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Questions And Answers July 6


(uncorrected transcript—subject to correction and further editing)

WEDNESDAY, 6 JULY 2011

QUESTIONS FOR ORAL ANSWER

QUESTIONS TO MINISTERS

State-owned Assets, Sales—On-selling Shares to Foreign Investors

1. Hon PHIL GOFF (Leader of the Opposition) to the Prime Minister: Will he prevent shares sold in New Zealand-owned and taxpayer-owned assets such as our power companies being on-sold to foreign corporates; if so, how?

Rt Hon JOHN KEY (Prime Minister): One of the tests we set for extending the mixedownership model to companies other than just Air New Zealand was that there would be widespread substantial New Zealand share ownership. We are still working through the details of that, but our expectation is that having New Zealanders at the front of the queue is one thing, and given the likely strong demand for shares from the likes of KiwiSaver funds, Crown financial institutions, and Kiwi mums and dads, such restrictions are likely to be unnecessary to achieving that test. By holding a stake of more than 50 percent the Government will ensure there is always a majority in New Zealand ownership.

Hon Phil Goff: So when Tony Ryall was asked at the Finance and Expenditure Committee on 22 June: “How would you guarantee that those shares would not be onsold for foreign multinationals?”, and he answered: “Well, you can’t guarantee on those issues.”, Tony Ryall was right, contrary to the Prime Minister’s questioning of that statement yesterday?

Rt Hon JOHN KEY: I think the debate is about what level of foreign ownership there would be, and because a majority is held by the Crown as a starting point, and because New Zealanders will be put at the front of the queue, we know by definition that the majority has to be in New Zealand hands. If it was such an amazing issue, why did Labour in 9 years in office never bother having the same restrictions it seems to be talking about now on the balance of Air New Zealand shares held by the public?

Hon Phil Goff: Did it pass by the Prime Minister’s attention—

Mr SPEAKER: I apologise to the honourable Leader of the Opposition. There will be a little bit more reasonableness on both sides. It was very difficult for me to hear the Prime Minister’s first answer because of the noise on my left and it was difficult for me to hear the start of the Leader of the Opposition’s question because of the noise on my right. So I ask for a little bit more reasonableness.

Hon Phil Goff: Did the Prime Minister somehow miss that in the 9 years of the last Labour Government we sold off no assets to foreign corporates—in fact we bought them back, such as New Zealand Rail, which was sold at a cheap price by a National Government, to the huge detriment of this country?

Rt Hon JOHN KEY: If Phil Goff thinks buying KiwiRail was a good deal for the taxpayer, I can see why he holidays in Greece these days.

Hon Trevor Mallard: I raise a point of order, Mr Speaker. [Interruption]

Mr SPEAKER: I apologise to the member. Now, look, a point of order has been called. The House must respect our basic rules. We can have a passionate exchange—I should not say that—we can have a noisy exchange, but we will not ignore the basic rules of the House.

Hon Trevor Mallard: It is a simple point of order. The comments that the Prime Minister made about the private travel and family travel of the Leader of the Opposition clearly led to disorder and were designed to do so.

Mr SPEAKER: My dilemma is that I could not hear what the Prime Minister said in his answer, and that is my difficulty. If I had been asked to rule on whether the Prime Minister answered the first question, I could not do so, because I could not hear his answer. The solution to this is in the hands of the House. If the Speaker is to do his job, he must be able to hear. I ask members to be sensible about that. I cannot rule on something I simply did not hear.

Hon Trevor Mallard: I raise a point of order, Mr Speaker. I ask that you ask the technicians to have another look at the sound system, please. If we can hear it over here, the sound system cannot be working properly if you cannot hear it.

Mr SPEAKER: I also accept that maybe my ears are inferior to the member’s. I apologise if that is the case. The noise level simply makes it very difficult for me. I ask members to be more reasonable.

Hon Phil Goff: When the Prime Minister answered in the House yesterday that Treasury advice said that “widespread and substantial New Zealand ownership is achievable”, why did he not finish the very same sentence in which that advice was included, which went on to state: “but significant participation by foreign investors will be essential to achieve the Government’s overall objectives”? Why did he not reveal that advice to the House?

Rt Hon JOHN KEY: Because that advice has been in the public domain for quite some time and the Government rejects it. One bit of Treasury advice we do accept is that a capital gains tax at 15 percent on a rental property—

Mr SPEAKER: That is not acceptable. It had nothing to do with the question asked. The question asked was a fair question. That last part was unacceptable. Labour has just earned itself a further supplementary question.

Hon Phil Goff: Did Treasury advise him and his Minister of Finance that strong foreign ownership restrictions would lead to net benefits from sale not being realised, and is that why he is refusing to put strong restrictions on foreign corporate ownership of New Zealand and taxpayerowned assets?

Rt Hon JOHN KEY: No, because we took the same approach that Labour did when it was in Government, and that was that it held 73 percent of Air New Zealand. It did not find any need for restrictions, because, as those members know, those shares held in the public domain did not for the most part flow overseas.

Hon Phil Goff: When the Prime Minister said in the House yesterday: “Arrogance would be to take a position where one passes the law and carries it out without reference to the New Zealand public.”, does he believe that it is also arrogant for his Government to have banked the proceeds of the sale of the privatisation of those assets in this year’s Budget and to have spent $6 million of taxpayers’ money in scoping out the study for privatisation without any mandate at all from the New Zealand public?

Rt Hon JOHN KEY: No, but I do think it would be arrogant to go and try to tell the press gallery that a capital gains tax would raise $4.5 billion when, in fact, it will raise only $700 million. If it will raise $4.5 billion, then that said capital gains tax would have to be on a bach, a rural property, a commercial property, any rental property anyone owns, any shares, and, by the way, that probably would not be happening because even then Labour would be polling under the Greens at that point.

