Westpac New Zealand Bill

CHRIS TREMAIN (National—Napier) Link to this

I move, That the Westpac New Zealand Bill be now read a third time. This is a private bill promoted by Westpac New Zealand Ltd. To date the bill has been steered through the House by my colleague Craig Foss, and it is a privilege to be able to steer this bill through its third reading today. The bill provides the mechanism to enable certain assets and liabilities of Westpac Banking Corporation in New Zealand, being principally assets and liabilities of Westpac Banking Corporation’s New Zealand institutional banking business, to be vested in its New Zealand subsidiary, Westpac New Zealand Ltd. Westpac operates in New Zealand through both a branch, the Westpac Banking Corporation New Zealand branch, and a locally incorporated subsidiary, which is called Westpac New Zealand Ltd.

Having regard to the Reserve Bank of New Zealand’s local incorporation policy, Westpac Banking Corporation and Westpac New Zealand Ltd have agreed with the Reserve Bank that Westpac Banking Corporation will transfer certain assets and liabilities, being principally assets and liabilities of its New Zealand institutional banking business, to Westpac New Zealand Ltd. The transfer will reduce the size of the New Zealand branch and will assist in ensuring that it continues to remain below its external liabilities cap both in periods of growth and in market volatility. Importantly, the transfer is also beneficial in terms of the Reserve Bank’s local incorporation policy, as it will increase the size of Westpac New Zealand Ltd and will consequently allow the Reserve Bank to have greater control over the assets and liabilities being transferred, were there ever to be a bank failure event.

Legislation is the only means by which the designated assets and liabilities can be vested in Westpac New Zealand Ltd efficiently and economically, without disrupting the conduct and continuity of Westpac New Zealand’s banking business. The bill also ensures minimal disruption to Westpac’s customers, employees, and suppliers, and given the size of the bank, this is extremely important indeed. I wish to offer my thanks to the members of the Finance and Expenditure Committee for facilitating the smooth and timely passage of the bill through the House, and to the officials who appeared before the select committee to offer advice on the bill. My thanks also go to the House for its support for, and its detailed attention to, the bill. I commend this bill to the House.

Hon DAVID CUNLIFFE (Labour—New Lynn) Link to this

I rise to take a call in the third reading of the Westpac New Zealand Bill to confirm that the Labour Opposition will be supporting this bill, because it is important to ensure that the New Zealand banking system remains strong and stable. This bill gives effect to this component of that financial security: to ensure that locally incorporated subsidiaries are of sufficient scale to provide good risk management within our system, pursuant to the regulations of the New Zealand Reserve Bank.

I will firstly draw on the submission by Westpac, in taking the House through the reasons why this bill is necessary, and I will then note several important contextual issues that surround it. Westpac, in some form or another, has operated in New Zealand for 150 years or so. Westpac New Zealand Ltd is a locally incorporated subsidiary of Westpac Banking Corporation, which is headquartered in Australia. That subsidiary has operated in New Zealand only since 2006, and it did so pursuant to regulations passed by the New Zealand Reserve Bank. Westpac New Zealand Ltd conducts Westpac Banking Incorporation’s retail operations in New Zealand, which includes consumer and business banking. The Westpac Banking Corporation branch, which is Australian owned, conducts the institutional business.

Under the regulations that institutional business is subject to a cap of $15 billion of assets and liabilities, excluding those to related parties, which is known as a liabilities cap. The Reserve Bank imposes on branches of overseas banks such as Westpac Banking New Zealand a condition of registration that restricts them from having liabilities in excess of that cap, in order to ensure that the foreign-owned entity does not become systemically important in the New Zealand system—that is, if the foreign-owned entity is too big and the market enters another period of considerable turbulence, then the risks go up for New Zealanders of too much of the asset book being held in foreign hands. That is why we have the rule and that is why a proportion of the assets and liabilities currently held by the Australian-owned parent directly are being transferred to the New Zealand incorporated subsidiary through this bill. That is a very important difference.

So what is being transferred? The answer is some institutional customer deposits, some institutional customer transactional banking, some institutional customer lending, some debt capital markets, and some corporate advisory functions. Of course, that brings to the fore the broader question of why more of Westpac Banking Corporation’s New Zealand assets and liabilities should not be transferred into the New Zealand subsidiary, and why it is in the interest of the bank to maintain a dual structure. Westpac is not the only bank that does that. ANZ, the Commonwealth Bank of Australia, and Rabobank also maintain the dual structure between a foreign-owned entity and a New Zealand - incorporated subsidiary. It may well be that in future it is an issue that a future Government might wish to turn its mind to, in consultation with the banking industry. For now, the Labour Opposition is satisfied that the provisions of this bill are in keeping with the object of the Westpac New Zealand Act and in keeping with the Reserve Bank’s policy to ensure a reasonable level of financial security and stability in New Zealand. For that reason, we support the bill.

