Amendment Bill 
Racing Amendment Bill 
Third Readings 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 I move  
That the Reserve Bank of New Zealand Amendment Bill and the Racing Amendment Bill be now read a third time 
. The Reserve Bank of New Zealand Amendment Bill is an important contribution to the trans-Tasman single economic market. It is a pioneering step in cross-border banking supervision cooperation. The trans-Tasman market of course is not the only cross-border banking market in the world. We are showing the way in which regulators can work together on shared issues and be alert to each other’s interests in times of stress. The fact is that most—nearly all—of our retail banks are owned from Australia and that therefore cooperation is crucial to the financial health of the New Zealand economy. 
The Reserve Bank and the Australian Prudential Regulation Authority the Australian regulator have already made a number of commitments to cooperate on prudential matters. The proposed changes in the bill and in the reciprocal Australian legislation currently before the Australian Senate will strengthen that commitment. They do so by creating upon each regulator a duty to consider formally the interests of the other regulator. There are specific duties to consult and to avoid interference with outsourcing arrangements when actions taken in one jurisdiction may impact adversely on the other. The bill draws a realistic balance between the desirability of trans-Tasman cooperation and the independence and discretion of each prudential regulator within international boundaries. That will help I think to enhance the maintenance of financial stability in both countries. 
There is also a technical amendment to the Racing Act to ensure that the Racing Board has the necessary flexibility in setting its policy to round dividends. That is in response to the withdrawal of the 5c piece. Members might wish to know or have probably already noticed that the old coins have just about disappeared from circulation but that only 30 percent of the silver coins have yet been returned to the Reserve Bank. This suggests that the 5c pieces in particular have largely disappeared because people have found them a nuisance to handle in relation to their actual value. But I do say that if people have lots of the old coins in their possession I am sure they can use those for the Labour Party “great whip-round” because they can still be traded in to the Reserve Bank in terms of being actual money. 
Hon Member 
: Ha ha! 
Hon Dr MICHAEL CULLEN 
: I would not want to give that member a whip-round. Again I thank the Finance and Expenditure Committee those who made submissions and officials for their work on the legislation. I also thank the House for its rapid consideration of the legislation in the Committee stage yesterday. It is simple technical legislation and it has widespread support particularly from the major Opposition party. I would not be very happy about passing any significant amendments to the Reserve Bank of New Zealand Act without at least bipartisan support from the two main parties. 
LINDSAY TISCH (National—Piako) 
: 
 As the Minister has just said there is support from parties for this legislation and National has been a supporter right along for the legislation and for splitting it into two bills. I want to re-emphasise some points we believe are important: that is that the Reserve Bank Act amendments in the Reserve Bank of New Zealand Amendment Bill implement the Government’s response to the recommendations of the Joint Trans-Tasman Council on Banking Supervision. The bill would oblige the bank where reasonably practicable to cooperate with Australian authorities by supporting them and by avoiding actions likely to have a detrimental effect on the stability of the financial system in Australia. The plan is also to have matching legislative changes in Australia in cooperation with the Reserve Bank. 
Closer integration of banking supervision with Australia is appropriate given the degree of integration that already exists between New Zealand’s and Australia’s banking systems. Most banks here are owned by Australian parents and given the desire to move towards a single economic market the legislation strengthens the arrangements for coordinating with Australia in the event of a general crisis or a specific bank failure involving a cross-border bank. It will be an improvement on what we have at the moment and it will be better than the alternative the Government was looking at which was having an Australian banking regulator the Australian Prudential Regulation Authority being the sole regulator of Australian banks operating in New Zealand. 
The second bill the Racing Amendment Bill amends the Racing Act. Currently the Racing Act requires dividends on winning bets to be rounded down to the nearest 5c. However the 5c coin will be phased out of circulation by 1 November this year and that creates a problem. When I spoke in the Committee stage I gave examples of what that actually means in real terms to the punters and what the Racing Board will now be able to do. The amendments to the Act will allow the Racing Board to decide as part of the betting rules how dividends will be rounded. These betting rules are currently subject to scrutiny by the Regulations Review Committee and the bill does not change this procedure. 
