Thursday, 12 November 2015

THURSDAY, 12 NOVEMBER 2015

THURSDAY, 12 NOVEMBER 2015

Mr Speaker took the Chair at 2 p.m.

Prayers.

Business Statement

Business Statement

Hon SIMON BRIDGES (Deputy Leader of the House): When the House resumes on 17 November the Government intends to make progress on the Support for Children in Hardship Bill, the Weathertight Homes Resolution Services Amendment Bill, and other bills in Committee on the Order Paper.

CHRIS HIPKINS (Senior Whip—Labour): I wonder whether the Deputy Leader of the House could give us an indication of whether the Government intends to use any urgency between now and Christmas; if so, what the approximate timing of that would be.

Hon SIMON BRIDGES (Deputy Leader of the House): When the Government has made final decisions, the member will be the first to know.

Points of Order

Speaker’s Rulings—Notification of Ruling

CHRIS HIPKINS (Senior Whip—Labour): I raise a point of order, Mr Speaker. Yesterday, prior to question time you gave a considered ruling on a matter that I am not going to re-traverse here. We have heard in the last 48 hours from National Party sources that they were aware of your intentions prior to that ruling being delivered in the House. I just seek some reassurance from you that that is not, in fact, the case and that if you are giving any advance notice of your intentions in the House prior to doing so, all members of the House are made aware of that, not one side and not the other.

Mr SPEAKER: I give my absolute assurance that I discussed it with no member of the National Party whatsoever. I spent a lot of time on it. I was still working on the final wording of it as I came into the House. I certainly did not discuss it with members of the National caucus.

Standing Orders—Proposed Suspension

DENIS O’ROURKE (NZ First): I raise a point of order, Mr Speaker. I move under Standing Order 4(1) that the Standing Orders be suspended for the purpose of permitting me to move a motion for a debate straight after question time today on a matter of very serious and urgent significance, being that the House debate the differences—

Mr SPEAKER: Order! The member may well have studied Standing Order 4(1), but he also needs to study Standing Order 5, because his action is not in line with the Standing Orders.

Oral Questions

Questions to Ministers

Unemployment—Rate and Measures to Address

1. GRANT ROBERTSON (Labour—Wellington Central) to the Minister of Finance: Does he stand by his statement, made on the day Statistics New Zealand reported that 151,000 people were unemployed, that “the Government did not intend to do anything specific to tackle rising unemployment”?

Hon BILL ENGLISH (Minister of Finance): No, I do not stand by that, because I did not say it. What I did say is that—

Grant Robertson: How could they have got it so wrong?

Hon BILL ENGLISH: You would have to ask Radio New Zealand. What I did say was that the Government would not be chasing around the unemployment numbers, 3 months to 3 months. We take a longer-term point of view because that is the realistic one, and that is to reinforce and encourage businesses that are doing well to invest, to employ more people, and to grow. In fact, the Government has around 500 specific actions to achieve this, all listed in the Business Growth Agenda, which I hope the member has read. This is part of the reason why the proportion of 15 to 19-year-olds not in education, employment, or training has fallen to the lowest level ever recorded.

Grant Robertson: In light of his taking a long-term view, why has New Zealand slipped in the OECD rankings on unemployment from first in 2005 to 15th under his watch?

Hon BILL ENGLISH: There are a number of reasons why that has changed, and that has a lot to do with the global financial crisis, which we know—[Interruption]

Mr SPEAKER: Order! I need to be able to hear the answer. I do not mind some interjection, but when it is a barrage, that is not acceptable.

Hon BILL ENGLISH: The other significant reason was the unwinding of the debt-funded, Government-funded bubble that led to those low levels of unemployment, but unsustainable levels of unemployment, back in 2005.

Grant Robertson: Given his reference to the global financial crisis, did the United States and the United Kingdom also experience the global financial crisis, and how is it that their unemployment levels are now lower than they were in 2008?

Hon BILL ENGLISH: There were, of course, higher levels of unemployment in those countries back in 2009-10, so they are still in a recovery from a recession that actually started in those countries back in 2009. We have recovered, and now we are going through another softer patch, for the obvious reason of lower dairy prices.

Hon Annette King: So we’re going up in unemployment?

Hon BILL ENGLISH: Economies do go up and down, and the member should get used to that.

Barbara Kuriger: What steps is the Government taking to support more jobs and higher wages?

Hon BILL ENGLISH: As I said, the Business Growth Agenda sets out 500 specific actions, but I will list just a few: introducing the 90-day trial period, which I understand the Opposition is still against; reduced income taxes and taxes on investment and savings; reduced ACC levies by $1.5 billion since 2012; alongside local government, spending $110 billion on infrastructure in the next 10 years; and negotiating a wide range of free-trade agreements, so our businesses can sell more—for instance, to North America—and create more jobs. But the Labour Party is, apparently—

Mr SPEAKER: Order!

Grant Robertson: Given that list of actions and his 500 actions in his glossy Business Growth Agenda, how come unemployment is 6 percent and heading towards 7 percent?

Hon BILL ENGLISH: For the pretty obvious reason that when an economy slows down, the rate of job creation slows as well. The fact is that the drop in dairy prices has taken billions of dollars of income out of the New Zealand economy, as the member has pointed out himself. If it is not coming in, it cannot be there to pay wages for more and more jobs. So we have had strong job creation. It has flattened out a bit at the moment, but we have every confidence that because of our 500 policy initiatives it will pick up again.

Sarah Dowie: What further steps is the Government taking to support employment?

Hon BILL ENGLISH: In particular, the Government has taken a large number of the steps to assist the transition of young New Zealanders into the labour market. A range of schemes, from targeting NCEA level 2 pass rates through to the Youth Guarantee, mean that there are now more young people than ever—or a larger proportion than ever of young people—who are going to employment or training, and that is a real success.

Grant Robertson: Is it correct that under his watch New Zealand has never ranked higher than ninth in the OECD in terms of unemployment, and the only times we have been as low as 15th have been under his watch?

Hon BILL ENGLISH: I have not checked that information, but I will—I have not checked that information, but I will. The important thing is that New Zealand is showing considerable resilience in the face of global economic shocks and domestic ones: a recession in 2009-10, a large earthquake, and now a softening in our commodity prices. All through that we have had consistent job growth, up until quite recently. The labour market has worked very well, and we have every confidence that although there is a slow-down in job creation at the moment, it will pick up again.

Grant Robertson: Can he promise New Zealanders that he will get back to first in the OECD rankings on unemployment, as we were in 2005, at any point in his three terms as finance Minister?

Hon BILL ENGLISH: No, because for a lot of New Zealanders it would be a meaningless promise; for instance, for most New Zealanders what matters is the employment rate—that is, the proportion of the available workforce that has jobs—and in New Zealand that is at the highest levels that it has ever been. We have got among the highest levels that we have ever had of the proportion of working-age New Zealanders who actually have a job and are available for work. So for most New Zealanders that is actually a more important measure of success.

Grant Robertson: Does he think that his employment policies are a success, and if he was to go ahead and say that, would that not make him a liar and a hypocrite?

Mr SPEAKER: Order! No. I am not going to allow that question. I will allow the member to rephrase it—

Grant Robertson: I raise a point of order, Mr Speaker. Yesterday in this House you made a very specific ruling about what was and was not unparliamentary language. I phrased my question carefully to fit within what you said yesterday was acceptable in terms of unparliamentary language.

Mr SPEAKER: Order! I have not got exactly what was said yesterday, but I am not happy with that question, which, effectively, implies that a member is a liar and a hypocrite. [Interruption] Order! It will lead to disorder—[Interruption] Order! I am inviting the member to rephrase this question. If it is not rephrased, I will not allow the question.

Grant Robertson: I raise a point of order, Mr Speaker. In your explanation you said that the reason that you were not accepting the question was because of the implication that a person was a liar and a hypocrite, in this case. That is precisely the thing that yesterday you said was acceptable: the implication from the Prime Minister that if we were to say something that would mean that we were to protect rapists, “go ahead”. That is exactly the same formulation that you found acceptable for the Prime Minister, but it is somehow not acceptable for me.

Mr SPEAKER: No, it is not, and I do not want to spend much more time on this, or we will move to the next question. The first instance with the Prime Minister was when no one took objection at the time. That is the point I have laboured to this House. If exception had been taken, and I should have acted quicker, and I have acknowledged that to the House—but no one took exception at the time. In this occasion, I have taken exception to those remarks at the time. I am therefore saying they are unacceptable. They will lead to—

Hon Annette King: But has the House?

Mr SPEAKER: I do not want to ask the member to leave, but if she is going to interject while I am on my feet, she gives me no choice. So I am inviting the member to re-ask the question, without that imputation. Otherwise, we will move immediately to the next question.

Grant Robertson: I raise a point of order, Mr Speaker.

Mr SPEAKER: Well, no—

Grant Robertson: I raise a point of order, Mr Speaker.

Mr SPEAKER: Order!

Grant Robertson: No, Mr Speaker, you yesterday—I raised a point of order as the person who had raised objection to the Prime Minister’s statement. I raised the point of order on Tuesday immediately after the Prime Minister used the phrasing that I have used in this question—immediately after. The “if” in the “go ahead”, which you told me yesterday made the Prime Minister’s statement acceptable—that is the framing I have used in this question today. And I raised my point of order about that immediately when the Prime Minister did that.

Mr SPEAKER: No, I happen—that is not correct, according to Hansard, because I happen to have the Hansard in front of me. You raised your point of order after the Prime Minister had finished saying: “if those members want to protect sex offenders, rapists, or murderers, go ahead. I am not going to.” I do not find—[Interruption] Order! I do not find anything unparliamentary in that, but to imply that a member of this House is a liar and a hypocrite, I do find unparliamentary, and therefore I will not allow the matter to be relitigated. I do not want to take a question off the member, but if he does not want the question, we can move very quickly—

Grant Robertson: Point of order—

Mr SPEAKER: No, no. Order! I am on my feet. We have spent now approximately 5 minutes on this matter. My decision is absolutely final. Members do not have to agree with my decision, but they have to accept it. I am happy to accept a fresh point of order, but I will not have the matter relitigated.

Chris Hipkins: I raise a point of order, Mr Speaker. I have the Hansard in front of me from yesterday, in fact, where you were ruling on the point of order that Grant Robertson raised.

Mr SPEAKER: Can I have the page of the Hansard?

Chris Hipkins: I have got the online version printed out, but it is immediately after—I am happy to read it for you, if you want me to. But you said that the member needs to actually quote the words that were said, and I happen to have them: “The Prime Minister, towards the end of the answer, says ‘If those members want to protect sex offenders, rapists … go ahead. I am not going to.’ I see nothing unparliamentary in that, as I have already stated categorically.” The issue is: what is the difference between that statement and the statement that you did rule unparliamentary? The only difference is the word “if” at the beginning of it.

Hon BILL ENGLISH: Speaking to the point of order—

Mr SPEAKER: I will hear from the Hon Bill English.

Hon BILL ENGLISH: Whatever the merits or otherwise of the issue of logic that the members raise, it is a longstanding convention in this House that those terms that the member used have always been ruled out, no matter what the circumstances or context. It would be a drastic departure from convention in this House if suddenly, on the basis of that sort of specious argument, they are now regarded as parliamentary. [Interruption]

Mr SPEAKER: Order! When I look back at the offensive remarks on Tuesday, those remarks were “You back racists”—

Hon Member: “Rapists”.

Mr SPEAKER: —“rapists”; I apologise. That implies that we all do, including me; in fact, it was addressed to me more than to members. That should have been addressed at the time. I should have addressed it at the time. Other members should also have addressed it at the time. No one did, so we have got to move past that situation. This one I am addressing at the time.

Catherine Delahunty: I raise a point of order, Mr Speaker. I just would like your guidance on this. How do we create a convention that protects us from that kind of language, which you have just said is unparliamentary? Because, presumably, those other words were created and that convention was accepted. How do we do that in this House? Because some of us really need that to happen.

Mr SPEAKER: The way we need to do it is by making sure that I act at the time, and in the times that I do not act—because I do not hear everything; this is a noisy environment—members themselves must act immediately. The problem with Tuesday was the time lapse that occurred and other statements that occurred in those 3½ minutes.

Chris Hipkins: I raise a point of order, Mr Speaker. A fresh point of order.

Mr SPEAKER: I would be pleased.

Chris Hipkins: I think going forward it might be useful for the House if you were to consider in a more deliberate way and perhaps come back to the House with whether, in fact, premising any unparliamentary remark with a question or a hypothetical—saying “if”, “what”, you know, or so on—would also make it unparliamentary. I think if you were to make such a ruling, you would have the full support of the Opposition in that, because an unparliamentary remark is unparliamentary regardless of whether it is made in a statement or in a question.

Mr SPEAKER: I do not think it requires any further work. The members themselves can look at Standing Order 380, “Content of questions”: “Questions must be concise …”—and, if you look particularly at paragraph (1)(c)—must not include “discreditable references to the House or any member of Parliament or any offensive or unparliamentary expression.” I am very lenient in the way I interpret Standing Order 380, because many, many questions, from all members—particularly supplementary questions—if I was strict, according to Standing Order 380, would be ruled out. I think it would make this place quite antiseptic; I do not think it would be helpful to political debates. I do not think I can respond in the way the member is asking me to, because it is a matter of me judging situations as they arise. To try to formulate them, and set down a Bible to guide me, I think would create difficulties for me and, frankly, would create difficulties for members of this House.

Grant Robertson: I raise a point of order, Mr Speaker. I have one more point of order. Just for absolute clarity, for my sake: the second statement that the Prime Minister made, which was when I did take my point of order on Tuesday—when he said “If members want to protect [etc., etc.] then go ahead”—for you that is acceptable, and that is not an unparliamentary piece of language? Can I just clarify that.

Mr SPEAKER: That is exactly what I have said.

Grant Robertson: So why was my question unacceptable?

Mr SPEAKER: Because of the terms you used. But I have explained it.

Grant Robertson: The terms I used? OK.

Mr SPEAKER: Yes.

Grant Robertson: Why does he think it is acceptable that after 7 years as Minister of Finance the best that he can do is 15th in the developed world, and rather than telling unemployed New Zealanders, as he did on Radio New Zealand the other morning, to “try harder” to get a job, should not he be the one who is trying harder?

Mr SPEAKER: Before I call the member, the question, in my mind, is certainly in order, but if I were to strictly interpret Standing Order 380, that question would not be in order. I think it is a good example of where we have moved. The question is in order; it can be answered.

Hon BILL ENGLISH: I would certainly have to check the member’s second, probably wrong allegation of something I said, but in respect of unemployment—

Chris Hipkins: I raise a point of order, Mr Speaker.

Mr SPEAKER: Order! Allow the—I will hear from the member.

Chris Hipkins: On a strict interpretation of the Standing Orders, the Minister’s answer would also now be out of order.

Mr SPEAKER: And I absolutely agree with that. It was unnecessary for the Minister to respond in the way he did. That is absolutely true. Would the Minister now complete his answer.

Hon BILL ENGLISH: I disagree with the member’s statement. The fact is that New Zealanders have a strong rate of job creation. It has—

Grant Robertson: 15th in the world, Bill.

Hon BILL ENGLISH: If he wants to measure them against the rest of the world, New Zealand’s participation rate is one of the highest in the developed world. That is, the proportion of the working-age population that is in work or available for work is one of the highest in the developed world. That is a measure that matters to a lot of New Zealanders. So we can trade measures, but the economy has shown it has been remarkably resilient through difficult circumstances, and we have every confidence that, to the extent that the Government can influence it, the employment outlook, which is currently soft, will strengthen over the next couple of years.

Economy—Performance and Risks

2. BARBARA KURIGER (National—Taranaki - King Country) to the Minister of Finance: What reports has he received on the stability of New Zealand’s financial system?

Hon BILL ENGLISH (Minister of Finance): Yesterday the Reserve Bank released its 6-monthly Financial Stability Report, which found that our financial system continues to perform well despite a deterioration in the outlook for global financial stability. The banking system is maintaining sound levels of capital, above minimum requirements, and growth in bank deposits has kept pace with growth in lending. Lower interest rates—in fact, the lowest interest rates in 50 years—are allowing borrowers to repay their debts faster. Our net external liabilities have declined from a peak of 85 percent of GDP down to 62 percent, supported by higher household savings. The softening economy may mean that these numbers worsen a bit in the short to medium term, but I would expect to see continued improvement in the long term.

Barbara Kuriger: What does the Reserve Bank have to say about risks to New Zealand’s financial stability?

Hon BILL ENGLISH: They point out risks that I think the House is pretty familiar with: the low prices in the dairy sector, which mean there are risks for that part of the dairy sector that has high debt; and also their view that Auckland house price increases are too high and are not sustainable. That is why we are working closely with the Auckland Council on a wide range of measures to improve supply and improve the planning system. In respect of housing, the Government has introduced tax measures such as the brightline test, the Reserve Bank has introduced the investor loan-to-value ratio restrictions, and on 1 April next year there will be a withholding tax payable by foreign owners of houses when they sell those houses.

Barbara Kuriger: What recent data has he seen on Auckland housing?

Hon BILL ENGLISH: The most important is the annual number of building consents, which in Auckland is currently running at the highest in 10 years, at 8,700. It needs to keep growing to keep up with growth in population and growing demand. There is some recent anecdotal evidence that the housing market in Auckland is slowing down, but we would need to see numbers for another 6 months in order to see whether it is a long-lasting effect. The recent National Construction Pipeline report projected an extra 80,000 homes over the next 6 years.

Barbara Kuriger: What other reports has he seen on New Zealand’s economic resilience?

Hon BILL ENGLISH: The International Monetary Fund published its concluding statement on New Zealand this week. It pointed out that the flexible exchange rate is an important economic buffer, so the drop in the exchange rate will help our economy adjust and grow again. Farmers are employing a range of measures to adapt to lower dairy prices. Finally, it pointed out that the banks are well capitalised, so they can handle a period of lower dairy prices or a slow-down in house prices.

Australia—Deportation of New Zealanders

3. METIRIA TUREI (Co-Leader—Green) to the Minister of Justice: Does she believe proposed laws dealing with deportees, including those from Christmas Island, will sufficiently uphold the rights of New Zealanders?

Hon SIMON BRIDGES (Associate Minister of Justice) on behalf of the Minister of Justice: Yes. As the Minister has previously stated, the intention of the returning offenders legislation is to mirror as closely as practicable the existing framework that applies for the monitoring and supervision of offenders who have served their sentence in New Zealand. Our primary concern is to uphold the rights of law-abiding New Zealanders who live in the communities that these offenders will be returning to.

Metiria Turei: How many New Zealanders are currently detained on Christmas Island?

Hon SIMON BRIDGES: I think it is approximately a couple of hundred, but I would need to check that to be precise.

Metiria Turei: Of those New Zealanders currently being detained on Christmas Island, how many have convictions for rape or for murder?

Hon SIMON BRIDGES: I cannot give the member numbers on behalf of the Minister. What I can be very clear about, though, is that on the most recent advice to the Minister, from yesterday, we know that there are sexual offending, indecent treatment, or dealings with children under 16. We know there is manslaughter. We know there is robbery, and some very serious assaults. I agree with what Minister Dutton of Australia has said, that it is a—

Mr SPEAKER: Order! The question was answered at the start when the Minister said he did not know.