Rahui Katene: Does he agree that iwi and hapū are attractive commercial partners for the Crown because of their intergenerational investment outlook; if so, what commitments can he give

to iwi and hapū that they will have first right of response before any New Zealand - owned assets come up for consideration?

Rt Hon JOHN KEY: I do agree that iwi and hapū would be attractive, long-term shareholders. They will be given the same rights as other New Zealanders to be at the front of the queue. What iwi and hapū are demonstrating through their commercial arms is that they—like many, many other New Zealanders—through their KiwiSaver accounts, through the Crown financial institutions, and through their savings actually want to buy shares in well-performing New Zealand companies, instead of having failed finance companies to invest in, as was the case under a Labour Government.

Hon Phil Goff: When the Prime Minister, earlier this afternoon, said he was considering transferring shares from the taxpayer—the Government—to Crown financial institutions to aid in privatisation, how does that actually help the economy, particularly when Crown research institutes pay more for their borrowing than the Government does?

Rt Hon JOHN KEY: We are not talking about transferring; we are talking about selling. This might come as a really novel idea to Phil Goff, but actually I reckon it is quite a good idea if the New Zealand Superannuation Fund buys shares in Genesis Power rather than buying them in an Australian energy company. I do not know about everyone else, but I happen to think that investing in New Zealand is a great idea.

Hon Heather Roy: Can he recall any precedents of previous Governments allowing New Zealand - owned and taxpayer-owned assets to be on-sold to foreign corporates; if so, which Ministers at the time were involved in the policy implementation?

Rt Hon JOHN KEY: I can recall that. I remember certainly Phil Goff and Annette King being Ministers in a Government that sold assets. I can remember Trevor Mallard being in Parliament. Mr Speaker if you will bear with me and just give me an extra few moments, I am happy to read the list. They would include New Zealand Steel, Petrocorp, Health Computing Services, DFC, Post Office Savings Bank, Shipping Corporation, Air New Zealand, Landcorp Farming, Rural Bank, Government Printing Office, National Film Unit, Communications New Zealand, State Insurance Office, the Tourist Hotel Corporation of New Zealand, New Zealand Liquid Fuel Investment, the forestry cutting rights—all of which added to a quick $9.761 billion flogged off by Phil Goff, who is now apparently opposed to asset sales.

Hon Phil Goff: Why—[Interruption]

Mr SPEAKER: I apologise to the Leader of—[Interruption] I say to the National frontbench, I have asked the honourable Leader of the Opposition to ask his question. It should be possible to hear it. I am sure the Prime Minister wants to hear it.

Hon Phil Goff: Why has not National learnt the lessons of history and the failures of past privatisation, like the last Labour Government, which sold no assets, knowing that the sale of some assets like New Zealand Rail led to asset-stripping, others like Air New Zealand led to a previously successful business being run into bankruptcy, and the sale by National of the BNZ for a mere $1.5 billion has resulted in $12.5 billion worth of dividends flowing out of this country; why has he not learnt those lessons?

Rt Hon JOHN KEY: I actually think the Leader of the Opposition asked a good question. This Government has learnt those lessons. That is exactly why there will be a majority ownership held by the Government. That is exactly why Kiwi mums and dads will be at the front of the queue. I say this to the Leader of the Opposition in all sincerity: the investment portfolios around New Zealand have changed. Back in the late 1980s and 1990s, there were not 1.7 million KiwiSaver accounts. There were no Crown financial institutions. Those entities were actually not in the form they are today. What investors are looking for are genuine investments in New Zealand companies.

Hon Trevor Mallard: Don’t be stupid. What was the ACC?

Rt Hon JOHN KEY: Well, I say to Trevor Mallard that what they are not looking for is a capital gains tax on everything they may ever own.

Hon Phil Goff: Has he and his Government been advised by Treasury and other officials that the cost to the taxpayer of selling these assets could actually be between 2 percent and 9 percent of their value, which, if one takes the midpoint of those figures, means that he will be spending $340 million worth of taxpayers’ money just to flog off the assets to foreign corporates?

Rt Hon JOHN KEY: No. What we have actually been advised by Treasury is that the average cost of an initial public offering is about 7 percent. In the United States it is 3 to 4 percent. In fact, when Contact Energy was sold off, I think it was about 1.8 percent. That is exactly what we are working towards, and the member knows that, because in fact that advice was presented to his office some months ago when he was away.

Hon Phil Goff: I seek leave to table a letter to the Minister of Finance from the Crown Ownership Monitoring Unit dated 17 May 2011 that states that in New Zealand large initial public offerings in recent years have cost around 2 to 9 percent, which is the figure I quoted.

Mr SPEAKER: Leave is sought to table that document. Is there any objection? There is no objection. Document, by leave, laid on the Table of the House.

Government Financial Position—Reports

2. PESETA SAM LOTU-IIGA (National—Maungakiekie) to the Minister of Finance: What reports has he received on the Government’s financial position?

Hon BILL ENGLISH (Minister of Finance): This morning we released the Government’s financial statements for the 11 months to 31 May of the financial year. The operating deficit was $10.8 billion, about 1.3 billion below forecast due to higher than expected tax revenue and lower core Crown expenses.

Peseta Sam Lotu-Iiga: What impact are these early signs of progress in reducing the deficit likely to have on the Government’s finances for the full year ended 30 June 2011?

Hon BILL ENGLISH: It could be a small positive impact. The forecast now looks like the deficit could be $16 billion for the year, down from $16.7 billion. But $16 billion is still a very large deficit, and it simply underlines the need for good fiscal management, good expenditure control, and sound policy that will promote the growth of the economy and the growth of tax revenue.

