Hide Rodney: Motions — Reserve Bank Funding Agreement—Ratification 
Hide Rodney: Motions — Reserve Bank Funding Agreement—Ratification 
[Volume:616;Page:12406] 
RODNEY HIDE (ACT) 
: 
 This has been an informative debate because it has lined up the political parties in this House. On one side are the parties that support the free market and the capitalist system and on the other side are the parties that are opposed to the free market do not support the capitalist system and believe that politicians know best. Just so listeners who are tuning in are aware of which party is where the National Party and the ACT party are on the side of free enterprise. The Labour Party the Greens New Zealand First and United Future are against free enterprise. They are the parties that are prepared to take a few paltry billion dollars put them up against the world capital markets and like King Canute say: “That is as far as the New Zealand dollar will go. I command you to stop.” 
That is something we in this House should have learnt like King Canute learnt long ago. We heard the Rt Hon Winston Peters’ criticism of Mr John Key. Mr John Key had to learn that being in Government was about running the entire economy. Think about that for a moment. What kinds of people see themselves as politicians running the entire economy? What we want in this country is a framework of stable rules within which businesses can get on and be productive earn a dollar and employ people—not Winston Peters not Michael Cullen and not Rod Donald sitting in the chair over there pretending they can run the entire economy. 
The last person who attempted to run the entire economy in New Zealand—the last time that someone decided politically what level the New Zealand dollar should be at—was the mentor of the Rt Hon Winston Peters Sir Robert Muldoon. We should understand this because the Rt Hon Winston Peters says: “Everything done since 1984 was bad.” That is what he says. He goes back to the glory days of Sir Robert Muldoon when he would command what the dollar could be. He would command what a punnet of margarine would cost. He would command what wages would be. He would command the economy. It is true to say that Sir Robert Muldoon did run the entire economy—and he ran it into the ground! What a backward step it is to suggest for a moment that the Reserve Bank can somehow in a positive way over the long run manipulate the New Zealand dollar. 
I notice that Dr Bollard and the Reserve Bank are being cautious about what they can and cannot do. But I do not see that caution from Dr Cullen I do not see that caution from Mr Rod Donald and I do not see that caution from Winston Peters. Is it not interesting that Winston Peters is standing in the House saying that he should be in the position of running the entire economy? I would not put him in charge of running a taxi out to Lower Hutt with a taxi chat let alone put him in charge of a couple of billion dollars and deciding what the dollar should be in New Zealand! Who would be that stupid? We know because we have heard it in this debate that Michael Cullen and the Labour Party would be and Rod Donald and the Green Party would be. Is United Future voting for this motion? That is typical. One United Future member says “no” and one says “yes”. Are they voting for this? [ 
Interruption 
] They are voting for it. They are the parties stupid enough to put a couple of billion dollars into a political war chest to sit there like King Canute and spray it around for 10 minutes and blow the lot. That is what they are prepared to do. 
I want to explain a few technical facts. It is interesting when one is talking about giving the bank a couple of billion dollars. It sounds very expensive. But it is not as expensive as it sounds. In fact it is estimated that in holding foreign reserves which the Government has done since 1989—since the new Act came into force for “dysfunctional” markets—the holding cost is $3 million a year fixed cost and about three-quarters of a million per $1 billion held. So the actual holding costs of those reserves is not a lot. Indeed given the increase in foreign exchange dealings the Reserve Bank has suggested that it get an extra $1.9 billion over the next 4 years for its reserves so it can manage if it ever gets a “dysfunctional” market whatever that is. The cost of that is not $1.9 billion; it is estimated to be $1.6 million a year. So there is not a lot holding those reserves. But what a lot of mischief it is when another couple of billion dollars is put in and it is said that this is to take the top off if the dollar is too high or this is to lift the dollar up if it is too low. That is where the cost will go. Because that is not sitting the money in a little pocket over here for a rainy day in case we need it. That is actively trading in the foreign exchange market. 
I would like to take members back to Michael Cullen’s pronouncements on what he thought the dollar would be doing in the future. Can everyone remember when he said: “Oh well it won’t stay below 50c for long.”? It did. Every pronouncement Michael Cullen has made even about the direction that the dollar was going in was wrong. Is that truly the man to whom we would want to give a billion dollars to play on the market? What Rod Donald knows about foreign exchange markets and economics would not fill Nandor Tanczos’ tea cosy. It is next to nothing. The idea that we would put him in charge of—or having anything to say about—$2 billion bidding against the capital markets of the world is absurd. 
 Of course we all know that we would not put Winston Peters in charge of anything. Then there is John Key who has actually managed a foreign exchange dealers’ room who says: “This ain’t gonna work.” I think that this House should pay attention. 
Adrian Orr the deputy governor of the Reserve Bank gave an interesting speech on 25 March this year. He said: “Here are the principles by which we would get involved in intervening in the foreign exchange market. At times the exchange rate has varied by far more than can be justified by relevant economic fundamentals.” So that means our models are not according with reality. He is saying that if our models do not accord with reality a billion dollars should be spent to make our models work. He went on to say: “It is at these exceptional and unjustifiable levels of the exchange rate that the bank would consider buying or selling foreign currencies for New Zealand dollars in an effort to influence the level of the exchange rate.” We are going to have a bunch of bureaucrats guided by a bunch of politicians deciding when the dollar is at an unjustifiable level and entering that market to buy and sell. I have to say that that is madness. 
Members should listen to this further quote from Adrian Orr: “What we are recommending is intervening when the moment is justified and opportune with the outcome of at best trimming the extreme tops and bottoms of the New Zealand dollar exchange rate cycle. … At best intervening when the moment is justified and opportune.” Would we not all like to do that? Would we not all like to invest in the sharemarket and on the foreign exchange market when the moment is “justified and opportune”? The point is that they will not know and a great deal of taxpayers’ money is being put at risk through a foolhardy political experiment the lessons of which we should have learnt a long time ago.