Metiria Turei: Of those New Zealanders currently detained on Christmas Island, how many have finished serving their sentence and are being detained solely because they are awaiting deportation?

Hon SIMON BRIDGES: Well, I note the primary, and I do not have that detail to hand.

Metiria Turei: Of those New Zealanders currently being detained on Christmas Island, how many are detained not because of a criminal conviction but because their visa was revoked on character grounds?

Hon SIMON BRIDGES: Again, I note the primary. I do not have those numbers.

Metiria Turei: Given that the Minister has released some information about the convictions of some of the detainees, when will she release the rest of the information about the convictions of the detainees?

Hon SIMON BRIDGES: The situation is reasonably clear. There are legal reasons in Australia, and, I think, in New Zealand, why that information cannot be provided. In any event, it is quite clear that the information has been provided to the New Zealand Government on the basis that it is not disclosed in full—that it is provided in confidence and not for public dissemination.

Metiria Turei: Is the Minister concerned that the laws governing the deportation of New Zealanders explicitly state that the rules of natural justice do not apply?

Hon SIMON BRIDGES: If the member is referring to the proposed legislation, I think that it is a very fair piece of legislation—in that what it is seeking to do is mirror, as far as practicable, what happens on release from prison in New Zealand.

Metiria Turei: I raise a point of order, Mr Speaker. I would ask your advice. The Minister has misunderstood my question. I would seek your indulgence to ask the question again in a way that would provide him with more information, because he is definitely—

Mr SPEAKER: Order! I will allow it in this case, but can the member, in asking the question, be clear whether she is talking about the proposed law, because that would help?

Metiria Turei: No, that is what I think the Minister misunderstood.

Mr SPEAKER: Well, I do not blame the Minister for being confused, because I was equally confused.

Metiria Turei: Is the Minister concerned that the laws governing the deportation of New Zealanders from Australia contain explicitly the statement that the rules of natural justice do not apply to those New Zealanders?

Mr SPEAKER: Again, in so far as there is ministerial responsibility, the Hon Simon Bridges.

Hon SIMON BRIDGES: The Minister does not have responsibility for Australian legislation.

Metiria Turei: How is it that the New Zealand Minister of Justice is not concerned that New Zealanders set for deportation from Australia are being deported under a law that explicitly states that the rules of natural justice do not apply to them?

Mr SPEAKER: The Hon Simon Bridges, in so far as there is ministerial responsibility.

Hon SIMON BRIDGES: The member is entirely misinterpreting what was said. I have never said on behalf of the Minister of Justice that I am not concerned. It has been made quite clear in this House a number of times that this Government disagrees with Australian policy on this—that we have advocated for New Zealand detainees and, importantly, for the victims of crime. As I made quite clear in the primary answer, though, our primary concern is the rights of law-abiding New Zealanders whom offenders return to here in New Zealand.

Special Education—Early Intervention Service

4. CHRIS HIPKINS (Labour—Rimutaka) to the Minister of Education: Why has funding for the early intervention service declined since 2010 when the ministry has reported that demand for the service is rising and its ability to respond to referrals on time is declining?

Hon HEKIA PARATA (Minister of Education): I am advised that funding for the early intervention service has not declined since 2010. What the member will be referring to is a reduction in expenditure in the early intervention service arising from the centralisation of support functions at a regional level between 2010 and 2011. Ensuring greater efficiency in the support functions of the ministry has enabled it to provide services to a greater number of children. The demand for the early intervention service has increased significantly. This year the service assisted an additional 2,818 children with early intervention services over our target for 2014-15. This is in part due to the success of the Government’s focus on more children participating in quality early childhood education.

Chris Hipkins: Why did she indicate in answer to written parliamentary question No. 13282 of this year that funding for the early intervention service had decreased from $41 million in 2010-11 to $40 million in 2014-15?

Hon HEKIA PARATA: I do not have to hand the specific written parliamentary question. The distinction I am drawing to the attention of the member and the House is between expenditure and funding. So although the amount went down by $2 million, the funding into the service did not change. Secretarial shared support services became shared across the ministry, and that explains the difference between those two numbers.

Chris Hipkins: How many eligible children did not receive an early intervention service within 90 days of referral last year?

Hon HEKIA PARATA: I do not have that operational detail to hand—

Dr David Clark: Oh!

Hon HEKIA PARATA: I do not have that operational detail to hand, but certainly I can get that for the member. What I can tell you is that 11,500 was the target for our service, and we exceeded that by 2,818.

Chris Hipkins: How many children were on a waiting list for early intervention services over the last year for more than 6 months?

Hon HEKIA PARATA: Again, I cannot provide that level of operational detail. What I can repeat is that 11,500 were targeted for services. We exceeded that by 2,818.

Chris Hipkins: I raise a point of order, Mr Speaker. I seek some guidance from you as to what recourse a member can have when they put down a relatively specific primary question, indicating the direction of supplementary questions, and ask very specific supplementary questions that they do not get answers to?

Mr SPEAKER: The recourse is to try again another day, I guess, or use more supplementary questions now, or to put it down specifically in the form of written questions. Those are the three options. My duty here is to judge whether the questions have been addressed. When a Minister says they do not have that information at hand, then the question has been addressed. I think the member actually knows that point.

Chris Hipkins: I raise a point of order, Mr Speaker. It is a further point of order. In cases where Ministers have not prepared that information and do not have that information to hand—

Mr SPEAKER: Order!

Chris Hipkins: We have only a limited number of supplementary questions each day. Will members get additional supplementary questions if Ministers do not prepare and do not answer the questions?

Hon Simon Bridges: Point of order.

Mr SPEAKER: No, I do not need assistance. The answer to your question is probably no.

Chris Hipkins: Did the Ministry of Education fail to provide early intervention support for over 6,000 children within the 90 days required in 2014, and does she think that this is acceptable?

Hon HEKIA PARATA: I cannot speak to that specific detail, but what I can tell you is that it is not acceptable. That is why we have been undertaking a special education review up and down the country this year. We have met with extraordinary numbers of parents and providers to understand what the challenges are so that we can improve the support. We do that, however, in the context of this Government having raised the funding into special education by 26 percent. It now stands at $530 billion.

Chris Hipkins: I raise a point of order, Mr Speaker. I seek some further guidance from you as to what Opposition members can do when a Minister says that they cannot answer a question and then goes on to provide a short speech on a whole range of other issues.

Mr SPEAKER: Order! The member is now starting to trifle with me on this matter. I have said on many occasions in the House that I will judge the length of answers. Often I think it has been answered very quickly and the additional information is simply superfluous. Sometimes I judge that the information may be of value to members.

Catherine Delahunty: What is her response to the 89 percent of early childhood council centres surveyed in October this year that said they had not received education support worker services for children with dyslexia, dyspraxia, and autism for the amount of time that they required them?

Hon HEKIA PARATA: Well, first of all, it was 80 percent, which amounted to 100 services out of 5,230. My answer is the same as to the previous question. We are concerned about some of the difficulties being experienced in the special education system, and that is why we are reviewing it. I welcome the select committee report that the member is referencing.

Catherine Delahunty: Will she commit more funding for early intervention services so that the delayed development of children with learning differences does not create more costs for the education, health, and justice systems, and children are not struggling under the label of failure?

Hon HEKIA PARATA: We are finding in the review that too much of the provision for special education is siloed into specific programmes. So the early intervention programme is one of a range of support services that are provided for early childhood education provision, and we are looking at how we can relax the boundaries between those services so that we can help more kids, without tripping over these programme parameters.

Catherine Delahunty: I raise a point of order, Mr Speaker. Thank you, Minister; that is very helpful. But I just did ask whether the Minister would commit more funding.

Mr SPEAKER: I wish the question had been as simple as that. We will allow you, on this occasion, to ask an additional supplementary question. Make it as a simple as that, and then we can assist with an answer. Catherine Delahunty—an additional supplementary question.

Catherine Delahunty: Will the Minister commit more funding, given the increasing numbers of children—

Mr SPEAKER: Order! No, this is where we get into trouble. I am trying to help the member. If the member just rises and asks whether there will be increased funding—but when she starts to add more and more, it gives the Minister every avenue to answer the other parts of the question. I am trying to help the member. I am giving her extra assistance here; I am being very generous on a Thursday. It is, effectively, an extra supplementary question. I invite her to ask it.

Catherine Delahunty: Will the Minister commit more funding?

Mr SPEAKER: To?

Catherine Delahunty: To early intervention services, so that our kids get their—

Mr SPEAKER: Order! That is all we need.

Hon HEKIA PARATA: There is already more funding available to that group of children. They are just not all called early intervention services. There is an early hearing service, there are services for speech therapy, there are services for different disabilities, and we are trying to bring all of those together into a wraparound service, rather than siloing them into one programme.

Hon David Cunliffe: Ashamed!

Hon HEKIA PARATA: I am not ashamed, actually—

Mr SPEAKER: Order! The question has now been addressed.

Childhood Obesity—Healthy Lifestyles Campaign

5. SIMON O’CONNOR (National—Tāmaki) to the Minister of Health: How will the new high-profile public awareness campaign starting today encourage people to make healthy lifestyle changes to tackle obesity?

Hon Dr JONATHAN COLEMAN (Minister of Health): Today we are launching a campaign to improve children’s health by encouraging small but long-term changes to diet and exercise habits. Kiwi sports stars, including Olympic gold medallist Valerie Adams, Silver Ferns captain Casey Kōpua, All Black Israel Dagg, Black Caps skipper Brendon McCullum, and Warriors star Shaun Johnson are fronting the campaign. Some ideas parents can pick up on include substituting unhealthy snacks with healthy snacks, rewarding kids with activities instead of food treats, and making water the first choice. In addition, we are launching a new website www.eatmovelive.govt.nz—

Hon Members: Speech! Speech!

Hon Dr JONATHAN COLEMAN: —you will learn something, so just listen—which provides families with affordable meal and activity ideas, which is one of the key things parents asked for during our recent research. [Interruption]

Mr SPEAKER: I stated earlier, and it may have been missed by Carmel Sepuloni, that I will judge when I think an answer is too long, not the junior Opposition whip.

Simon O’Connor: How does this campaign fit into the Government’s wider anti - childhood obesity plan?

Hon Dr JONATHAN COLEMAN: This public awareness campaign is one of 22 initiatives contained in the Government’s Childhood Obesity Plan announced last month. New Zealand is one of the first OECD countries to have a target and a comprehensive plan to tackle childhood obesity. Other initiatives include front-of-pack health star ratings for common foods, support for more sport and physical activity in schools, and referrals for kids from B4 School health checks for further expert medical advice and guidance, if required. Overall, our plan is a comprehensive package that will address one of the country’s most serious health issues.

Hon Annette King: Does he agree with Jamie Oliver, who has come out in support of Labour’s obesity plan because it is based on ministry advice and evidence, which he ignored?

Hon Dr JONATHAN COLEMAN: I am sure if Mr Oliver saw the full extent of Labour’s policy he would probably have a different comment to make.

Hon Nikki Kaye: What other reports—[Interruption]

Mr SPEAKER: Order! I need to be able to hear—

Hon Annette King: Yes, you need to hear this—

Mr SPEAKER: Well, I would like to try to hear it, so it would be useful if the deputy leader of the Labour Party could ask her colleagues to stop interjecting through it.

Hon Nikki Kaye: What other reports has he had of obesity policy announcements?

Hon Dr JONATHAN COLEMAN: I have had reports of a New Zealand politician drawing parallels between herself and Hillary Clinton—[Interruption]

Mr SPEAKER: Order! [Interruption] Order! The member may have a point of order shortly, but that question, in my mind, is designed to do nothing but create disorder by attacking—

Hon Dr JONATHAN COLEMAN: It is just called humour, Mr Speaker—

Mr SPEAKER: Order! It is not going to help the order of the House one bit. Question—[Interruption] No, I have dealt with the matter.

Hon Dr JONATHAN COLEMAN: Are you serious?

Mr SPEAKER: I am very serious. I would have thought the member knew that.

Police—Investigation of Sexual Assault

6. TRACEY MARTIN (NZ First) to the Minister of Police: Does he stand by all his statements?

Mr SPEAKER: Order! Did the question get heard by the—

Hon MICHAEL WOODHOUSE (Minister of Police): Yes, I heard the question. Yes.

Tracey Martin: Does he stand by his statement in Hansard that “the police and other social agencies had worked very hard to ensure that there will not be a repeat of this.”, with reference to the Roast Busters case?

Hon MICHAEL WOODHOUSE: Yes.

Tracey Martin: Does he stand by his statement in Hansard that “… I am confident, hopeful, and optimistic that this does not reveal a culture of ambivalence towards the complainants.”?

Hon MICHAEL WOODHOUSE: Yes.

Tracey Martin: Has he, in recent meetings with the Commissioner of Police, inquired whether the law on intimate covert filming was considered in the recent case of young men taking photos of unconscious young girls where they dangled their penises over the girls’ faces?

Hon MICHAEL WOODHOUSE: As the member is probably aware, by law the Commissioner of Police must act independently of the Ministers of the Crown, particularly in relation to the enforcement of law and the investigation and prosecution of offences. However, I have made inquiries about the incident that was the subject of media reporting earlier this week. I would say—and I caution the member—that, on the advice I have received, not all the facts were present in the media reporting. I cannot go into the operational detail, but I am satisfied on the information I have been given that the investigation was conducted thoroughly and sensitively, that the decision not to lay formal charges was made after legal advice, and that the young woman involved in the incident is satisfied with the outcome and the police’s support.

Tracey Martin: In light of that answer, why should young girls and their families have any confidence in this Minister and the New Zealand Police if cases such as this continue to merely result in a warning to perpetrators?

Hon MICHAEL WOODHOUSE: It is not for me to judge the utility of that warning, as the member suggests. My role is to make sure that police activities are such that the public can have confidence in the quality of investigations, and the feedback from the young woman involved is a very good barometer of that.

Sexual Offences—Reporting and Measures to Address

7. KELVIN DAVIS (Labour—Te Tai Tokerau) to the Prime Minister: Does he stand by all his statements?

Hon BILL ENGLISH (Deputy Prime Minister) on behalf of the Prime Minister: Yes.

Kelvin Davis: Can he confirm that there are no New Zealand - born rapists and murderers on Christmas Island, contrary to what he said in the House on Tuesday?

Hon BILL ENGLISH: I do not necessarily agree with the member’s characterisation of it, but the Prime Minister has pointed out the broader issue here around the detention of Kiwis in Australia, which is that many of them have committed serious crimes. The ones who are detained have said that they do not want to come back to New Zealand.

Kelvin Davis: Why did he say “We are not on the side of sex offenders; we are on the side of New Zealanders.” when the number of serious sex offences has skyrocketed by more than 1,000 a year under his watch and fewer than half of those are now solved?

Hon BILL ENGLISH: I think the Government can point to consistent and, for the first time ever, very focused activity on reducing assaults on children. In fact, one of our Better Public Services results is to reduce substantiated assaults on children. No Labour Government ever set out to do that. [Interruption]

Mr SPEAKER: Order! [Interruption] Order! If a member from the front bench wants to leave, I can assist.

Kelvin Davis: Are his Government’s $160 million of cuts to police funding, in real per capita terms, the reason that fewer than half of rapists are being caught on his watch compared with two-thirds in 2008, and does this not show his disregard for the victims of these crimes?

Hon BILL ENGLISH: First, the member should understand that policing is a matter for the Commissioner of Police, not the Prime Minister. [Interruption] Well, it is an important constitutional distinction, which, clearly, the Labour Party does not understand. Secondly, Policing Excellence and Policing Excellence to Policing Excellence: The Future, the two change programmes that the police have implemented, is the most intelligent, community-focused, and prevention-focused policing that New Zealand has ever seen. It may be true and it may be the case that reporting of domestic and sexual violence is higher. That indicates confidence that the police are increasingly able to deal with this scourge on our society. The police have the full support—and I am sure they would tell the member this—of the Government in addressing these serious issues.

Kelvin Davis: Does the dramatic rise in unsolved sex crimes on his watch not show that he a hollow man who is happy to hurl insults in the House but is failing to keep Kiwis safe in their homes?

Hon BILL ENGLISH: The member does himself no good by crassly overstating his case. [Interruption] It is true. The reporting of sexual crime has increased because there is more confidence that it is better understood and better dealt with. Just by way of example, this Government inherited a complete shambles of Government programmes aimed at vulnerable children and family violence. In fact, it took several years to find all the bits of a shambolic, unpredictable set of interventions set up by the Labour Government, and they should go and ask groups like the family violence prevention groups and Women’s Refuge, and they will tell that member that he has no idea what he is talking about—

Mr SPEAKER: Order! The answer is now going on for too long.

Kelvin Davis: Has he ever said a person was suitable to be a Minister in this Government while knowing that that person was under investigation for sex offences?

Mr SPEAKER: Order! No, I am not going to allow that one to proceed, because of a matter that is currently before the courts, and I refer the member to Standing Order 115(2). I will allow the member to replace that supplementary question.

Chris Hipkins: I raise a point of order, Mr Speaker. I have Kelvin Davis’s question. I have made a note of it, and I have it with me. He did not refer to any specific case at all. So I just want to be clear because, hypothetically—

Mr SPEAKER: Order! [Interruption] Order! Yes, I accept that. Listen—I think the member is genuinely raising a point. This is a dangerous area for everybody, where this Parliament, as long as I am here, will respect the separate jurisdiction of our judicial system. I think it is a dangerous question. I am ruling it out, but I am going to replace it with an additional supplementary question for the benefit of the member, and I will not entertain further discussion, because that, of course, defeats the very purpose of Standing Order 115. Kelvin Davis.

Kelvin Davis: No, actually. I think the point was made—[Interruption]

Mr SPEAKER: Order! [Interruption] Order! To the Deputy Prime Minister: I am on my feet. Question No. 8—Scott Simpson.

Tourism—Growth

8. SCOTT SIMPSON (National—Coromandel) to the Associate Minister of Tourism: What contribution is tourism making to diversify the New Zealand economy?

Hon PAULA BENNETT (Associate Minister of Tourism): The tourism industry is continuing its impressive growth. The total tourism spend in the year to March 2015 was nearly $30 billion, up more than 10 percent compared with the year before. Tourism now represents 17.4 percent of our total exports, up from 15 percent, and is our second-largest export. The growth in tourism, along with success in other export industries, such as international education, ICT, wool, and wine is contributing to our increasingly diverse and growing economy.

Scott Simpson: What contribution is tourism making to job growth?

Hon PAULA BENNETT: One in every eight jobs is now directly or indirectly related to tourism. There are 168,000 New Zealanders who are directly employed in tourism, with a further 128,000 indirectly employed. Tourism is worth $10.6 billion, or nearly 5 percent of our GDP. Many regions are benefiting directly, including places like Matamata. Hobbiton Movie Set and Farm Tours has hired 92 new staff in the past 3 months and now employs more than 200 people.

Scott Simpson: What evidence is there that the tourism industry will continue to grow?

Hon PAULA BENNETT: We are actually ahead of track to reach the ambitious target of generating $41 billion in tourism revenue by 2025. We are seeing growth in the number of visitors from our major markets such as the US and Australia, and we have had a 35 percent increase in the number of visitors from China. And, of course, just yesterday Qantas and American Airlines announced a new direct service between Auckland and Los Angeles, making New Zealand an even more accessible destination for American tourists.

