Copeland Gordon: Reserve Bank of New Zealand Amendment Bill — Second Reading 
Copeland Gordon: Reserve Bank of New Zealand Amendment Bill — Second Reading 
[Volume:634;Page:5968] 
GORDON COPELAND (United Future) 
: 
 The Reserve Bank of New Zealand Amendment Bill continues actions taken over recent times by the Reserve Bank of New Zealand to increase the quality of its prudential oversight over the New Zealand banking system. It is very very important that the bill does so. Many of these actions—and this bill is certainly in this category—actually anticipate bank failure or a bank coming under stress. These are the kinds of bills we pass while hoping desperately that the provisions of the bill will never actually have to be brought into practice. 
I for one clearly remember the mad banking days of the late 1980s when we saw the State Bank of Victoria going under owing billions and the State Bank of South Australia going under owing $3 billion. As most people remember the Government of the day had to come to the rescue of the Bank of New Zealand which was also owing a very very significant amount of money and going under. This event led directly to the sale of the Bank of New Zealand; it went from the ownership and control of New Zealanders to what is now the ownership and control mainly of people living in Australia. 
Because 85 percent of our banking industry here is owned by Australian-owned companies it is extremely important that the Reserve Bank does all it can to protect New Zealand depositors in those companies. Recently we had before this House the Westpac New Zealand Bill which was also part of this same task of increasing prudential supervision. The legislation now sees the Westpac bank incorporated in New Zealand as a company whereas previously it operated merely as a branch of an Australian operation. 
John Key raised some interesting issues about the interrelationship of the New Zealand and Australian economies. When it comes to the dovetailing of banking operations I think it is extremely important to bring to the attention of the House that in the view of United Future we should also be looking at the possibility of a currency union. Clayton Cosgrove and Pansy Wong were both members of the Finance and Expenditure Committee delegation that went across to Canberra in 2004. In one of those meetings with our Australian counterparts we talked about the whole subject of a currency union. I stress that it would be a currency union of the type that would see New Zealand retaining a New Zealand dollar and Australia retaining an Australian dollar but would in some way merge or peg the rates between the two so that we became part of one complete integrated currency system. I say to the House today that I think it is extremely important that the Government continues to look at that option. 
We have been working for a long long time now—we had the 20th anniversary of CER during the last Parliament—to try to ensure that we have one single market between Australia and New Zealand. But in fact there is one great defect in that and that is that the exchange rate between Australia and New Zealand fluctuates up and down on a daily—indeed an hourly—basis. Whereas we could potentially with a currency union create a domestic market of 24 million people for New Zealand companies we are still in practice restricted to a domestic market of just 4 million people. That is a tremendous problem for the future growth and prosperity of this nation. 
We want to get into exports right across the board in manufacturing information technology and other areas—and I must say that the 4 million Kiwis who live here are well-educated and entrepreneurial by world standards—but we have a huge problem in that our domestic market is so small. The second problem is that among official OECD nations New Zealand is geographically the most distant nation in the world from its major markets. So we have a double whammy. We have a very very small domestic market of just 4 million people and we are a long way from our markets. 
The ability therefore for us to grow our companies outside this country and into strong export markets in manufacturing and other areas is extremely difficult. When we look at those figures we see that it is more difficult for New Zealand to do this than it is for any other country on the face of the Earth. Therefore to have the potential of having a domestic market of effectively 24 million people without having the ups and downs of the exchange rate would be most desirable. I talked to the Canterbury Manufacturers Association for example and heard that when the New Zealand dollar is weak against the Aussie dollar manufacturers make money big-time. On the other hand when the New Zealand dollar is strong against the Aussie dollar manufacturers are on the verge of bankruptcy. No one can actually run a business and no one can plan to grow a business on that basis. 
I want New Zealand First in particular to look very very closely at that point because that party is in favour of a New Zealand export growth market. I am sure Ron Mark will confirm that it is at the heart of New Zealand First’s policy to grow our export markets internationally. 
Ron Mark 
: Yes that’s right. 
GORDON COPELAND 
: Yes New Zealand First is a persistent advocate of that policy. But that position cannot be lined up with that of somehow being nervous about New Zealand losing its sovereignty if we go into some sort of monetary union with Australia. It does not work that way. New Zealand will retain its sovereignty; it will still be a separate country. There will still be an All Blacks team there will still be a Silver Ferns team we will still have the Kiwi rugby league team and so on and so forth. Those things are not at issue; what is at issue is both our ability to expand and grow our economy through export-led growth and the way in which the variable exchange rate between our two nations affects that in a negative way. 
So I want to advocate that at some point in time—and we would probably need to get some international experts here to look at it—we should continue to explore a currency union between our two nations based on a New Zealand dollar for New Zealanders and an Australian dollar for Australians but with the removal of those risks and variabilities in the connections. Then I think we would have not only an integrated banking system but a truly integrated domestic and export economy. Thank you.