Bayly AndrewANDREW BAYLY (National—Hunua): It's pleasure to be talking to the Reserve Bank of New Zealand (Monetary Policy) Amendment Bill although it is a disappointing day for the financial arrangements in New Zealand particularly with regard to the Reserve Bank of New Zealand. The structural arrangements at the moment are cherished and cited as world-leading practice around the world. This is because the bank is known to have a very clear mandate it is highly professional and it also lacks any degree of political interference in its decision making. These changes are not warranted they're not required nor have they been requested. They certainly haven't been requested by the Reserve Bank. In fact they've been brought about by a Minister who's a soft touch who's chosen as one of his key planks to cut away at the very independence of the Reserve Bank.As my colleagues have highlighted these changes are significant. As we all know the Reserve Bank sets the official cash rate—the OCR—which has a direct bearing on interest rates which in turn have a direct bearing on foreign exchange rates. The financial consequences of these decisions regarding monetary policy are incredibly significant. It affects what New Zealanders pay when they borrow money from banks it affects what businesses pay when they borrow money from banks and it also affects what people pay when they want to buy foreign currency.I think the thing about these changes is that there are three real issues for me: one is the issue of now having a dual mandate the second is the politicisation of the appointment process for the members of the board and the monetary policy committee (MPC) itself and the third is the issue around transparency of decision making.My colleagues have talked at length about the dual mandate but it does create a potential for conflict. What happens when we're in recessionary times and a political ruling party is under pressure? Do they want the bank to have a greater focus on reducing unemployment or increasing inflation to help grow the economy? Conversely in growth periods the reverse will be true. Under these new arrangements the finance Minister now has the ability to influence indirectly the results of the monetary policy decisions by specifying what they want in the remit that he or she puts forward to the bank.I just want to turn to the second issue around the politicisation of the appointment of members of the board and the MPC. We have new arrangements. What happens now under these new arrangements is that the Minister appoints the members of the board. He or she will appoint those people that he or she is most comfortable with. The board then recommends to the Minister who should be appointed to the monetary policy committee. The Minister then has the right to appoint those people whom he or she chooses to the monetary policy committee and they have long terms—periods of four to five years. So the best analogy is Donald Trump appointing the last member to the Supreme Court as a bench member. That is what is going to happen with the Reserve Bank—whoever is the finance Minister has the right effectively to determine who sits on the board but much more importantly who sits on the monetary policy committee. That is the real issue around the lack of independence. I think the thing about boards is the need to have diversity of thinking and to have people who are challenging on that. Under these arrangements there is the potential for members to be appointed because they have the same aligned process or concept or mind-set as the Minister and I think that is totally wrong.The other issue I just want to talk about is this issue around transparency of decision making. We've had this issue around how monetary policy decisions are to be disseminated and this is yet to be determined because it's not specified in the bill. But what we heard at the select committee is somewhat alarming because consideration is going to be given to who should make the pronouncements around what are the monetary policy changes—i.e. is the OCR going to be changed or not? The question is whether in fact the decision-making process and the decision-voting process will be made public.I'm particularly perturbed about this because foreign currency dealers spend a lot of time analysing where the Reserve Bank is going to go with its OCR because it has such a significant impact on interest rates and foreign exchange rates. There is a certain naivety to think that we're going to have all the decision making of those members displayed for everyone to see because if it is a split decision with maybe the casting vote of the governor that will show to people that there is likely to be a change maybe in the OCR announcement after that. That will drive markets and that is totally wrong because at the moment we have one person—the governor—making the pronouncement which is totally appropriate and it's carefully controlled so that we do not see people in the market taking advantage of this type of situation.I think this also opens up the possibility of those members of the MPC actually being lobbied and I think all those issues strike at the core of why this is such a bad bill. It strikes at the core of the loss of the independence of the Reserve Bank which at the moment is one of the best in the world and this is a shame on this Minister who's pushing through these changes.