Asthma and Respiratory Conditions—Services for Māori

9. Hon TE URUROA FLAVELL (Co-Leader—Māori Party) on behalf of MARAMA FOX (Co-Leader—Māori Party) to the Minister of Health: What is he doing to ensure vital services to promote the understanding and management of asthma and respiratory conditions amongst Māori are maintained given that funding to the only Māori Asthma Society in New Zealand will be discontinued at the end of 2015?

Chris Hipkins: I raise a point of order, Mr Speaker. I just seek some clarification. I have not had a chance to look it up in the Standing Orders yet, but I am sure you will be able to. My understanding is that Ministers cannot ask primary questions in the House. My understanding may be wrong—I have not had a chance to check that—but if you could clarify that, that would be useful.

Mr SPEAKER: To the best of my knowledge, I was aware that Marama Fox was called away urgently. I will ask the Clerk, because this is an important issue. Ministers can ask questions. So, yes, the answer can now proceed.

Hon Dr JONATHAN COLEMAN (Minister of Health): District health boards are responsible for providing health services for their populations, and for allocating their share of the record $15.9 billion health budget in a way that meets the needs of their local populations. The Māori asthma society, to which the member refers, has a contract to provide train-the-trainer courses, but the review of the contract showed low uptake, and the decision was made to spend the money in a way that would deliver better health outcomes.

Hon Te Ururoa Flavell: How many contracts for Māori health providers were cancelled over the last 2 years, and to what value?

Hon Dr JONATHAN COLEMAN: The ministry has hundreds of contracts across the sector, and we would need to go away to check them. If the member would like to set down a written question I would be happy to provide a considered answer. What I can tell the member is that recently the ministry reported on the health literacy demands on both whānau and health services around asthma management for Māori children. The ministry is using this report to improve care, and is also currently considering an asthma and respiratory indicator for the 2016-17 district health board Māori Health Plans.

Business Transformation Programme—Tax System Reforms and Progress

10. ANDREW BAYLY (National—Hunua) to the Minister of Revenue: What recent announcements has he made on how the Government is making tax simpler?

Hon TODD McCLAY (Minister of Revenue): Yesterday I released two consultation documents as part of the Government’s Business Transformation programme to modernise and simplify tax administration. The first is making it simpler for businesses to manage PAYE and GST, with proposals to make PAYE and GST systems fit with business processes rather than the other way around. The second discussion paper looks at the Tax Administration Act and how the current systems might be made simpler for everyone and more flexible for the future. The Government is also focused on making business tax simpler, and will consult on this in 2016.

Andrew Bayly: How is the Business Transformation programme progressing?

Hon TODD McCLAY: The Inland Revenue Department’s Business Transformation programme is now planned to be completed within 7 years instead of the 10 years originally indicated. This is because we have selected a core tax system that is built for tax, proven in a significant number of other tax jurisdictions around the world, and that will require minimal customisation. I also expect the project to come in well below the high end of projections of $1.9 billion. It is now likely that new Crown-funding requirement will be under $1 billion. I am pleased that the programme will also deliver more benefits for New Zealanders and businesses than originally proposed.

Andrew Bayly: What opportunities are there for New Zealand companies in the Business Transformation programme?

Hon TODD McCLAY: We have always said that the programme will use a mixture of New Zealand and international expertise. New Zealand companies have received 67 percent of the spend to date—supporting businesses and creating jobs. Yesterday I announced that next month a sample of Xero and Mind Your Own Business (MYOB) customers will be able to file GST returns straight from their accounting software to the Inland Revenue Department, rather than having to file a separate return. This will be rolled out to all Xero and MYOB customers, and in time will be extended to all other software providers. This has very practical benefits for businesses, cutting the amount of time it takes for them to meet their tax obligations, and it is an early step in integrating business and tax processes.

Child Poverty—Measurement

JACINDA ARDERN (Labour): My question is to the Minister for Social Development and asks: does she stand by her statement, when asked whether child poverty was—[Interruption]

Mr SPEAKER: Order! I expect silence, when this question is being asked, from members to my right. The member might have to start her question again.

11. JACINDA ARDERN (Labour) to the Minister for Social Development: Does she stand by her statement, when asked whether child poverty was too high in New Zealand, that “it is very difficult to use one measure to determine poverty and hardship”?

Hon ANNE TOLLEY (Minister for Social Development): Yes.

Jacinda Ardern: Can she confirm that her Government did just that, and used one measure to determine poverty and hardship for her Government’s Budget package, and it was the measure that produced the smallest number of children?

Hon ANNE TOLLEY: Quite the contrary. The Government looked at the considerable work produced by the Ministry of Social Development, and of course it produced that annual report on household incomes. But we were very focused—and we are unapologetically very focused—on those children, between 60,000 and 100,000 depending on where you draw the line, who are experiencing the most severe hardship. In fact, the $790 million package that formed the basis of Budget 2015 targeted 190,000 children with the first increase in benefits in 43 years, and the increase in Working for Families targets about 380,000 children. That is almost half a million children in New Zealand who will be benefiting from this Government’s focus on reducing hardship.

Jacinda Ardern: How did she determine that just 60,000 to 100,000 children in poverty needed her Government’s assistance, when, based on income measures, there are 305,000 children in poverty?

Hon ANNE TOLLEY: The first thing I would say to that member is that we need to all be very careful when we use the term “poverty” that we actually know how we are defining that. There are a range of assumptions and judgments that are made in defining what poverty is. I will not go into them, but I would suggest that members of the Opposition might like to read section E in the Ministry of Social Development’s 2015 household incomes report. What I would say to that member is that we looked at the accepted OECD range of hardship measures to determine those children on whom we were going to focus that part of the Budget package.

Jacinda Ardern: How does she define child poverty?

Hon ANNE TOLLEY: There are a range of decisions on key issues that would have a significant influence on how anyone would define poverty. It would be more time than the Speaker would allow me to go through what those are, but I would say in my mind that I would use a range of measures, both income-related—[Interruption]

Mr SPEAKER: Order! I am sorry to interrupt the Minister. Members might not be interested in the answer, but Jacinda Ardern certainly is interested in the answer. I cannot see how she could possibly hear with the din that is coming, because I cannot hear. Would the member please complete her answer to the question.

Jacinda Ardern: I raise a point of order, Mr Speaker. I think the Minister thinks she has completed her answer, but I still did not feel like I came away with an answer to the simple question: how does she define child poverty?

Mr SPEAKER: The way forward is to allow the Minister, if she wants, to add anything. If you think the Minister has completed—if the Minister wants to add any more? Then we will move to the next supplementary question.

Jacinda Ardern: If her Government was not manipulating figures for the purpose of this Budget, why did her Government remove one of the highest-scoring measures of material deprivation when it made its calculation for those 60,000 children? It removed it from 17 measures of deprivation to 16, to make it more convenient.

Hon ANNE TOLLEY: I completely—completely—disagree with the assertion of that member.

Jacinda Ardern: I seek leave to table an Official Information Act document that demonstrates that the Minister removed whether or not—

Mr SPEAKER: Order! [Interruption] Order! We do not need the latter part. Leave is sought—I just need the date of the—[Interruption] It is an Official Information Act document?

Jacinda Ardern: The Official Information Act document is dated 2 November.

Mr SPEAKER: 2 November. Leave is sought to table that particular document. Is there any objection? There is objection.

Youth Unemployment—Statistics

RON MARK (Deputy Leader—NZ First): My question is to the Minister of Finance—[Interruption]

Mr SPEAKER: Order! The member can start his question now.

RON MARK: My question is to the Minister of Finance and asks: does he stand by all of his questions to oral question No. 1—

Mr SPEAKER: Order! I am going to get the member to read the question again. [Interruption] Order! Ask the question again.

RON MARK: Sorry?

Mr SPEAKER: The member used the word “questions” rather than “answers” in his reading. Just read the question again.

RON MARK: It actually says—sorry—it actually says “answers” on what a bloody—[Interruption]

Mr SPEAKER: That is right. [Interruption] That is exactly my point.

RON MARK: Thank you, Mr Speaker, for your tolerance and guidance. We will have a better day tomorrow.

Mr SPEAKER: Order!

RON MARK: To the Minister of Finance, does he stand by all of his answers to oral question—[Interruption]

Mr SPEAKER: Order! I am now specifically looking for someone to my right whom I am going to ask to leave. So the next one, I hope, will be easy for me to pick.

12. RON MARK (Deputy Leader—NZ First) to the Minister of Finance: Does he stand by all of his answers to oral question No. 1 on 11 November 2015?

Hon BILL ENGLISH (Minister of Finance): I do, with one small exception, and that is that I have made a statement that New Zealanders’ savings have been positive for 5 years, which has not happened for the last 25 years. In fact, it has not happened for the last 21 years.

Darroch Ball: How can he stand by his statement that “we now have the lowest rate ever of young people not in education, employment, or training.”—being at 11 percent—when the rate was 10.3 percent when he was in Opposition?

Hon BILL ENGLISH: We are just using the measures as they have been consistently measured on a consistent basis for some time.

Darroch Ball: I seek leave to table a document prepared by the Parliamentary Library, which shows the measurement of the “neet” rates in—

Mr SPEAKER: Order! The document has been described, I will put the leave.

Hon Annette King: So you didn’t tell the truth, Bill.

Mr SPEAKER: And that was unhelpful. Leave is sought to table that particular document. Is there any objection? There is none. It can be tabled.

Document, by leave, laid on the Table of the House.

Darroch Ball: Does he agree with Steven Joyce’s comment made last week: “… we will quote the ‘neet’ figure, which is the lowest it has been in 7 years, at 11 percent” when I tabled documents in the House that day proving that to be demonstrably false?

Hon BILL ENGLISH: It is possible that we are talking about a different group of people. The numbers that we have been quoting relate to the group that has been the highest priority to the Government—that is, 15 to 19-year-olds—and it is the lowest in that series since March 2004. It is possible that for the wider group of 15 to 24-year-olds, there were points when it was lower than that.

Darroch Ball: I seek leave to table a document entitled “Introducing the youth not in employment, education, training”—

Mr SPEAKER: The date of the document, please.

Darroch Ball: —“indicator”, which shows the—

Mr SPEAKER: Order! The date of—[Interruption] Order! I am not even going to put the leave. I asked the member for the date and he continues getting his message across. I am not even going to bother.

Darroch Ball: Supplementary question.

Mr SPEAKER: Supplementary question, Darroch Ball. [Interruption]

Darroch Ball: Well, he should know.

Mr SPEAKER: Order! The member will now rise to ask a supplementary question in line with the Standing Orders, or he will not get the opportunity.

Darroch Ball: Will he admit that the “neet” rate has actually increased under National’s 7 years in Government—that is, 72,000 youth not in employment, education, or training, which is 6,000 more under National? That is an increase of almost a thousand young people every year.

Hon BILL ENGLISH: In the first place, as I said, we probably are talking about different groups. We are talking about 15 to 19-year-olds; the member is talking about 15 to 24-year-olds. Secondly, we look forward to the member’s constructive contribution to more solutions, because the Government has put in place, for instance, the innovative Youth Guarantee system, the Māori and Pacific trades training system, and now the youth services, which provide individual supervision—[Interruption]

Mr SPEAKER: Order!

Hon BILL ENGLISH: —for every young person—[Interruption]

Mr SPEAKER: Order! There is no point in continuing with the answer if the member is not interested in it.

Question No. 3 to Minister—Amended Answer

Hon SIMON BRIDGES (Associate Minister of Justice): I seek leave to correct an answer given earlier today in question time.

Mr SPEAKER: Leave is sought for that particular purpose. Is there any objection?

Hon SIMON BRIDGES: In a supplementary answer to question No. 3 on behalf of the Minister of Justice, I was asked how many New Zealanders there are at Christmas Island. I indicated that I was not certain, but I indicated a number of around 200. In fact, we do not know the exact number, but it is likely to be a much smaller number than I gave.

Urgent Debates Declined

National Council of Women of New Zealand—Enabling women's potential Report

Mr SPEAKER: I have received a letter from Sue Moroney seeking to debate under Standing Order 389 the release of the National Council of Women of New Zealand’s white paper, Enabling women’s potential: the social, economic and ethical imperative, released today. In order for an urgent debate to be held there must be a particular case of recent occurrence involving ministerial responsibility. There is no ministerial responsibility for a National Council of Women of New Zealand report. The Minister for Women may have commented on the report, but she has made no decision that reveals a new development of significant importance in itself to warrant a debate being held today. The application is therefore declined.

Bills

International Finance Agreements Amendment Bill

Third Reading

Hon BILL ENGLISH (Minister of Finance): I move, That the International Finance Agreements Amendment Bill be now read a third time. Just to remind ourselves what this bill is, it amends the International Finance Agreements Act 1961 in order to enable the New Zealand Government to become a founding member of the Asian Infrastructure Investment Bank. The Foreign Affairs, Defence and Trade Committee proposed one amendment to the bill, and the Government has accepted that amendment. Through a number of amicable discussions about this bill it has become pretty clear that there is broad parliamentary support for it.

The New Zealand Government was the first developed country to participate in discussions with the Chinese Government about setting up the Asian Infrastructure Investment Bank, and, as has been acknowledged in the debate and in the select committee, New Zealand’s role in bringing about what is now a very high-quality multilateral institution is something we should be proud of. It was certainly effective, and in that context I want to thank John Whitehead, former Secretary to the Treasury, who acted as New Zealand’s principal negotiator on this bank. I am sure he found it much more time-consuming than he expected, with meetings held all over the globe and the level of intensity that was required to get this Asian Infrastructure Investment Bank up and running in record time.

Our interest in it has been largely strategic. We are in the Asia-Pacific region. We have the opportunity now, because of our range of free-trade agreements, to trade with the faster-growing economies in the world, some of which have quite large populations and, as yet, a relatively small penetration by New Zealand trade—the Philippines, Viet Nam, and Indonesia. These countries will grow faster if they can finance high-quality infrastructure; this bank is one of the ways by which we can influence that process, and we have done so constructively.

The form of the bill is that it gives the Asian Infrastructure Investment Bank Articles of Agreement the force of law in New Zealand. The bill extends various privileges and immunities to the Asian Infrastructure Investment Bank and its employees, exempts it from taxation, and provides for permanent legislative authority to meet the capital contributions under the agreement. Our capital contribution will be small relative to others because we are a small economy, but it will amount to over $100 million in order for New Zealand to take up its prorated shareholding.

I want to thank the Opposition parties and the members of the select committee for the constructive way in which they have dealt with this issue. Increasingly, our fortunes are tied to those of the Asia-Pacific region. As free-trade agreements multiply and global supply chains become more normal even for quite small New Zealand businesses, and as we increasingly see an Asian flavour to the investment that is coming to New Zealand, this is just one more plank in the bridge between us and Asia. That has been, I think, acknowledged by all the parties in Parliament and by the work of the select committee.

The national interest assessment that was done by the select committee showed that it was in the interests of New Zealand, so if we get the third reading of this bill done then the Asian Infrastructure Investment Bank will be up and running in the first half of next year, and I want to thank Parliament for allowing that to occur.

Hon DAVID PARKER (Labour): It is my pleasure to confirm, as has been said in earlier contributions from the Labour Party and mentioned in the Foreign Affairs, Defence and Trade Committee report, that the Labour Party is in favour of this legislation. We think it is a very good advance in world affairs that China is leading, using some of its financial wherewithal—which is very substantial these days—to improve the lot of people in countries that are not quite as fortunate by funding through the Asian Infrastructure Investment Bank things that would not otherwise occur.

I want to mention one level of detail where we do not agree with the Government before coming back to our agreement with the general provisions that we are enacting. Under this agreement, New Zealand subscribes for 4,615 shares in the Asian Infrastructure Investment Bank. That is given effect to in the articles of association of this new organisation, which are included as a schedule to the bill. For every one of those shares New Zealand commits a million dollars of capital to the fund. Not all of it has to be paid across, but we are liable for it to be called on if things went wrong and we agree for a certain proportion of it to be paid in cash. So every time New Zealand’s shareholding goes up or down in one of these organisations in the future, there is a considerable economic cost to the country. This is true of every one of these international finance agreements.

I think it was just last year we changed the proportions held by New Zealand in the IMF and also increased the amount that was due in respect of each IMF member per share. So the effect of that in respect of the IMF was to increase the total amount of capital available through the IMF in the various things that the IMF does but to decrease the proportion held by New Zealand of that increased total.

These things only happen occasionally, but when they happen relatively small changes in shareholding have a big impact on the amount of money that the Government is required, under the international agreement, which is changed, to commit to that organisation. The Labour Party is of the view that those sorts of changes, which are spending taxpayers’ money in a way that is not generally contemplated in a Budget—those sorts of things should be overseen by Parliament rather than be done by the executive. As a consequence, in respect of the last amendment to the International Finance Agreements Act, the Government conferred upon itself the regulation-making power to agree to changes in the amounts of capital that New Zealand is required to be responsible for in these international organisations by statutory regulation. I thought at the time that that was wrong, that that sort of change to international financial agreements ought to have the approval of Parliament. It actually does not happen that often. I think the number of times that that sort of change would have been before Parliament—it has only been on a few occasions since the IMF was founded all those years ago.

In respect of the Asian Infrastructure Investment Bank, I am also confident that those changes in capital subscription will not occur very often. One of the reasons you can be confident in that is partly that they have got so much room to move, in that the capital subscribed for is so much more than the capital that is called. So if there is a need for some more capital in the fund, they have got quite a bit of room to move in terms of calling capital that has already been subscribed upon rather than increasing the capital that is subscribed for and, therefore, the total liability of the Government. So I think it is wrong that, through this amendment legislation, we are actually extending the right of the executive to change the obligation of New Zealand in the future by way of statutory regulation, rather than having to come back to Parliament for a new authorisation if they want to subscribe for more capital to one of these international organisations.

That said, I want to agree with the Minister of Finance, the Hon Bill English, in respect of a number of his comments. I think it is very good that New Zealand embraced the concept of the Asian Infrastructure Investment Bank early on. There is a long history in New Zealand of New Zealand engaging with China, both economically and politically, in advance of a lot of other countries. I think it has been of credit to New Zealand that we have done that. I think it has also been to New Zealand’s benefit in our international reputation, and I think it has also been to our economic benefit. I think it has also benefited China. China, as a consequence of its exposure to New Zealand earlier than would otherwise have been the case, changed its system, I am sure, in some ways to reflect the sorts of things that New Zealand advocated it should do. I am sure that, just as China gives us advice at times and we look to it sometimes for examples where it might do things well, it also looks to New Zealand and respects the advice that we tender at times.

That is certainly true in respect of the Asian Infrastructure Investment Bank. Through the former Secretary to the Treasury John Whitehead the New Zealand Government was able to influence the shape of the provisions under which this new Asian Infrastructure Investment Bank will operate. One of the concerns that was mentioned in the media by some of the countries that were less enamoured, initially, of the Asian Infrastructure Investment Bank, was based on the concern that this bank might be used as a primarily political tool driven by the Chinese Government to pursue its international ambitions in a way that was not neutral and to pursue political objectives rather than being focused on what are the most pressing infrastructure needs in this region that need to be met.

I think it is fair to say that those criticisms have waned as a consequence of the fact that when the detail has been provided as to how the Asian Infrastructure Investment Bank board will act—those concerns have waned, and there is now widespread recognition, across not just the countries that are in the Asian Infrastructure Investment Bank but across other developed countries as well, that the earlier concerns were not valid. I think that reflects well upon both China and New Zealand.

