Jones Shane: Westpac New Zealand Bill — In Committee 
Jones Shane: Westpac New Zealand Bill — In Committee 
[Volume:672;Page:18831] 
Hon SHANE JONES (Labour) 
: 
 Tena tatou katoa at 8 o’clock on a Wednesday evening. I will augment in a very modest fashion that which has been offered. I might wait until the senior member Pete Hodgson moves away from the Table; the wisdom is blinding me at the moment. 
I direct our attention to clause 26 in Part 3. I want to be confident about the changes that are contemplated. I remind the current chair of the Finance and Expenditure Committee Craig Foss who is the member in the chair—I dare not say “the throne”—that when this legislation first went through he enjoyed sterling chairmanship under the leadership of a Mr Jones. Now that I have rejoined the Finance and Expenditure Committee we will look to see whether those qualities have continued. Time will tell. 
I cannot imagine that Mr Chairperson is likely to rule any of what I am about to say far of the mark but I will say that the banking sector is facing some substantial changes not the least of which is a change to the capital adequacy equation or dare I say it the framework. So when clause 26 states: “Nothing in this Act exempts Westpac Banking Corporation or Westpac New Zealand from the provisions …” I am presuming that those provisions are enabling the Governor of the Reserve Bank to introduce changes that ensure our major banks especially those of systemic importance are able and will be required to fulfil the Basel II capital requirements that have recently been in the newspaper. Basically they require that as we continue to fund the very substantial appetites of the farming sector that continue to grow the banks derive an adequate amount of capital from their own inherent sources and are not relying to such an extent on a thin level of capital so that when they continue to fund the more aggressive elements of the farming community which have been unwisely in my view stacking up too much debt and running a set of operations—unless it is arrested and they are brought to accept that there is a fair standard that all contributors to the economy ought to observe in relation to the tax system—their prodigious appetite for debt does not undermine the broader banking sector. 
Mr Foss is challenging me to demonstrate the relevance of that to the bill and I will be glad to do that over the next 20 minutes with the Chairperson’s forbearance. I am referring to clause 26 in the unlikely event that Mr Foss—unlike the Labour member who formerly brought in the 2006 bill—has not read it. I am talking about whether the banks will be captured by the provisions that enable the regulator the Reserve Bank to impose standards. I would not like to think that as a consequence of shoddy workmanship or shoddy drafting—perish the thought—they may not be required to observe the new strictures put in place by the Reserve Bank because those strictures are there for a purpose. 
Farm sales have slowed down. They have gone through a very low period. Not every single client of Westpac who is a farmer is in “Strugglers’ Gully” in terms of their debt-equity ratio but it is important that as the bank goes forward it does not worsen that situation. A sum of between $45 billion to 47 billion has been extended in the form of debt to our agricultural primary produce sector. Not all of it is with dairy farmers but the vast majority of it is. In addition to that as I have said not all dairy farmers are facing tragic economic circumstances but a significant minority are. I am sure the banks that put them in that situation will work very judiciously with them to ensure that they are not tipped over the edge. I am sure that no particular provision requires a bank to act in that fashion but banks have to accept that they are members of the community and that they have a critical role in relation to the provision of credit. That credit depends inordinately on overseas sources as a consequence of the blighted view that the current Government has about saving and unfortunately that will be worsened tomorrow. These things are in relation to clause 26. 
I will continue in this vein of farming. As the current Minister of Agriculture knows when the front page of the  
Dominion Post 
 is not about us and is about members opposite it is never wrong—never. There are odd occasions when the front page of the  
Dominion Post  
is unwisely directed on members on this side of the Chamber and that is a case of poor research of personal agendas and of its feeling beholden perhaps to some of the corporate backers of the current Government and we cannot do much about that. But we know that as a consequence of today this is connected to the status of the banking sector. I must not continue in this vein however. 
We have talked about this bank our Westpac bank which has now been fully incorporated as a consequence of changes that originated back in 2000. Ann Sherry a former chief executive officer fought that doggedly. She has since gone on to run not the 
 Love Boat 
 but some sort of ocean liner business. Under her stewardship Westpac was the last bank that was willing to embrace its obligations. 
Westpac accounts for somewhere between 18 to 20 percent of our commercial banking sector. It is not the largest—I think that belongs to ANZ in terms of its exposure to the rural sector—but it has a handsome book. Part of that book contains warts otherwise known as Crafar which will soon no doubt be sold overseas as a consequence of more dilatory approaches by members opposite but we will learn more about that closer to 26 November. Will the bank be obliged to continue along with the other banking sectors will it be obliged to observe such capital adequacy ratios as I earlier referred to and as a consequence of this legislation will it be able to do anything that might worsen the situation with our real estate - based debt? Our Aussie-backed banks are unlike the single sterling example of Labour policy Kiwibank which is regularly undermined by the current Minister of Finance in his very parsimonious approach to providing adequate amounts of capital for it to slowly grow into flourishing areas of the economy rare though they may be under the current administration. 
On the household sector debt what will happen as a consequence of this bill’s passing? Can it be affirmed that our Westpac bank will continue to play a key role not only in ongoing funding of house owners and young families wanting to purchase houses but also in the provision of credit for business lending? That is the provision of credit on the basis of the strength of the cash flow that an enterprise is showing as opposed to small to medium sized businesses having to rack up more debt against their houses and move that credit through to sustaining their businesses. We would like to see something of that nature flow from banks such as this monumental institution otherwise known as the Westpac bank so that they are providing capital to those who are willing to take a risk diversify the revenue the Government relies on and deepen our reach into overseas markets with the provision of innovative services and new goods. 
But none of that can happen without the banks being willing to move away from their very comfortable association with lending dough against houses one after the other. We want to be assured that as a consequence of this enactment—clause 26 in Part 3—they will be able to continue to adopt the attitude that grows the part of the economy that has actually withered over the last 2 or 3 years and in particular the last 2 years. That is not really a consequence of the so-called international recession but has actually come about because of the very drowsy approach taken by the current leadership towards reviving the economy training people and more important using a time of adversity and turning it into an opportunity to create new sources of wealth and innovation and to boost productivity. From a time of adversity can come inventiveness and resourcefulness—something that is spectacularly absent from the current approach shown to us by the Government. 
Part 3 agreed to.