Woodhouse MichaelHon MICHAEL WOODHOUSE (National): Congratulations on your appointment Madam Assistant Speaker Salesa. It's nice to see you in the Chair. Last year—no; actually halfway through this year—I gave a speech that caused quite some chagrin across the House when I described the Prime Minister as like Rob Muldoon with slogans and kindness and I stood by those comments in the face of that criticism because of what I believed was the creeping executive fiat that's been going on over the last 10 months that looks very much like a Muldoonist approach. Then Dr Deborah Russell absolutely nailed home the confirmation that this Government looks acts and sounds exactly like a Government of the 1970s and 1980s. She said that our primary objective is that there is a Government that is going to govern and then she says that this will increase political accountability. Well actually it won't. It might increase accountability but it reduces independence and in the post-Muldoon period the passage of the Reserve Bank Act was designed as a handbrake on executive fiat by maintaining and protecting the independence between the Government—Hon Gerry Brownlee: Who brought that Act in? Labour. Hon MICHAEL WOODHOUSE: Labour did. That very fine fourth Labour Government that they will never talk about—never once will they even mention it. The best Labour Government this country's ever had and they don't want to talk about it. But the Reserve Bank of New Zealand Act 1989 did exactly what this bill is attempting to undermine: it maintained the important independence between the executive and the Reserve Bank by setting a set of criteria that the Reserve Bank is bound by law to follow without fear or favour. There's no doubt that there has been some tinkering at the edges and in my interjection to the Minister of Finance where I said that most of it was being done by him he acknowledged that. But he also said Oh well Bill English did a little bit of that as well." and I think that's worth deconstructing because some of the things that the previous Minister—sorry two Ministers of Finance ago—did were designed to meet the goals of the Reserve Bank Act in the financial remit and that is to improve financial stability and manage any risks to the economy—for example the deposit guarantee scheme the insurance schemes that the Reserve Bank now follow all were consistent with the mandate that the Reserve Bank had and the requirements that the Government set for it. What they didn't do was change that mandate and the first thing this Government did was throw the responsibility for maximum employment on to the banking system—on to the Reserve Bank. I've got this picture in my head of Adrian Orr as the classic one-man band with the trombone under one arm with accordion under the other and with the tambourines between the knees. Hon Gerry Brownlee: They tried to give him housing. What did he do with that? Hon MICHAEL WOODHOUSE: Well we'll come to housing Mr Brownlee. That's a very good point and actually that's not the picture I have any more because Minister Robertson didn't like the tune that Mr Orr was playing. He didn't like the tempo and he didn't like the fact that he couldn't change the tune. So now I've got a picture of a puppet—a marionette—and Robertson's on one end and poor old Adrian Orr's bouncing along in the wake of these things that the Minister doesn't like. Now when it comes to housing there is a problem. It is a problem of the Government's making and that's exactly what the Reserve Bank Governor pointed out in his reply to the Minister on 24 November. Now the Minister wrote to Adrian Orr—actually under pressure from the shadow Treasurer Andrew Bayly who pointed out quite rightly that actually if you wanted to pull a string the Minister of Finance had one under section 68B of the Reserve Bank Act. What was really interesting about that was if you look at the remit of the monetary policy committee when it talks about price stability the Government—and this was written by the previous Government—requires the Reserve Bank to discount events that only have transitory effects on inflation setting policy with a medium-term orientation. What that means is that the Government has given up on any kind of short-term control of house price inflation. In the remit we're now going to add house prices—not just inflation generally but house price inflation—so I wonder what happens when the price of bananas goes up or the price of fish or the price of fruit and vege. Whatever the Government doesn't like it effectively is going to tinker with the Reserve Bank Act and throw the responsibility of the things that this Government has on to the Reserve Bank. That is entirely against the principles of the Reserve Bank of New Zealand Act 1989 and as Mr Bayly pointed out there is far far less independence than was envisaged when that Act was passed 31 years ago. Dr Russell talks about strengthening—and the Minister mentioned this as well—the role of the board. But who appoints the board? Who appoints the governor? Who appoints the monetary policy committee? Every element of independence by the Reserve Bank—Hon Gerry Brownlee: Gone. Hon MICHAEL WOODHOUSE: —is now being undermined and could well be gone in the future Mr Brownlee. That is the opposite of what we need. Actually Dr Russell talks about—I was gobsmacked at this—the monster. She said "The monster of inflation has largely been slayed." as if it is a creature that cannot rise again—that it's gone for all time. Well in the 1980s during the fourth Labour Government I was working for a retail bank in New Zealand in the mortgage department giving out mortgages in the Hutt Valley. The A rate for the best mortgages was 19.5 percent and the B rate was 20.5 percent and people were still picking up mortgages because they knew house price inflation was going to mean that that investment was worthwhile. We don't have that now; in fact we have the house price inflation but we don't have the interest rate inflation. That is not to say that with the level of quantitative easing that is being employed by the Reserve Bank right now to stimulate the economy inflation is not a monster that cannot rise again. It absolutely can and I have confidence that the Reserve Bank knows much much more about those risks than the Government does because if the former chair of the Finance and Expenditure Committee believes that the inflation monster is dead and buried for ever—and that's the level of financial acumen from a former senior lecturer in accounting—then I'm afraid we've got a problem in terms of the financial literacy of the Government. She aspires to ministry. She's probably—well there's no "probably" about it. She has a far better pedigree than the current Minister of Finance has when it comes to understanding financial matters—Hon Gerry Brownlee: Who's that? Hon MICHAEL WOODHOUSE: —Dr Russell—but what staggers me is despite that she still believes that inflation has been defeated as if that's it. It lurks like a virus and it can come back if we don't take the sorts of prevention measures—how about some social distancing or some economic distancing then between the Government and the Reserve Bank of New Zealand? There's no masks there's no social distancing there's no COVID Act here for the Reserve Bank. They're at risk and the virus of inflation will come back if the sorts of interventions interferences and a lack of separation is allowed to continue. This is a slow creep towards a very very poor situation—a dangerous situation dare I say it—and it saddens me that we cannot support the bill. Reserve Bank bills should be bipartisan but at least at the first reading it's not going to be possible. So when we go to select committee and when we hear from submitters I think there is a very good opportunity to make this bill better than when it came in and we will certainly keep an open mind about whether or not those changes are sufficiently robust to maintain the independence of the Reserve Bank in order that we can support it. The last thing we want is the marionette master continuing to tinker and a future Government having to undo that because what worries me is that by then a significant amount of damage could be done to our banking system and to our monetary policy framework. I hope that's not the case."