Harawira Hone: Reserve Bank of New Zealand Amendment Bill (No 3) — First Reading 
Harawira Hone: Reserve Bank of New Zealand Amendment Bill (No 3) — First Reading 
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HONE HARAWIRA (Maori Party—Te Tai Tokerau) 
: 
 Tena koe Mr Deputy Speaker. Kia ora tatou e te Whare. In July this year the Waitakere Wellbeing Summit held a hui at the Kelston Community Centre to consider a simple question: do all families in Waitakere have enough to live on? It found that 19 percent of people living in Waitakere—some 27000 people—are living on low incomes. But even amongst the poor it noted disparities. Although it found that some 15 percent of Pakeha were categorised as low-income earners for Maori that figure rose dramatically to 25 percent and it rose even higher to 27 percent for Pasifika and surprisingly to 32 percent for Asians. The focus of the hui was to think of ways to help families who are in a state of multiple disadvantage and who therefore are at the greatest risk of extreme hardship. 
Well we know all about the impacts of the current financial situation on citizens here in Aotearoa. I remind the House today that the level of household debt in the last 7 years has rocketed by a massive 73.6 percent. Consumer debt is growing larger by the day the consumer price index has increased by 1.8 percent house prices have not just gone through the roof but settled above the cloud layer and prices for basic foodstuffs have shot up. 
The costs of getting finance are ever increasing and to no one’s great surprise dodgy finance companies which are playing fast and loose with everybody else’s money are going belly up as well. Over the last 18 months in fact 12 such companies have collapsed thus creating crisis and chaos for more than 50000 investors and costing $1.3 billion in debenture deposits. To come back to that hui in Waitakere I note that one of the recommendations was to regulate lending institutions and lending rates particularly in the non-bank financial institution sector—retail money lenders and loan sharks. There is that word again; it is a favourite of my whanaunga Dover Samuels. 
This bill is supposed to introduce changes so that deposit takers including non-bank deposit takers like finance companies building societies and credit unions will have to take greater care of the finances of their investors by getting a credit rating from an approved rating agency. I cannot help but see the irony in the latest finance company to bite the dust Capital + Merchant Finance which went bust under the slogan “Invest with care”—not that the 7000 investors who are owed about $190 million have much to laugh about. Certainly these 7000 investors thought they were investing with care by putting their hard-earned cash into the country’s 13th largest finance company which had a high profile through its sponsoring of Television One’s news until it all went haywire last week along with the Christmas plans of 7000 households. 
The Maori Party supports the movement that this bill makes to establish regulations for deposit takers. We support the maintenance of minimum capital levels and capital ratios limiting exposure and maintaining risk management approaches in line with good corporate governance standards. 
The McDouall Stuart 2007 report on the New Zealand finance company sector  
Flow and Ebb 
 set out a clear context for the volatility that has affected finance companies over the last 18 months. When we consider that this is a sector with more than $10 billion of investor money we see that it makes sense for Parliament to try to minimise financial collapse. Of course when we consider that this sector has more than $10 billion of investor money we see that it also makes sense for Parliament to express concern about the impact of such volatility on whanau on the economy and on general well-being and to do all that it can to ensure that care is taken in providing for the future. 
There is a lot of talk around the easy cash market about the impacts of financial collapse on mum and dad investors so I thought I would tease out that mum and dad concept a bit more. It occurred to me that one of the greatest investments any parents can make for their descendants is in reviewing their financial emotional genealogical and physical circumstances when it comes time for them to get married. 
Back in the old days partnerships forged through marriage were regarded with enormous significance. Peace and the settling of grievances the strengthening of whakapaka political solutions and land rights were all factors that might be considered by elders in pledging their descendants to another hapu or even another iwi. Whanau would look into the other party’s background hold negotiations and debate with the whanau of the other party so that when the deal was finalised everyone would be aware of the legacy being created by the union. 
In much the same way a whanau considering making financial investments should also carry out the same kind of thorough investigation and analysis in order to guarantee the future health of their investment. But to do that investors need to have better information from which to make strong decisions. 
Too many investors Maori included invest their savings in finance companies without realising the risk they are exposed to due to the fact that the finance companies do not always have the proper rules and standards in place to safeguard their investors properly. The common misconception is that standards are in place and that proper monitoring has occurred but that is not so. As a result people many on low to modest incomes have lost their hard-earned savings. We can blame individuals for not doing their homework but often we find that some people are simply being pushed to live beyond their means. 
It is also a matter of knowing whether the claims made by financial advisers actually stack up like companies saying that they are underwritten when they are not; that they are guaranteed by Lloyd’s of London when they are not; or that investors will get their principal back even if the company collapses which of course they do not. The real test is not so much about whether investments are safe. All investments carry a measure of risk and the greater the promise the greater the risk. The test is whether the investing public can believe that the rules of the game are fair. 
This is where recent research from Massey University warns us that legislation like this is needed quick smart. Dr Chris Malone from Massey’s college of business says that a failure to quell investors’ fears and help remaining financial institutions survive could lead to negative impacts on other sectors and that restoring investor confidence is critical to cutting the circuit of panic. 
So the Maori Party welcomes this proposal for a sound and efficient financial system and for putting measures in place to avoid significant damage to that system in the event of financial company failure. Just as our tupuna did all the homework necessary to ensure a good marriage so too should we carry over those same principles to ensure that our own Reserve Bank can effectively protect the New Zealand financial system. The Maori Party will support this bill at its first reading. Kia ora Mr Deputy Speaker. Thank you very much.