I wish to turn briefly to the economic context within which this transfer is taking place. In doing so, it is important to acknowledge that the banking system is of huge importance to New Zealand. Approximately 93 percent, I think, of the banking system is owned by entities that are not headquartered in New Zealand—they are foreign-owned, as it were. They include, notably, the four big Australian banks. The exceptions to that rule are Kiwibank, started by the former Labour-led Government, which has about 5 percent of the market, other smaller entities like TSB Bank and PSIS, and other locally based organisations.

New Zealand is too indebted. That is a theme we have heard a lot about from the Government, before the Budget came out with the figure of $380 million of Crown borrowing a week. It turned out that it was only $280 million a week that was needed; the other hundred million was purely discretionary timing - based. That hides the larger truth, and perhaps deliberately so, that most of the international investment deficit, our net debt as a nation, is not Crown debt, is not public debt, and is not debt owed by the taxpayer. It is debt owed by individuals through the banking system, some 55 percent of which has been invested in house mortgages. I think it is common ground across the House that New Zealanders went on a bit of a house-buying binge over the previous decade.

AMY ADAMS (National—Selwyn) Link to this

I rise to take a call in the third reading debate on the Westpac New Zealand Bill. I believe I have spoken in every debate on the bill as it has passed through the House, so I have already said a lot of what I wanted to cover and I do not propose making a long contribution. I will, though, take the opportunity at the beginning of the third reading debate to acknowledge the previous sponsor of the bill, who is also the previous chair of the Finance and Expenditure Committee, Craig Foss. I have not had a chance yet in the House to congratulate Mr Foss on his promotion to Minister, so I will make a comment as we complete the passage of this bill that Mr Foss has sponsored and shepherded though the House. I think he has done an outstanding job in his previous roles in this Parliament. I have every confidence that he will make an equally outstanding contribution in his new role as a Minister. In fact, I should refer to him as the Hon Craig Foss; it takes a while to get used to that.

The Westpac New Zealand Bill, oddly enough given its name, is not really about Westpac in the most holistic sense. The bill is really about the need—and both previous speakers have certainly touched on this—to ensure that New Zealand has a strong, stable banking environment. Certainly, the last few years have shown us the importance of that. As the previous speaker has said, I think we can all be very grateful, actually, for the way our banking sector has responded in these very challenging times. Although the banks have responded extremely well through the global economic crisis, and have to date responded very well through Canterbury’s own crises, I add what is my plea, I guess, to those “big four” banks, and to all the banks in New Zealand, that they continue to support Cantabrians as we carry on through our own regional crisis.

The bill is driven by the Reserve Bank’s local incorporation policy, which in this sense is really about ensuring that the systemically important banks, the banks that are so big that we need them to be strong and stable, are controlled and incorporated locally, so that if there is ever any sort of banking crisis, the Reserve Bank is able to wrap around those banking organisations and ensure that they are protected for the good of all New Zealanders, and continue to provide the service to New Zealand that we expect of them. A part of that local incorporation policy says there is a liabilities cap of $15 billion, and if banks are to exceed that cap they need to be based and owned locally by a locally incorporated company.

The situation with Westpac, as Mr Cunliffe has commented, is that it is one of the four banks that currently have dual banking registration. The bank has operated to date, and will continue to do so, as a combination of a branch of the Westpac Banking Corporation, which is Australian, and Westpac New Zealand, which is a locally incorporated body. In 2006 the New Zealand branch of the Westpac Banking Corporation, in a bill very similar to the one we have before us, had the consumer and retail business banking transferred over to Westpac New Zealand. This bill mirrors that process, and adds the institutional banking and financial markets operations to that locally incorporated pool.

The important thing to get on record—I have said this in previous debates but it is worth repeating—is that this bill in no way will affect anyone who might be listening or reading these debates and who banks with Westpac in New Zealand. It is entirely limited to the institutional banks, and even for those organisations the benefit of passing the bill through this House is that there can be a seamless transition that really does not affect customers in any way. I just reiterate to all Westpac customers that the bill will have no effect on them, except in the wider sense, which is that all New Zealand consumers, banking customers, and residents can have confidence that because of this bill, and bills like it, we will continue to have a strong and stable banking environment that the Reserve Bank can step up to, can wrap around, and can have good prudential oversight of in years to come.

The bill, as I said, mirrors what happened in 2006. It is a necessary step forward to ensure that Westpac continues to operate within the liabilities cap of the local incorporation policy. It is a necessary bill; it is the best way to achieve the objectives that the Reserve Bank requires of Westpac. I commend it to the House.

Hon DAVID PARKER (Labour) Link to this

At times like this listeners will get an appreciation that a lot of what we do in this Parliament we actually agree on. I do not quite agree with the way in which it was expressed by the prior speaker, Amy Adams, who said that the Westpac New Zealand Bill does not affect depositors. Actually, it does have effects for depositors that are positive.