Those operating principles are set out in article 13 of the agreement set out in schedule 8. It says that the operating principles are, firstly, that “The Bank shall be guided by sound banking principles in its operations.”, and secondly, that “The operations of the Bank shall provide principally for the financing of specific projects or specific investment programmes”—there is some more detail, which I will not read out there. It “shall not finance any undertaking in the territory of a member if that member objects to such financing.”—so they have got to have the cooperation of the local government. “The Bank shall ensure that each of its operations complies with the Bank’s operational and financial policies, including without limitation, policies addressing environmental and social impacts.”—it is pleasing to see that.

There were some earlier projects of the IMF, and other development projects elsewhere in the world, where there was the assertion that some of the projects that were funded by international banks like the IMF inappropriately ignored some of the adverse environmental consequences. Indeed, my understanding is that some of the projects that were criticised were mining projects—actually, not so much mining projects as big power projects, including hydro-projects in parts of the world that had serious environmental concerns, including the displacement of local people, who were not treated fairly when they were displaced and perhaps should not have been displaced in the first place because the projects might not have been that wise. So it is good to see that that sort of thing has been guarded against through part 4 of article 13.

There are other parts of this agreement that will ensure that New Zealand’s reputation for pursuing good governance in the world is adhered to. I think that is very important—that New Zealand lends our weight and our ethic, which is that we ought not to be embarking on corrupt practices and we ought not to be assisting in corrupt practices. I am sure that New Zealand’s influence on the Asian Infrastructure Investment Bank will ensure that it is less likely that this bank gets tied up through those investments in the propping-up of corrupt practices in the countries that this Asian Infrastructure Investment Bank will be assisting. With those comments, I will take my seat and record my thanks to the Minister of Finance for shepherding this legislation through.

Dr SHANE RETI (National—Whangarei): It is a pleasure to speak in the third reading of the International Finance Agreements Amendment Bill. This is an excellent bill. The Asian Infrastructure Investment Bank is definitely a bank that we want to be a part of. If we look at the definition of “Asia” in this agreement, it is actually the United Nations definition of Asia and Pacific, which indicates the breadth of reach that this agreement will actually have, because that definition includes North Asia, South-east Asia, South Asia, central Asia, parts of the Middle East, Australasia, and the Pacific—so quite a lot of breadth.

Chris Bishop: Quite lot of Asia.

Dr SHANE RETI: Clearly quite a lot of Asia. Clearly the need is great. The World Bank tells us that $1 trillion is needed in infrastructure in Asia, so there is no question that the need is there. There are a lot of benefits to being a member, to being a part of this bank. The three obvious ones that have been commented on are the benefit of being a founding member—that is, our ability to influence the direction and best practices that the bank has been able to start with; secondly, economically, our ability to compete for contracts; and, thirdly, the strategic relationship.

The cost that has been mentioned is $125 million in paid-up capital. We inquired as to the benefits of that and we were told, amongst other things, that for what is, effectively, a 0.6 percent shareholding we have already received disproportionate benefits. We are also interested in the security—how secure is that $125 million? We were told that we have a favourable risk rating and we have preferred creditor status. On the ratio of paid-up to on-call capital this looks very favourable to parameters that, say, the World Bank has. So we are quite reassured that that paid-up capital is secure. The $500 million on-call—I take the point that my colleague Mr Parker was making when he was looking at a cost per unit share. Effectively, he took the $125 million paid-up and put it together with the $500 million on-call. I do not think that is an accurate metric to take, because the likelihood of the on-call being called up is very, very small. Officials were very clear on that. Secondly, it does not take into account the time value of money—more specifically, the paid-up capital is paid over 5 years. So I do not think it is quite accurate, but I take the point he was making.

The case has been made that membership of this bank is almost to the exclusion of other banks—the World Bank and the Asian Development Bank. I do not think that is a correct representation either, because we remain engaged and active shareholders in both of those other banks. So I just want to comment that that is not to their exclusion. We focused on the economic, the founding member benefits, and the strategic benefits to being a part of this agreement, but let us talk about the quality of life impact for people in Asia that this bank will have. This is an infrastructure bank. We are not building cars, we are not building ships or planes; it is an infrastructure bank. That means reliable electricity for many people in Asia. This means reliable and clean water. This means roads and telecommunications. And I think that lifting these people or helping them lift from poverty of course is a good thing. So I think there is some mission around this bank that is a good thing for us to be a part of.

Furthermore, as a founding member, New Zealand has used its founding member status to inject principles of sustainability and some sense of the environment in that. More specifically, we are able to have the word “sustainable” placed before the words “economic development”, so it reads “sustainable economic development”. The Foreign Affairs, Defence and Trade Committee made only one change: to delete clause 9(1), which enabled article 19(1) in the agreement, which was around foreign currency restrictions. That was really about the only discussion we needed to have around core principles towards this agreement within the select committee. So I would like to acknowledge the committee chair, Mark Mitchell, for his guidance in this, and other committee members who bring the bill here today for the third reading, and I commend it to the House.

DAVID SHEARER (Labour—Mt Albert): As my colleague David Parker said earlier, Labour is supporting this bill and commending the Government for pushing this through—the acceptance of the amendment to the International Finance Agreements Act 1961—so that New Zealand will be one of the founding members of the Asian Infrastructure Investment Bank. Being a founding member obviously has some advantages, and those advantages have been spoken about at some length earlier. Perhaps more important and more strategic is that New Zealand is a member of the Asia-Pacific region. We have huge and growing interests in this area. Six out of our 10 top markets are located in this area, and with the expansion obviously of China and of Japan too, but also of Viet Nam and Malaysia, we are seeing growth here that is very important for our economic welfare into the future as well. So being part of this agreement is important. I think that getting in and being one of the first countries, the first Western country, to be part of this sent a very good signal and a strong signal about our commitment to the region and the way that we see our future.

As the last speaker, Dr Shane Reti, was talking about, the real demand for infrastructure development in the region is huge. Even the Asian Development Bank put the needs at around about $8 trillion, and the IMF talked about it as being about $1 trillion per year. Most of that—51 percent, in fact—was estimated to be needed in the electricity sector, but the need is not only in that but in rail, in road, and in a whole range of other infrastructure areas as well. So there is a real demand within the Asia region, which underpins its further development and the welfare of its people, to be able to provide those basic services that enable them to develop and, by rights, create the markets for our goods as well. So it is a beneficial cycle that we are trying to create here. As I say, it helps and it enhances the welfare and the prosperity of those people living in many of those countries, but at the same time there is a benefit to New Zealand as well.

That demand and the way that this bank is going to be able to meet that demand were well set out by Alan Bollard, a very well-respected former official from New Zealand who now serves in the APEC secretariat. He spoke of the real advantages of this bank coming into operation. It did not have the easiest of births. There was some push-back, particularly from the United States, which—I think rather unwisely—looked at this as being an extension of China’s influence in the region, which to some degree we admit to, in the sense that China is one of the big stakeholders in this bank and is putting billions in. It is by far the biggest shareholder in the bank and is putting billions into it. But, actually, why should it not be? If you look at the other big Bretton Woods institutions—the IMF, the World Bank, the Asian Development Bank—they are products of the Second World War. This is a changed world now where China does hold a greater degree of influence around the world and greater economic clout as well.

The important thing, I think, about the bank, and particularly China’s involvement, is being in on the ground floor as we have been, and particularly the influence of John Whitehead, another of our excellent officials—extraordinarily well qualified and respected. His being there has enabled us to be at the table when the principles and the values and the working procedures of the bank have been set up, so that we can be confident that the bank is going to be seen to both be transparent and have best practice. That has been perhaps one of New Zealand’s greatest contributions to the future of this bank.

So although China will have 20 to 30 percent of the voting rights in the bank, alongside it will sit at least 50 other countries. As Dr Shane Reti just mentioned, New Zealand will be there with a very modest input into the bank—a very modest voting right—yet it will actually have quite a lot of influence in the way that the bank operates and benefits New Zealand as well. We put in, as has been said, about $145 million, putting up capital over the next 5 years—so it is a relatively modest amount. We also put forward about NZ$461 million as callable capital, although we have to acknowledge, as far as I am aware anyway, that with the various shareholdings we have had in international operations and institutions around the world I do not think we have ever been asked—our contribution has never been called up in the past. I think that is a pretty rare possibility.

The other thing that I want to touch on, and that David Parker mentioned as well, is the fact that environmental and social impacts are in the bank’s operation as well, so that the rather disastrous big power projects and environmental projects that have taken place in the past will at least be mitigated against. We will be able to see some of those large, inappropriate types of projects having to address the environmental and social impacts before they will be funded by this bank.

There were no submissions from the public to the select committee on this. In some ways I am not quite sure why that was. Perhaps because it looked like it was a bank, a financial institution, people were not interested. But I think it is a very significant part of New Zealand’s contribution, standing alongside China, which was the main proponent of the bank. It stands alongside our other firsts with China, starting off in 1972 with our formal recognition of China and, most recently, in 2008 with the first free-trade agreement, well before the Australians across the ditch. We actually got in there well before them and had our first trade agreement, which, of course, happened under Phil Goff’s reign as the trade Minister.

There is no doubt that the bank is responding to a need and a demand. As I have said, the infrastructure demands from right across Asia are enormous, they are immense, and we need to be able to be sure that they are met. To repeat one more time, there are certainly countries across Asia—and I was in one this week, in Myanmar. Looking at its infrastructure, the demands that Asia has for infrastructure are immense. Meeting those demands—by meeting electricity, transport, railway, and all of those types of infrastructure demands—will mean that people’s lives will be significantly uplifted or provide the basis for further economic development. That economic development will trigger more demand for goods that New Zealand is able to produce. So I see that this is a positive step for New Zealand. I was pleased that the Government moved quickly in support of the bank, that it got in on the ground floor, and that it got somebody as illustrious as John Whitehead to be there at the table to make sure that this bank upholds the best practices that it is possible to have.

I think this is a good investment, and something that New Zealanders will recoup in terms of both our influence and our economic ability and potential into the future. So I commend the Government and once again congratulate them on moving ahead in this and obtaining Labour’s support. Thank you.

DAVID BENNETT (National—Hamilton East): I do not think there was anything in that last speech from David Shearer that you would have any contrary views to. I think the last speaker summed it up pretty well and made some very good points around what this bank is about. I would like to thank the Labour Party for its support of this bill. It is being rational and reasonable and looking at it from a New Zealand perspective, and I think that is good to see.

We all know what this is about. The speakers have all talked about it. There are basically three infrastructure banks that are operating in this part of the world: the Asian Development Bank, which is the Japanese bank; this bank, which is the Chinese bank; and the American bank, which is the World Bank. Basically, they have a role in providing infrastructure for our region. There are two crucial parts of that infrastructure development that are important. The last speaker mentioned them considerably in regard to the Asian economies, the big economies of Asia, that basically are adding a city the size of Tauranga, with that standard of living, every week into those communities. That is a market that is expanding quite considerably, and they need infrastructure for those communities. So these three banks, and especially this bank, will provide in that area.

The other area that has not been touched on by speakers is the Pacific itself. The Pacific Islands are probably our main area of interest. When we are engaged with these kinds of banks, we push the Pacific. It is easy for the Asian Development Bank and for this bank to forget about the Pacific, when that is actually where we want that infrastructure to be spent as well. Our Pacific Island neighbours are our closest neighbours and, along with the Australians, we would have to provide that infrastructure if they do not have sources of capital. These banks are vital for the Pacific Islands. They provide a lot of capital for projects on those islands, and that is something that we need to keep on pushing, so that it has not only one tier—which is the development of those major Asian cities that will provide economic consumers for us—but also there is the development of our Pacific Island neighbours who are important for us as a country, going forward, as we have a special relationship there in the sense of that economic development.

We know that some other parties will not support this bill. It is disappointing that New Zealand First will not support it. That is on the grounds that we can assume for New Zealand First would be the normal grounds; they would not support something like this. The disappointing one is the Greens not supporting this bill. To grow the Asian communities and to get economic growth through there actually means that those communities have got the best potential to have the best environmental outcomes for their communities. It is disappointing the Green Party will not allow or support the development of Asia so that it can achieve good environmental outcomes for their people. I think that is a very short-sighted approach from the Green Party. We will get a whole lot of arguments from the Green speaker, which will not make any sense, trying to confirm its position.

It is good to see the Labour Party is supporting the bill. We look forward to this bill passing through the House. It is a good bill for New Zealand and for our regions.

Dr KENNEDY GRAHAM (Green): This is just to confirm that the Green Party will be supporting this bill, as was explained in the first and second readings. We support the general view of the Minister of Finance that the Asian Infrastructure Investment Bank represents an advance in the region and an advance in world affairs, and that there are strong strategic reasons, which I think both the Hon David Parker and David Shearer pointed out as well, as did many of the esteemed National colleagues. There is a strong strategic reason for New Zealand to be involved in this, and to support China’s initiative and to support the general promotion of poverty reduction and the spread of wealth in Asia and the Pacific.

I think the only political party that is opposing this bill is New Zealand First. We always give respect to New Zealand First members when they produce reasons. We find, from their argumentation, three reasons that they have articulated to not support the bill. With respect, we do not agree with them. The first reason, in the second reading at least, was that the NZ$145 million should be spent in New Zealand and not in Asia. Second was that the Chinese economy is not a completely open and free-market economy, and that you need personal connections to get anything done successfully in the Chinese economy. And the third was that joining the bank would undermine New Zealand’s relationship and ties with the United States.

We disagree with each of those reasons. We think the money should be spent in Asia; it is both in New Zealand’s interests and in Asia’s interests that that is the case. You probably have to have connections to do anything in any country, in any economy, including New Zealand. You just have to understand the culture properly. Thirdly, undermining the relationship with the United States is a distorted view, I think, of the 21st century perception. I think the Green Party would take this moment to call on the United States and Japan to shed the 20th century perception of strategic rivalry and, in fact, get up to speed with the 21st century, recognise China for what it is and what its potential is, assist in the peaceful ascendancy of China and a general regional cooperation and harmony, and get involved in the bank. We would encourage New Zealand First, at this last moment, to reflect on that and to actually change its vote to one in support.

I do not want to take up further time of the House, because the bill has been well canvassed in the previous readings, but there is just one point that does need to be made, and made strongly. That is the imbalance that this Government continues to show in terms of its perception of what economic sustainability is all about in the 21st century. It is not just about economic growth, which is essentially—if you read the preamble to the articles of the agreement in schedule 8 of the bill, and you listen to the peroration of National colleagues, you tend to think it is still all about economic growth. It is not. It is about sustainability and the increasing quality of life and prosperity within the context of sustainability. If that fundamental principle is not well established, both in the constitutional foundations of this bank and in the day-to-day operations of it, then we are doomed.

The New Zealand Government has done nothing to allay concerns in that respect, when it provides NZ$145 million to the bank and—how much to the United Nations Green Climate Fund? It is NZ$4 million. That is $145 million for economic growth, and $4 million for climate control. That is wrong. Run them together and it is NZ$150 million. Split them in two, and it is $75 million to the Asian Infrastructure Investment Bank and $75 million to the United Nations Green Climate Fund. That would bring New Zealand up to a respectable level per capita with all the other contributors to the UN Green Climate Fund. They range from $60 to $8 per person, from Norway down to Australia—and New Zealand is 60 cents. So given our priorities, as we convey them to the world in this respect and in the context of full support for New Zealand to be a member of the Asian Infrastructure Investment Bank, we call on the Government to reassess the actual financial quantum in terms of its contributions to the bank on the one hand and to the climate fund on the other. Thank you.

RICHARD PROSSER (NZ First): I am pleased to rise on behalf of New Zealand First to take a call in this third reading of the International Finance Agreements Amendment Bill. New Zealand First does not support this bill. Our opposition to this legislation, and indeed to New Zealand’s membership of the bank to which it relates, was summed up by my colleague Fletcher Tabuteau during the Committee of the whole House, which I recall turned into a somewhat livelier debate than one might otherwise expect from what is essentially a fairly pedestrian piece of lawmaking.

Our opposition is not actually about the Asian Infrastructure Investment Development Bank itself, or even about New Zealand’s involvement in international financial agreements of this type in general. Indeed, as the Minister of Finance himself said during the first reading, the New Zealand Government already has shareholdings in the World Bank and its various manifestations and the Asian Development Bank. That is well and good and very probably as it should be. Rather, our opposition centres on two things.

Firstly, there is the undeniably questionable worth of New Zealand’s participation in an infrastructure development bank from which the Government openly acknowledges it will gain little to no tangible benefit. The departmental disclosure statement is unambiguous in this regard. It states: “The direct economic consequences of the investment in AIIB for New Zealand are likely to be modest.” It also says: “The practical effect on revenue for New Zealand, which will not be borrowing from the Infrastructure Bank or be a destination for investment, is likely to be minimal.” So we will neither be benefiting from being able to borrow from the bank nor benefiting from having the bank invest in New Zealand, but we are committing nearly half a billion US dollars to it over the next 5 years, with almost a hundred million US dollars being the upfront payment. So that is half a billion dollars for membership essentially of a club from which we will derive almost nothing in terms of material benefit.

We get what the Government has argued in terms of the fact that there are intangible benefits—and, in fact, tangible benefits that are not able to be directly or immediately linked to involvement in the international institutions such as this proposed bank. But we struggle to accept that these will be—or even could be, in this case—worth anywhere near as much as the investment is costing us, let alone that they could come to represent some sort of net return on that investment.

We understand that other countries are more ready to deal and trade and treat with nations when there is wider involvement, when multiple associations are entered into, when nations are able to meet one another in a greater number of forums, and when nations demonstrate that they are prepared to commit tangibly to institutions that they rely on and that they regard as having value. We get that. We understand that the projects that this bank will fund are necessary, are going to be valuable to nations across the region that it covers, and that that will increase economic activity in those countries, and that down the track New Zealand firms and businesses will be able to benefit from that. But those things will happen anyway, with us or without us. We are such a minuscule contribution to what is such a vast area of the earth and such a vast area of economic activity that these things would go ahead anyway, whether we are involved are not.

New Zealand First questions whether having a mere 0.66 percent of the voting power within the proposed bank’s governance, based on our contribution of just 0.4 percent of the total subscribed capital, can be regarded as having any practical worth at all, let alone any great value for New Zealand when measured against the need to allocate or commit nearly half a billion dollars to it in real terms.

We do get that institutions of this type garner more credibility when they are endorsed by nations that are perceived as being stable and advanced and reliable and largely free from corruption. We are pleased that New Zealand continues to be acknowledged as such a country by the other mostly much larger nations in our region, and indeed the wider world. In fact, as Minister English said during the first reading: “New Zealand took something of a brave step early on, partly with the encouragement and assistance of Singapore, to be the first developed country that put up its hand to engage developing countries and that put up its hand to engage in discussion with the Chinese Government about the possibility of the Asian Infrastructure Investment Bank being a true multilateral institution”.

I know these things are calculated according to some differing criteria, but I have to ask how much longer China is going to be regarded as a developing country relative to New Zealand. I mean, here we have a country that has nearly one and a half billion people and is the second largest economy in the world, a nuclear power, and an active participant in the space race, compared with New Zealand, which is essentially a small agrarian economy with a tiny population sitting quietly in an unassuming backwater of world affairs. There is “developing” and there is “developing”.

