Key John: Reserve Bank of New Zealand Amendment Bill — Second Reading 
Key John: Reserve Bank of New Zealand Amendment Bill — Second Reading 
[Volume:610;Page:7614] 
JOHN KEY (NZ National—Helensville) 
: 
 I want members to cast their minds back to 1988. Fifteen years ago I was just a young man in shorts and the Speaker of the House the Rt Hon Jonathan Hunt had spent only two decades in this House. We were the proud owners of the silverware—the Rugby World Cup. Buck Shelford had progressed to become All Black captain after David Kirk and a very young and sprightly Donald Brash wandered into the Reserve Bank as governor. How did he get there? I ask that question. I hear the Labour Party members who are looking at me ask how did he get there. It was by a remarkable turn of fate. 
Tonight for the first time before this House and the public of New Zealand I want to unveil the truth of how Donald Brash came to be Governor of the Reserve Bank of New Zealand. He did so with the support of Margaret Wilson board member of the Reserve Bank. She knew quality when she saw it. She saw the twinkle in a very young Donald Brash’s eyes. She said: “We need him as Governor of the Reserve Bank.” She said: “If you want a good Governor of the Reserve Bank then you need a man with intelligence and with skill.” and she looked into Don Brash’s eyes and she melted. She said: “Absolutely this is a man with skill and intelligence.” 
But he was not just a good governor. He could have gone to the next level—that is a great Governor of the Reserve Bank. But he was not a great Governor of the Reserve Bank. He is a man of courage commitment and ability. No he went right out there on the bell curve right in the 99th percentile. He was outstanding. He was one of the greatest New Zealanders ever to govern the Reserve Bank and he did it because Margaret Wilson gave him the opportunity to do so and to this day he is for ever grateful. Whenever the National Party caucus starts in on her he for one always stands and says: “I want to thank Margaret Wilson. I want to thank her for the opportunity she gave me. She is a wonderful woman and even if she gets a bit confused on other issues I forgive her.” That is what he has said since he came into the House. 
In 1989 through the stewardship of a Douglas Labour Government the Reserve Bank of New Zealand Act was passed. From that time when inflation was 9.1 percent with the brilliance of that outstanding governor Don Brash the country was shepherded through a period of low inflation. In 1991 we were between our targets of 0 to 2 percent and only for a brief time did we exit up to the top end of the band with 2.6 percent. 
It was an outstanding contribution. He is a fine New Zealander and New Zealanders up and down the country are proud to have called him their governor. We are proud to call him a National Party member. He will be a very fine Minister of Finance. That is what is coming. I look into the eyes of the Labour members opposite and I see Jill Pettis can see exactly what Margaret Wilson saw those many years ago—how to recognise a fine New Zealander and how lucky we are to be in this House today. That is how it happened. But we are not here to talk about the 1989 Act we are here tonight to talk about the 2003 Reserve Bank of New Zealand Amendment Bill. 
Richard Worth 
: Hurray for Don! 
JOHN KEY 
: Exactly hurray for Don Brash. So what are some of the specifics of this bill that would be of interest to members of this House? 
Hon Lianne Dalziel 
: When are you taking over from Bill? 
JOHN KEY 
: I am not taking over from anybody at the moment. I do not know whether the Minister has noticed but I am last—26. But anyway let us not worry about my career let us worry about the career of the Governor of the Reserve Bank as he goes forward. 
The first thing this bill does is to remove the governor as chairman of the board. Now that is an unusual thing worldwide. We do not see Alan Greenspan skipping into the Federal Reserve in the mornings thinking “Hello I’m not’’— 
Rodney Hide 
: Skip? 
JOHN KEY 
: Mr Hide is quite right he does not skip that much at 77. We do not see him hopping into the Federal Reserve saying: “My goodness I’m not chairman anymore.” But we have done that in New Zealand and that is OK; we are setting an international trend. It is one of the things that will happen because of the Reserve Bank of New Zealand Amendment Bill will be passed in this House in the months ahead. 
The second person I want to make a very brief mention of is the poor old deputy governor. He is now being removed from the board. When he picks up the 2003 Reserve Bank of New Zealand Amendment Bill he will read of his departure. It is very sad indeed but he will still play a very strong role. The Reserve Bank has a very fine deputy governor at the moment but that position will be gone from the board. 
What I do want to talk about for just a moment are the words “bank” “banker” and “banking”. Rod Donald stood in this House just a few moments ago and waxed lyrical about why the Green Party supported that provision why National had challenged the words “bank” “banker” and “banking” as they stand in a trademark and why we were wrong to challenge that. We were not wrong to challenge that. When the people of New Zealand go to a bank and look at a trademark they rely very heavily on those words. Name trading is a significant part of the banking industry in New Zealand. In my opinion if someone sees a title that has “bank” “banker” or “banking” in it as a trademark that person is entitled to understand that it is backed up by strong supervision and that his or her money is safe. People are entitled to expect that they will not be led down a path of deceit as we have seen from so many financial scams around the world. I stand in this House to protect poor innocent hard-working New Zealanders—my constituents—and we were right to be at the select committee and to make that challenge. We were right to challenge that provision and if Rod Donald is questioning our ethics then he is wrong because we were right to do that. 
For a moment I want to talk about the Continuous Linked Settlement service which is a very interesting issue that is covered in the bill. Members will be aware that foreign exchange markets involve the buying of one currency and the selling of another. In a simple transaction if one were to buy New Zealand dollars and sell US dollars one would need to make what is called the payments. For instance one needs to receive into one’s bank account say NZ$10 million and on the very high exchange rate we have at the moment of roughly 59c against the US dollar pay that $5.9 million into the US bank account. The period of time when those transactions may take place in New Zealand will be within our banking hours of 9 a.m. until 3 or 4 o’clock in the afternoon. However at that time the bank in the US where one holds one’s account or “Nostro” as it is known in the industry is asleep. It lies dormant in the US because people are no longer at work at that time. 
That period of time where people may receive New Zealand dollars and pay away US dollars is known in the industry as the Herstatt Risk. It is named after the German Herstatt Bank which went into default. It had paid away some transactions and not received others and that created a huge liability. For years and years the worldwide financial services industry has faced Herstatt Risk in paying away billions of dollars before it has received the counter dollars on the other side. 
This legislation will adopt an international trend called Continuous Linked Settlement. It is an international protocol and clearance system that will allow real time exchange for foreign exchange. It will allow the receipt of US dollars at the same time that New Zealand dollars are paid away. That will remove a huge contingent liability on the banking system. 
National will support this legislation because we support strong monetary policy. Strong monetary policy must play its role in a strong New Zealand economy. We also support this legislation because Continuous Linked Settlement can provide some real benefits to the financial services industry in New Zealand. 
Whenever we get an opportunity we will reflect on the wonderful contribution that the Governor of the Reserve Bank made in that time from 1988 to 2002. We can only hope that the new Governor Alan Bollard can follow in the great steps of that wonderful New Zealander Dr Donald Brash. 
Bill read a second time.