The background to this bill is that under the last Government the Reserve Bank came to the Government and said it was concerned that the dependence of New Zealand on overseas-based banking institutions could be detrimental to the interests of New Zealand depositors if we came to a tight squeeze, because there were fewer instruments the Reserve Bank would use to control the ranking of unsecured depositors if there was a big clean-out in the banking system. The Reserve Bank wanted to make sure that the interests of New Zealanders could be secured against the assets of New Zealand - domiciled branches of banks, rather than those banks being run as a branch of an Australian entity. As a consequence, the last Government and the Reserve Bank—and now the current Government and the Reserve Bank—have taken steps to ensure that large New Zealand - based banking operations have a New Zealand - based branch that has New Zealand - based assets that would be available to depositors in the event of a failure of the bank. Otherwise there would be a contest between New Zealand - based depositors and Australian-based depositors over what would effectively be Australian-based assets, even if some of those assets were physically based in New Zealand. That is the underlying reason why we have this change. As a consequence of this change, we will have improvement in the banking system for New Zealand.

The other point I will develop was raised by my colleague the Hon David Cunliffe, which is the position that the National Government is taking with regard to savings and the economy. Effectively, it is saying—I think the phrase Mr Cunliffe used was “steady as she goes”. I do not think he was referring to the track by The Raconteurs; he was referring to the economic vision that the National Party has for the country, which is really that we do not have to change much. In its view, New Zealand’s lot will improve despite the settings of the New Zealand economy being largely unchanged.

I challenge that view. I think this bill is an illustration of why that view ought to be challenged. Australia owns not just its own banks but ours. That situation points to a fundamental problem that we have in savings: we do not save enough and we spend too much.

Dr RUSSEL NORMAN (Co-Leader—Green) Link to this

I rise to speak on the Westpac New Zealand Bill, a private bill first promoted by the Hon Craig Foss. The Green Party will be supporting this bill, which is the final instalment of the process of forcing Australian-owned banks to be locally incorporated. Getting Westpac to move its back office to New Zealand has been a protracted process that has involved a lot of kicking and screaming, but finally it seems we have managed to get Westpac to incorporate in New Zealand and actually go through the necessary hoops so that one of our major banks is incorporated in New Zealand and is able to be controlled, to some degree, by the Reserve Bank, our regulator.

This bill has a number of ironies about it. One of the ironies is that the bill is structured in such a way as to be tax-neutral for Westpac. The irony of this, of course, is that Westpac itself is a massive tax avoider, and was convicted of tax avoidance in the High Court. Westpac was found by Justice Harrison to have illegally avoided $586 million of tax, in a case that was settled a year or so ago. The case was finally settled in an out-of-court settlement that was released on 23 December 2009. Many of the listeners to this debate may not have noticed or heard about this particular massive tax avoidance case that Westpac was involved in, because, of course, it was settled just before Christmas and announced at that time. This bill has special provisions in order to ensure tax-neutrality.

The thing about Westpac and the other Australian-owned banks is that they operate in their own interests, which is perfectly understandable, and we should expect nothing else. For example, during that period, according to the judgment about the activities of Westpac in that tax-avoidance case, Westpac had invested about $4.3 billion in its tax-avoidance transactions by August 2002. At the time that was 18 percent of the bank’s total assets, which I think is a very interesting insight into Westpac’s approach to the New Zealand economy. The bank had 18 percent of its total assets invested in tax-avoidance activity. We know that this economy is desperately short of capital, and has been for many years—capital invested into the productive sector—yet we find that one of our major banks had invested nearly one dollar in five in its tax-avoidance transactions rather than in the productive economy of New Zealand. Here we are in this Parliament passing a law that ensures that in the process of transferring these assets there will be tax-neutrality for Westpac. It will not get more tax liabilities—which is perfectly fine—in the process of incorporation in New Zealand. But Westpac itself has a history of illegal tax-avoidance, and it was caught out in that regard.

The way this works is, I think, an interesting insight into the way that Westpac approaches New Zealand. It is why we need to be pretty cynical about the big banks in order to regulate them very closely to make sure they work in New Zealand’s best interests. The way this particular tax-avoidance scheme worked was that the cost of loans was claimed as a tax deduction. Westpac made loans to overseas companies, effectively. The cost of those loans was a tax deduction against the New Zealand tax system, but the interest received on those loans was not taxable. It was a fantastic arrangement for Westpac. That is how it made a huge amount of money and avoided half a billion dollars worth of tax at the time. The bank said that the cost of making those loans was a business cost, so it claimed it as a tax deduction, and then it said that the interest it had received on those loans was not taxable. It did that by getting the interest through an overseas entity and then transferring it back.

So on the one hand we are quite reasonably ensuring that this bill is tax-neutral for the certain vesting operations that we are supporting, but on the other hand Westpac itself has a long history of snubbing its nose at the New Zealand taxpayer—in particular, in this transaction, when Westpac and the other Australian-owned banks were caught unlawfully and illegally avoiding tax. They owed $2.5 billion worth of back taxes, including interest payments. In the end, even though Westpac owed $961 million all up, it ended up getting a cut-price deal and paying only $760 million to the taxpayer of New Zealand, although with interest payments it owed us $960 million. As the judge said at the time, these transactions made no commercial sense. They were purely transactions to unlawfully avoid tax.