Peseta Sam Lotu-Iiga: How did Budget 2011 improve the outlook for Government debt and deficits over the next few years?

Hon BILL ENGLISH: As a result of the measures in the Budget the Government now expects a surplus by 2014-15, and will borrow considerably less over the next 3 or 4 years: possibly up to about $10 billion less borrowing than was forecast in the 2010 Budget. The Government debt is expected to peak at under 30 percent of GDP, compared with 34 percent of GDP without the decisions of Budget 2011.

Peseta Sam Lotu-Iiga: How does the improved fiscal and debt outlook in Budget 2011 compare with the position that the Government inherited in late 2008?

Hon BILL ENGLISH: It is much healthier. The pre-election update in 2008 showed a decade of deficits and ever-rising debt. That was because New Zealand went into recession in early 2008, 9 months before the global financial crisis. Net debt in December 2008 was forecast to soar to 50 percent of GDP and never fall. The last Labour Government left a fiscal mess, and by making careful and considered decisions, this Government has tidied it up.

Energy Companies, State-owned—Onselling Shares to Foreign Investors

3. Hon DAVID CUNLIFFE (Labour—New Lynn) to the Minister of Finance: Does he agree with State-owned Enterprises Minister Hon Tony Ryall who told the Finance and Expenditure Committee “there’s going to be no guarantee about what happens with foreign ownership”; if not,

what mechanisms would he put in place to stop the shares in energy companies which he plans to privatise from ending up in foreign hands?

Hon BILL ENGLISH (Minister of Finance): I presume the Government would take the same approach as the Labour Government did when it floated a quarter of Air New Zealand on the New Zealand Stock Exchange. As far as I understand, most of those shares have not fallen into foreign hands.

Hon David Cunliffe: Given that the Minister has clearly taken no advice about the fact that Labour bought back shares in Air New Zealand rather than floated them, what official advice has he received on the percentage of any shares sold under his privatisation policy that would end up in foreign hands?

Hon BILL ENGLISH: Let us go through it: 51 percent will be owned by the Government, and who would know just what percentage—but we know it would be considerable—will be owned by the 1.7 million New Zealanders in KiwiSaver, the New Zealand Superannuation Fund, the ACC, the Government Superannuation Fund, and Kiwi mums and dads? I guess the difference is this: we think Kiwis want to invest in New Zealand, and Labour thinks Kiwis want to sell out of New Zealand. They are wrong; we are right.

Hon David Cunliffe: Given that simply transferring the shares from the Crown’s own balance sheet to that of the New Zealand Superannuation Fund would be a merry-go-round at a higher cost of capital, and given that there is potential for mum and dad investors to onsell to foreign investors, how would he avoid a repeat of the partial privatisations in Queensland, where most of the shares bought by mum and dad investors ended up in the hands of foreign corporates?

Hon BILL ENGLISH: We just look at the experience of Contact Energy, which was floated in the late 1990s and still has the largest register of shareholders on the New Zealand stock exchange—shares still largely held by Kiwi mums and dads. Again, we think New Zealanders want to invest in New Zealand, and we back them to do that.

Hon David Cunliffe: Given that Contact Energy is now largely owned by a foreign multinational that bought its shares from mum and dad investors, can the Minister tell the House whether he met with China Investment Corporation, a State-owned Chinese company that signalled that it has $6 billion set aside to buy New Zealand assets shortly before the Budget was announced?

Hon BILL ENGLISH: Yes, I did visit China, and I did visit the Chinese Investment Corporation, along with the State Administration of Foreign Exchange, which manages $3 trillion of foreign reserves. I also met with two of the top six politicians in China, who will effectively become the leader and the deputy leader of China next year. I met with a number of New Zealand companies who operate in China, and a number of Chinese companies who want to operate or who do operate in New Zealand. They are very pleased with New Zealand’s economic policy, which is focused on taking the huge opportunities offered by the growing market of China.

Michael Woodhouse: What criteria were applied by the Government when considering foreign investment in Air New Zealand by the very successful mixed-ownership model under which it is operating?

Hon BILL ENGLISH: The largest foreign investment in Air New Zealand actually occurred in December 2002, under the previous Government, when Qantas paid $100 million for a minority shareholding. This was led by then Associate Minister of Finance Trevor Mallard. The Government set six criteria at the time, including the maintenance of effective control of Air New Zealand by New Zealand nationals. It noted that without the outside investment, there would be a real risk that the Government as principal shareholder would be called on for further substantial funds, diverting Government expenditure away from higher priorities in health and education. The Opposition seemed to have forgotten that when in Government it sold a chunk of Air New Zealand to Qantas, and that it was happy to do that because it maintained effective control—that is the mixedownership model.

Hon David Cunliffe: Is one of the reasons that the Minister met with the China Investment Corporation the fact that Treasury has advised that a significant proportion of foreign ownership is essential for the success of its partial privatisation plan; if so, what arrangements did he make with that Chinese investment fund to participate in that privatisation?

Hon BILL ENGLISH: The answer to that is absolutely no.

Mr SPEAKER: Question No. 4, Aaron Gilmore. [Interruption] I want to hear from the member at the back of the House. [Interruption] Have both front benches quite finished?

Tax System Changes—Investment Properties

4. AARON GILMORE (National) to the Minister of Finance: What changes has the Government made to the tax treatment of investment property to increase fairness and help rebalance the economy towards productive investment?

Hon BILL ENGLISH (Minister of Finance): The Government inherited a flawed property tax regime that contributed to the excessive property boom of the last decade. So in last year’s Budget we stopped claims for depreciation deductions, tightened rules on loss attributing qualifying companies, prevented property investors from using rental losses to inflate their eligibility for Working for Families, and cut the top personal tax rate, reducing the value of losses that higherincome earners can claim on property investments.

