Woodhouse Michael; Robertson GrantHon MICHAEL WOODHOUSE (National): Thank you Madam Chair and I appreciate the Minister's broad-ranging description of Part 2—it is the substantive part of the bill and we're going to take a random walk through it not a linear walk through it because I will start with clause 79(1) and (2) and continue the conversation that we started in Part 1 about the appointment of the governor as a member of the board. Now the National Party have not tabled an amendment to this clause but I think it's worth drilling into the circumstances that led to new clause 79(1) and (2). And I note the Minister in Part 1 talked about the fact that while this wasn't raised in select committee there was a significant consultation process prior to the bill the second of three being introduced. I stand to be corrected but as far as I can tell none of those submissions actually said to the Minister We would like the governor on the board." And when the bill was referred to the select committee none of the submitters said that then. So we have this unusual situation where on page 11 of the departmental report in response to the questions of governance and changes to the governance structure up it pops with oblique references to the review considering a wide range of governance and decision-making models and then the Reserve Bank Act review team considered a range of different models and decided that this was a good idea. Now I think the committee deserves a little bit more of a fleshed out explanation about where this came from. The reason it's not as a tabled amendment is because I think there are different views about an appropriate governance structure for an organisation like this. And the departmental report does point out although the Minister has informed the committee quite rightly that around the world this is not an uncommon arrangement but in my experience executive directors on boards in a commercial sense in New Zealand at least is probably not the predominant governance structure and in Government in the public sector it's quite rare. Now the committee was informed by officials that commissions often have the commissioner on the board but commissions I think are different—the Law Commission the Commerce Commission—and it also acknowledged that actually for other Crown entities it's very unusual. In fact I don't think there are any other Crown entities where the chief executive is a member of the board.So this is a change; it is a departure. My concern is that that potentially greys what was in 1989 a very clear separation between ministerial oversight board governance and the independence of the governor and his or her team to make decisions independent of that traditional line. Even so there is I think a very strong nose in fingers out principle that underpins governance in New Zealand that has stood the test of time and works well in effective boards.So while I don't strongly oppose it I am concerned at the manner in which this change was made and I think the Minister could give us an explanation of how this came about and the basis and the reasons why he believes that it's appropriate to have the governor as a member of the board because prior to this change actually the Minister had some influence over the sort of operational aspects of the governor's role but it's important that that be kept separate as it is right across the public sector. We've had examples where the Minister might be grumpy with the chief executive of the Public Service but has no influence except over the chair of the board. Now you've this situation where the governor is on the board it's my view that it actually creates perhaps a little more influence than I might be comfortable with subject to the Minister explaining and convincing me that this is a good idea.Hon GRANT ROBERTSON (Minister of Finance): A number of points to cover off in that. The first of those is yes the member is right. Obviously it's not normal in a Crown entity but I've tried to stress all the way through we're trying to match the central bank elements with the Crown entity model and the member himself has acknowledged that it's not unheard of—or certainly not uncommon—in central banking around the world for this to happen.The second thing to say is that he asked the question around how did this come to be. This was the subject of a live debate between the external expert panel that I created for this review exercise the Treasury the bank itself and me. And the views coalesced over a period of time around that. What convinced me primarily that this was a good idea was that the Reserve Bank has these two very particular roles: the monetary policy role and the financial policy role. And the person best placed to glue that together is the governor given the governor's role in those matters both in the monetary policy committee and the broad sweep of financial policy work that the bank does. So that role to me was important.What's changed—and I think the member has hit on probably the biggest point here—is that the board as we've previously known it in the Reserve Bank context to speak very frankly didn't play that much of an active role in terms of the way we would think of boards of the many different variety of Crown entities and State-owned enterprises and other bodies. They had quite a limited scope and role and that did—I take the member's point—make some sense in that very pure 1989 model. However times have changed the role of the bank has changed expanded and looks quite different than what it did. And especially once we moved to that decision-making model with the monetary policy committee the board's role started to change. So I think at that point it did mean that we took a step back and said "Well we want a board that can really have oversight on this." I don't think it does anything in terms of the Minister—far from it in fact. I think the Minister's role stays largely the same except that the board will have a greater role in some of the more closer monitoring that I as the Minister or whoever the Minister is wouldn't do.In terms of the role of the governor there are things that make sure that the position is clearly understood—one of up to nine so clearly there will be eight other people at the table. Secondly areas that the governor cannot be involved in and they're in the bill—in particular the monetary policy committee where reviews of its work and so on the governor steps out for those matters. So I think we get a very good element here of the governor who is the glue of what the bank does being involved. We've got eight other people there so there's no danger of the governor somehow or other overwhelming that or extending their powers too far and I think it puts in place the board structure that will give us the best overall governance. Again clearly contestable because it's not done everywhere but our observation looking around the world is that this enables central banks to work well and we've obviously got a process for the appointment of both the board and the governor that has a high level of transparency associated with it."