That tells us something about the way in which Westpac views New Zealand. It tells us something about the way in which the bigger Australian banks view New Zealand. They do not see us as a base that they want to invest in and support; they see us as a profit centre for sending money back to the Australian owners. It does not surprise me, and it should not surprise anyone, in our attitude towards the big Australian banks, that they would behave in this particular way.

A number of other aspects of the operation of Westpac have been a cause for concern. We have heard about some of the issues around the asset bubbles that have occurred in New Zealand over the last decade. These have primarily been in the housing sector and also in rural land. There have been asset bubbles in both those sectors, and the big Australian banks have been promoting and inflating those asset bubbles in an incredibly irresponsible way. For example, front-line staff were encouraged to push loans on to people who could not afford them, because Westpac and other banks wanted to increase their loan book to increase their profits. So we have had this huge bubble in the housing market and elsewhere, which we are still trying to get ourselves out of. In that respect, Westpac was not acting in our national interests.

Of course, the $5 million pay packet for the chief executive of Westpac has become an issue as well. It is a most incredible and ridiculous pay, which all Westpac customers end up paying for. Then there is the issue of the tender for the master banking contract. Westpac is the Government banker, and the master banking contract has not been tendered since David Lange was Prime Minister. But thanks to pressure from the Green Party it appears that finally we will go through a tender process for the Government’s banking contract, and I congratulate the Government on seeing the light in that respect.

We need a strategy in New Zealand, both to increase savings—the banks will obviously be part of that—and to find a way to move capital into the productive sectors of the economy. The banking system—in particular, the system of the big Australian banks like Westpac—has been a profound failure in moving capital into the useful part of the economy. Instead, it has pushed it into the not-useful part of the economy, which has been the housing asset bubble. As Mr English has said many times, it was a debt-fuelled asset bubble. Mr English is absolutely right to call it a debt-fuelled asset bubble. I see Mr Bennett over there shaking his head; he does not agree with Mr English. Well, I agree with Mr English. He is right. It was a debt-fuelled asset bubble in which the banks were shoving capital into the non-productive sectors of the New Zealand economy.

We need an alternative strategy. One of the strategies on the table is to invest in the existing clean-technology sector in New Zealand. We have a number of clean-technology energy companies in New Zealand that are very successful and have already started exporting. They could be the core and foundation of a clean-technology sector exporting to the world. These are, of course, the State-owned energy companies, which the Government proposes to privatise. These State-owned energy companies already have a lot of expertise and experience in clean technology and could provide the foundation for a clean-technology export sector to the world.

The great thing about those companies is they will not fall into overseas ownership and move overseas. They also have access to a lot of capital. They can do that through their own resources or by issuing green energy bonds. Instead of using banks like Westpac as a way to very ineffectively mobilise capital—because the banks tend to put it into the wrong sectors—we can actually mobilise capital directly by getting the energy companies to issue green energy bonds, the capital of which is directed into the clean-technology sector. The sector is then a platform to export to the rest of the world and also to partner with the private sector.

The Green Party supports keeping the companies in public ownership, but they should partner with green energy entrepreneurs so that they can actually export to the rest of the world. They can mobilise capital using green energy bonds rather than having to rely on the banks, which have a very conservative strategy of simply investing in what they think are safe returns: primarily land, particularly the housing market, but also the rural land market. Those markets, and making bubbles in those markets, are fine for the banks, at least in the short term. However, that is not in the national interest of New Zealand, where we want to promote capital being moved into the productive sector.

We will be supporting this bill. We think it is important that Westpac and the other banks be incorporated in New Zealand and be under the regulatory control of the Reserve Bank. This bill is part of that step but it is far from the solution to the challenge we have in our capital markets in New Zealand. Although it is an important step, it is just the beginning of the reforms we need to make.

RAHUI KATENE (Māori Party—Te Tai Tonga) Link to this

Over the last few months when I have stood in this Chamber to debate a bill, like the Westpac New Zealand Bill, I have had several déjà vu moments—those experiences of having been here before. It is a bit like what we in Christchurch have started to call Groundhog Day—been there, done that, ready to move on. Debating these bills is an experience akin to being on the set of a rolling movie called The Emperor’s New Clothes.

Some members in the House might remember that story. It is a story in which two weavers promise the emperor a new set of clothes, clothes that are invisible to those unfit for their position, stupid, or incompetent. When the emperor parades before his subjects, however, a voice rings out: “He isn’t wearing anything at all.”

Of course, no one in this House could be said to be unfit for their position, or stupid, or incompetent, so I am very pleased to stand here today and see that we are all clothed. But what may be invisible is the cloak of steel that every Christchurch MP wears when he or she comes back to this House. It is a cloak that reflects the courage, the grit, and the sheer determination of each one of our constituents as they will themselves to face another day in the wake of ongoing tremors of the earth.