Aaron Gilmore: What extra resources has the Government provided to the Inland Revenue Department to help ensure that property speculators pay their fair share of tax?

Hon BILL ENGLISH: People who trade in property, of course, have to pay tax on their profits, and we need to make sure that they do. The Budget last year provided the Inland Revenue Department with $119 million over 4 years to target property speculators who were not paying. This investment has paid for itself in the first year, with $115 million of new tax assessments in the last 9 months. The extra funding has also been used for audits centred on the hidden economy, where people tend to do cash transactions to avoid paying tax.

Aaron Gilmore: What other options did the Government consider for tightening tax rules on property investors?

Hon BILL ENGLISH: We considered a number of options that were worked through by the Tax Working Group, including a comprehensive capital gains tax. However, we decided against a capital gains tax, for several reasons: it would make the tax system much more complex to administer, it would raise virtually no money for several years, and it would encourage taxpayers to hold on to assets for longer to avoid tax. Far from raising $4 billion, as I think the Opposition claimed, even a 15 percent capital gains tax on rental property will raise only $700 million, which will not pay for even half of its other tax promises.

Aaron Gilmore: What reports has he seen of alternative tax policies?

Hon BILL ENGLISH: I have seen what I think was an announcement that a 15 percent capital gains tax applied to investment properties would raise $4.5 billion. This is simply not correct. A 15 percent tax of that nature would eventually raise $700 million. In fact, it would probably take 15 years before it raised $700 million. The other big problem for a capital gains tax is that house prices are flat or falling, so it is quite possible that one could bring in the tax and raise nothing.

Taxation, Capital Gains Tax—Investment Properties

5. Dr RUSSEL NORMAN (Co-Leader—Green) to the Minister of Finance: Does he agree with the findings of the Savings Working Group which found that the favourable tax treatment of property investment accounted for about 50 percent of house price increases from 2001 to 2007?

Hon BILL ENGLISH (Minister of Finance): Yes, to some extent we did agree with them. It is likely that it was a contributing factor, and that was why we moved to increase the effective tax rate on property investors by reducing depreciation deductions, adjusting the loss attributing qualifying company rules, tightening Working for Families definitions to exclude losses on property

investment, reducing the top tax rate, which significantly reduces the value of losses they can claim and, therefore, the tax they can get back, and giving increased funding to the Inland Revenue Department to target property speculators who are avoiding property tax.

Dr Russel Norman: Does he—[Interruption]

Mr SPEAKER: I ask both front benches to show some courtesy—[Interruption]

Dr Russel Norman: Another supp, I think, Mr Speaker.

Mr SPEAKER: The House will settle.

Dr Russel Norman: One from each side, maybe.

Mr SPEAKER: We will not have any more interjections, even though they might be helpful like that one. I say to both front benches that it is unacceptable to continue interjecting. Both front-bench members were doing it in a blatant fashion.

Dr Russel Norman: Does the Minister disagree, then, with the recommendations from the Savings Working Group, Treasury, and the OECD, which have all found in favour of a capital gains tax—

Hon David Parker: And the IMF.

Dr Russel Norman: —and the IMF—in order to put downward pressure on house prices?

Hon BILL ENGLISH: Yes, we did disagree with the recommendations. If we had agreed with them, we would have implemented a comprehensive capital gains tax. But I have to say that house prices are flat or falling, generally, and that will assist with the rebalancing of this economy towards a focus on exports, investment, and savings, and away from excessive property speculation.

Dr Russel Norman: Why does the Minister continue to insist that a capital gains tax would be too complicated, when they can manage it in the United States, China, Denmark, Finland, France, Germany, Poland, Singapore, Sweden, Switzerland, the UK, and Japan, and when even the Australians can do it; what is he implying about New Zealand—that it is too complicated for New Zealand?

Hon David Cunliffe: Tell us about Southland.

Hon BILL ENGLISH: Do not tempt me! The Tax Working Group looked at capital gains taxes as they operated in all those jurisdictions, and, on balance, actually decided not to recommend in favour of a capital gains tax. The other significant reason is that actually it does not raise much revenue in the shorter term. As I said, even the proposal we have heard could take up to 15 years to raise $700 million worth of revenue, and when the market is flat or falling, it could possibly raise no revenue at all.

Dr Russel Norman: With reference to the flat housing market, does he agree with Fran O’Sullivan, who recently said that now is the best time to introduce a capital gains tax—when house values are relatively static—and that “It is quite simply a nonsense to continue to run a system which protects the asset-rich …”?

Hon BILL ENGLISH: Well, I think the reason she is advocating that is that for the foreseeable future the readers of the New Zealand Herald would not be paying any capital gains tax, because there is no capital gain. That is a problem for a party that is proposing the tax as a way of paying for other very expensive promises. This tax would raise almost no revenue. They would have to find some other way to pay for several billion dollars worth of promises.

Taxation, Capital Gains Tax —OECD Report

6. Dr RUSSEL NORMAN (Co-Leader—Green) to the Minister of Finance: Does he agree with the OECD which found in April this year that “New Zealand is one of the few OECD countries with no comprehensive capital gains tax on any asset class” and that this “favourable tax treatment of housing” should be removed to lower house prices, lower wealth inequalities, and level the playing field for saving and investment decisions?

Hon BILL ENGLISH (Minister of Finance): We do agree with it that New Zealand has no comprehensive capital gains tax, and generally we agree with its objectives, and we have chosen other means to achieve those objectives.

Dr Russel Norman: Does he agree with John Walley from the New Zealand Manufacturers and Exporters Association—

Hon Members: Who?