Our second cause for concern—the other grounds on which we primarily oppose this legislation and New Zealand’s participation in the bank—is the source of funds that New Zealand will be putting into it and the disingenuous nature of the Government’s proclamations with regard to that source. The Future Investment Fund was supposed to be about reinvesting in New Zealand, and no amount of Government spin can change that fact. It was meant to be about schools and hospitals in New Zealand, not schools and hospitals in other countries. It was meant to be about roads and bridges in New Zealand, not roads and bridges in Asia and the Pacific.

It is bad enough that the power companies and the other assets were sold off against the wishes of the majority of New Zealand voters, but completely inexcusable that the proceeds are then to be used for other than their stated purpose. It is bad enough that we lose half the ownership and half the revenue stream from our wealth-generating assets, but incomprehensible that we should then lose part of the proceeds as well, sending them instead to be locked up in a foreign-focused development bank from which the Government itself admits we will receive little to no benefit.

The Government has been completely dishonest about this part of the legislation, and it continues to be completely dishonest. For those reasons New Zealand First cannot and does not support this bill. Thank you.

JAMI-LEE ROSS (National—Botany): I stand to support the International Finance Agreements Amendment Bill, as have others in this House—many parties in this House, in fact, apart from New Zealand First. It is a very good piece of legislation supporting the articles of agreement for the Asian Infrastructure Investment Bank—something that New Zealand must be a part of.

The reason why New Zealand must be a part of this is that our economic future and our economic opportunities as a country are linked very much to Asia. New Zealand is continuing to increase its trade more and more with Asia, and going forward into the future I foresee that that will only continue to increase and it will increase to the benefit of New Zealanders.

But one of the constraints that is in place in Asia is a lack of infrastructure, and the purpose of this bank is to try to invest in greater infrastructure improvements in Asia so Asia can grow faster. Faster growth in Asia will lead to greater demand for goods around the world, and as we continue to improve our free-trade agreements and increase the number of free-trade agreements with Asian countries, that will only see New Zealand benefit from a bank such as this.

New Zealand First members are, unfortunately, very much isolated in their view on this particular matter. They have a view that New Zealand should be isolated from the rest of the world. It is a view that is detrimental to New Zealand. It is a view that is out of line with economic opportunities for New Zealand. It is a view that is very poor, and if it was ever adopted by Governments in the future it would lead New Zealand to slipping further and further down the ranking tables, and I do not think that the voters of New Zealand First would actually want to see that happen. The argument that Richard Prosser put on the table was that this is going to go ahead anyway so New Zealand should not be part of it. The reality is that if other nations took the view that it is going to go ahead anyway and they should not be a part of it, then nothing would actually happen.

We have a proud tradition as a country of standing up on the international stage. We have a proud tradition as a country of getting involved in supporting greater growth around the world. We have a proud tradition as a country that stands up for good things, and this is one of them. If we took the view that trade agreements were going to go ahead, whether or not we got involved, then we would be left out of the pack.

I guess New Zealand First members do not care about that, because they are actually opposed to free trade. They are opposed to greater infrastructure investment in Asia. They are opposed to New Zealand being involved on the world stage. I do not know what they are for, other than New Zealand locking itself off from the rest of the world. This bill will aid New Zealand’s international opportunities. It will aid future growth for New Zealanders, and it will aid future trade for New Zealand firms. That is why many parties in this House are supporting this bill.

Mr DEPUTY SPEAKER: This is a 5-minute call on behalf of the Labour Party—the Hon Clayton Cosgrove.

Hon CLAYTON COSGROVE (Labour): Like other Labour members I reiterate that we are supporting the International Finance Agreements Amendment Bill. I do find myself, unusually, in agreement with some of what the speaker who has just resumed his seat, Jami-Lee Ross, has said in respect of the need for New Zealand to be at the table in the great international institutions. We have always been at the forefront of the formation of international institutions, whether it be the UN, the World Trade Organization, and on it goes. I respect New Zealand First’s view, but I say it was a bit like the contribution last night: “What’s in it for New Zealand?”. I do agree that there has to be something in it for us, and what is in it for us is the ability to influence, the ability to take our place in the Asian region, and the ability also, in a very pragmatic and practical way, I would hope, to be recipients of work and goods and services that are provided to the Asian region as they move to fill the gap in infrastructure that they have. That creates jobs for New Zealand.

We have highly skilled people in this country. We provide world-class goods and services, and world-class infrastructure and engineering services. I would have thought that being part of this, and putting up a very modest $126 million, I think it is, as the first hit, and possibly $504 million going forward, is an investment in respect of being a recipient of that work and those projects and of being around that table. If you are not in the ring you are out of the ring and you do not have influence.

The Asian Infrastructure Investment Bank is part of that, and I think the Government has made the right move in being a plank-owner, a foundation member, of this new international institution, as we are in respect of the World Bank, the IMF, the ILO, the World Intellectual Property Organization, and a whole series of other international institutions. It is appropriate, and being at the forefront of it we have influenced the governance arrangements, the structure, and the level of transparency so that this is a proper and world-class institution. I do not believe that we can throw the cone over New Zealand and somehow divorce ourselves from the rest of the world. The world is an interlocked place, an interconnected place, and we have a duty to our citizenry in growing our economies to ensure that we are advantaged off the back of the growth in economies around the world; otherwise, we do not survive.

I want to take issue, though, with one thing that Mr Ross said. He is right that in the past New Zealand had an extremely proud track record of leading the charge on key issues around the world. That is absolute, and I believe that New Zealanders and Governments of all shades up until recently could be extremely proud of the “New Zealand Inc.” philosophy that is exhibited, generally, by political parties. When we go overseas we are for New Zealand. We are absolutely for New Zealanders, and we are for the growth of our nation, and we are proud of that. I have to say to Mr Ross, with all due respect, that in the last 72 hours that has taken a real kick in the guts—an absolute kick in the guts—in terms of our profile around the world. It is has taken a hit, I think, before the UN. I think it has taken a hit in respect of media around the world. Many of those, and many political commentators and actors around the globe, are scratching their heads wondering what on earth is going on, obviously in Australia, and what on earth is going on in respect of the leadership, both internationally and domestically, in respect of our Prime Minister and our Government over the issue, of course, of the detainees on Christmas Island.

As we celebrate the success of being a foundation member in this international institution, and as we move to take our place in other international institutions, the Security Council and others, I think the Government really needs to reflect on the potential damage that it does to New Zealand’s international reputation by both its conduct in respect of this trans-Tasman issue and its conduct within this Chamber. People watch what happens in this Chamber. Ambassadors and others monitor what happens in this Chamber, and they report back to capitals. I think that every member would agree that we want to maintain and enhance New Zealand’s reputation on all fronts: economically, socially, and geopolitically, and in terms of trade, etc., but that starts at home with domestic matters. I would ask the Government to reflect on that, because this is a very germane debate as we look at our international reputation.

The Labour Party supports this bill. We think it is a good piece of legislation. We look forward to Governments of all shades being active participants in this institution as we move in as part of the Asian region.

Mr DEPUTY SPEAKER: I call David Seymour; a 5-minute call.

DAVID SEYMOUR (Leader—ACT): I rise on behalf of the ACT Party in support of this bill. May I just chime in in support of what the previous member, Clayton Cosgrove, said—that our international reputation does matter, people do watch what happens in this Chamber, and charity does begin at home. And the member may very well take those words on board: charity does begin at home. And as the Speaker said just yesterday, it is not just what happens in this Chamber that people watch, but what happens outside this Chamber. And I may remind the member that the proper place for debate in this Parliament is within this Chamber and the select committee rooms, not out there on the tiles harassing the Prime Minister, as his member did.

Mr DEPUTY SPEAKER: Talk to the bill.

DAVID SEYMOUR: I am addressing the bill and the debate on the bill.

This bill is a positive step for New Zealand. And to those who oppose it, I say there is a very simple thought experiment into which we can enter, and it is this. There are a number of jurisdictions around the world of similar size to New Zealand, and I would say that, for instance, Denmark is one of those, British Columbia in Canada is one of those, and Colorado in the United States is one of those. All of those jurisdictions of 4 million or 5 million people are deeply integrated with the rest of the region that they are part of: with the United States on the part of Colorado, with the European Union on the part of Denmark, and with Canada and the wider North America Free Trade Agreement area in the case of British Columbia.

To say that we do not have interest beyond our borders, that it is somehow an abrogation of our sovereignty to be involved in institutions such as this bank, is to close yourself off from reality in a way that none of those jurisdictions would have done. Public policy must be politically sustainable if it is to endure and achieve its purposes. And it is interesting to reflect, by extension, on some of the political views on this bill, and, in particular, on the one exception party that opposes the bill, which is, in this case, New Zealand First. New Zealand First is a party traditionally opposed to foreign investment in New Zealand. Their argument is that large profits are taken out of New Zealand when foreigners invest here. Quid pro quo, one may have thought that they would be in favour of New Zealanders investing overseas so that we can make such large profits from those other jurisdictions.

But it gets more interesting. It is also a party that is typically interested in the Government taxing taxpayers to fund a lot of enterprises and infrastructure and, quid pro quo, you may have thought that the best possible policy for New Zealand First would be to support a policy where New Zealanders are taxed by the New Zealand Government to provide capital for investments that may become profitable and make a return in foreign countries. One may have thought that this was the ideal policy for the New Zealand First Party, but, of course, what I have just done is laid out a coherent and logical series of premises and conclusions, and that is a process completely alien to the New Zealand First Party.

This matters for this particular bill and this particular initiative because public policies, if they are to be sustainable, must be politically accepted, and New Zealand First claims that it may one day have the balance of power in this House. It is critical for this policy and our reputation abroad and our interests in having solid, high-quality infrastructure developed outside of our borders in our region of influence—which any of those other jurisdictions I mentioned would view as important—that such an incoherent party, whose only true point of reference is a resentment of outsiders and a resentment of foreigners who come here, such as telling them to go home, does not hold the balance of power in this House so that this policy can remain sustainable. Not only will that help in this particular policy but, I dare say, it would also increase the average IQ of this House. I commend this bill to the House. Thank you.

Dr JIAN YANG (National): I rise to support New Zealand’s involvement in the Asian Infrastructure Investment Bank. In 1978, when China opened up and started to have economic reforms, the most important thing to realise for the Chinese Government was that it needed to have much better infrastructure. There was a saying in China in those years, when I was still in China. It was “Yao zhi fu, xian xiu lu.” It means that if you want to get wealthy, you need to have good roads. So that is basically the principle: that is, to have better infrastructure if you want to be wealthy or you want to be economically developed. For that reason, the Chinese Government opened the market and attracted a lot of foreign investment in Chinese infrastructure. So that is why today, when you look at Chinese infrastructure, railways or highways, it is very well developed.

In Asia generally there is a strong demand for investment in infrastructure. According to a widely cited report—and many people have mentioned this—there will be a need of about US$8 trillion for infrastructure in Asia between 2010 and 2020. So there is genuine need there. Well, this bank—the Asian Infrastructure Investment Bank—has a capital base of US$100 billion, which is not a huge amount of money. However, it can be a catalyst to attract more funding into this particular project.

New Zealand is one of 57 founding members. I am very proud that we are now a founding member. New Zealand is the first Western, developed country to become a founding member of the bank. Our contribution is small, NZ$145 million is a small contribution, but the return is huge, mainly because our relations with Asia have grown so fast and so deep, particularly economically—at the moment, six out of the top 10 trading partners are in Asia—and also in terms of exports. In the 1970s about 10 percent of our exports would go to Asia; now 43 percent of our merchandise exports will go to Asia. So, if you look at ASEAN—the Association of South-east Asian Nations, the 10 countries in South-east Asia—you will find that today our trade with those countries in 1 week accounts for about 1 year of our trade volume with those countries in the 1970s. You will find that our trade with the region has grown substantially. Also, if you look at the opportunities for us with the bank, with our involvement our New Zealand companies will get more opportunities to get into the projects in the region. So overall I would say that it is a hugely beneficial investment, and also it is good for the region and it is good for New Zealand. Thank you very much.

Hon DAVID CUNLIFFE (Labour—New Lynn): It is a pleasure to take a call in this third reading debate and to acknowledge the member who has just resumed his seat, Jian Yang, and the contributions of other members.

The member makes a very good point: New Zealand is, indeed, the first Western country to sign up for this international bank as a founding member. New Zealand was also the first Western country to convey diplomatic recognition on the People’s Republic of China. We were the first Western country to welcome the admission of China into the World Trade Organization, and we were the first Western country to have a free-trade agreement with the People’s Republic of China.

Much of that was on the watch of Labour-led Governments. We mention that for two reasons. Firstly, we underscore the ongoing contribution that Labour-led Governments have made to New Zealand’s foreign policy and its broad internationalist outlook. We are not a large country, but we are a very constructive one. We are seen internationally as one of the least corrupt countries in the world, deservedly; one of the easiest countries in the world to do business with; and a country—perhaps up until this week—that has had a long and internationally recognised commitment to human rights. I believe that is still intact, despite some sullying from members opposite.

I am proud to be a New Zealander, and I am proud to be a member of the New Zealand Labour Party, which has upheld over the decades the finest traditions of New Zealand’s independent but multilateral and constructive foreign policy. So here we are today, where we are debating the International Finance Agreements Amendment Bill to set up this multilateral bank.

The second reason that I mention New Zealand’s relationship with the People’s Republic of China is, of course, that China has been a very influential sponsor in the early stages of the development of the Asian Infrastructure Investment Bank. That is important because New Zealand had to make a decision: would we become an early participant in that process, and encourage good governance in that bank, or would we take the approach of some other Western countries and say: “No, no. We want to stay solely within the other institutions.”—what they call Bretton Woods institutions: the Asia Development Bank, the World Bank, and the IMF? We chose the former course, and I believe—and Labour believes—that that was the right approach to take. This is because a constructively engaged, multilaterally disposed China is good for the region, and it is good for the world. An isolated China, on the other hand, is less good.

Let us turn to some of the arguments that have been raised in the various stages of this debate. One was the reluctance of our Western friends to initially support the bank. I think, as my colleague David Parker said earlier, those questions and tensions, if you like, have eased progressively during the set-up process of the bank, not least because of the participation of senior New Zealand officials or former officials, such as John Whitehead, former Secretary to the Treasury, in the design of the articles of association of the bank.

In the Committee stage we all took some time to work through those and to recognise the contribution of officials in setting up a two-tier governance structure with a board of governors and a board of directors, transparent powers, and good governance processes. New Zealand joins the board of governors. We will have the right, alongside other countries, to appoint directors, and we look forward to there being a healthy flow of transparent information to the board of governors so that we as a shareholder can ensure that we are continuing to participate in the national interest.

I do want to acknowledge—and I do not think I have done this before—the contribution of our New Zealand First colleague Richard Prosser. I thought he described the controversy around the use of the Future Investment Fund pretty accurately. The $140 million initial contribution and the $450 million contingent liability are being underwritten by the Future Investment Fund, which he quite rightly pointed out was the fund created when the half-share in New Zealand State-owned enterprises was sold down by the current Government. That was a fund that was clearly established for the development of alternative infrastructure in New Zealand—social infrastructure: schools, hospitals, roads, etc. in New Zealand.

I agree with the member that the Government has been fundamentally dishonest, actually, in taking those funds for a different purpose than the fund was clearly legislated for. That may even be subject to challenge, but that is an issue for another day. New Zealand does not believe that is a sufficient reason to vote against the bill, but we do join members alongside us in condemning the chicanery that has gone on by the misuse—and the multiple misuse—of the Future Investment Fund. I think the Government has committed it about 16 times over in various press releases so far this year.

I turn briefly to note the Foreign Affairs, Defence and Trade Committee report and the national interest analysis, which are detached. I made the point in the Committee stage that that national interest analysis was pretty thin. It was a little bit on a wing and a prayer. Certainly, there were no numbers on it.

I would challenge officials, as we bed in our participation to the bank, to be very transparent in accounting for—both through the Ministry of Foreign Affairs and Trade, New Zealand Trade and Enterprise, and Statistics New Zealand—any indication of contractual flows that stem from our participation in this bank. In other words, if New Zealand suppliers are getting bank contracts or consultancies, it would be valuable for that to be recorded so that 5 years down the track we can look back and actually quantify what the value-add to New Zealand exporters from our participation was, which would be alongside the more general value of the sustainable development of our region. We have both a general multilateral interest and a specific national export interest in participating in that region.

The main benefits of New Zealand becoming a party to the bank, therefore, should include the increased economic development in the Asian region, with flow-on benefits direct and indirect to New Zealand. The bank will support the economic integration of the Asian region, it will augment New Zealand’s existing relationships, and it will contribute to the implementation, it is hoped, of best-practice policies, operational standards, and economic and social safeguards in place alongside its infrastructure investment. It will reinforce our constructive, longstanding, and positive relationship with the People’s Republic of China while we also explore, potentially, new forms of relationship with other countries in the region, and it could and should provide commercial opportunities for New Zealand firms, which we are very keen to see quantified.

Just to return, if you like, to the top of the analysis, this proposal emanated from a perceived shortfall in commitment to infrastructure investment in the Asia-Pacific region by the Bretton Woods institutions—in particular, the amount of funding available to the Asian Development Bank—and some arguments about its shareholding, which was Japan-heavy, and its governance.

We are not, in supporting this Asian Infrastructure Investment Bank, denigrating the Asian Development Bank. We think there is room for both, and we think the combination of both will recognise the growing importance of the Asia region to the world economy and to New Zealand.

We have looked in detail at the governance arrangements set out in the articles of association, we have recognised the role of New Zealand officials in bringing best-practice guidelines to that, we have noted the advantages of being a founding governor of the bank through our founding shareholding, and we have commended what it represents in terms of constructive engagement with the countries of our Asia-Pacific region.

We have criticised the use of the Future Investment Fund, and we have questioned the depth of the national interest analysis that went with this, but overall, in geostrategic terms, we believe this to be a sensible, prudent, and long-sighted investment in the growing infrastructure, and the growing political infrastructure, of the Asia-Pacific region. We commend the bill to the House.

A party vote was called for on the question, That the International Finance Agreements Amendment Bill be now read a third time.

Ayes 109

New Zealand National 59; New Zealand Labour 32; Green Party 14; Māori Party 2; ACT New Zealand 1; United Future 1.

Noes 12

New Zealand First 12.

Bill read a third time.

Bills

Taxation (Bright-line Test for Residential Land) Bill

Third Reading

Hon TODD McCLAY (Minister of Revenue): I move, That the Taxation (Bright-line Test for Residential Land) Bill be now read a third time. The changes in this bill were announced by the Government in Budget 2015, as part of a package of proposals to improve compliance with the current land sale rules and to help ensure that people pay their fair share of tax on gains from those property sales. Detailed proposals were released for public feedback in June, which has helped to shape the measures proposed in the bill.

The centrepiece is a new brightline test to supplement the current intention test in the Income Tax Act and make it clear that income tax must be paid on any gains from residential property purchased and sold within 2 years. After the 2-year period the current intention tests will remain. This means where somebody buys property with the intention of making a profit, they must pay income tax on that gain. The Inland Revenue Department (IRD) will be watching transactions, as part of the requirement to provide IRD numbers at the time of sale. This will allow it to enforce income tax rules against those who might try to avoid their obligations outside the 2-year period.

