Cunliffe David: Westpac New Zealand Bill — In Committee 
Cunliffe David: Westpac New Zealand Bill — In Committee 
[Volume:672;Page:18821] 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I will get in quickly ahead of my colleague the Hon Lianne Dalziel because I want to refer to her previous speech and also to the member who has just resumed his seat Craig Foss. 
Part 2 of the Westpac New Zealand Bill is in a sense the operative part of the bill. It provides for the vesting of designated assets and liabilities into Westpac New Zealand from and on behalf of Westpac Banking Corporation. Just to reiterate the very helpful clarification that the Hon Lianne Dalziel made earlier—which was faithfully represented by the chairman of the Finance and Expenditure Committee who has just spoken—it is important to make the public aware that Westpac Banking Corporation is the parent and the institutional bank assets are part of the parent. They are under this bill able to be vested in or transferred into the ownership of Westpac New Zealand which is the New Zealand - domiciled branch. 
It would be useful if the member in the chair could get a little more background on the record for the public about the circumstances during the global financial crisis in which a cap was breached which led to in part this bill being required. I may not have been present on all of the days on which this bill was considered by the Finance and Expenditure Committee and I cannot recall in great detail that background so I think it would be helpful to the Committee to get that elucidation from the chair of the select committee. 
I compliment the Hon Lianne Dalziel. I thought her previous contribution absolutely crisply and sharply showed exactly the transfer mechanism that is portrayed in this bill and summarised very succinctly the reasons for it which we as a Committee have gone into during this debate. It is at two levels. It is at the level of the bank itself and the transfer mechanism and it is at the level of the broader context both of the banking system the regulators around it and the broader economic context within which that operates. 
In my brief contribution to debate on the previous part I noted that although the risk factors that were very acute during 2008 and 2009 have subsided they have not gone away. The macroeconomic imbalances around us and we might add the commodities boom—which dairy farmers in particular are the current happy beneficiaries of and which has been driven by the rapid industrialisation of our East Asian neighbours in particular who are hungry for the resource inputs to their economies including protein products which this country excels at producing—carry risks. If the imbalances get too great and confidence is lost in the transaction system credit could again freeze. I understand from very reliable sources that over the last couple of months there have been signs of real stress in some of those clearance markets. I think all New Zealanders need to understand that it is very very important that we manage carefully for the future. 
For that reason the Labour Opposition supports the Government’s intention to carefully manage fiscal resources and to reduce debt. It is the Labour Party’s view that we need to reduce debt very considerably over the medium term. We think net debt is a better measure than gross debt. We think we should include Crown financial assets in that measure. But we are I think relatively close on that objective. 
The difference—and it is an important one—is that for the Labour Opposition debt reduction can never be an end in itself and it cannot be divorced from the other macroeconomic changes that are necessary to support both economic stability and system stability which is where we intersect again with this bill. Those changes include building a stronger more diversified more innovative and higher-value export economy. They include strengthening our savings system and our banking system so that we own our own future. They also include making sure that there is enough disposable income—in the jargon of the subject “readies in the pocket” of ordinary Kiwis who are always extraordinary hard-working families—to ensure that the purchasing power is there to keep the country moving forward as well as to feed their families. 
That adds up to I think four interlinked objectives: building the economy owning our future helping the Kiwis concerned to get ahead and of course having the fiscal prudence that must underlie the economy. That is how we reduce risk in our domestic economy; that economic stability needs to underlie the financial system stability that is part of this bill. 
Going back to this particular part I tell members that clause 6 provides for the Governor-General to approve the proposal to vest designated assets and that subclauses (2) and (3) allow those assets to be stated either in whole or in part. That may be important because the institutional banking arm of the parent may not wish to vest the whole of a very large set of assets for some practical business reason in the New Zealand branch. 
Under clause 7 the Governor-General may approve amendments to a proposal. That is important so that this becomes a dynamic process not a static one and so that the vesting of designated assets and liabilities occurs in the way described in the proposal which is transparent. Under clause 9 the process does not undermine customers and their rights and liabilities; under clause 10 it does not unduly affect security interests; and under clauses 12 and 13 it does not upset contracts. 
Of course as the member in the chair has noted the proposal will have no tax consequences that will differ from those that would occur essentially if the enacting of the bill did not take place. The bill must be tax neutral. I think the committee examined that question and received letters of comfort. We were reassured that there was no hidden agenda in terms of the tax position of the bank. That is to be commended. We note that this bank along with the other major banks has recently had some attention paid to its tax position particularly in the area of a structured finance transaction which resulted in the bank generously refunding to the taxpayer some $2.5 billion of underpaid tax. We hope that that situation will not recur because it is important for the reputation of the sector that it does not. I know there are always two sides to the story but the courts have held that in respect of those cases that went to court—and politicians never interfere in the judicial process once it is under way—a good case was made by the Inland Revenue Department and the remaining banks entered into a settlement. That was appropriate. 
It is absolutely appropriate in light of that situation and as a matter of principle that this Committee should be satisfied and should find comfort through the work of the Finance and Expenditure Committee that there are no improper tax consequences pertaining to this bill. We are assured. We accept the assurance that there are none.