Mr SPEAKER: Order!

Dr Russel Norman: Definitely an extra supplementary—

Mr SPEAKER: No.

Dr Russel Norman: Does he agree with John Walley from the New Zealand Manufacturers and Exporters Association, who said recently: “A balanced tax system including taxation on property is needed so that capital is used to invest in revenue and job generating businesses ...”; if so, why does he continue with a tax system that has this bias for housing speculation?

Hon BILL ENGLISH: I do remember agreeing with him once. Look, we share with Mr Walley the objective of moving this economy to an export-orientated economy built on higher savings, high-quality investment, and high productivity. The Government has taken a number of very significant measures to achieve that, including major tax reform. In that context, we made the decision that there were means of achieving a correction in the taxation of property other than a capital gains tax. As I said, the big problem here is for the Opposition to come up with a high enough rate of capital gains tax covering a broad enough base to pay for the very expensive other promises that they have made.

Dr Russel Norman: Why does the Minister reject the advice from the Tax Working Group that a capital gains tax, excluding the family home, would raise $4.5 billion a year, which was in their report, whereas on the other hand he is willing to accept their advice that a capital gains tax is too complicated; why does he not accept their number, $4.5 billion, but he is happy to accept their recommendation not to proceed?

Hon BILL ENGLISH: In respect of their number, I understand that it was based on what we call an accrual regime, which means that any uplift in value is taxed each year, regardless of whether the property has been sold. A realisation-based tax, which is when we pay when we have the money, would realise quite a lot less money. The group most harshly affected by the regime that Labour is proposing is superannuitants, who have low cash incomes but would have to come up with tax to pay accrued capital gains. The only saving grace is that in current conditions there is almost no capital gain, so they would not have to pay, but it means that Labour would get no revenue from it.

Dr Russel Norman: Why is he ignoring the advice of the OECD, Treasury, the IMF, and the Savings Working Group, which have all found that New Zealand is now an outlier in not having a comprehensive tax on capital gains, the absence of which seriously undermines Government revenue and the competitiveness of our productive sector, which he has repeatedly said is central to his economic strategy?

Hon BILL ENGLISH: I am pleased to see the Greens are now starting to take notice of mainstream economic advice. It has taken a while. I had not expected the Greens to be quoting Treasury and the IMF, but there you go. As I said, we share their objectives but we have found different means of achieving them.

New Zealand Trade and Enterprise—China Beachheads Advisory Board

7. Hon DAVID PARKER (Labour) to the Acting Minister for Economic Development: Does he stand by all his answers to Oral Question No 8 yesterday?

Hon DAVID CARTER (Acting Minister for Economic Development): Yes, I do.

Hon David Parker: Is the Minister aware that the total trade deficit with China since his Government came to office is $4.6 billion?

Hon DAVID CARTER: No; I do not have that figure with me. I am aware that trade exports to China have grown from $2.3 billion to $5.5 billion since 2008, and that is a remarkable rate of growth of around 140 percent. It is an absolute success story.

Hon David Parker: Is the investment balance with China positive or negative, or, in other words, every year is China buying more of New Zealand than New Zealand is investing in China?

Hon DAVID CARTER: I know that the member is totally opposed to foreign investment. What I was talking about yesterday was the performance of New Zealand Trade and Enterprise in raising the amount of exporting by New Zealand companies to China. It has been remarkably successful— something that the member does not seem to be prepared to accept.

Hon David Parker: I raise a point of order, Mr Speaker.

Mr SPEAKER: Before I call the honourable member, I say that the question had no particular political content. The question simply asked, if I recollect correctly, whether the investment balance between New Zealand and China was positive or negative, or whether China was buying more—I cannot remember the exact words. If the Minister did not have those particular figures, that is one thing, but then to criticise the questioner in the way he did, by saying that the member does not like foreign investment, is not acceptable. I invite the Hon David Parker to repeat his question.

Hon David Parker: Is the investment balance with China positive or negative, or, in other words, every year is China buying more of New Zealand than New Zealand is investing in China?

Hon DAVID CARTER: I do not have figures as to the investment balance between China and New Zealand.

Hon David Parker: The projections in the Budget show the current account deficit getting worse every year, from here on, and New Zealand’s net investment position getting worse every year, from here on, so both deficits are expected to worsen, so does this not show that the China Beachheads board resignation is indicative of a wider problem for New Zealand?

Hon DAVID CARTER: No, it does not. The resignation by the Beachheads board occurred simply because there was a significant clash of personality between the management of New Zealand Trade and Enterprise in China and the Beachheads board. The Beachheads board delivered an ultimatum to New Zealand Trade and Enterprise stating that if the board was to remain as the current board, it would require a change of management staff of New Zealand Trade and Enterprise in China. The chief executive of New Zealand Trade and Enterprise was not prepared to accept that ultimatum, and therefore the board resigned en masse.

Hon David Parker: Did a member of the New Zealand Trade and Enterprise board cause or contribute to the mass resignation of the China Beachheads board; if so, who was that board member?

Hon DAVID CARTER: I am not aware of any board member of New Zealand Trade and Enterprise causing the resignation of the Beachheads advisory board. What happened, as I have just explained to the member, is that the Beachheads advisory board was attempting to decide who should be the management personnel of New Zealand Trade and Enterprise in China. It is not appropriate for an advisory board to attempt to manage the operations of New Zealand Trade and Enterprise.

Agricultural Emissions and Food Security—International Research

8. COLIN KING (National—Kaikōura) to the Minister of Agriculture: What recent steps has the Government taken to progress international research into agricultural emissions and food security?

