Key John: Reserve Bank of New Zealand Amendment Bill — Second Reading 
Key John: Reserve Bank of New Zealand Amendment Bill — Second Reading 
[Volume:634;Page:5959] 
JOHN KEY (National—Helensville) 
: 
 I rise on behalf of the National Party to support the Reserve Bank of New Zealand Amendment Bill. I will start by saying that there is an interesting dynamic to this bill which is that the bill does not go as far as the Australian Treasurer Peter Costello wanted it to go. He wanted to have a single banking regulator in the form of a kind of Australasian version of the Australian Prudential Regulation Authority that would have overseen the banking activities of Australia and New Zealand. One can understand why Peter Costello would want that because 85 percent of the banks that operate here in New Zealand have an Australian parent. They would have enjoyed that situation and it was an issue to be considered. 
I say there is an interesting element to that because Michael Cullen believed in that model. He privately supported a single banking regulator in the form of a New Zealand and Australian prudential regulatory authority and he was very happy to make those comments known to those who should know them. An interesting person to whom he made those comments known was none other than the Australian Treasurer Peter Costello himself. So Peter Costello for quite a period of time believed that his New Zealand counterpart Michael Cullen was indeed an honourable member and would honour what he was telling him in the private little soirées they had as they met on each side of the Tasman as they do on a yearly basis. 
Interestingly enough though Michael Cullen who has proven that he has been unable to get support for much of what he does including the carbon tax his own agenda of not wanting to have tax cuts—I could continue to list them but it would take up the entire 10 minutes I am allocated for my speech—could not get support in New Zealand for a single banking regulator. FinSec made some pretty strong claims as did a number of other people. So he had an interesting dilemma if one likes. On the one hand over a nice bottle of Australian Penfolds red he promised Peter Costello— 
Dr the Hon Lockwood Smith 
: Was it Penfolds Grange? 
JOHN KEY 
: I do not know whether it was; I am not sure whether Peter is quite up to Penfolds Grange. But anyway over a nice bottle of Australian Penfolds red by the fireside Michael Cullen promised Peter Costello that he need not worry because it was a done deal that there would be a single banking regulator in New Zealand. 
 Back in New Zealand Michael Cullen could not actually get that over the line not the least reason for that being that the Governor of the Reserve Bank Alan Bollard saw a part of his fiefdom moving away. That case was put to Michael Cullen in New Zealand in no uncertain terms. He realised he was out of step with what he could pass in New Zealand and at some point he had to deliver the bad news to Peter Costello that his word was not worth very much and that by the way they needed to back away from that position and get something else. 
Why is all that interesting? It is not particularly interesting in terms of talking to the character of Michael Cullen because he does that all the time—there is nothing new about Michael Cullen doing that. He is the same guy who before the election was up on the ninth floor telling Helen Clark and Heather Simpson that Labour was so far over the line on using taxpayers’ funds for paying for the pledge card that it was not funny. But he said they should not worry about that and that because Labour was kind of desperate to win the election it should just go ahead with that spending anyway. I bet Helen Clark did not put quite that spin on that situation on Tuesday when Labour was having its 5 percent giant whip-round. All of that is an aside. What is interesting about this is— 
Eric Roy 
: A good point though. 
JOHN KEY 
: It is a good point and it is all fair but a lot of it is an aside. The serious part of it is that Peter Costello thought he could trust Michael Cullen and found he could not. If Peter had rung me I would have put him straight at the outset and saved him from all the embarrassment. But the reaction— 
Dianne Yates 
: Did he ring you? 
JOHN KEY 
: He does ring actually. 
The reaction from Peter Costello was this. New Zealand wanted the streaming of imputation credits with Australia. We wanted that because without it more New Zealand companies will head offshore. Interestingly enough for those who follow the stock market—and I am sure all members of the Finance and Expenditure Committee do—on Friday the Fletcher Building share price went up by about 25 cents or 30 cents very late in the day. It looked as though—and this could still well be the case—there was a lot of buying in Fletcher Building on the basis of yet another rumour that Fletcher Building was moving to Australia. So here is another company that is potentially moving on the back of the fact that the streaming of imputation credits causes its Australian shareholders a problem. Here was the deal. Over a nice bottle of red wine in Australia Michael Cullen told his old mate Peter Costello that he would deliver for him a single banking regulator in return for Peter Costello delivering for him the streaming of imputation credits. Peter Costello said there would be no problem in doing so and that the way things were done over there was on the basis of a handshake so it was a done deal. Michael Cullen came home and could not deliver on his side of the bargain. So there is no surprise that the streaming of imputation credits is off the agenda with Peter Costello and Michael Cullen. 
