1. JOHN KEY (Leader of the Opposition) Link to this
to the Prime Minister
Does she have confidence in the Minister of Finance?
Did the Minister of Finance consult the Prime Minister before he made repeated comments in question time yesterday about having the power under section 12 of the Reserve Bank of New Zealand Act to override the policy targets agreement; if so, what was the Prime Minister’s response to her outgoing Minister of Finance?
Hon Dr MICHAEL CULLEN Link to this
No, because the Minister of Finance does not need to consult the Prime Minister to find out what is in the Reserve Bank of New Zealand Act.
Why does she think the Minister of Finance made such a big deal yesterday in Parliament of drawing attention to section 12?
Hon Dr MICHAEL CULLEN Link to this
Because in the light of leave being sought by the Rt Hon Winston Peters to introduce a member’s bill, it was useful to point out to the House that the current Reserve Bank of New Zealand Act contains provisions—much to the surprise, obviously, of many people—other than those that people may think are in it.
Hon Peter DunneCan the Prime Minister recall the circumstances in which section 12 of the Reserve Bank of New Zealand Act was inserted into the legislation in 1989, and has she had any discussion with the Minister of Finance about whether the rather extraordinary circumstances envisaged by that section have, in fact, been triggered at this time?
Hon Dr MICHAEL CULLEN Link to this
Clearly, section 12 was put in the Act to indicate that in certain circumstances the Governor of the Reserve Bank’s operating within the policy targets agreement would mean he was unable to fulfil other, broader economic objectives. It was, therefore, a modification of the primary objective within the Reserve Bank of New Zealand Act. I recall that at that time National could not make up its mind which way to vote. It was only a threat made by Ruth Richardson to resign as finance spokesperson that led to National supporting the Reserve Bank of New Zealand Act.
If the Minister of Finance was not trying to send a shot across the bow of Dr Alan Bollard yesterday, why did he bother to come into the House and repeat comments that he had already made outside the House and knew would be publicised on television; and why did he allow leave for Winston Peters to table a bill that Dr Cullen knew was unnecessary because its provisions were already contained in section 12?
Hon Dr MICHAEL CULLEN Link to this
Unlike the member opposite, I make a habit of saying the same thing inside the House as I say outside the House. Because the Finance and Expenditure Committee is already seized of an inquiry into monetary policy, I saw no harm in the select committee also considering a bill that dealt with the same matter. I have every confidence that the majority of that select committee will determine that the current framework of the Act is correct.
In what circumstances would the Government decide to invoke section 12, given that that section was meant to be used in genuine economic emergencies, not just to bail out the failed policies of the Prime Minister’s Minister of Finance?
Hon Dr MICHAEL CULLEN Link to this
Those circumstances would be determined at the time. Of course, the only alternative policy that I am aware of at the present time is that Mr English keeps calling for higher interest rates; he believes they should have been put up earlier and higher.
When the Minister of Finance yesterday floated the idea about the powers of section 12, was that an admission that the intervention that the Reserve Bank has been undertaking—something the Minister of Finance gave the Reserve Bank the power to do—has failed; and is the Minister of Finance aware that the Reserve Bank is currently sitting on a paper loss, as a result of that intervention, in the order of $60 million to $80 million?
Hon Dr MICHAEL CULLEN Link to this
Nobody can float the idea of section 12; it is a reality. If the member goes out into the lobby and opens up the Reserve Bank of New Zealand Act 1989, he will find section 12 of that Act.
Was yesterday’s attempt to float section 12 just another example of what we have seen from the Prime Minister’s Minister of Finance in the last 3 or 4 months—that the Minister will get up on his feet, muse about some idea that he is not really serious about, have his wings clipped or his horns pulled back in, and then blame Bill English?
Hon Dr MICHAEL CULLEN Link to this
That is the first time I have been accused in this House of being horny, but never mind.
Does the Prime Minister’s Government still have a bipartisan approach to monetary policy, as her Government has professed time and time again; if so, and if she is serious about her Government invoking the powers of section 12, could the Opposition expect to be consulted on that?
Hon Dr MICHAEL CULLEN Link to this
There is no bipartisanship over monetary policy. There is bipartisanship over the framework outlined in the Reserve Bank of New Zealand Act. The policy targets agreement has been agreed successively between the Minister of Finance and the Governor of the Reserve Bank, under both Governments, without any reference to the Opposition spokesperson. If there had been, I would have had quite strong views in the past about the nature of the policy targets agreement that was entered into.
Does the Prime Minister expect that her Minister of Finance will eventually recognise that the reason interest rates are very high, the reason New Zealand households are paying more for their mortgages, and the reason New Zealand exporters are struggling under a very high exchange rate is that her Minister of Finance has made such a mess of his economic management, and does she think it will be Michael Cullen who resolves that issue for New Zealanders next year, or will it be Phil Goff, the new Minister of Finance?
Hon Dr MICHAEL CULLEN Link to this
Dr Cullen will remain the Minister of Finance, I am sure, through to the election and beyond. But what the member has to explain is that while his Opposition spokesperson on finance keeps calling for tighter fiscal policy as the answer to monetary policy problems, the member keeps going around the country promising $2.5 billion a year in tax cuts, and more spending in every possible area of public policy. That is called looser fiscal policy.