The point of the story is just to point out the utter contrast that Christchurch MPs encounter as we try to reconcile the reality of our lives at home with our business in the House. It is such a constant challenge to focus on the events of the legislative day when back in Christchurch my Aranui office is unusable again—or was until late this morning. The water is out, the roof has partially fallen in, and what is even worse for my staff is that the TV is munted.

Following the double whammy of aftershocks on Monday, my constituents in the eastern suburbs are once again confronting the challenge of cleaning up the liquefaction. We have people staying in Cowles Stadium Welfare Centre again. The water tankers are out on the roads and the Farmy Army and the student army are getting themselves prepared to get out on the streets again. Throughout it all, fatigue and tension overwhelm us all.

It is not just the nerves and the buildings that have taken a hit. Our economic position is once again threatened by as much as an estimated $6 billion in new damage. I lay all this before the House as part of the context in which we consider the Westpac New Zealand Bill. The entire economy, and, in particular, the Canterbury economy, is in such a state of uncertainty as we reel from the impacts of earthquakes and related damage. We must ensure we respond to such uncertainty by acting in decisive ways to improve efficiencies and to do whatever is necessary in any quarter to achieve the stability we all desire.

So in that sense we turn to this bill knowing that it is part of a move to improve compliance and accountability in the banking sector to ensure the efficient conduct of Westpac New Zealand’s core business. The Māori Party supports the intention of this bill to vest certain assets and liabilities of Westpac Banking Corporation into Westpac New Zealand rather than their remaining incorporated in Australia. It is consistent with the Reserve Bank’s local incorporation policy, and it complies with the overall direction to bring such banks home.

We understand also that legislation is the only means by which the vesting of these assets and liabilities in Westpac can be effected efficiently and economically. As such, we will, of course, support this move. As I understand it, both Westpac Banking Corporation in Australia and Westpac New Zealand will be able to continue to share information and intellectual property. These are all factors we can support in the third reading of the bill. In particular, we support the basic principles of a local incorporation policy as it is consistent with Māori Party policy of keeping things local, of investing in our own sovereignty.

Six months ago Ngāi Tahu leader Mark Solomon, along with Tuku Morgan, Naida Glavish, and Ngāhihi O Te Rā Bidois, attended a meeting on public-private partnerships hosted by Sir Ron Carter, with all the major banks and 40 major companies. At that meeting there was a big banner asking: “Are iwi ready to invest?”. Mark Solomon faced the gathering and told them that their question was back to front. He suggested that the question should read: “Are you ready to invest with iwi, as we have stood in front of you all for 150 years and been absolutely invisible.” There is something in his comment, I think, to consider as we reflect on the direction outlined in this bill—trusting in our own domestic market.

Finally, although we support this bill at its third and final reading, I just note that at some point in this House we need a full discussion about the leadership of the banking and the finance industry in terms of putting in place measures to prevent or mitigate the damaging effects of a global recession.

DAVID BENNETT (National—Hamilton East) Link to this

I will take just a short call with regard to the Westpac New Zealand Bill, a bill that many of us have spoken about a number of times in this House. I congratulate Craig Foss—the Hon Craig Foss now—who shepherded this bill through the House. His position as chair of the Finance and Expenditure Committee has been ably taken over by Amy Adams.

When we look at this bill we see that there is a fairly simple reason and explanation behind why it came before this House. Basically, it is to enable Westpac to meet its obligations with regard to its capital requirements under the Reserve Bank of New Zealand Act. The changes proposed in the bill enable Westpac to meet its obligations and are in the best interests of Westpac itself. It is in the best interests of the New Zealand Government and the New Zealand economy to have Westpac operating under the rules and regulations of the country. It is also in the best interests of the many people who invest, whether by putting their savings into Westpac or by drawing funds from Westpac as borrowers, in the sense that they have a bank that is stable, large, and part of the economic framework of New Zealand.

However, the Labour Party and the Green Party have tended to use this bill as bank-bashing legislation for their purposes. They try their rhetoric around the devil they see in the Australian banks and the New Zealand economy, they perpetuate a lot of myths that create a lot of distraction in our economic environment, and they create a perception that is simply not the case. The Labour Party says that we can have banks only if we have large savings, and the Greens talk about banks that have invested in the wrong things. Well, they cannot blame the Australian banks for those situations. That is the typical Labour and Green guilt and jealousy trip that they put everybody under. The reality is that banks deal with the issues that an economy grants them.

The real problem in New Zealand has been the economic framework that the previous Government set up with regard to property investment, which led to the issues that have been resolved by this Government in our tax changes. This bill is very important in the sense that it is not about Australian banks being dominant in our market, or anything like that. It is about providing the economic framework so that these banks can perform their functions.

I think we need to pay tribute and thank those big banks that have provided stability in the New Zealand economy, which most other economies in the Western World have not had. If we look at places like America and Britain, they would have given their teeth to have had stability in their banking sector over the last 4 or 5 years—stability that New Zealand has through having the big Australian banks in this country.

In essence this bill is partly procedural, in the sense of enabling Westpac to meet its requirements, but also it is very important for our economy in the sense that we need to have a strong Westpac bank that is able to perform its functions as it desires as a big bank in this country and as part of the Australian banking network as well, through its parent company. We look forward to this bill passing through the House.

