Cunliffe David: Westpac New Zealand Bill — Second Reading 
Cunliffe David: Westpac New Zealand Bill — Second Reading 
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Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 Labour supports the Westpac New Zealand Bill being referred to a select committee and we do so for several reasons. 
Amy Adams 
: No—it is back from the select committee. 
Hon DAVID CUNLIFFE 
: Thank you. We support this bill at its second reading and we will support it right the way through for several reasons. The first is that it reflects the outgrowth of a strong domestic asset-holding position from Westpac bank which is in line with the objectives that we have for a long time taken to ensure that the domestic banking system is robust. 
We are fortunate in New Zealand that we have a number of strong banking institutions and Westpac is one of them. As an outgrowth of previous regulations the domestic size of its book has grown to the point where it requires legislation to allow it to continue outside the previous limit. That is one of the primary objectives of this bill. It is important to ensure that Westpac New Zealand Ltd has a strong and stable New Zealand operation while enjoying the benefits of linking to its trans-Tasman parent which has improved its access to capital. We note the success of the Reserve Bank’s local incorporation policy. That is one element in securing the stability of the New Zealand banking sector and it is critical that we retain sovereign oversight of our banking regulation. 
There have been a number of previous debates in this House about the fact that we need to retain a full-service Reserve Bank. There were times in days gone by when it was suggested in this House that we might in fact end up ceding to the Australia banking authorities effective control over the New Zealand banking system. There were calls for that from the major banks given their parentage. I am very glad that the previous Labour Government resisted those calls and ensured that we had an effective full-service Reserve Bank with prudential supervision. 
The bill is in this House today in part because of the effectiveness of those rules. It gives the public of New Zealand through this House the opportunity to ensure that the law is still working in the interests of all New Zealanders—that is that there is sufficient oversight over the operations of New Zealand banks including Westpac to ensure that they are strong stable and well managed. I am pleased to report that based on all the evidence we have seen in terms of the hearings on this bill there is no doubt that Westpac meets those criteria as do others. 
There are a number of related concerns that we would be remiss not to mention in respect of the banking system and some of the major banks in particular. The first is that we have been through a shocking time with the global financial crisis. Although it is true that we have enjoyed some of the world’s strongest banks in our region and it is also true that they have been plain vanilla banking rather than indulging in a whole lot of derivatives which cost so much to the American market and were in large part behind the collapse of September 2008 none the less there is a linkage between the influence of the financial system and some of the economic problems we face today. We cannot blame a bank for making money but it is the responsibility of policy makers to see how that is done. 
The fact is that in New Zealand we have had a huge housing bubble. We have net international debt that is about 85 percent of our GDP. That is just about as high as some of the so-called PIGS—Portugal Ireland Greece and Spain. It is just about as high in terms of total international debt. The difference is—and we did not hear it from Mr English’s comments in question time today—that it is not public debt. It is about 90 percent private debt and of that about $6 in every $10 comes from house mortgages which were extremely profitable for the banks and extremely bad for the New Zealand economy. 
Simon Bridges 
: Where was Michael Cullen when this was happening? 
Hon DAVID CUNLIFFE 
: It is now that Labour is saying much more needs to be done I tell Mr Bridges to ensure that we never have a repeat of that bubble. I tell Mr Bridges there is no point in complaining about things that occurred before he was at school. He should think about the future when he is old enough to have kids and he can worry about their futures. 
We care about the future; we are not looking at the past. If the Government had confidence in its own abilities it would not be complaining about former Governments. It would have the strength and the courage to look forward. That is what the Labour Opposition is doing. It is looking forward to make sure that we do not have another housing bubble and that we have appropriate incentives in our banking system to ensure that we meet several objectives. 
The first objective is good prudential oversight of the banking system. It was under the former Labour Government—I thank its current members—that that was extended. The bill follows from an aspect of that prudential regulation which is ensuring a sufficient book in the New Zealand domicile from the major trans-Tasman banks. Westpac is in the fortunate position if you like that its book has grown so far that we have to have this legislation. That is a subset of that prudential supervision. 
Secondly we have to have regard for the macroeconomic place of the banking and finance system in New Zealand. We know they have contributed to a housing bubble. We know we have to go through deleveraging. We also know that the drain from the New Zealand economy of profits to the foreign-owned banking system means we can almost never run a current account surplus. Even if we export a lot more milk and wool than we import computers and petrol we still cannot make a current account surplus because we have the drain of several billion dollars a year of profits being repatriated to the foreign-owned financial system. 
People often ask what the difference is between the New Zealand and Australian economies. The biggest difference is not minerals. The biggest difference is that Australia is capital rich and we are capital poor. The reasons we are capital poor are several. No. 1 we do not save enough and No. 2 we do not own enough of our own financial system. So it is appropriate to note in passing this bill that New Zealand will need to take steady and determined steps over time working with the market in a responsible way to ensure that a higher proportion of our financial system is New Zealand - owned. New Zealanders need to own more of their own future. That is another important objective of the way we interface with the banking sector. 
I will raise one final issue in relation to the global financial crisis which has made a lot of things obvious that were not so obvious before. One of those things is the culture of excess that sometimes exists in the finance sector. We put on note in a very polite way that we do not want to see that culture of excess return to the New Zealand finance sector. We will not name any particular companies but we want to ensure that everybody in New Zealand is paying their fair share to get New Zealand through the rough economic waters we are going through so that nobody misses out nobody dodges paying their fair share the pain is spread evenly and the opportunities are spread evenly. We do not want to see millionaire bankers drinking Veuve Clicquot from dawn to dusk while a lot of New Zealanders cannot afford milk. That is not the kind of country Kiwis believe in. It is not the kind of country where we get a fair go for all where we take care of each other and where everybody gets a chance. We want a country where everybody gets a chance and where everybody pays their fair share and that applies to the finance sector as well. 
In summing up Labour supports the bill. We will support the bill right through to the third reading. I think it has the unanimous support of the House or very close to it. We support the bill because it reflects the appropriate prudential regulation of the New Zealand banking system. It reflects the fact that the previous Labour Government fought to maintain a full-service Reserve Bank. That gives New Zealand the ability to oversee its domestic financial system. The reason we are here legislating for Westpac today which we are happy to do is because that reflects the fact that its domestic book has grown to the point where it has exceeded some of those guidelines and it needs explicit legislative endorsement. There is no problem in principle with that. 
But we will retain vigilance. We will retain vigilance to ensure that prudential regulation is appropriate and tight. We will ensure that the macroeconomic settings are appropriate and that we avoid another bank-driven housing bubble. We will maintain vigilance to avoid a culture of excess returning to the New Zealand financial system rather we will move progressively towards owning more of our own future. Thank you. 
Debate interrupted.