The amendments to the Racing Act are obvious and necessary. One point to make though may be that the Act currently stipulates that dividends are to be rounded down not up or down. Supermarkets for example round up or round down to whatever the closest denomination is. In this case dividends are to be rounded down. If dividends are now to be payable only in multiples of 10c we hope for the punters’ sake that the Racing Board will not continue the practice of only rounding down. However rounding down is a possible way to go. I gave examples in the Committee yesterday of punters not being disadvantaged by this approach. 
It is important that we have commonality with Australia. We need flexibility in the marketplace to meet the market especially in racing where it is very easy to bet on horses overseas—not just in Australia but elsewhere. That commonality with Australia will bring the two countries into line and give us the flexibility we require. So National is very happy to support the two bills into which the original Reserve Bank of New Zealand Amendment Bill is now split. 
Hon BRIAN DONNELLY (NZ First) 
: 
 New Zealand First’s member on the Finance and Expenditure Committee Doug Woolerton has already given some very erudite explanations of our position vis-à-vis this legislation during the earlier readings and also during the Committee stage. There is really no need for me to traverse the points he made so lucidly. I just need in fact to reiterate New Zealand First’s support for the splitting of the original bill and for each of the bills created by that split. 
KEITH LOCKE (Green) 
: 
 The Green Party supports this legislation. In terms of banking supervision we support cooperation between Australia and New Zealand. Clearly the fates of the two countries are tied particularly as the four main trading banks in New Zealand are Australian-owned. The ANZ Westpac the BNZ and the ASB are all Australian-owned. They have a total market value of $36.4 billion which is equal in value to the assets of the 12 top listed companies in New Zealand and in 2005 they had net earnings of $2.63 billion. The impact on the New Zealand economy is huge so it is important to make sure that the banking sector is healthy. 
In previous legislation and arrangements we made sure there was relative independence of the New Zealand subsidies of those four banks. This was to ensure that if something happened in Australia and one of the banks fell over because of Australian factors ordinary New Zealand depositors would not suffer. Although we are a long way from any Australian bank falling over this morning’s  
Dominion Post  
has an interesting headline that reads: “Drought debts loom over banks”. The article explains that the long drought in Australia is having a huge impact on Australia’s rural economy and that many farmers will not be able to repay their loans. The drought is having an effect on the whole rural services sector and that also impacts on the banks. The situation could easily get worse particularly with global warming. One of the predictions in relation to global warming is that the east coast of Australia will become even drier and perhaps put into doubt the viability of more and more farms in Australia. Economies go through difficult times in some sectors and farming is one of them. Of course at the moment the situation is counterbalanced by the minerals boom in Australia which I suppose is helping the banks. But we do not want our economy to be hostage to the Australian economy in terms of its up and downs and even of the failure of one or more of its banks in the future. 
The measures we are taking here today to introduce more cooperation in the banking sector are good although I think we also have to look at the other end of things and try to reduce our dependence on Australia in the area of banking. It is good to see Kiwibank moving ahead somewhat. New Zealand has only two independent banks: the Taranaki savings bank and Kiwibank. It is important we assist them because one of the problems with the banking sector being largely Australian-owned is that it contributes very badly to our current account deficit. When net earnings from the Australian banks amount to $2.63 billion that translates into a big outflow in dividends each year and contributes significantly to our current account deficit. 
There is another side to the internationalisation of money flows and we are feeling it particularly in the housing sector. Interest rates in the finance sector and the banking sector differ so much internationally that we have the phenomenon of Japanese housewives as they are often described investing heavily in New Zealand bonds which are higher earning than the bonds they can get in Japan. So there has been a huge inflow into the banking sector often via the money controlled by the Australian banks. That money is then invested heavily in housing and that has put up the price of houses substantially particularly in the absence of any capital gains tax in New Zealand—on investment homes not personal homes. The lack of a capital gains tax has increased that phenomenon often via the Australian banks and I think this is to our detriment. It makes it much more difficult for young New Zealanders in particular to buy a home or to get within reach of buying a home. This situation has also put many families who do buy a home in a huge mortgage-debt situation and the situation could become even worse for them if there is as a lot of real estate people predict a crash in the housing market as has occurred in some other Western housing sectors over the last year or so. Such a crash in New Zealand has been delayed but we could be in for a bit of thump in that area and that could affect the banking sector quite significantly as well. 
For all of those reasons I think it is important to have cooperation between Australia and New Zealand in the banking sector and to make the best job of it we can. With those few comments the Greens will be supporting this legislation. 