STUART NASH (Labour) Link to this

I would like to clarify one point that the last speaker, David Bennett, made. He said that the Labour and Green members had used the Westpac New Zealand Bill for bank bashing. Well, I can clarify that the Labour Party is supporting this bill. We have always supported this bill. In the Finance and Expenditure Committee we were very proactive in making sure that this bill went through without any interruption whatsoever. It might have been 3 weeks that the select committee spent deliberating on this bill. There were a couple of small changes, but not once in the select committee process did we mention anything that was bank bashing.

What the member may have been referring to—and I would not want to put words in his mouth—is that occasionally in our speeches we have highlighted some of the inequities in the banking system as it relates to ordinary, good hard-working New Zealanders. But we certainly do not think this bill is bad banking legislation. This is good banking legislation. The Labour Party, of all parties, understands that a good, solid, sound banking system is absolutely important to the economic well-being of an economy. In fact, once Parliament had risen for the 2008 election, Michael Cullen came back here to do a considerable amount of work at the height of the economic crisis to ensure that our banking system was stable and to ensure that the deposits of all New Zealanders were secure. That is how much we believe that a secure, sound, robust banking system is vital to this economy.

Before I talk about the bill, there is one thing I would like to correct. I was deeply offended by something that “Mr Nasty”—Chris Finlayson—said. He said that if Peter Fraser were alive today, he would be a member of the National Party. I think that comment shows Chris Finlayson’s complete lack of knowledge of history and culture. The vast majority of members on both sides of the House and from all parties will be aware, I am sure, that Peter Fraser fought his whole life for the working men and the working women of New Zealand. He fought his whole life to ensure social equity, and he would be disgusted at the way that the Government is dumping on those hard-working New Zealanders who are really struggling at the moment. Peter Fraser was a man with a vision. He led this country and his Government through a war, and he led them through the Depression. He was one of New Zealand’s most visionary Prime Ministers, and that is acknowledged by the vast majority of historians. He is acknowledged as one of the greatest Prime Ministers this country has had. John Key and this Government—there was a full stop there—are not worthy of being mentioned in the same sentence as the great first Labour Government of Peter Fraser. I wanted to get that out. I was going to stand up at the time and say that I took personal offence at Peter Fraser’s name and legacy being demeaned, but I decided I would wait till my speech and give it a little more effort.

Let me talk about the bill. This bill will allow the vesting of certain assets and liabilities of the Westpac Banking Corporation, which is incorporated in Australia, in Westpac New Zealand. This is to enable Westpac New Zealand to comply with the Reserve Bank of New Zealand’s local incorporation policy for systemically important banks, and to conduct its business efficiently. Legislation is, in fact, the only way that we can do this. There is the Westpac New Zealand Act 2006, and we did have a look at it, I understand, but it could not be done under it. The only way it can be done is through this Westpac New Zealand Bill. The bill was brought to the select committee by Craig Foss—the Hon Craig Foss now—when he was chair of that committee, and it was supported by all members of the select committee. As was mentioned, we understand the necessity for this sort of thing.

Westpac is one of New Zealand’s oldest financial institutions. In fact, I understand that next year Westpac will celebrate its 150th anniversary. If we look at the New Zealand banking sector at the moment, we will find there is only one New Zealand - owned bank, and that is Kiwibank. Who set up Kiwibank?

AARON GILMORE (National) Link to this

I start off by pointing out some of the economic voodoo we always hear from the previous speaker, Mr Nash. He is a good man on the footy field, but he sometimes gets his facts a bit mixed up. I think he pointed out that there is only one bank that is Kiwi-owned in New Zealand, and that is Kiwibank. But there are a number. There is TSB bank, which some of the people I know pretty well bank with. There is the Southland Building Society down in the South Island. It is a fine institution, registered in New Zealand. There are a number of other banks, such as the Heartland bank, which we saw in the paper today is forming itself as another New Zealand - owned bank. So there are actually a number of choices of Kiwi-owned banks out there for the people of New Zealand to invest in, put their money in, or borrow from. That has to be a good thing. We also heard that there is a shortage of people wanting to lend to businesses. Well, I was walking down Lambton Quay at lunchtime to buy my sushi, as I do every Wednesday, and outside the Westpac branch on Lambton Quay I read: “If you are a business and you want to borrow money, come in and talk to your local bank manager.” Just down Lambton Quay, the Westpac bank—which this Westpac New Zealand Bill is all about—is willing to lend money to new businesses. I ask Mr Nash to go and talk to them, learn a bit, and find out what is actually happening in the real world.

Westpac has been a wonderful bank, and it has done some great things in my community in Christchurch. I will talk about one thing in particular, which shows us what a great corporate citizen Westpac really is. Westpac has established something called the Westpac Business Hub, which is a place for people to operate businesses whose premises were destroyed in the tragic earthquakes we have had in Christchurch. Businesses can operate from a conjoint area where people can share ideas. Westpac has done that almost free of charge. That just shows us what a wonderful corporate citizen Westpac has been, following the earthquakes. It is not the only bank to do so; many other banks have done other, similar very good things. But Westpac has gone out of its way to provide some extra resources.

