Adams AmyHon AMY ADAMS (National—Selwyn): Thank you Mr Chair. I want to follow on from my colleague Andrew Bayly and pick up some of the same themes that he's mentioning because there are a number of matters in the Reserve Bank of New Zealand (Monetary Policy) Amendment Bill and in Part 1 which we're on that are of significant concern to the Opposition and they are worth just taking a moment to reflect on because the Reserve Bank of New Zealand Act and the Reserve Bank are a fundamental pillar of our economic and financial system. And actually we've got even Michael Cullen back in his era as finance Minister making the point that it's so important that changes to the structure of the Reserve Bank and the Reserve Bank of New Zealand Act be made only with bipartisan support and we don't have that in this case because these changes will weaken the independence and the clarity of function of the Reserve Bank that have served us so well for such a long time.I would urge the current Minister of Finance to heed those words from Sir Michael Cullen and reflect on the fact that when you are making changes to legislative instruments like the Reserve Bank to do so without bipartisan support is a serious error because it makes the Reserve Bank frankly a political football. And that is one of the major concerns about this legislation that this side of the House has been expressing repeatedly and without frankly any interest or involvement or willingness from the Government to take on board our concern. This legislation runs the risk of seriously weakening the independence of the Reserve Bank and even Adrian Orr the current governor has made the point on a number of occasions that a central bank's independence is critical to its operation and to its success.Now when you have a situation where the monetary policy committee is made up entirely of appointments made by the Minister of Finance and is able to be removed by the Minister of Finance you lose the very purpose of having a decision-making committee because a decision-making committee when the only reason for having it is being better than an individual making the decision because you get diversity of thought and diversity of opinion and contestable ideas and a real contest of the issues when the appointment process is such that it can all be products of the same ideology that very purpose is destroyed. Not only do you then have a committee and a governor who are appointed and owe their tenure entirely to the Minister you're now going to have a senior Treasury official—in fact we understand it will be the most senior Treasury official to begin with the Secretary to the Treasury—sitting and partaking in all monetary policy committee meetings.Now again the Government has said Well it's so that the Reserve Bank can be better informed." but there's no evidence that the Reserve Bank has any issue getting information about Treasury's or the Government's policies. In fact both officials and the bank have been quite clear with us that there is no problem to be solved. The only reason to have such a senior Treasury person in those meetings is clearly to influence the Reserve Bank—to influence their view of Government policy. Treasury are bound to give effect to the Minister's and the Government's policies. They're bound to put the spin on things that the Government wants. And now they are very clearly trying to reach their tentacles of control into the Reserve Bank to stop issues like we've seen with KiwiBuild where the Reserve Bank dares to come out with an opinion that cuts across the Government narrative. Well this Government doesn't want that. So what do they do? They ensure that they have full control over the processes of appointment of the Reserve Bank and that they have a Treasury person sitting in the room making it very clear the message that the Government wants to see return. That is not an independent central bank. That is not going to serve the institutions of this country well.I would say to the Minister that to have a situation like this where there is as I say total control from the Minister in terms of the Reserve Bank board the monetary policy committee and the governor—and yes I know there is interplay with recommendations between them but when the Minister controls the appointments of all of those that interplay is very quickly shown for what it is which is a complete fallacy. Then even if the Minister carries out those roles responsibly and with good ethics and impartiality in seeking contestability of views—even with that—the perception will always be there of political influence. Now I worry deeply that the perception will go further than perception and we'll actually see a drive to politicise the Reserve Bank and see people put in place for 10 years which will quite possibly survive this Government. But even if that isn't the case then I would say to the Minister that perception matters and the perception under this legislation is a clear watering down of the independence of the Reserve Bank. It is not done on a bipartisan basis. There is no clear evidence of a problem they're trying to solve. This is a very very poor way to go about reforming what is a crucial piece of our legislative framework.Now the Minister early in the process certainly reached out to me and I appreciate that and I acknowledged that in my first reading speech. I indicated that the Opposition would work constructively with him and try to find good changes and we think there are good changes to be made. I've told the Minister my view that I see there is merit in a monetary policy committee. I think there are changes that can be made. This is not a case of the Opposition opposing the legislation because it's Government and we're Opposition. I think there are absolutely areas where we could have worked together to come up with a good suite of reforms. But while I'm happy to work with the Minister of course that doesn't guarantee our acceptance and unfortunately the changes in these two respects go further than this Opposition is able to agree to.The second aspect of that is around this dual mandate. Now you know I've been in umpteen meetings with officials and hearings and briefings where we have asked time and again: what is the problem we're trying to solve? What isn't working well with the mandate the way it is expressed at the moment bearing in mind that the Reserve Bank has for many years already taken into account a basket of wider economic considerations in setting their monetary policy framework? They already do this. In fact when we've asked the governor—and we'll ask him again tomorrow no doubt at select committee—he has said repeatedly "It's not going to change much. We can already do this." So what is the point of making the change?Here's the risk however of making the change. First of all you're playing with a framework that is well established and that has held New Zealand in very very good stead for a number of years. There have been a number of reviews of our monetary policy framework since the 2000s and they have found that New Zealand has best practice set up in our framework. So why would you take a system that has served New Zealand well that has delivered a very stable economic environment and that has been held up as best practice worldwide and change it with no description at all of what the problem is you're trying to solve and the bank themselves saying it won't change the way they operate?Actually the risk goes further than that because not only is it a case of uncertainty and "What might this do?" and "Why do we need it?" actually you now have the very real risk and again officials have confirmed this that the Minister will now be able to direct the Reserve Bank not only to treat price stability and maximum sustainable employment on the same level—which we think is risky enough because how on earth do you reconcile them if they pull in different directions?—not only will that be permissible; the Minister will be able to direct the Reserve Bank to prioritise employment over price stability. In fact the Minister could go so far as to direct the Reserve Bank through Order in Council to ignore price stability totally for a period of time.Now what would that do to our monetary policy framework? This is a very real risk that the Minister has made no case for and actually will create further uncertainty and weakening in our economic framework. We've already got a business environment where there is rampant uncertainty and to now pull a rug out from one of the few non-political well-functioning bipartisan non-argued pieces of our economic framework without any real reason is sheer madness. I really think it is sheer madness. What on earth will world markets make of a situation where our monetary policy framework can be reversed and thrown on its head by the direction of the Minister of Finance without reference back to the Houses of Parliament?I mentioned before that there is no clarity in the legislation or in anything officials have been able to give us on exactly how a governor or a monetary policy committee can and should reconcile those two competing aspects of their mandate should they find themselves in conflict. And it's interesting isn't it because right now you could say we have a situation where the inflation forecasts over the forecast period in the latest monetary policy statement show that the bank expects inflation to be higher than the 2 percent midpoint. So they're almost forecasting that they're going to fail to meet that target and yet no move in the official cash rate. So then you start saying "Well why is that?" Well the question will always be there: is it because the governor now feels obliged to run the economy a bit hotter to keep the employment numbers up? Well who knows? I can only speculate of course what's in the governor's mind but that question will always persist. Is this the best thing for price stability and the stability of the economy or is the Reserve Bank now going to be delivering on its political imperatives?"