The Government has provided the IRD with $29 million in Budget 2015 to focus on property tax compliance. In total, it has $62 million over 5 years, which is expected to generate an additional $420 million of property-related tax revenue. There are likely to be up to an additional 100 compliance officers as part of the property compliance team.

The only exceptions to the brightline test are as follows: an owner’s own home, inherited property, or property transferred in a relationship settlement. Furthermore, the proposed test will apply to the disposal of residential land only and not to business premises or farmland. It also clearly identifies the start and end of the 2-year brightline period. The proposed tests will apply to the gains from residential property acquired on or after 1 October 2015 and disposed of within 2 years. These are the main provisions in the bill. What we have is a straightforward, easy to enforce rule that will help improve compliance with tax rules for land sales and make the tax system fairer.

As always, I am grateful for the efforts of all those who have contributed towards the successful package of this bill so far. My thanks go to the officials who have worked on the policy development of this proposal in the bill and to the drafters who worked on the detail of the draft legislation. I also want to thank those who made submissions, both in the earlier period and on the bill, to improve its application in practice. Finally, I want to thank the Finance and Expenditure Committee for its consideration of the proposed measures and recommendations to improve them overall.

Hon Clayton Cosgrove: It’s all David Bennett’s work.

Hon TODD McCLAY: As the bill now stands, we have a very practical mechanism for achieving greater fairness and transparency across the House.

As unusual as it is, I want to thank Clayton Cosgrove for also deciding, although speaking heavily against this bill, to vote for it, and I look forward to the party vote to confirm that. I have great pleasure in commending the Taxation (Bright-line Test for Residential Land) Bill to the House.

Hon CLAYTON COSGROVE (Labour): I thank the Minister of Revenue for his charitable comments; I am not sure I can return fire on that score. This is a complete and utter waste of time—a complete and utter waste of time.

Hon Todd McClay: But you’re going to vote for it.

Hon CLAYTON COSGROVE: Yes—yes, the Minister is right. We will put a tick in the box, because even this bill, which is not even a fig leaf—not even a shadow of a fig leaf—is better than nothing.

Hon Simon Bridges: We don’t want to see you with just a fig leaf.

Hon CLAYTON COSGROVE: I just read out the words of one Terry Baucher—what was that, “Junior Gerry” in the front row? He is an accounting professional, who said, quoting from a submission: “ ‘We do not believe that the introduction of a bright-line test for residential land is sound tax policy.’ That was the Chartered Accountants Australia and New Zealand’s (‘CAANZ’) opening sentence in their submission to Parliament’s Finance and Expenditure Committee regarding the Taxation (Bright-line Test for Residential Land) Bill.” It is complete bunkum. Even the Minister used the phrase “own home”. He could not even get his own definition right. The definition in the bill is “main home”, but I have some sympathy, because the definition in this bill is not consistent with the Income Tax Act or the Land Act, and he has got another definition there of the “main home”.

This was going to be the big hit. This was Mr Key and Mr McClay going away and saying: “Hang on. After years and years of the feet of this Government being put to the fire about the problem of Auckland and New Zealand house prices spiralling, the polls have told us we cannot sit there with our hands behind our backs and do nothing. We have got to do something.” So in the usual Tory way they come out and say: “We will do just enough to make it look like we are doing something substantial.” Treasury said to them: “If you are going to do this and you actually want to limit the housing sale churn, you have got to have 5 years.” That is what Treasury said—Treasury said 5 years. These guys said 2 years.

Submitter after submitter—and these were not Joe Public; these were learned people from the accounting profession, Ernst and Young, Chartered Accountants Australia and New Zealand, the Law Society, and others—came before the select committee and shot bazooka holes through this piece of legislation. [Interruption] Many of them said, basically, that it will have no effect, except it will have a perverse effect for the ACT member in the front row, David Seymour—I am sure he will listen to this—in that submitter after submitter said that his mates, the property speculators, of course, will simply change their behaviour. They will hold for 2 years and 1 day and then start all over again. If it is Joe Average who falls on hard times—somebody passes away, the income earner, perhaps, or something happens and a family or a property owner falls on hard times—and has to sell, then they are nailed by this. They are nailed by this inside 2 years. There is no provision in here—unlike, for instance, in the KiwiSaver legislation, where there are provisions, I believe, very tight ones, around hardship—to deal with that.

Then you look at the definitions. This is going to be the big hit—the big hit. Those members are going to go after the property speculators, they said. As capital prices go up a thousand dollars a day in Auckland, they are going to go after the big-time speculators. Then the Inland Revenue Department (IRD) and Treasury reported that the total amount of revenue they are going to raise from this is a mere $5 million. If you look at the figures and the house price inflation that has been reported in recent days—20-plus percent in Auckland—that is pitiful: $5 million is all they are going to get. That is absolute prima facie evidence that this is just a political pamphlet. This is just something to make it look like the Government is doing something. But the people who will get clobbered are mum and dad Joe Average who fall on hard times and are forced to sell inside the 2-year period. They are the ones who will get taxed. Then you come and you look at the definitions.

I must say, the Minister took a call today. Thank God for that. It took until the third reading for the Minister to take a call. He never took a call in the Committee stage—never took a call. He had every other portfolio Minister sit there and never answer a question—utterly indicative. I have sympathy for him. The poor old soul takes over from Peter Dunne, the poor guy. The Prime Minister must have come to him and said: “Mate, here’s a live grenade. Swallow this one, brother.” And it is indefensible, because the best the Minister could do was get up and read the IRD’s notes in the third reading, not having answered one question.

One of the other speakers for the National Party today might tell us, because one of the questions we raised was: what does this mean? One of the definitions of a “main home” is—get this—the home “with which the person has the greatest connection,”. I do not know. Maybe there are a few hippies over there—a bit of the old psychedelic pūhā. Maybe they are levitating a bit. Maybe they are feeling their softer side.

The ASSISTANT SPEAKER (Hon Trevor Mallard): Order! The member will resume his seat. We have had some public comment about members making accusations about other members’ drug taking. That will not continue.

Hon CLAYTON COSGROVE: Sorry, Mr Assistant Speaker. Can I put it this way: maybe they are imbibing legitimate substances that are giving them a wee gee up, but maybe they can tell us what “connection” means. What a wonderful word that is: “connection”. How are they going to actually—actually, how is the IRD going to sort of look through the crystal ball and in some socialised way tell us how someone is connected to a property? Is it that they go down to the local pub on the corner three or four times a week? Maybe they are there for a day, maybe their kids are there—no definition, no explanation from the Minister, nothing.

You have got to also look at Auckland. So you are getting, what, 20 points plus per annum—20 points plus per annum. I think the percentages are that 15 to 17 percent of properties are turned over inside 2 years, and we know which end of town that is. But why would you not hold for 2 years and 1 day if you are getting a 20 percent return, which is better than anything I have seen that the investment community can get? This is not going to stop—this is not going to stop. This might stop a few people. They might have a look. They might have a quick look and say “Maybe we’ve got to change our behaviour.”, but this is going to have virtually zero impact.

We will put a tick in the box, though. It was rushed through the Parliament, rushed through the select committee process—a David Bennett special. He did not want any in-depth inquiries and official advice. Feel sorry for the officials, because you always know, when an official cannot answer a question, what that means—or will not answer a question. It means that they do know the answer, but the Minister has told them that they cannot answer that question because it will be an embarrassment to the Government. They are very professional officials that we have.

This legislation is bunkum, absolute bunkum. From the Law Society, from the Chartered Accountants Australia and New Zealand group, right through, everybody has said, to a man and woman, that this is not going to work. We have had a Minister who simply adopted, I suppose, the Peter Dunne philosophy of life, which is to go down the burrow, pull the lid over the top, and hope that the grenades do not shatter over his head. Say nothing, do nothing—pardon?

Phil Twyford: Do burrows have lids?

Hon CLAYTON COSGROVE: Oh, well, they do with this guy—sinking lids, in this case. We will support the bill, but I make this point: we will be back here, I wager—I thought it would be 2 years; a change of Government. I suspect we will be back here, possibly as the courts deal with some of this legislation, to fill the holes, patch it up, and try to make it work—try to make it work. I know who is going to be speaking next: that eminent chartered accountant, that expert from Hamilton and Waikato, who knows everything about these sorts of—I humble myself before him. I would like him, perhaps, to deal with some of the questions we raised in the Committee stage—to deal with the “main home” definition.

Phil Twyford: You’re dreaming.

Hon CLAYTON COSGROVE: Well, I live in hope. I am a charitable guy, as the Assistant Speaker knows. I live in hope that some of the questions raised by the Law Society, by Terry Baucher, and by others—the exemptions for farmland; you could drive a bus through those. The main home exemption, the trust exemption—you could drive a bus through them. Given that Mr Bennett is such an expert, I am sure he might do what his Minister has not done, and actually get up and explain to us. Say, for instance—to make it easy for him—what is the connection to the main home? What is that? What intangible concept is that, which IRD is going to be dealing with? Why is there an exemption for farmland, and how is it going to be administered?

I will make a bet with him. I will make a bet. The accounting profession is out there today, and it has got all the loopholes lined up—it is like a colander. They may as well deliver a briefing paper with their cohorts with a whole lot of holes in it. They are working quick fixes and workarounds to this legislation. It is an embarrassment to this Government. It will prove to be an embarrassment to this Government, and I look forward to the speeches when they return to this Parliament and we have to amend it, because this is not a big hit. This is not a small hit. This is what one could only describe as quality bull.

DAVID BENNETT (National—Hamilton East): The Taxation (Bright-line Test for Residential Land) Bill—this is the third reading—is a bill that is sponsored by Minister Todd McClay. I wish to acknowledge Todd and the work he has done in this area, especially around tax. It is also a part of a programme of looking at the wider housing market in Auckland, and is one of those initiatives to look at that market. When we look at it, it is important to look at the fundamental principles of tax law that underpin this area. That last speaker, Clayton Cosgrove, ignored those in his speech. The fundamental principle is that if you sell a property within 10 years, that property is taxable if the intention was to buy or sell within that period of time.

When we hear the Opposition members, they are always going to say the word “speculator”. They will say: “Speculators are exempt from this. They’re not getting caught by this legislation.” That is rubbish. That is absolute rubbish. The fact is that if someone is a speculator, then they are in the business, by definition, of buying or selling a property. If they are in the business of buying or selling a property, it is taxable under New Zealand law. If a property is sold within the 10 years, then they have to explain that. All this bill does is say that within the 2-period you are deemed to be basically selling and buying as a speculator would or as a property developer would, and so that is taxable.

The Opposition is supporting this bill, which is a bit weird if they have so many problems with it. You would wonder why they are actually supporting it. But I think that there are some big difficulties in the Opposition. First of all is that they had a programme of a capital gains tax, and that capital gains tax policy failed at the last election. I know, Mr Assistant Speaker, you want me to talk about this bill, and this is a taxation on the sale of property, and the capital gains tax is exactly the same as that. The Labour members opposite, in the last weekend at their conference, have put that to bed. They have said that they are not going to have a capital gains tax, and that is fine. They have obviously changed their tune, but before that we heard from the Opposition—I think the Green Party still holds to a capital gains tax, but the Labour Party does not.

Hon Member: Yeah, we love it. Great idea.

DAVID BENNETT: Yes, well, the Green Party agrees with the capital gains tax, but the Labour Party has put that to bed. But the Labour Party also talks about a 5-year rule—that it would be comfortable with a 5-year rule. Well, what is the difference between a 2-year and a 5-year rule? You have 5 years and 1 day—same problem. It is exactly the same thing, the same problem.

Phil Twyford: I thought you were good at maths, David.

DAVID BENNETT: The member over there says “do the maths”. Well, the thing is, that member ignores the fundamental principle of tax law, which we talked about—that if the intention is buying and selling within 10 years—it does not matter whether it is within 2, 5, or 7 years. Within the 10 years, if the intention is buying and selling, then it is taxable. That is the thing. The 10-year rule is the pre-eminent rule. This is a subset of that rule. The intention—

Phil Twyford: If the intention test is enough, why bother with this bill?

DAVID BENNETT: Well, you are supporting it, which is good to see. It is good to see.

The ASSISTANT SPEAKER (Hon Trevor Mallard): Order! The member is not asking me at all here.

DAVID BENNETT: No, exactly. The member should stick to the Standing Orders and not try to—

The ASSISTANT SPEAKER (Hon Trevor Mallard): Order! The member will now resume his seat. I was trying to help the member stop the unhelpful interjections. The member knows that when the Speaker makes a ruling, even from his seat, the member is not meant to refer to it.

DAVID BENNETT: This bill is actually really important. The Labour Party is supporting it, which is great to see, but when members opposite talk about a 5-year test, that makes no difference, because the 10-year rule is the pre-eminent rule. It is the main test in this area of tax law. The 2-year rule is really deeming transactions within that period of time to be considered taxable under tax legislation.

When we look at the connection test—well, that will be something that will be defined through the interpretation of it. It is not something that the legislation would want to define in this sense, because it is something that needs to take into account different circumstances and different factual situations that may arise. That is common in tax law. That is why we have tax definitions and help through the tax department, with its recommendations of what would be considered in and out of such a test. Also, it is something that gives a bit of flexibility over time to look at different circumstances that may arise. The Inland Revenue Department usually gives examples, and it will do so, as it provides more information in cases like this, so that taxpayers are fully aware of what the situation is.

The connection test is as would normally be expected in any tax law. It would not be expected to be defined to the extent that the last speaker asked for. If it was defined to that extent, then that would actually create the opportunity for people to get around that definition, because they would look at just getting around that part, and it needs to have that flexibility within how the application of that test would be.

This is an important piece of legislation. The Labour Party is opposing it in principle but then voting for it in practice, and it shows its conflict when it comes to this area. The Labour Party does not have a consistent approach. We have seen that in regard to capital gains taxes. We are seeing that again in this House this afternoon. This is a piece of legislation that will have an important effect on the Auckland housing market, as other pieces of legislation that were connected with this bill have shown to have had an effect. If we look at the last month’s property price information from Auckland, we can see that stabilising, and that is after the implementation of the last piece of legislation that connected with this. So it is important that we support this bill, and we look forward to it going through the House.

PHIL TWYFORD (Labour—Te Atatū): We are voting for this bill. We are voting for it because it is better than nothing—but not by much.

The question you have to ask is why the National Government so often, particularly on the housing issue, brings so much flimflam to this Parliament. This bill is one in a long line of flimflam housing measures. Take, for example, Nick Smith lifting tariffs and anti-dumping duties. It was the centrepiece Budget announcement, and his own officials have declared that it has had no discernible impact—no impact on prices, nada, zilch, nothing. With the special housing areas, the other great flagship initiative, 102 houses were built in the last 2 years—102 houses. And this bill, the Taxation Bright-line Test for Residential Land Bill, is likely to go down in the annals of this House as a measure that will have very little impact. All of the informed commentators, the experts, from the day that this Government announced this bill, have said that it will not deter speculators and it will not make any difference to the price of Auckland houses. It is simply there as a piece of political window dressing.

But why—why—does the National Government constantly do this? The reason is that speculators generally, who are purportedly the target of this bill, are the friends of the National Party. The last thing the National Government wants to do is to make a significant difference to property speculation in Auckland, because that is where it gets its money, that is where it gets its support. The last thing National wants to do is choke off the supply of foreign money. For years now the National Government has denied that property speculation is even a problem. I have lost count of the times that Ministers have stood up in this House and denied that property speculation is a problem. If you listen to them, you would think that it is only a question of supply.

Now, with the IMF and the Reserve Bank telling us that the Auckland housing crisis poses a real risk to the whole economy and that Auckland is teetering on the brink of the housing bubble bursting, National is panicking. Government members are terrified out of their wits that this housing bubble will burst on their watch. They are petrified that their inaction, combined with low interest rates, high immigration, a structural shortfall of housing in Auckland of about 30,000, and rampant property speculation will see the bubble burst on their watch. They are absolutely terrified about it. They are terrified that their inaction will be blamed for causing the housing bubble to burst and they are terrified that anything they do will trigger a bust in the Auckland housing market, which would undoubtedly cause major economic and social damage. That is why this bill is so insubstantial. That is why it will make very little difference. Treasury said it will be lucky if the bill generates $5 million in revenue, when we know there are billions and billions of dollars’ worth of tax re capital gain going on in the Auckland housing market as we speak.

What is it about this bill that makes it such a dud? The very premise of the bill, the 2-year test, is an invitation to speculators to hold on to their properties for 2 years and a day. It will deter only the most short-term of the quick-flick merchants. Treasury warned that the 2-year limit would be ineffective. It said: “Push it out, make it 3 years or 5 years.” It said that 2 years would be ineffective. The experts came along; they said that the bill was incoherent and it would be ineffective. One of the senior tax experts in the country said that it was professionally confusing. It will not capture speculators, but it will capture ordinary Kiwis who by no fault of their own—because of relationship breakup, because of a death, or because of illness—are forced to sell their house. Those are the people whom this legislation will punish, but it will capture very few speculators, and it will not make very much difference at all.

It is riddled through with problems. The definition of “main home” is a joke. It is ridiculous, as Clayton Cosgrove said, that if you have to choose between two homes that the person claims are their main homes, it is the place of “greatest connection”. This is a made-up definition. It is going to be a field day for tax lawyers.

Chris Bishop: Welcome to legislation, Phil.

PHIL TWYFORD: Would you like me to quote The Castle again? Because if you insist, I will.

Why all these problems? Because it was a chaotic, rushed, political response to the opinion polls that were telling the Government that the public thought it was doing nothing about the Auckland housing crisis, and Bill English was desperate to see some kind of measure incorporated into the Government’s Budget package.

What should the Government have done? It could have done something much more effective and more substantial. That opportunity is still with the Government. It could support my member’s bill, which was pulled out of the ballot today. If the Government wanted to do something that would have more effect than this pathetic Taxation (Bright-line Test for Residential Land) Bill, it could support Labour’s policy to ban non-resident foreign buyers from purchasing existing homes. That is the Australian Government’s policy. It has successfully channelled $30 billion of offshore money into building new homes in Sydney and Melbourne in the last 12 months. Would that not be a nice problem to have? It is a policy that works, it is effective, and it is actually generating foreign investment that is invested productively in the building of new houses in Australia, so why would you not want that?

But this Government went off to the Trans-Pacific Partnership agreement and it did not even try to negotiate a carve-out for this kind of legislation to ban foreign buyers from buying existing houses in this country, like the Australians did and like several other countries did. It does not care. This National Government stands on the side of property speculators, both domestic and foreign. It does not care about Kiwi families who are struggling to get a foothold in the property market. It should not surprise us, because the National Party is the party of speculators.

It does not believe in productive investment in businesses and the economy. It does not care about Kiwi first-home buyers. It is happy to sit back and watch homeownership levels fall to the lowest in 64 years. It is happy for homes in Auckland to be left as ghost houses, empty because their foreign owners do not care about renting them out for people to live in because they are happy to make a 25 percent year-on-year capital gain on those houses. National is happy with that situation. It is happy for people to live in cars and campgrounds and garages, because it is so petrified that if it does anything significant, its housing crisis—the National Party’s housing bubble—will burst before the election and it will be blamed for the massive economic and social damage that will be left in its wake.

