Russell DeborahDr DEBORAH RUSSELL (Labour—New Lynn): The Minister of Finance suggested that this was the second or said it was the second of a trilogy of pieces of legislation reforming the Reserve Bank. In that case if it's the second it's either—perhaps it's The Two Towers could be The Empire Strikes Back the more modern term might be Catching Fire the second book and movie of The Hunger Games trilogy. I say that for a reason to cast back to a book—The Two Towers—that was published in the 1950s; The Empire Strikes Back of course came out in the early 1980s and Catching Fire in the 2010s. Things move along things change new things come along. In fact that is what has happened with the Reserve Bank.I want this House to cast its mind back—those of us who can—to the 1970s and early 1980s and the spectre of rampant inflation; absolutely rampant inflation. It was the bogeyman of the age. Not only did we have rampant inflation in our economy here in New Zealand and elsewhere in the world but we had here in New Zealand in particular in the early 1980s a Prime Minister who was also the Minister of Finance at the time had very direct control of the economy and some extraordinary things like a wage and price freeze imposed overnight and so on. It was a very different time and there was a real need for reform. A real need for the sort of the reform that would give our institutions much more independence. That is the background that the Reserve Bank Act that we have had up until now was born out of. It did actually come into being much earlier but there was substantial reform in the late 1980s.In fact in a very thoughtful—though I think mistaken—speech from Mr Woodhouse he made substantive reference to the debate of the time about the need for independence in the Reserve Bank. But that Reserve Bank Act that was passed in the late 1980s has been in place for I suppose close on 40 years now with very little amendment since then with some changes but not many. The world has moved on. The world has changed. If in the 1980s this House was legislating in the shadow of rampant inflation and of an interfering Prime Minister and Minister of Finance in this decade we are legislating in the shadow of the global financial crisis—a crisis where banks ran amok; where the world teetered on a precipice and was only saved by the most massive Government intervention into economies. We are operating in a different context in a context where we need to have a different relationship with our Reserve Bank and that is the world we are operating in now. The pieces of legislation that—this trilogy of pieces of legislation is oriented at operating in this world; the world where we need that greater control.So this piece of legislation does in fact modernise the relationship. It does change it. Now Mr Woodhouse was very very concerned that the independence of the Reserve Bank was going to be compromised. It is for this reason he says that the Opposition will not be joining in support of this bill. He is worried about the independence of the Reserve Bank. He feels that we are going to compromise it. However I suggest that this is not a compromise; in fact it is a changing of the relationship in a way that is appropriate for the times. In fact there is still plenty of independence for the Reserve Bank. But what there is enabled by this is ways for the Minister of Finance and for the Reserve Bank to interact more to do so by adding objectives to what the bank can do to asking the bank to have a real position in terms of managing our economy that is not related solely to an inflation target but instead ask the bank to have a more holistic approach to understanding how our economy works and how it might operate within that economy. So it is a closer relationship. But that is at this time a good thing—that is what we need in this current time.Now I do just want to address a couple of points there. In particular Mr Woodhouse talked about some of the changes but some of these changes what they have done is they have ensured that the Reserve Bank has a real body of experts to draw on. The monetary policy committee gives the Reserve Bank more strength in its decision making around monetary policy. It would be a bold Minister of Finance indeed or courageous Minister of Finance who chose to try to interfere with what the monetary policy committee was doing. This legislation sets up a governance board which has that financial stability responsibility. It would be a bold and courageous Minister of Finance who interfered with that body of experts. So I think that that collective decision-making enhances the standing of the Reserve Bank vis-à-vis the Minister of Finance.I want to talk briefly about the financial policy objective where as Mr Woodhouse pointed out it is no longer concerned with the efficiency of the banking system but we are now concerned with protecting and promoting the stability of the financial system. I suggest that again that is very very important in the wake of the global financial crisis. It's very important in this much more complex world we live in. It's very important in this much more connected world we live in this world where we do have cryptocurrencies. So that is one reason why we have gone to this move of promoting stability in the financial system. It doesn't mean that efficiency will be ignored. The principles of efficiency will come through the deposit takers bill through the Insurance (Prudential Supervision) Act where under those Acts and bills the Reserve Bank will need to have regard for the principles of efficiency. So I think that's a very important way of safeguarding efficiency.Mr Woodhouse was concerned I think about the way that new functions could be ordered could be added to the bank. I was puzzled by this because in actual fact this is a way that the bank does preserve its independence. You see the Minister can only add new functions to the Reserve Bank at the request of the bank. That reserves the independence of the bank itself. Now of course the Minister does have the ultimate power of legislating. That is what we have in this House as we ought—as we ought. You see our institutions are very very important to us. They are part of our structure and the governance of our societies. We need our institutions to be independent for our public servants to have the capacity to give independent advice for us for the courts to operate independently from us for the Reserve Bank to operate independently from us. But ultimately in this Chamber we are the people who are responsible for governing this country we are the people who are elected to do it we are the people who retain that legislative power and we are the people who are held accountable for it every three years—as it should be.So in fact what you find in this bill is that it strikes a very nice balance. Between the independence of the Reserve Bank and the political accountability of this House for what actually happens in our country. So I think it's a fine piece of legislation. It's a very worthy second part of the trilogy. I'm sure—we'll wait to see with bated breath I'm sure we'll all be waiting for the third and final instalment as one always does for the third part of a trilogy. It's an excellent bill and I commend it to the House.