Hon DAVID CARTER (Minister of Agriculture): Recently Tim Groser and I attended the inaugural ministerial summit of the New Zealand – led Global Research Alliance on Agricultural Greenhouse Gases in Rome. The summit was a resounding success, with 36 countries signing up to the alliance and its aims of bringing together countries to work on solutions to reduce agricultural emissions whilst producing more food. The success of the alliance and its endorsement by countries

such as Brazil, China, and the United States is a significant coup for New Zealand, and shows that this Government is serious about taking practical steps to reduce agricultural greenhouse gas emissions without crippling our vital food producing sector.

Colin King: What further support has New Zealand provided to the Global Research Alliance on Agricultural Greenhouse Gases?

Hon DAVID CARTER: At the ministerial summit I was pleased to announce that New Zealand will establish a $25 million international fund to support research on mitigating agricultural greenhouse gas emissions. The fund is aimed at bold research efforts that must have people working across disciplines and across borders, but they must include a New Zealand partner.

Colin King: Why has the Global Research Alliance on Agricultural Greenhouse Gases received such a high level of international support?

Hon DAVID CARTER: There is clear international consensus that the two biggest challenges to face the world are food security and climate change. The Global Research Alliance on Agricultural Greenhouse Gases squarely addresses both of these challenges through its voluntary, pragmatic nature, and its focus on scientists, not politicians. That is why 36 countries from France to South Africa, Brazil, the United Kingdom, and Korea are strongly supportive. All of them praise New Zealand’s leadership in turning the Global Research Alliance on Agricultural Greenhouse Gases into a reality.

Earthquakes, Canterbury—Property Equity

9. Hon LIANNE DALZIEL (Labour—Christchurch East) to the Minister for Canterbury

Earthquake Recovery: Does he stand by his statement on 7 October last year that “the people of Canterbury who have suffered property damage can take heart…that the equity they believed they had in their properties prior to the 4 September event is preserved”; if so, why?

Hon MAURICE WILLIAMSON (Associate Minister for Canterbury Earthquake

Recovery) on behalf of the Minister for Canterbury Earthquake Recovery: He stands by the statement he made on 7 October. No one could have predicted the 22 February event. The 23 June offer to purchase in the most damaged areas at the 2007 rating value is a fair one.

Hon Lianne Dalziel: Does he then stand by his statement of 8 March this year, after the 22 February earthquake: “But right from 4 September I have repeatedly said that what we have to do is protect the equity that people think they’ve got in their properties”, and will he now admit that the Government’s offer fails to achieve that for many of those who will be receiving the Government’s offer, as evidenced by 17 emails I received after the Government leaked the announcement but before it was made?

Hon MAURICE WILLIAMSON: I think it is fair to say that the Government believes the offer we have made is a fair and balanced offer that in the vast bulk of cases will achieve the aim the member wants. As the Minister has said on a number of occasions, the exact technical details of the package are still being worked through.

Hon Lianne Dalziel: Why has he not yet advised property owners that they still have the option of taking the Earthquake Commission cash settlement for the land if it is higher than the 2007 rating value for the land, and will the amount of the cash settlement that that would entail be included in the letter of offer so homeowners can make an informed decision?

Hon MAURICE WILLIAMSON: I do not want to pre-empt anything about details that will go to homeowners. I can assure the member that they will be informed of all of the details of the offer, and then they will have up to 9 months to make a determination as to whether they accept it.

Brendon Burns: When the Minister said on 15 June that “we need to make sure that when we’re protecting equity in one place, we’re also protecting that equity in the places where we have the same outcome”, did he intend to include examples like that of my constituents who will be offered $90,000 less than the mortgage on their Avonside home, which had a market value when bought well above the 2007 rating valuation; if so, why did he not refer to negative equity?

Hon MAURICE WILLIAMSON: I can tell that member of an experience I had with the Weathertight Homes Resolution Service, and that is that whenever a global offer is made, there will be cases that are outliers and are difficult—

Hon Trevor Mallard: Outliers?

Hon MAURICE WILLIAMSON: Well, they can be. This offer the Government has made is, in our view, a fair and balanced offer, and it cannot incorporate every individual case the member is referring to.

Brendon Burns: Is the Minister aware that section prices across Christchurch can start at around $150,000, which can be $50,000 above current land valuation in red zone areas, and will that not mean that red zone property owners will need to borrow considerably to resettle, rather than being able to use preserved equity, as he repeatedly suggested?

Hon MAURICE WILLIAMSON: I think it would be really wrong for me to comment on the land prices of various sections. All I can say is that I think the Government’s offer, which takes into account the rating value as of 2007, is a fair and balanced offer.

Hon Ruth Dyson: Does he consider the allocation of the value of the land within the rating valuation process to be robust, when it has produced such variable outcomes, leaving many in the red zone with insufficient funds to buy a section to take advantage of the replacement option in their insurance policy?

Hon MAURICE WILLIAMSON: The offer the Government announced on 23 June took a lot of time to work through. The details were carefully considered and the final offer was considered to be a fair and balanced package. But it is fair to say that there will always be a specific case that members in this House can raise when people may have paid a higher price for their property or whatever, but in general the package the Government has offered is fair and balanced.

Hon Ruth Dyson: When will he announce the appeal process for those who wish to challenge the valuation?

Hon MAURICE WILLIAMSON: I do not believe that that date has yet been set.

Hon Lianne Dalziel: I seek leave to table a summary that I have put together of the 17 emails I received the night before the Government made the offer announcement public.

Mr SPEAKER: Leave is sought to table that document prepared by the member. Is there any objection? Did I hear objection? No, there is no objection. Document, by leave, laid on the Table of the House.