It is not fair or strictly correct to accuse this bill, the Taxation (Bright-line Test for Residential Land) Bill, of being a poor case of legislative drafting. It is not the fault of officials. It is actually a perfectly good example of legislative drafting because this bill does exactly what the National Government wanted it to do, and that is not very much at all. It is emblematic of this Government’s entire response to the Auckland housing crisis. It denied it, it denied it, it denied it. It hoped that it would somehow just go away. It did not want to pay attention to it. Then, for the last 3 years while Nick Smith has been the housing Minister, we have seen an endless procession of micro-initiatives, photo stunts, and press releases—all designed, like this bill, to convey the impression of activity. Simon Bridges knows that is right. He is laughing. He knows that Nick Smith is a liability for this Government. He knows that the public of New Zealand want to see real action.

The public want to see a crackdown on speculators. They want to see a policy that actually results in houses being built that people can live in, not this ridiculous policy of this National Government that has led to 102 houses built in the last 2 years. They want to see a crackdown on speculators, not this flimflam. It is a pretence. It is a joke, and the public can see through it. This Government does not want to do anything about it. It does not want to move, because it is petrified that if it actually takes action against speculators, if it actually builds houses, it will trigger a bust in the housing market and the egg will be all on its face.

CHRIS BISHOP (National): Phil Twyford just said that this bill was about a bunch of blather and flimflam. Well, I have got to say that that is deeply rich and ironic, coming from that member. That member has spent the last 2 years while he has been the shadow Minister for housing going up and down the country speaking flimflam and blather himself. This is the guy who supported loan-to-value ratios, before he opposed them. This is the member of Parliament who supported the thrust of the Government’s social housing reforms, before he decided that they were a bad idea and he was opposed to them. In fact, he even turned up to the social housing providers’ conference and told them that transferring ownership of social housing to the private sector or to the community sector was a good idea and that they would do a good job and that often they were better than the State, before he decided to oppose that.

So this is the person who is the king of outrageous slurs and accusations. You can see it every day in question time. You can see it every time he gets up and speaks in the House—the anger and the venom against Nick Smith, who was mentioned about 14 times during his speech. So for Phil Twyford, who launched by himself a personal vendetta and campaign against people of Chinese ethnicity in this country, to turn up in this Parliament and say that this bill is full of blather and flimflam is, I find, deeply ironic.

I think it is worth reflecting on the campaign that the Labour Party—or Phil Twyford, I should say—has launched against people of Chinese origin. It was deeply offensive. It was deeply repugnant to New Zealand values. And it was deeply strange, coming from a party that in 2002, quite rightly, issued an apology to people of Chinese backgrounds for the poll tax of the 1860s. So to turn round in 2015 in multicultural New Zealand—

The ASSISTANT SPEAKER (Hon Trevor Mallard): Order! The member Phil Twyford, who preceded this member, did take a very wide approach to the bill, but he did not take a full 2 minutes until he mentioned it. I want to invite the member to at least address the bill.

CHRIS BISHOP: The Taxation (Bright-line Test for Residential Land) Bill is a good bill. It is not, as the previous member said, a political response to the housing crisis. It is not, as the previous member said, something that the National Government is introducing only because to do anything more than that would be to disadvantage its rich mates. I think on all three readings of this bill Phil Twyford has made the outrageous slur against the National Party that we are doing something or are not doing something because of interests outside this House, because of money, or because of donations or things like that—outrageous. That is not the point of this bill. This bill is all about fairness in the taxation system. It is all about making sure that people do actually comply properly with tax rules. My colleague David Bennett has given a very good elucidation of how the bill does that.

I briefly want to focus on this issue of the main home exemption. Members opposite, in all three readings of this bill, have criticised this provision, the exemption that the bill provides for the main home. In particular, they have criticised the exemption that is provided, or the definitional term around the person with whom—

Hon Clayton Cosgrove: The connection.

CHRIS BISHOP: Yes, as Mr Cosgrove says, with whom the person has the greatest connection. They said, I have got to say, some really silly things about this provision. So let us run through what they have said.

The first thing that they have said—Grant Robertson said this in the first reading, and other members have repeated it subsequently—is that this is an invention. In fact, we have just heard Phil Twyford say: “This is an invention. This term does not exist in law.” Well, yes, that is true. As I think I said in the second reading, or it might have been in the first reading of this bill, actually this is a Parliament. Parliament makes law, and sometimes we use terms that do not exist already. It is not actually that radical. Sometimes we pass pieces of legislation that contain words that have been combined to make a phrase that does not currently exist. So that is not actually a particularly good point of rebuttal to the idea that this is a good bill—that the phrase is an invention. OK? So that is the first point.

Secondly, in response to this, I have talked to the officials. The phrase “the greatest connection or with whom the person has the greatest connection” is a carefully chosen phrase. It is carefully chosen because although it might not exist in New Zealand’s statute law right now, it does exist in case law. Members opposite should know, anyway, that the laws of New Zealand are not just based on what we pass here in Parliament or on regulations that the executive passes but also on what has built up through case law. That phrase has been carefully chosen, and it would allow the courts to apply this law properly.

What was the second thing they said in response? We heard this from Jacinda Ardern yesterday. Jacinda Ardern got up and said: “Oh, this is totally subjective. This is just subjective. It is just a subjective test.” No, it is not a subjective test. It is not up to the person to define that. It is an objective test.

The ASSISTANT SPEAKER (Hon Trevor Mallard): Order! Sorry—I apologise to the member. Members have a set amount of time for which they can speak. It is not the role of Opposition members to try to shut them down in the way that members are trying to do at the moment.

CHRIS BISHOP: Thank you, Mr Assistant Speaker. It is not a subjective test. It is an objective test. So Jacinda Ardern is completely wrong. If people try to claim that they have a greater connection to the crib or the bach, they will have to prove that. It will have to be objectively proved. They will have to produce evidence, and the courts, if it gets to the courts, will have to examine the evidence and they will find one way or the other. Again, it is like explaining the judicial function to members opposite. It is like Public Law 214 at Victoria University. David Parker must be ashamed of some of the stuff that gets said by members opposite.

What is the third thing that Labour Party members have said? They have said that this will just let people classify the apartment they live in in Wellington, when they come to Parliament every week, or they will be able to classify their bach or beach house as the place with which they have the greatest connection, and they will be exempt from the law. As I said before, that is not going to happen.

This phrase does not exist in law as it is at the moment, but that is not remarkable. That is not an argument against passing the law. It is just a statement of fact. So some of the criticisms from Labour members in response to this bill have been very silly. This is a good bill. This is a bill that will improve compliance with tax law. It will make our tax system fairer. I commend this bill to the House.

METIRIA TUREI (Co-Leader—Green): This is yet another one of those examples where there is a major, serious policy hole in New Zealand that is causing New Zealand families enormous amounts of economic and social pressure. Thousands of New Zealand families, especially young families, are completely unable to access the housing market because of massively increasing house prices, particularly in areas like Auckland. This is a major crisis for those families, and this Government, instead of actually making a policy contribution that will help young New Zealand families get their foot into the front door of their first own home, is providing a meagre piece of legislation that does nothing to address the problem but has all the spin wrapped around it that it wants to get out.

This Government has done this a million times in New Zealand. It is one of the reasons why we are continuing to have major problems in the housing market and why so many New Zealanders remain locked out of purchasing their own home. This bill will not make a huge difference to that. We are supporting this legislation, at least, because it opens a crack where we can perhaps improve the situation after 2017, when these guys are thrown out. They are clearly incapable of running the country and governing the country in the best interests of young New Zealand families. It is a too little, too late attempt to try to curb what we all know is rampant house price inflation, in Auckland and elsewhere in the country.

I want to be clear about this for New Zealanders who may be hearing this debate for the first time. There is already a theoretical law in place that if you buy a property with the intention of selling it on for a profit, you are technically a speculator and you are subject to paying tax on the profit. But this is a test of your intention—what you intend to do with that house. It is highly subjective and virtually impossible to enforce. Very rarely is there tax gathered on the profit that a speculator would be making on these homes. This supposed brightline test that the Government is talking about is meant to support, lean up against, and buttress that intention test. It is a requirement, along with other requirements. The brightline test, this legislation, says that if you buy an investment property—not your main home, or not necessarily a home—and sell it within 2 years you are subject to income tax on the profits that you make from that sale. That is what this law does. The previous law has an intention test. This new law is supposed to provide a 2-year requirement—if you sell in that time, you will need to pay tax on the profits.

There is increasing evidence that the New Zealand housing market is being driven up by speculation. Just this week the IMF and the Reserve Bank have both identified increases in housing unaffordability as a serious risk to the New Zealand economy, let alone to the stability and well-being of New Zealand families. The Reserve Bank in its Financial Stability Report talked about rampant house price inflation fuelled by property speculation all putting the economy at risk. It said: “Rising investor activity has been an important driver of price developments, and”—it went on—“international evidence suggests that investor loans have a higher tendency to default in the event of a major downturn in the housing market.” So this increasing speculation, particularly from foreign buyers, puts the whole economic situation, particularly in Auckland and elsewhere, at real risk of a downturn, and that means people losing money on their houses if things go bad. That is the kind of risk that National is putting New Zealanders under with miserable policy like this that does not go far enough to actually fix the problem.

The IMF report, which was called “New Zealand: Staff Concluding Statement of the 2015 Article IV Mission”, was quite explicit that New Zealand urgently needs to build more houses, in Auckland in particular, and that given the time frame that is needed to make that happen—and you know it takes a while for that to happen—we therefore need tax incentives for housing speculators to be removed. One of the tax incentives is that if you buy a property and then sell it on, you do not have to pay any tax on the profit that you make. You can gain an income without any kind of tax. So even the IMF is saying there is a real need to remove the tax incentives.

A capital gains tax is pretty common. It exists in virtually every OECD country around the world, but it has not been that politically palatable in New Zealand until recently. The Green Party has long held a policy of a capital gains tax. Rod Donald was talking about it in 2005, I have done work on it since 2010, and other Green MPs will continue to advocate for a capital gains tax because it is one of the tools—not the only tool; it is not going to solve the problem—that we need to help dampen the housing market that is causing so many problems. I do note with some disappointment that Labour has decided not to proceed with a capital gains tax, given all of the evidence that shows that it is a one of the necessary tools that needs to be put in place so that young families can have a chance of buying their own home.

National, ever anti-tax as it is, has never had the courage to campaign on a policy that would be objectively good for the economy as a whole.

The ASSISTANT SPEAKER (Hon Trevor Mallard): The member will resume her seat. Members cannot accuse members, either individually or collectively, of lacking courage. It is against the rules, so the member will withdraw that comment.

METIRIA TUREI: My apologies. I withdraw, Mr Assistant Speaker. A capital gains tax would close a critical tax loophole that we have on New Zealand property. It would reduce speculation, and it would provide an incentive to invest in the productive sector of the economy, as opposed to housing. These are all parts of the puzzle that need to fit together.

One of the other reasons why the Green Party is committed to a capital gains tax, and a good policy as opposed to this miserable one, is that it also goes towards helping reduce wealth inequality. This is one of the issues that arise when you have a big gap between those who own wealth in this country and those who do not. Max Rashbrooke, in his new book Wealth and New Zealand, makes a very strong argument that it is not just about income inequality or income measures. He argues for equitable measures to assist New Zealanders so that everyone has access to an asset base. One of those measures, actually, the Green Party proposed earlier this year, before the Budget. This was a kids’ KiwiSaver. This was at a time before the Government kicked the guts out of the KiwiSaver scheme by removing the Government contribution. But if it were committed to sensible policy that would help deal with wealth inequality, the kids’ KiwiSaver would mean a small contribution from the Government from birth and a small contribution from the family so that at the time a child reached 18 years of age they would have a small asset base of well over $10,000 that they could use to buy a house or to invest in their education.

That is one way of dealing with wealth inequality; a capital gains tax is another one of those measures to help deal with that. The fact is in this country that 10 percent of New Zealanders—just 10 percent of New Zealanders—own 52 percent of the country’s wealth. Ten percent of this country owns more than 50 percent of the wealth in this country. On the other hand you have half of the country—half of all New Zealanders—and how much wealth do you think they might own? Half of the New Zealand population owns just 5 percent of the nation’s wealth—the nation’s assets. The gap in wealth inequality is massive and housing is part of that gap. It can be a solution to bringing New Zealanders together and closing the wealth gap. Otherwise, if we continue with miserable piecemeal measures, as National keeps providing, and a complete failure by National to really understand the issues for New Zealand families, that wealth gap is simply going to grow.

A capital gains tax is one of the tools that we can use to help close that wealth gap so that there is greater equity in New Zealand, so that there is greater equity between families—and we all know why that is important for our kids and for their future: so that young families have access to purchasing their own home for the security and stability that that provides, and that when you have a stable community with a strong housing base and with a strong asset base then everybody is doing better. We know that a capital gains tax is essential; it is a great shame that National simply does not know or care about that. This is at least is a small—very small—step towards making some progress. Thank you.

RICHARD PROSSER (NZ First): I am pleased to rise on behalf of New Zealand First to take a call on the third reading of the Taxation (Bright-line Test for Residential Land) Bill. New Zealand First opposes this bill. There is any number of reasons why any party—in fact, every party in this House—could and, in fact, should be opposing this bill. New Zealand First’s primary reason for opposing it—our primary objection—is that it quite simply will not work.

As Mr Cosgrove said, this bill is a waste of time. It is strange that he did. It has put me in the rather odd position of being able to agree with Mr Bennett who, in a rare moment of cogency, questioned why Mr Cosgrove and others from Labour would bag this bill and then vote for it anyway. I have to ask the same question. In New Zealand First, of course, we do not just talk the talk, we walk the walk. We say the reasons why we are going to oppose the bill, and then we oppose it. Perhaps Labour could take a leaf out of our book rather than the other.

But, as Mr Cosgrove said, the bill is a waste of time. It is a waste of time, money, and effort. It does not acknowledge the underlying problems that affect residential property in New Zealand. It does not admit where the obvious faults lie, and it does not address any of the root causes of discrepancies between supply and demand in any honest or effective manner.

So this bill is not about a brightline test. It is about a “dumbline” test. It is a dumb bill that introduces a dumb regime that represents a dumb approach to what is a very real problem, and it highlights the way that this Government has tried—and failed, I might add, because people have not swallowed the line—to dumb down every aspect of the foreign ownership debate that it does not agree with. There are holes in this bill, again as Mr Cosgrove noted, that you could drive a bus through. I might suggest that perhaps it should be a housebus, because housing and, more to the point, the lack of it, is what this issue is all about and what this bill purportedly attempts to address.

Chartered Accountants Australia and New Zealand has said that this bill is not sound tax policy. Treasury itself has stated that it will not capture the speculator. Anyone who is happy to wait for 2 years and 1 day after buying a property and before selling it again will not be inconvenienced by this bill either. Trusts and companies are exempt from it. Farmland and business premises are exempt from it. Foreign buyers, and in fact anyone who wants to land bank and simply has a need to expatriate money from wherever they are in order to get it out of the reach of various authorities in other jurisdictions, and who are not motivated necessarily by the prospect of short-term speculation, will not be affected by this bill, but the action of their purchase will nevertheless remove New Zealand residential properties from the reach of New Zealand buyers. The Minister of Finance himself has said that any transaction that is likely to be captured by this bill is very likely to already be liable for capital gains tax under existing legislation.

So this bill and the other related and rather limp responses that the Government has belatedly brought to this House, as a result of a multitude of increasingly loud voices protesting the sell-off of New Zealand, quite simply do not address the real issues, and because of that it quite simply will not work. Making foreign buyers obtain a New Zealand tax number, which a tourist here for a weekend can apply for and get, will not slow down the overseas speculator who is out to get their hands on New Zealand residential property.

As for making them obtain a New Zealand bank account when almost all the commercial banks in this country are foreign owned—no one is going to refuse to open an account for a foreign buyer who turns up with a fistful of dollars, or any other currency, come to that. So that is not going to slow them down. Neither is making them wait 2 years and 1 day before they clip the ticket on what is an ability to trade in New Zealand residential property, which an overwhelming majority of New Zealanders quite simply do not want them to have in the first place.

New Zealanders do not want foreigners buying our country. No one has any objection to immigrants whom we choose to allow to come buying a home to live in. But there is a world of difference between that and the kind of unbridled speculation and purchase that has been allowed under this and previous Governments, where anyone at all from anywhere at all, with access to very cheap, zero percent foreign finance, can come to New Zealand—or not come to New Zealand; they can get on the phone—and buy up any number of houses and properties that they like, frequently sight unseen, at whatever money the seller demands, at whatever money the market commands, and at prices that are beyond the reach of New Zealand citizens, permanent residents, and first-home buyers. New Zealanders do not want that, and the Government’s own supporters do not want that, and they have been saying so with increasing volume and increasing stridency. This bill and others like it—the other measures that this Government has brought in—are a rather half-hearted attempt to provide a sop to those concerns, and it will not work.

The answer to what is this very real problem is to limit the purchase and ownership of New Zealand houses to New Zealand citizens and permanent residents who are exercising their permanent residency, and to no one else. As Mr Twyford mentioned, his bill addresses this too. We are very, very glad to see that Labour has adopted this longstanding piece of New Zealand First policy, and, when Mr Twyford’s bill comes up, I am sure our caucus will be only too keen to discuss it. Taking that action will fix the supply and demand problems, and it will fix the looming Godzilla that is the Auckland housing bubble. This bill will do no such thing. For that reason New Zealand First cannot and does not support it. Thank you.

JAMI-LEE ROSS (National—Botany): I am happy to speak in support of this bill, which is another forward-thinking policy from the Government that is showing already, before it has even been legislated for, that it is having an effect and is working. I am enjoying the fact that the Labour Party, despite all its rhetoric today in the House, is having to swallow some dead rats and vote for a Government policy that is working. I have to say that this appears to be capping off a bad week for the Labour Party. It started off at the weekend, with its poorly attended conference, when it had to ditch unpopular policies like its great capital gains tax of the election. Labour members have now decided that it is not popular, so they are not going to go with it. Then the cheerleaders in the Dominion Post slated the conference, starting off the rest of the bad week for them. The politically motivated dummy-spit yesterday and the day before did not work either, and now they are going to have to stand and vote in favour of this bill because they know that this is a policy that New Zealanders want to see implemented.

It is not a case of doing small things and having no effect. In fact, we are seeing already, before this policy is even legislated, that Auckland house prices are starting to slow down. The policies we have implemented—such as requiring an Inland Revenue Department number from those offshore who are purchasing housing, and requiring those who speculate on housing and buy and sell within 2 years to pay tax, as they should do, through the brightline test—are having an effect. The increased construction that we are seeing in Auckland through the special housing areas, the fact that 19,000 houses have been consented already, out of 47,000 potential houses, and seeing that supply coming on board is having an effect and will have more of an effect going forward into the future.

This bill is something that New Zealanders have been demanding, and it is something that the Government is delivering on. New Zealanders expect the Government to be taking action on those who speculate on property. I am pleased that the Labour Party members, despite what they have said in the House today, are going to be supporting it, but bear in mind that when it comes to Auckland housing and prices going up, the best thing that we can do is support more supply and get more houses built. So when they stand on their feet and say they support that and when they actually stand and support what the Government is doing by increasing the spending and increasing the value of construction in Auckland, then I will be proud of them. But, until that day, New Zealanders know which side of the House is taking action and which side of the House has got the policies—and that is the Government, and we are implementing them.