I will touch on the earlier speech by Rahui Katene, and some of the issues she pointed out that her people and my people have encountered down in Christchurch. She pointed out some of the issues that have been encountered, and she is right: many people have many issues at the moment down in Canterbury. Westpac itself has encountered many issues, as well. Many people may not know, but the Westpac Building down in Christchurch is one of the buildings that has been condemned and has to come down. It is one of the largest buildings in Christchurch, and it is of architectural note. It has a very well-known, long history in Canterbury. It used to be the headquarters for what was called Trust Bank Canterbury, which was taken over by Westpac a number of years ago. It ended up moving its headquarters into what became the Westpac Building. It was a miracle that nobody was badly hurt in that building in the February earthquake.

We heard from the Greens about the idea that we have to control and regulate banks to death. I think, really, the issue is that if we turn round and try to control monetary policy to the extent that the Greens want to undertake, and put in place a regime they seem to talk about for a bank such as Westpac, no one would be able to borrow, because no one would be willing to lend. I just do not think that makes a lot of sense. We heard from Mr Parker earlier on about the great perils of monetary policy, issues in relation to the dollar, the monetary issues of banks, and how evil banks are in this part of the world. I do not think that that is really appropriate, because this bill is actually about something positive that we all support across this House.

We heard from Mr Nash earlier about the idea that National will borrow large amounts of money. We are borrowing money. We are borrowing money, there is no doubt, to be able to keep people OK, to take the sharpest edge off the recession, and to be able to pay for what we are doing in Christchurch. This year we face a record deficit, there is no doubt about it, because we have had a series of disasters. Next year the deficit will be halved. The year after that the deficit will be halved again, and the year after that we will be in surplus. That is due to good, strong economic policy undertaken under this Government. The banking sector and banks like Westpac have a big part to play in that process, in what they are lending. But Labour would borrow billions and billions more. We heard that Miss Moroney wants to spend another $500 million on early childhood education. That is fine. People over here want to spend more money on foreign missions. That is fine, but there is no big money tree. We need to save more money. Westpac is one of the good banks that people can invest their money in.

I will touch on one final point. One of the issues we seem to hear ad infinitum from the Opposition is in relation to investing more money into the productive sector. I sit in this House and hear Labour say that the rural sector, in particular, is not a productive part of New Zealand. Those members should go and tell that to the dairy farmers, who work 70-hour weeks so that they can produce real foreign exchange to put into their bank accounts. They pay taxes to give benefits to the people of New Zealand. I say to members that that is a productive use of New Zealand savers’ capital. It is a productive business enterprise. We are lucky in New Zealand. We are Saudi Arabia in terms of milk. We produce more milk than any other place in the world. [Interruption] It is white gold. We produce more milk than the rest of the world, and it is a wonderful thing for us to be able to sell and make money—foreign exchange—to pay for the things we need to have. Many of those banking put their money in Westpac accounts, which will not be touched or harmed by this bill. That has to be a good thing. I commend this bill to the House.

DAVID SHEARER (Labour—Mt Albert) Link to this

It is a pleasure to speak on the Westpac New Zealand Bill. I say that touting this bill as part of the Government’s economic plan is a bit rich, really. I mean, this is a largely technical bill that effectively helps to shore up and stabilise our banking system, but I fail to see how it is a part of any great plan. Mind you, I fail to see where the plan is anyway; I am not actually sure what the plan is. Maybe this bill is a central plank in the Government’s economic plan to grow New Zealand. But I see it, and Labour sees it, as something along a more technical line, which helps to stabilise our banking system and to ensure that Westpac is fully incorporated in New Zealand. For that reason Labour supports this bill.

Many of the people who are watching the proceedings of Parliament at the moment may actually reflect on the fact that a lot of the time Parliament agrees on much of the legislation before it. In fact, from memory I think about 80 percent of the legislation that comes through the House is agreed upon by both sides, and that is because it is largely uncontroversial legislation designed to help New Zealand to go forward in a common-sense way. It is only in relation to some of the critical issues, which most people hear about, that we disagree. This bill is one of those pieces of legislation that we do agree on.

The purpose of this legislation is to provide for the vesting of the assets and liabilities of Westpac Banking Corporation’s New Zealand institutional business in Westpac New Zealand. Effectively the bill makes sure that Westpac is fully incorporated as a New Zealand bank. The third reading debate this evening has brought up the matter of the foreign ownership of New Zealand banks. Aaron Gilmore raised the point that yes, we do have the Taranaki savings bank and the Southland bank that he talked about, but overwhelmingly bank transactions in liabilities and assets in New Zealand are undertaken by banks that are owned outside New Zealand, not within it. I think it is a very disappointing feature of our banking system that a lot of the dividends and profits made in New Zealand are made by those banks, which in many ways purport to be local. Let us face it, if we look at the advertising by Westpac, in particular—and by the ASB and other banks—we see they purport to be local. But, in fact, their ownership is offshore.