Hon Lianne Dalziel: I seek leave to table the transcript taken from the Campbell Live interview with Gerry Brownlee, to which—

Mr SPEAKER: No, we do not seek leave for that. The House let the member table a document that she had prepared, but we do not seek leave to table transcripts from broadcasts.

Royal Society of New Zealand—Minister of Science and Innovation’s Meetings With

10. Hon HEATHER ROY (ACT) to the Minister of Science and Innovation: How many times has he met with the Royal Society of New Zealand and what issues were discussed at these meetings?

Hon Dr WAYNE MAPP (Minister of Science and Innovation): I have met formally or attended functions with the Royal Society 11 times as the Minister of Science and Innovation. In addition, I have frequently met informally with members of the Royal Society board and management team at various science events. I have discussed a broad range of topics, including, in fact, the Royal Society of New Zealand Amendment Bill. This is an excellent bill, which has the unanimous support of the House and the especially devoted attention of members opposite. I can only assume that Mr Grant Robertson thinks that the volume of speaking is one way to—

Mr SPEAKER: It is not the member’s responsibility what Mr Grant Robertson might think—or not think.

Hon Heather Roy: During these meetings has the Royal Society expressed concern over the deliberately slow progress of the Royal Society of New Zealand Amendment Bill, especially considering the bill’s cross-party support; if so, what concerns has it expressed?

Hon Dr WAYNE MAPP: The Royal Society is, of course, a very proper organisation, and its members would never seek to influence Parliament. However, I can say informally that they are somewhat bemused as to what is happening. They apprehend that they are in the grip of forces beyond their control. They ask: “When will the bill pass?”. They wonder, and I have said: “With a bit of luck, this year, or maybe next.” As befits the detailed and forensic analysis of the humanities, Mr Hodgson, Mr Robertson, and Mr Shearer have spent more than half an hour on whether—

Mr SPEAKER: The member will resume his seat. He has no responsibility for Messrs Hodgson or Shearer, or anyone else in the Labour Party.

Hon Heather Roy: What advice or guidance has he given the Royal Society about progressing the bill more quickly in light of the Labour Party delaying its own bill?

Mr SPEAKER: The Minister has no responsibility whatsoever for the member’s bill.

Hon Heather Roy: I raise a point of order, Mr Speaker. The question was in response to the answer to the previous supplementary question, which was within the parliamentary guidelines, I think. It was asking what advice or guidance he might have given the Royal Society in response to the conversations he has just reported on, and I would have thought that it would be within the Standing Orders.

Mr SPEAKER: I will accept the member’s question. She may repeat the question, but the Minister will need to be careful in answering it.

Hon Heather Roy: What advice or guidance has he given the Royal Society about the progressing the bill more quickly in light of the Labour Party delaying its own bill?

Hon Trevor Mallard: I raise a point of order, Mr Speaker. My submission to you is that you were right in your first ruling, and the fact that you allowed the Minister to stray outside his area of responsibility earlier does not mean that a supplementary question that is not within the Standing Orders should be allowed.

Hon Simon Power: My recollection is that the question was: “What advice has he given to the Royal Society” in respect of a particular issue. That is within his responsibility as a Minister with responsibility in the science and innovation area.

Hon Trevor Mallard: This is not a matter of science; it is a matter of legislation that is the responsibility of my colleague Grant Robertson. It is not this Minister’s responsibility. It might be that Minister’s responsibility, but not this one’s.

Mr SPEAKER: I have heard sufficient on the matter, and I am persuaded by the Hon Trevor Mallard’s view that the Minister can be questioned only on advice he has given in areas of his responsibility, and he is not responsible for this legislation. My first instinct, I believe, was correct, and I must rule accordingly. What I am prepared to do, though, as the member has no further questions, is give the member a chance to ask a question that is within the Standing Orders.

Hon Heather Roy: What affiliate members of the Royal Society has the Minister met with, and do they also have concerns about progress on legislation before Parliament that might affect them?

Hon Trevor Mallard: I raise a point of order, Mr Speaker. Again, that is outside his responsibility. The question asked who he has met with, and that is fine. But asking about their concerns—not whether they have advised him or anything like that—is not his responsibility.

Mr SPEAKER: I think the Minister can answer the first part of the question. Does he recollect the first part of the question?

Hon Dr WAYNE MAPP: Yes, I do.

Mr SPEAKER: Could the Hon Heather Roy please repeat just the first part of the question?

Hon Heather Roy: What affiliate members or those associated with the Royal Society of New Zealand has he also met with and given advice to, and what might that advice be?

Hon Trevor Mallard: No, that’s not what she said before.

Mr SPEAKER: The Hon Dr Wayne Mapp, in the interests of making progress, may answer that question.

Hon Dr WAYNE MAPP: Yes, I have met with affiliate members and board members. I have to say that the issue on their minds is when the bill will pass.

Grant Robertson: Has he seen a copy of the memorandum of understanding between the Royal Society of New Zealand and the Council for the Humanities, dated 9 February 2010, which states that they hope to pass the legislation referred to in the primary question within 5 years?

Hon Dr WAYNE MAPP: No, I have not seen that memorandum, but I say this: I do not think that was seen as an invitation to spend the entire year debating the legislation.

Grant Robertson: I seek leave of the House to table the memorandum of understanding between the Royal Society of New Zealand and the Council for the Humanities, dated 9 February 2010, which gives them 5 years to pass the legislation.

Mr SPEAKER: Leave is sought to table that document, is there any objection? There is objection.

Education, National Standards—Submission of Charter by Schools

11. SUE MORONEY (Labour) to the Minister of Education: How many schools failed to submit a National Standards-consistent charter to the Ministry of Education before last Friday’s deadline?