HONE HARAWIRA (Maori Party—Te Tai Tokerau) 
: 
 Kia ora Mr Deputy Speaker. Kia ora tatou katoa te Whare. The next time we see a 5c coin we might want to grab it because it will probably be the last time we handle Aotearoa’s unique and threatened tuatara. We had better be quick because we have only 7 more days to see the coin that features our taonga species before it is dumped by the Reserve Bank. Although I am sure that the Reserve Bank has perfectly good reasons for getting rid of the old silver coins it is sad that our oldest and most unevolved species—outside this House of course—will no longer be seen on the face of our currency. 
The survival of this unique living fossil prompted NgatiKoata to join with NgatiKuri Ngati Wai Te Rarawa NgatiPorou and Ngati Kahungunu to challenge the Crown’s failure to protect the exercise of tino rangatiratanga and kaitiakitanga over indigenous flora and fauna. This is a far-reaching claim lodged with the Waitangi Tribunal and known as Wai 262 which asserts rights to indigenous flora fauna Maori traditional knowledge intellectual and cultural property rights and authority in environmental resource and conservation management. 
This legislation refers to addressing a problem facing the racing industry with the dumping of the 5c coin but in truth nothing is ever so simple and we would do well to consider the big issues at stake here. The Reserve Bank of New Zealand Amendment Bill is supposed to promote better regulation of the trans-Tasman financial sector as part of a single economic market agenda. The Maori Party again questions the view that Maori and New Zealand’s economic future should be forever tied to Aussie apron strings. These last few weeks the Maori Party has been raising issues about the outsourcing of Air New Zealand’s finance work to Fiji Telecom’s shifting of its call centre work to the Philippines and other developments that show how control is fast moving offshore. We cannot help but express concerns regarding our own sovereignty and our capacity to participate fully in the developing economy. 
Perhaps now is also the right time for Maori to be considering the nature of profit and risk that may come from doing business abroad. The growth of land-based businesses across international boundaries may indeed enhance an iwi’s ability to serve its beneficiaries and the Maori Party is interested to hear what iwi think about the implications of the single economic market. I know that regulating bank activity in Aotearoa and Australia can reduce bank operating costs and help financial stability and I have no doubt that those improvements will help create better economic conditions for Maori commercial entities and better prospects for their beneficiaries. 
Maori have made great strides in developing economic opportunities and economic independence and we see how that growth is clearly noted year after year in the positive results of the Global Entrepreneurship Monitor reports which provide a detailed view of a major source of economic growth in the world across 35 countries. The most recent study released earlier this year showed that one in three Maori between 35 and 45 is an entrepreneur that Maori have the highest informal investment rate in the OECD that Maori have doubled the rate of informal investment of other Global Entrepreneurship Monitor nations and that Maori have higher growth expectations—12.3 percent of Maori entrepreneurs believe they will create 20 jobs in 5 years compared with only 8 percent of the general population. 
That entrepreneurial talent also has a positive crossover to exercising judgment identifying opportunities and handling market swings. Indeed Treasury says that entrepreneurial success encompasses risk taking innovation resource reallocation and coordination. These factors provide fertile ground for exploring economic options and in the particular context of this legislation the benefits that may come from cooperation between our Reserve Bank and Australian financial authorities. Of course the big question is whether the obligations that will be expected of us will be matched by those in Australia. All this remains to be seen but we are willing to support this legislation at third reading in order to enhance economic vision and opportunity for Maori and all other New Zealanders. 
In speaking of that vision I want to return again to our humble currency and to acknowledge the recent accolades from the Royal New Zealand Foundation of the Blind for the Reserve Bank’s efforts to ensure the new coins are cool for blind people. I see that a fortnight ago the Reserve Bank of New Zealand got the “extra touch” award from the Association of Blind Citizens of New Zealand in recognition of its commitment to ensuring the new coins would be easily identifiable by blind and vision-impaired people. Of course our view is that the unique form of the tuatara would have made it just as easy for blind people to tell the difference but perhaps that is something we can leave for the Wai 262 claimants to consider. 
The Maori Party will support these bills at third reading as part of its commitment to supporting financial stability for all indigenous peoples in Aotearoa Australia and the rest of the homeland we call the Pacific—as well as supporting the Labour Government. Kia ora tatou. 
Bills read a third time.