Following New Zealand’s General Election on Saturday, 14 October, the final election result will be published by the Electoral Commission on Friday, 3 November.
Based on the preliminary results from election night, the new government is expected to be a centre-right coalition, led by the National Party with the ACT Party (and potentially the New Zealand First Party).
What that means for the financial services sector will depend on the priorities negotiated by those parties, some of which will likely be set out in a coalition agreement expected to be published in the next week or two, while others will be developed over the term of government.
We’ve summarised the relevant key policies published before the election, and provided our thoughts, below.
Overall approach
Both National and ACT campaigned on policies intended to improve the regulatory environment for businesses by encouraging entrepreneurialism and innovation, with ACT saying they would introduce a Regulatory Standards Act to “ensure new and existing regulations met tough new standards and would put red tape on the chopping block”.
NZ First had a more eclectic position and anticipated that after the election there would need to be a realistic assessment of the true state of the economy followed by a focus on the basics.
None of these parties particularly focused on financial services in campaigning and there is no reference in National’s 100-day plan, but some specific policies were announced in the lead up to the election.
CCCFA
Both National and the ACT Party announced an intention to roll-back the “unworkable” changes that were introduced to the Credit Contract and Consumer Finance Act 2003 (CCCFA) in December 2021.
Both parties are on record saying they plan to “significantly reduce the scope” of the Labour Party’s changes, which were designed to protect vulnerable borrowers from predatory lenders, but which widely attracted criticism for being too prescriptive.
The unintended consequences of the CCCFA regulations have acted as a handbrake on credit availability for borrowers across the sector, with both National and ACT referring to borrowers having to justify the brand of pet food they buy or the number of online streaming services they subscribe to before having lending approved.
With NZ First focused on improving affordable home ownership, we can’t see the coalition parties disagreeing on the unwind of the reforms, but how (and to what extent) the CCCFA complexity will be unravelled is yet to be determined.
CoFI reforms
At the Financial Services Council annual conference in August, the National Party leader, Christopher Luxon, surprised many by making a policy announcement that the National Party would, if elected, repeal the Financial Markets (Conduct of Institutions) Amendment Act 2022 (CoFI).
CoFI, which provides a conduct licensing regime for retail banking and insurance, only became law on 29 June 2022 and the regime will not come into full force until 31 March 2025. However, many institutions are already well down the road getting ready for the upcoming regime – including the preparation of fair conduct programmes - and Financial Markets Authority (FMA) has already opened applications for licensing.
While we are yet to see any further detail on the proposed wind-back of CoFI – it is mentioned only briefly on National’s website and does not feature in National’s 100-day plan – it does seem National are insistent on “cutting red tape” to help “get financial markets working efficiently, quickly and appropriately”. Neither the ACT Party nor NZ First have said anything publicly about CoFI, so it is unclear what their position might be.
Repealing CoFI would not only remove the requirement on financial institutions to put in place a fair conduct programme to implement the fair conduct principle, and prepare and submit their licence application, it may also involve:
- Revoking regulations that will restrict the incentives that can be paid by intermediaries (such as financial advisers or brokers) to some of their staff in relation in relation to advice and services provided to retail clients; and
- Reallocation of resource within the FMA of those who were going to undertake licensing, supervision and enforcement in relation to CoFI.
It is possible some elements of CoFI may yet be retained, such as the fair conduct principle. But where (and how) that might feature in financial services legislation is yet to be determined. Some institutions may also decide that they will voluntarily continue with aspects of their proposed fair conduct programme (including greater oversight of intermediaries).
KiwiSaver
At the same FSC Conference, and on their website, the National Party proposed allowing KiwiSaver members to split their savings to invest with more than one provider. The website quotes National Party spokesperson Andrew Bayley saying the change would “drive innovation, boost competition and put downward pressure on fees”. Putting aside the necessary legislative change and potential administrative complexity involved in achieving this outcome, the proposal could benefit smaller or boutique providers with more specialised investment options. However, unless other changes are made, it may increase the level of switching between schemes and the concurrent need for investment liquidity perceived by many.