MARAMA DAVIDSON (Green): E Te Māngai o Te Whare, tēnā koe, tēna tātou katoa e Te Whare. Taking action, that is interesting. There is a lot more action that needs to be taken when you are coming from my communities, my networks, and my experiences. But I rise to speak in this third reading of the Taxation (Bright-line Test for Residential Land) Bill on behalf of the Green Party as our spokesperson on social housing. As my co-leader Metiria Turei has mentioned earlier in this debate, the Green Party is supporting this bill as it is a small step in the right direction. However, this bill also represents a massive missed opportunity for this House to take the real action we actually need—meaningful action—to address the Auckland housing crisis and to support young families who have been completely shut out of the property market.

All tamariki in this country, and indeed all whānau, have the right to live in a warm, dry, and affordable home. It is the basic necessity of life and it has been something that New Zealand has stood quite proudly on for generations. Yet this seems to be taken for granted and, in fact, disregarded. I have heard a couple of National backbenchers, I think it was yesterday, shouting out “What’s wrong with renting? What’s wrong with renting?” when Labour was talking about the high incidence of renters in this country. How many of those MPs rent? How many would give up their homeownership to take their place as one of those renters? They are yelling out “What’s wrong with that?”.

Hon Anne Tolley: Well, what is wrong with that?

MARAMA DAVIDSON: “What is wrong with that?” We need a choice. We need the choice. And that pride in homeownership for Aotearoa that New Zealand is built on has been disregarded by an increasingly out-of-touch third-term Government. Come into my community, come into my iwi, come into my hapū, and come into my networks and talk to us about how much easier this bill will make life for their families.

As I mentioned in my maiden statement just last week, in my community of Manurewa and, indeed, across the whole country, whānau are living in homes so filled with mould that it is making their kids sick, often with what are Third World diseases. Shame! What are we? Shame. This is simply disgraceful in what is a land of great plenty. For these families, the dream of owning their own healthy home will remain that—just a dream. Under the current policy settings, so many people—too many people—simply have no chance.

Listen, I have been into the homes of families who have young children and who absolutely have no other choices. They are in mouldy homes that are making their children sick, even with numerous notices from health practitioners and from local community health workers who are saying on paper: “These people need to be assisted into healthier, warmer homes.” This family has tried so hard to get into the private rental market and to get into a healthier home. They have tried. I looked at this mother’s face. She wanted the best for her seven children. She wanted the best. She wanted to be independent and get into a better situation, but she is coming up against road blocks at every turn—road blocks that this Government has chosen not to push out of the way. And she has aspirations that are great for her family and for her children, but this bill and these measures do not go far enough. She has been discriminated against—[Bell rung]—and she is not able to get into the private market. How long was that? Sorry—

The ASSISTANT SPEAKER (Hon Trevor Mallard): One minute to go.

MARAMA DAVIDSON: Thank you—oh, goodness.

The ASSISTANT SPEAKER (Hon Trevor Mallard): It is only a 5-minute speech.

MARAMA DAVIDSON: There you go. So, actually, the Green Party has a whole package of solutions to ensure that all New Zealanders are able to live in a warm, dry, and affordable home. Among these solutions is our progressive ownership scheme, our homeownership scheme that will enable young whānau to purchase equity in their State rental houses. I do not know how aware any of the people in this House are to exactly how difficult it is for lower-income and even single-income families to even dream about any sort of deposit. Even a deposit of $5,000 would be virtually impossible for far too many families whom I am connected to. I look into their eyes and know how hard it is. Why is that choice not available for all of us? You know, we would, of course, introduce comprehensive taxes on capital gains—

The ASSISTANT SPEAKER (Hon Trevor Mallard): Order!

MARAMA DAVIDSON: Am I up now?

The ASSISTANT SPEAKER (Hon Trevor Mallard): You are.

MARAMA DAVIDSON: OK. Thank you, Mr Assistant Speaker.

DAVID SEYMOUR (Leader—ACT): We are, indeed, a House of Representatives, and was that last speech from Marama Davidson not 5 minutes of raging self-righteousness with very little to do with the bill? This bill is a public policy abomination. It is one the ACT Party will be supporting, because it is a Budget commitment, and supporting Budget commitments helps to keep those people over there in Opposition and these people over here in Government. From what we have just heard—I thought the bill was important before Marama Davidson’s speech, but now I think it is absolutely vital to the future of this country.

The Labour members may be interested to know that I have just been reading a lot about the Rt Hon Norman Kirk. Was Labour not a great party when it was led by him? I think most famously he said that New Zealanders want somewhere to live, someone to love, somewhere to work, and something to hope for. I think it is a very important question for New Zealand in 2015—why is it that it has become so much harder, for a society vastly more technically sophisticated than we were 40 years ago, to provide places that people wish to live in at prices they are able to afford? Some people may say the answer is “Don’t have seven kids if you’re not entirely sure that you can afford to support them.”, but other people would say that at least it should be easier to afford homes than it was 40 years ago. Some people say: “Oh, it’s because of the free market.” Well, what sort of free market is it when the Government has the monopoly on planning—

The ASSISTANT SPEAKER (Hon Trevor Mallard): Order! I was, as the member pointed out, relatively lenient on the previous speaker, who is a new speaker, with regard to relevance. This member is an experienced member now, and the leader of a party, and he will follow the rules and speak to the bill.

DAVID SEYMOUR: I am differentiating between supply side and demand side measures when it comes to attacking housing affordability. It is worth stating that in the Auckland region we built 5,000 houses a year throughout the 1990s and only 4,000 in the past decade. That is the material reason for a lack of housing affordability in Auckland. I think it is worth noting that it is not a free market when it is the Government that is responsible for providing the infrastructure.

This bill is a bill that will do nothing to help with housing affordability in Auckland because nobody ever built more houses in order to pay more tax. That is what at best might happen as a result of this bill, but, as we heard in the excellent submissions to the Finance and Expenditure Committee, even that is going to occur to an extent less than what real estate agents I know earn in fees—less than $5 million a year in projected revenue. That reflects the fact that, as we heard in submissions, we are only going to take in revenue from those who own a second house, find themselves stranded, and really cannot sell. Everybody else who is involved in serious property investment will easily manage their affairs to avoid a 2-year brightline test.

It is with some regret, but, suffice to say, as demonstrated by the previous speaker, some considerable necessity that I support this Budget measure of the brightline test. But let it be put on record that this tax is the acorn of a capital gains tax. It is a measure that will grow from 2 years to 5 to 10 to 15 years. You watch: it will eventually apply to a wider range of homes. It is the acorn that the National Party has planted that will grow into a full-blown capital gains tax. From the point of view of those of us who believe in simple, market-oriented policies, and those of us who want rational public policy for New Zealand, this will be viewed as a very dark day indeed. Thank you.

ALASTAIR SCOTT (National—Wairarapa): I rise in support and to take a brief call, but I would like to address the previous Green Party speaker, Marama Davidson, vis-à-vis her question of who on this side rents a place. Up until the last few months I was renting a place in Wellington. It is not such a bad thing. There are advantages in renting. You do not have to front up with the capital. You do not have to replace the fridge or the freezer when it breaks down. When the roof leaks, the landlord comes in. There are a lot of advantages in renting. There is no shame in renting, and it is part of the market place and the reality that we live in today.

I would like also to address a comment from Mr Twyford. I will ask the question to Mr Twyford: how much has a foreign investor made in the last 12 months when he has purchased a house in Auckland—how much has a foreign buyer made? The answer is zero—the answer is zero, simply because Mr Twyford has forgotten to consider the effect of the foreign exchange rate. The value of the Kiwi dollar has dropped approximately 25 percent and negated any gains that a foreign investor has made in Auckland, whether it be in the New Zealand housing market or whether it be in the New Zealand sharemarket. Because that is, of course, another class of asset, which I am not sure whether Mr Twyford is willing to ban. I am not sure whether he is wanting to ban foreign investors in our sharemarket and in our bond market or just in our housing market, or whether it is our buildings, or farmland, or any industry that might relate to his bill. It seems odd that he would want to ban only one class of asset.

Getting back to the bill, this is an excellent bill. It is for a 2-year limit. It could have been 1 year, it could have been 3 years; it happens to be 2 years. There is an exemption for the family home with the greatest connection. Some of these guys on the other side have a problem with that. It is very simple. There are exemptions around whether one is divorced or has inherited property, which is obviously sensible. This bill is based on logic. It is sensible legislation; it is not based on whether a person’s name is of Chinese descent. It is not based on whether the money comes in from offshore or not; it relates specifically to the trader who is wanting to speculate in the housing market in New Zealand. On that basis, I commend it to the House.

STUART NASH (Labour—Napier): I do stand in support of this bill. But I must admit I do find it a little rich when someone like Alastair Scott—with all due respect to Mr Scott, who I think is a man of substantial means—rents a property out of choice. It is a little different from a poor family that rents out of economic necessity. I suspect the house that Mr Scott rents is a little different from some of the houses that we find in South Auckland. But I could be wrong. Maybe Mr Scott was in a mouldy house with no curtains and no heating, etc. It just does not sort of seem right.

The other thing is that I have to smile at the ACT member starting to talk about Norman Kirk, a towering man of huge principle, and then at the end of his speech he says: “It is with regret that I support this bill.” Well, I can tell you that Norman Kirk stood up for what he believed in. There is no way that Norman Kirk would have ever done anything just because he felt he had to support another party. He would have stood up and he would have banged the desk and said: “This is what I believe in; this is what I stand for; this is what I am doing.” Not like that member. So that is a little disingenuous. I think it just epitomises what the ACT Party stands for, or does not.

It is generally accepted that tax legislation of this nature is not there to quell house prices. This sort of tax legislation is there to actually bring people into the tax system who are outside the tax system at the moment. I remember reading a paper in about 2010 that said the problem of avoidance in the speculative housing industry was valued at around $250 million a year—that was the size of the issue. It was very big; the Inland Revenue Department recognised the size of the problem. We now, 5 years later, have a bill that the Government says is going to raise about $5 million. This bill fails the test around tax legislation on so many features and in so many areas. The first one is, it does not meet the requirements. It is not there to bring people into the tax system.

The thing is, there is a test at the moment under current tax legislation, and it is called the intention test. What that basically means is that if a person has bought a house with the intent of making a capital gain then they have to pay tax on that at their marginal tax rate. However, if they bought the house with the intention of making a rental yield, and then they sell that house, they do not have to pay any tax. It is notoriously difficult to prove someone’s intent if they are arguing the other way. What this piece of legislation actually admits is that the intention test is not working, because if it was working then we would not need legislation in place to capture those who we believe are avoiding tax.

But the problem with this—the problem with this—is that it is there for only 2 years. What this is called is lock-in: someone buys a property, they know that all they have to do is to hold it for 2 years and 1 day, and they can sell it and they do not have to pay any capital gains. The intention test still exists, but, again, what a smart investor does is they always go out and say: “I’ve bought this as a part of a balanced portfolio. It is there to make a rental yield and I am going to hold on to this for as long as necessary.” Then they sell it after 2 years. The Inland Revenue Department (IRD) may come knocking and say: “You bought that with the intent of making a capital gain.” All the investor has to say is “No I didn’t. Talk to my accountant, talk to my lawyer, talk to my portfolio manager. I bought this with the intention of making a rental yield.”, and the IRD walks away because it knows it will never win that argument in court.

The IRD did have a look at this, and it actually ran two scenarios. It said “Let’s try a 2-year scenario, and let’s try a 5-year scenario.”, and it actually admitted that a 5-year scenario would have a much better outcome in terms of catching speculators than a 2-year one would. There would still be lock-in, there is no doubt about that. In fact, the Australian capital gains tax—how that worked is that if you bought the property before the capital gains tax came in, then you do not have to pay capital gains tax when you sell this property. And that has created a problem in Australia, because there are a whole lot of people who own properties for capital gain that they bought way before the capital gains tax came in. That is what will happen with this one. Five years would have been better—there is no doubt about that—and I have no doubt that Mr Scott knows this. I have no doubt that Mr Bayly knows this. Because when you look at it, this is capturing $5 million from speculators in an industry where avoidance has been estimated at around $200 million.

The other thing about this piece of legislation is that it is retrospective. It was signalled by the Government, and there is no doubt about that, but if you follow the line that this took, it very much looks like this was a Government making policy on the hoof, and then it thought: “Well, in order to put effect to this policy, we are going to need to pass legislation.” So, in effect, anyone who has bought a house on or after 1 October—keeping in mind this legislation will probably come in at the end of this month, or as soon as it receives Royal assent—they come under this 2-year brightline test. This is not a good way to make legislation for two reasons. The first one is, who would bother to put a submission in, knowing that the Government had signalled this—that the bill already said it was going to come in on 1 October and there is nothing you can do about this? This was a fait accompli.

The fact that we had tax advisers, the fact that we had large accounting companies, the fact that we had legal firms coming and saying this is not fit for purpose—I think they did it because they felt they needed to be heard, knowing that the odds of them making a difference were remote. But at least they came to the Finance and Expenditure Committee and said that this piece of legislation does not give effect to the Government’s policy, this will not have the intended effect that we need in the Auckland housing market, and it will not raise the level of revenue for the Government that a well-thought-out brightline test would.

The second thing I would say—oh, no, not the second thing; the third thing I would say, or even the fourth—is that I think the main home exclusion is unclear. There are so many points about this bill—can I have 20 minutes to speak on this, Mr Assistant Speaker? There are so many points about this bill that just are not right. It uses that famous legal term “if the land has been used predominantly, for most of the time”—“if the land has been used predominantly, for most of the time”. Is that a test in terms of whether it is a family home or not, or “the greatest connection”?

Mr Bishop always says: “Well, there is a legal definition for this. It has been determined in the courts, and we know that if it is bad legislation, then judges will have to determine what parliamentarians meant.” My view is that judges should not have to determine what Parliament meant when it passed legislation, because that legislation should be so clear that we do not need to take it to court. But this legislation will be taken to court and, again, it creates uncertainty and it creates ambiguity, which is not great tax legislation in any way, shape, or form. It fails yet another one of the tests.

Another point is that I do not think the family home test actually meets 21st century reality. By that, I mean that if you sell two or more family homes within the 2-year period, then you come under this test. Myself, I got a job in Taupō with Fletcher Challenge, then I moved to Auckland, and then we sold that house and we bought another one. This was in my younger days, when I could afford to buy Auckland homes. I would have been caught under that test, and there was no way at all that I was speculating in property. I was just buying a family home.

So, to wrap up, we are supporting this bill. I think this is a very poor process in terms of creating tax legislation. I do not think that this piece of legislation will have the desired effect that the Government wanted it to have. I think that the Government could have done a lot more in terms of revenue raising, in terms of addressing the core issue, which is people avoiding paying tax, and also—an unintended consequence—in terms of just putting a bit of a cooling on the Auckland house market. It is not good legislation, and I hope that the Government will come up with something more substantial that is actually going to meet the requirements of the IRD, of Aucklanders, and of New Zealanders. Thank you very much.

ANDREW BAYLY (National—Hunua): It is a pleasure to be talking on this third reading of the Taxation (Bright-line Test for Residential Land) Bill. Particularly after the previous speaker, Stuart Nash, I was getting so worried. I was getting so confused with what he was saying, and then he says at the end that he supports it, so I am just glad that he has got it clear in his own mind.

This is a Government trying to deal with an issue of market failure, and, of course, the Opposition always wants to claim that market failure is due to the Government. Well, it is not. What we have had is an issue through the global financial crisis where houses were not being built and, consequently, there has been a shortfall in the number of houses, simply because developers were not prepared to take the risk.

What I do know is that this Government is now actively trying to deal with this market failure. The case in point is the 104 special housing areas that are now in place in Auckland.

Stuart Nash: Andrew, you’re being disingenuous.

ANDREW BAYLY: I can tell you, within my own electorate of Hunua—and you should stay and listen to this bit—

The ASSISTANT SPEAKER (Hon Trevor Mallard): Order!

ANDREW BAYLY: Sorry. Excuse me, Mr Assistant Speaker. In my own electorate of Hunua, from my own assessment of all the developments I know are coming to the market over the next 6 years, there will be 13,000 new homes built in the next 6 years. That is a substantial number of houses, representing, roughly, about 30,000 people moving into my electorate.

What this bill does is amend the Income Tax Act 2007 by inserting a new clause that requires property owners and investors to pay income tax on any property that they sell within a 2-year period. Most people seem to get very confused about this. This is an income tax, which is exactly the same as you would pay if you were buying and selling shares on the stock market. If you are deemed to be a trader you pay income tax, just as this bill is seeking to apply to those trading in houses.

The 2-year rule is slightly different. In the normal course of events, it applies from the date of registration, or the acquisition date, of the land through to the date that that property is sold. There is a slight amendment for apartments, where the initial date of the 2-year period applies when entering into an agreement to buy the property, and that is an important little distinction that has been applied. Also, it is very clear that this applies only to residential land. If it is the case that you have a corner store that has a residential property at the back, only if more than 50 percent of the building is deemed to be occupied for the purposes of business would it be excluded from this legislation.

So what this bill also does is make three very clear exemptions. The first one is if you are buying and selling a property within 2 years and it is your normal house of residence—and that, of course, applies to most transactions in the country. That exclusion is one that all New Zealanders can rely on—i.e., if they buy and sell their house and they live in it, they will be excluded from this, full stop. The second exclusion is if you are selling a property within 2 years of having a matrimonial dispute, and the third is if you inherit some property.

I think the most important thing about this bill—and this is the bit that the Opposition certainly has not talked about today—is that it should be seen in the context of a number of new initiatives that this Government and the Reserve Bank have brought into force. So just dealing with the latter, we are all aware that the deposit rate, the loan-to-value ratio that the Reserve Bank has applied to the Auckland market, has moved to a rate of 30 percent.

This is a heavy requirement on banks to make sure that they are not lending extraordinary amounts of money to people and to make sure that the deposit rate that people have to have before they can enter into funding agreements with banks is at a suitable level. That already is showing some benefit. The Reserve Bank Governor at the Finance and Expenditure Committee was remarking on it yesterday—that we are now seeing a flattening off of property prices in Auckland.

But the second thing is, in terms of the legislation that this Government has already passed, we passed the Taxation (Land Information and Offshore Persons Information) Bill. This is the legislation that dealt with the question of requiring investors to make sure they get a bank account and an IRD number.

On that note, I think this is a very comprehensive bill. We are going to see another piece of legislation next year dealing with resident withholding tax. In that context, I commend it to the House, and I am happy to support it.

A party vote was called for on the question, That the Taxation (Bright-line Test for Residential Land) Bill be now read a third time.

Ayes 105

New Zealand National 59; New Zealand Labour 28; Green Party 14; Māori Party 2; ACT New Zealand 1; United Future 1.

Noes 12

New Zealand First 12.

Bill read a third time.

The result corrected after originally being announced as Ayes 107, Noes 12.

Sittings of the House

Sittings of the House

JOANNE HAYES (Third Whip—National): It has been a very busy and eventful week for the House this week, and so I seek the leave of the House to rise early.

The ASSISTANT SPEAKER (Hon Trevor Mallard): Is anyone brave enough to object to that? There appears to be no objection.

The House adjourned at 5.51 p.m.