The Minister and my colleague the member from New Lynn which is very close to my electorate in Helensville— 
Hon David Cunliffe 
: You fly over me on the way to work. 
JOHN KEY 
: No I do not fly there. Mr Cunliffe has made it clear that this Government is committed to a single economic market. That is interesting because Australia and New Zealand had a leadership forum but Michael Cullen was too busy having his hair and nails done in Napier to pop up to Auckland to that meeting. He did not go and why did he not go? It was because Peter Costello did not go. Why did Peter Costello not go? It was because they both care very much about a single economic market with Australia except that they do not care enough to have a single banking regulator and they do not care enough to have the streaming of imputation credits. Actually they do not even like each other any more because Michael Cullen has done the dirty on Peter Costello. 
So there members have it. That is the interesting little tale about the Reserve Bank of New Zealand Act. So if any New Zealand company is wondering why it is moving to Australia I say it is because it has to because otherwise it cannot get the streaming of imputation credits. It has Michael Cullen—that winning Minister of Finance as he likes to think of himself; the man who could not keep his word with Peter Costello—to thank and to blame for that. That is a very interesting situation and I think a very interesting addition to this debate. 
I move on to the second more interesting and important bit of this debate. Why do we have regulatory oversight of our banks? I ask people who are interested in those things to go back to 1997 and the Asian debt crisis. That was caused by a lot of countries in Asia—the Malaysias Thailands and Indonesias of the world. They had a great issue because their banking systems were fundamentally flawed there were no good oversights their banks were fundamentally insolvent and that caused a collapse. It went on and I saw exactly the same scenario in Russia in the Russian debt crisis. For those who have nothing to read over Christmas I recommend Bob Rubin’s  
In an Uncertain World 
—a very interesting read on those kinds of matter. Amazon knows about it. What is interesting about that scenario is that he talks about the rating of countries. A country is rated in part on the health of its financial system. That is really important. In the financial system in New Zealand 70 percent of the assets are controlled by the banks and regulated by the Reserve Bank of New Zealand and 85 percent of the banks are owned by Australia. There is a huge interdependent relationship between the two. 
This week Michael Cullen met with Moody’s Investors Service. There are three big rating agencies in the world: Standard and Poor’s Moody’s and Fitch Ratings. A week earlier Michael Cullen had been on  
Close Up 
 with me telling the good people of New Zealand that if we have a tax cut we will be downgraded. Interestingly enough we are running a surplus in New Zealand of 7.3 percent of GDP. ANZ also thinks New Zealand could be downgraded if we do not run a surplus. The bank thinks a surplus of less than 1 percent could be an issue but that is quite a long way away from 7.3 percent. What do Moody’s think about whether New Zealand could be downgraded on a tax cut? The company says there is not a dog’s show that New Zealand will be downgraded. In fact New Zealand has probably more chance in the long term of being downgraded if it does not have a competitive tax system. As we saw from the OECD data that came out last week we are becoming less competitive under the Labour Government. 
Interestingly enough Standard and Poor’s made some interesting comments. Kyran Curry the analyst for New Zealand made a few comments that could be interpreted— 
Hon David Cunliffe 
: I raise a point of order Madam Speaker. Amusing though the member can sometimes be this diatribe has absolutely nothing whatsoever to do with prudential supervision by the Reserve Bank. That is the subject of this debate. 
The ASSISTANT SPEAKER (Ann Hartley) 
: I think that the member has stuck to the tenor of the bill. 
JOHN KEY 
: Speaking to the point of order I suggest that Mr Cunliffe when he goes back to his office looks at the impact of the supervisory oversight of banks on the rating of a country’s financial system and at how important that is. 
The ASSISTANT SPEAKER (Ann Hartley) 
: That is not a point of order— 
JOHN KEY 
: I think that he will then realise how on message I actually am. Interestingly enough Kyran Curry has made a few comments that were interpreted in the New Zealand press as meaning that there could be a downgrading of New Zealand’s rating if there were a tax cut. Our office rang Kyran Curry to ask him whether that was accurate and I can assure the people of New Zealand that those comments are not accurate. New Zealand will not be downgraded if there is a tax cut—and there certainly will be a tax cut under a National Government.