National has also announced it would allow members under the age of 30 to use their KiwiSaver savings to pay for a tenancy bond agreement. While National spokesperson Chris Bishop said it was a “common-sense change”, the proposal was met with a lukewarm reception from industry providers who were concerned it could further erode confidence in KiwiSaver. The FSC also expressed concern with the proposal but suggested it was a great way to start a wider conversation on KiwiSaver settings more generally. We agree with the FSC’s view on this.
Then, on the eve of the election, Todd McClay, National’s Agriculture spokesperson, announced that, if elected, National would allow young farmers use their KiwiSaver as part of a deposit to buy a farm, or sharemilking herd or for a flock, to help them get on the ownership ladder. There hasn’t been any commentary from providers on the announcement (it was made on the final day of campaigning).
ACT have proposed de-coupling KiwiSaver from the superannuation age (meaning if the age for the government provided-NZ Superannuation is raised to the ACT-recommended age of 67, KiwiSaver members could still withdraw funds from age 65).
NZ First, who have long supported increasing retirement benefits for New Zealand, have also proposed a raft of changes to KiwiSaver including making membership compulsory from age 18, repealing the default provider investment rules, and allowing those with “sufficient balances” to use their KiwiSaver funds to reduce the mortgage on the family home. NZ First has also proposed increasing the government contribution (which, by contrast, ACT would cap).
The differences between the three parties who may make up a coalition government indicate that there may well be significant negotiation before there is agreement on exactly what changes (if any) will be made to KiwiSaver. We may even see consideration of the fundamental question that some commentators have asked to be addressed: “do we want KiwiSaver to act as an alternative to NZ Superannuation over the longer term, or are we happy with our current retirement settings?”
AML/CFT laws
Both National and ACT have expressed concern around existing AML/CFT laws and want to see simplified requirements to reduce compliance costs, particularly for smaller businesses. ACT’s package of policies aimed at small businesses is targeted at dealing with “frustrating and ineffective” AML compliance.
The Ministry of Justice recently led a review of AML/CFT laws between July 2021 and June 2022, and found that the Act provided for a generally sound regulatory regime but made recommendations for further changes to be introduced over three phases. The recommendations for change included proposals to streamline aspects of the regime. The first stage of the regulatory changes came into force on 31 July 2023, and will be followed over the next two years by the second stage (1 June 2024) and third stage (1 June 2025). Subsequently other changes requiring amendment of the legislation have already been raised in the Ministry of Justice consultation. See our earlier newsletter for more detail.
We think the existing proposals which lighten the load will continue to be progressed, but it remains to be seen whether more radical changes might be initiated by the coalition.
Other
NZ First’s policies includes expanding the current Commerce Commission market study into personal banking services, into a full pricing and competition enquiry into foreign owned banks. On the campaign trail National made comments about expanding the current market study to cover business banking services.
NZ First proposed changes to the Banking (Prudential Supervision) Act to prevent discriminating against, or “de-banking”, businesses or individuals on the basis of business type or political belief. It is not clear what priority will be given to those proposals in coalition negotiations.
Final thoughts
What is clear is that the pace of change for financial services will not abate with the introduction of a new government.
The financial services sector continues to face into new and challenging issues, including climate-related pressures, the ever-evolving fintech and digital assets industry, the development of open banking and the possibility of a consumer data right. Legislative and regulatory reform is a natural consequence to respond to these issues.
Although it is unclear exactly what policy changes might be implemented by a National-led coalition, we are likely to see some of the above proposals applied in the coming years. Providers will need to be alert to the proposed policies and ready for change.
For further insights from our experts about what a National-led government might mean for the country, see these articles:
- The road ahead: Trade policy under a National-led Government
- Is New Zealand’s employment law landscape set to change?
- Election 2023 policy snapshot: Taxes and visas
If you have any questions, please contact one of our experts.
Key contacts
Speak with one of our experts.
