Smith Lockwood: Reserve Bank of New Zealand Amendment Bill — Second Reading 
Smith Lockwood: Reserve Bank of New Zealand Amendment Bill — Second Reading 
[Volume:634;Page:5964] 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 In speaking to the second reading of the Reserve Bank of New Zealand Amendment Bill I acknowledge and thank the chairperson of the Finance and Expenditure Committee Shane Jones who has just spoken. He was prepared to allow me to take the call ahead of him. I appreciate that because my reason for seeking the call was that I had organised—on the basis of the schedule this afternoon—an interview in a few minutes’ time. I note New Zealand First members were so mean-spirited that they would not allow that but that is their decision. They have had their snouts in the trough to the tune of $157000 of taxpayers’ money which they have stolen. New Zealand First is the only party in this House that has refused to promise to pay back the money. 
Ron Mark 
: I raise a point of order Madam Speaker. I take absolute offence at that member in particular—the “Calendar Boy”—suggesting I am a thief. I ask that he retract and apologise for saying that I stole money. 
The ASSISTANT SPEAKER (Ann Hartley) 
: The member has taken offence at that remark. The member will stand withdraw and apologise. 
Dr the Hon LOCKWOOD SMITH 
: I withdraw and apologise. The voters of New Zealand will note that New Zealand First members have made no commitment to pay back that misappropriated money and other members will not let them forget about it. 
This bill amends two Acts. First I will follow up some comments made by the Labour member Shane Jones in respect of the amendment to the Racing Act. Of course it is necessary to amend the Racing Act 2003 because the Reserve Bank is withdrawing the 5c coin. Mr Jones mentioned the importance the Finance and Expenditure Committee attached to the issue of rounding down. 
This is an important issue because when the 5c coins are out of circulation we will be looking at a situation say of rounding down up to 9c—for argument’s sake it may be $1.29 being rounded down to $1.20. We can well understand that good New Zealand punters might say: “Hang on! We will miss out here.” With it being a systematic system across the board of rounding down punters might think that a rounding down of say 9c would mean that they were significantly worse off as a consequence of this amendment. National members of the committee also gave considerable attention to this matter because we must always make sure that legislation such as this which on the face of it seems technical does not result in systematic damage to the interests of New Zealanders. 
The New Zealand Racing Board gave evidence to the committee and it gave us an assurance. Although this legislation gives the board the power to set the rules for how it rounds matters it will be rounding down to the nearest legal unit once the 5c coin is withdrawn. The board assured us that it will alter the proportion of the betting revenue or if you like alter the margin that is retained. So the total amount paid out after the extra rounding down will remain the same. The committee questioned the board very closely about that and we received an absolute assurance that its margins or proportion of revenue gathered that is retained will be reduced to compensate for the rounding down. So punters will receive exactly the same proportion of total bets back into their hands. 
This bill also deals with trans-Tasman matters. The New Zealand Racing Board pointed out that it was quite important that the method of rounding used in New Zealand be consistent with that used in Australia because with our two economies—and in fact our societies—almost being one big trans-Tasman family a lot of trans-Tasman betting goes on. If the New Zealand arrangements were significantly different from those in Australia and if they did not match the Australian arrangements there could be an incentive for New Zealanders to gamble offshore and to do more of their betting on races in Australia rather than on races in New Zealand. That would not be in New Zealand’s interests; it would not be in the interests of our thoroughbred industry. So it is quite important that we take the advice of the New Zealand Racing Board. As has been mentioned this matter needs to be watched to make sure that there is a reduction in the retained margins so that payouts to New Zealand punters are maintained at their previous levels despite the larger quantum of the rounding down. 
Most of us on the select committee when we first heard about this rounding down said: “Hang on! Why do you not round to the nearest legal unit rather than automatically rounding down?”. But we were satisfied that the arguments presented by the Racing Board for supporting the rounding down were sufficiently sound and robust. However we need to make sure there is a reduction in those proportions retained so that New Zealand punters are treated fairly. 
In my remaining minutes I will just follow on from the excellent and insightful comments made by my colleague John Key—the next Minister of Finance in this country—about the issue of trans-Tasman banking regulation which is hugely important. I well remember that when I was trade Minister for New Zealand in 1999 at the time of the Asian financial crisis I did a lot of work around Asia because New Zealand was chairing APEC—the Asia Pacific Economic Cooperation group. That group involved 45 percent of total international trade. 
One of the reasons why the Asian financial crisis became so serious was the problem around the banking sector. Asia unlike New Zealand has many small often private banks and banking regulation would not be of quite the same standard that we have here. Banks were simply not as sound as they should have been and they went broke. That was part of the reason why the Asian financial crisis spread as widely and went as deeply as it did—and it is for that reason that banking regulation in New Zealand is so important. 
Many people criticise the fact that most of our trading banks are Australian-owned banks. Some people lament that fact and say how terrible it is that we do not have our own banks operating in New Zealand. I do not happen to share that view. I think the important thing for an economy like New Zealand’s is how sound and efficient the banking sector is. It is less important who owns it. What is important for the confidence of the New Zealand economy is how well regulated it is how sound it is and how efficient it is. I think New Zealand is reasonably well served with a banking system that is sound and well regulated. 
What is fascinating—as my colleague John Key said—is that there is an issue though around this loss of New Zealand companies to Australia. That issue will become worse as New Zealand’s Labour Government presses ahead with its proposed changes to our foreign tax regime. As the Government presses ahead with its concept to introduce a 5 percent fair dividend rate on the ownership of foreign shares in New Zealand the Finance and Expenditure Committee has been warned that doing that will add to the problem of New Zealand businesses shifting to Australia. 
That is why the issue raised by my good colleague John Key—the issue of streaming of imputation credits or full franking of credits between Australia and New Zealand—is so important. It is very interesting that Dr Cullen failed to achieve that for New Zealand because the select committee has heard in recent weeks how hugely important that is for New Zealand investors. The benefit of having a single trans-Tasman economic market is probably the No. 1 issue for New Zealand investors. I think the fact that Dr Cullen promised Peter Costello that the single banking regulator the Australian Prudential Regulation Authority could deliver for New Zealand say a full franking of imputation credits is kind of sad. That could have delivered so much benefit for New Zealand when in fact having a common banking regulator with Australia would not have been a huge loss for New Zealand. I think that is a very revealing aspect. 
Despite the fact Dr Cullen could not deliver that for New Zealand National does support the legislation as it will deliver sound regulation for our banking sector. There is no question that any move to improve the stability of the banking sector—which this bill delivers—is beneficial for New Zealand and the bill has the support of National.