Hon ANNE TOLLEY (Minister of Education): It is impossible to completely answer that question, because the Ministry of Education has not yet assessed all the charters. However, I am advised that by 5 p.m. on 1 July, 1,886 of the 2,075 English-medium schools with students in years 1 to 8 had submitted their charter. That compares with 1,058 submitted by 1 July last year. Initial assessments of 1,445 of this year’s charters indicate that 87 percent were compliant. I am also advised that each year over the last 10 years a number of schools have not even submitted a charter, but because the last Government never bothered to check them, no one even knows how many of those there were.

SUE MORONEY: Does she agree with Mary Chamberlain from her Ministry of Education, who told Radio New Zealand National’s Insight programme on the weekend that it would take 2 years to get to the point where even 80 percent of teacher judgments would be consistent, using national standards?

Hon ANNE TOLLEY: Yes. That is not represented in the charters, but yes, it is right. This is a 3-year implementation programme and we are halfway through it. This year the focus is on the moderation of overall teacher judgments.

Sue Moroney: Is the Minister confirming, then, that 20 percent, or one in five, of our children will be incorrectly assessed under national standards even after 4 years of implementation?

Hon ANNE TOLLEY: I raise a point of order, Mr Speaker. This is very wide of the primary question, which was about the charters that schools submitted. I am happy to answer it, but I am making this point because if I answer the supplementary question, the debate widens. [Interruption]

Mr SPEAKER: A point of order has been called. I accept that the question is a little removed from the primary question, but I do not think it is out of order in that regard. I think what that may affect is the Minister’s ability to answer it in detail. That is the risk when members move a bit away from the primary question. But I do not think it is so far away that I should rule it out. Sue Moroney may repeat her question.

Sue Moroney: Is the Minister confirming, then, that 20 percent, or one in five, of our children will be incorrectly assessed under national standards even after 4 years of implementation?

Hon ANNE TOLLEY: No. What I can confirm is that that member’s Government sat back and watched for 9 long—

Mr SPEAKER: Order!

Hon ANNE TOLLEY: —years—

Mr SPEAKER: I am not seated very far from the Minister. The Minister should have seen that I was on my feet. I am not sure whether the question deserved quite that answer. I accept that it was somewhat provocative, but I believe that the Minister went to some extreme there in answering that question. Although I will let her get away with it this time, I do not want there to be a repeat of that.

Sue Moroney: If the Minister accepts that Mary Chamberlain is correct in saying it will take 2 years to get to the point where even 80 percent of teacher judgments will be consistent using national standards, does that not mean that 20 percent will be inconsistent, leading to one in five of our children having incorrect assessments under national standards?

Hon ANNE TOLLEY: No, I do not follow that logic. I say to the member that national standards are a huge step forward in trying to identify those students who are not progressing as they should be. This Government is not prepared to tolerate children failing in our education system, which they had continued to do under that member’s Government.

Louise Upston: What feedback has she had from parents at one of the schools that claim not to have a compliant charter?

Hon ANNE TOLLEY: I have recently seen a letter that was sent by a parent to the New Zealand Educational Institute—the political wing of the Labour Party—which said her son’s previous school report had stated: “He was a pleasure to have in class, and was achieving fine.” Lo and behold, his first national standards report showed that the parents should be concerned. This mother said: “National standards assisted by supplying evidence-based data on our child’s achievement trail and that the lack of achievement that could be taken to medical practitioners. And now, success. It is: ‘Mum, I’ve finished my writing and I’ve moved up in my maths group.’ ” Good on him and his mother! This mother said to the New Zealand Educational Institute: “Maybe you need to expand your vision and find the balance and consider my son, who would have been another lost child in the past system. I welcome national standards.”

Sue Moroney: Does she stand by her threat that she made in the New Zealand Herald— [Interruption]

Mr SPEAKER: I apologise to the member. Both sides have been very noisy today, but I must be able to hear the supplementary question.

Sue Moroney: Thank you, Mr Speaker. Does she still stand by her threat that she made in the New Zealand Herald in December 2008 to dissolve the board and put in a commissioner if schools refused to implement national standards, and how does she intend to carry that out, given that at least 140 schools have refused to implement her standards?

Hon ANNE TOLLEY: There is a process that we are working through to help these boards to develop compliant charters, and the next step is to appoint an adviser under section 78K of the Education Act 1989 to assist these schools. We are in no position yet to determine whether we do need to step in and replace the board.

Trade, New Zealand and Republic of Korea—Reports

12. MELISSA LEE (National) to the Minister of Customs: What reports has he received on the facilitation of trade between New Zealand and the Republic of Korea?

Hon MAURICE WILLIAMSON (Minister of Customs): More good news. The recent signing of a mutual recognition agreement, or MRA, between New Zealand and the Republic of Korea will bring significant benefits to New Zealand exporters. The mutual recognition agreement was signed at a World Customs Organization council meeting in Brussels on the weekend of 25-26 June. I expect that the agreement will become operational on 1 January next year. The Korea mutual recognition agreement is New Zealand Customs Service’s third such agreement; the other two are with the United States and Japan.

Melissa Lee: What benefits does this agreement give to New Zealand’s Secure Export Scheme exporters to the Republic of Korea?

Hon MAURICE WILLIAMSON: The mutual recognition agreement allows New Zealand members of the Secure Export Scheme to have their goods processed faster at the Republic of Korea’s border, and they can receive front-of-line priority, which therefore gives them quicker access to the Korean market. In the last year New Zealand exported nearly $1.4 billion worth of goods to Korea by sea. Exports from Secure Export Scheme members made up 37 percent of that figure. The mutual recognition agreement is an important contributor to strengthening trade ties with Korea while our countries negotiate a bilateral free-trade agreement. The Government is looking forward to concluding that agreement at the earliest possible opportunity.

ENDS

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