One of the few major banks actually owned in New Zealand is Kiwibank. It was brought in with a great deal of opposition from the National Party, yet it has proved to be a resounding success. People have got behind it, and they feel that it is their bank because it is owned and controlled here in New Zealand. I worry—and Stuart Nash mentioned this earlier—that Kiwibank, one of the assets that we New Zealanders own, will be next in the firing line for sale once the power companies, Air New Zealand, and a number of the other assets that are in the firing line at the moment have gone.

I come back to this bill, which, as I said, is uncontroversial. The background is that the Reserve Bank’s local incorporation policy assists the regulator by providing it with greater control over the assets of a bank in the event of a bank failure under New Zealand law. This control can help to prevent a bank failure from spilling over into the wider financial system, and causing a wider, more systematic meltdown. Because of that policy, Westpac Banking Corporation and Westpac New Zealand Ltd have agreed with the Reserve Bank that the Westpac Banking Corporation will transfer some assets and liabilities to Westpac New Zealand. Those are principally the assets and liabilities of Westpac Banking Corporation’s New Zealand branch—its institutional banking business. What this really does is to ensure that the assets and liabilities of the Westpac Banking Corporation’s New Zealand business are transferred across to Westpac New Zealand. For that reason Labour will support this bill, as we did right throughout the discussions that took place at the Finance and Expenditure Committee during the select committee process.

I want to touch on a couple of other points with regard to Westpac. I admit that I have a Westpac account; I bank with Westpac. However, as an account owner and a member of Parliament I have a lot of issues with regard to the salary that the Westpac chief executive officer has awarded himself of $5.5 million.

MICHAEL WOODHOUSE (National) Link to this

For the third reading of the rather uncontroversial Westpac New Zealand Bill, which includes fairly straightforward amendments, we have had a very wide-ranging debate on a number of issues in relation to our banking system, some of which was literally from cloud-cuckoo-land. I did notice also a bit of a rewrite of history, so I feel compelled to clear up a couple of misapprehensions that Stuart Nash had about why we have Kiwibank. The rewrite of history is that Kiwibank is a Labour invention and now that it is here we should protect it with every fibre we have. Well, that was not really the case, was it, because from 1999 to 2002 the Labour Government relied very heavily on the Alliance Party and the Deputy Prime Minister, Jim Anderton. Were it not for that reliance—the reluctant Dr Michael Cullen was led kicking and screaming—the formation of Kiwibank would not have taken place. Let the Labour Party take the credit for Kiwibank, but were it not for Mr Anderton and members long since gone from this House, Kiwibank would not exist.

I note the track record on the asset sales of financial institutions. I should say that in 1984 or so, when Westpac was formed, it was formed out of two other Australian banks, the Bank of New South Wales and the Commercial Bank of Australia. I have vague recollections of that. I worked across the road from a couple of those branches in Dunedin, at the National Bank. The National Bank was then owned by Lloyds Bank plc, which was a UK-based bank, as were a number of other banks in New Zealand. Those committed Labour people in that term in the 1980s not only sold the Development Finance Corporation, the Post Office Savings Bank, and the Rural Banking and Finance Corporation but also had—wait for it—a mixed-ownership model with the partial float of that iconic then New Zealand - owned institution, the Bank of New Zealand. In 1986 the fourth Labour Government floated the Bank of New Zealand. Those members over there should own the history.

I suggest that the crocodile tears being shed for the New Zealand banking system are just that. I think Mr Finlayson put it very accurately in his general debate speech when he called Labour lions in Opposition and lambs in Government. They are fairly inarticulate lambs, if Jacinda Ardern’s call in the general debate is anything to go by.

It has been nearly a year since Mr Goff announced that Labour would no longer support the monetary policy accord. Who knows where Labour is on its alternative monetary policy. Will it print money? Will it go back to fixing the dollar against an international currency? It is so concerned that the dollar is so high, but it is a pity Labour was not that concerned when interest rates were so high and the dollar remained stubbornly high, because that was killing our export markets. At least now the New Zealand dollar against the trade-weighted index is lower than it has been since 2007. Were it not for the fact that the United States has twice printed money, in that magical thing it calls quantitative easing, we would probably be in a better position. But it is not for this economy to control what that economy does.

I acknowledge that Mr Cunliffe recognises and takes very seriously the issue of New Zealand’s debt position. He also acknowledged in his call, with big nods from Mr Parker, that the private debt situation is particularly concerning. We on this side of the House do not distinguish as much, because the international financers of that debt do not distinguish so much, between private and public debt. Nevertheless, it was pleasing to hear Mr Cunliffe’s concern about debt levels. So it is really quite perplexing that Labour would go about and campaign on increasing New Zealand’s total debt by billions and billions of dollars not only in its reckless spending but also in a return to the funding of the Government Superannuation Fund and borrowing to put money into KiwiSaver.