Chye-Ching Huang: Lessons from across the Ditch can benefit us all

The APC has gained support for its recommendations from across Australia's political spectrum.

The Government has announced a New Zealand Productivity Commission modelled on Australia's. The idea behind these commissions is that an independent policy shop within government can push for beneficial policy changes that might otherwise escape the attention of politicians, who can tend to think in terms of constituencies and three-year blocks.

The Government will hammer out the details of the NZPC over the coming months. As it does, it should keep in mind the following ways that the Australian Productivity Commission (APC) has been successful, alongside some things New Zealand should do if it wants to replicate those successes:

BUY-IN

The APC is influential because it has gained support for its recommendations from across Australia's political spectrum. The APC has survived changes in government, so it can take a long-term view of economic, social, and environmental policy. How has it maintained its political independence and generated broad buy-in?

The APC's overarching concern is not productivity above all else, but "the well-being of the community as a whole, rather than just the interests of any particular industry or group". Productivity is just one way to improve the life of citizens. The APC has 12 commissioners, and by law at least one must have experience dealing with the social effects of economic adjustment and social welfare delivery, and at least one must have experience in environmental issues.

The New Zealand Government has indicated that the NZPC will be more stringently focused on productivity and regulatory issues than the APC (issues that deserve attention, and should be the core of the NZPC's work). But this focus should not amount to the NZPC putting productivity above all else. That would make for unsound policy, make it difficult for New Zealanders to understand the link between productivity and a better life, and make it harder to generate broad support for the NZPC's mission.

Our Government (and future governments) should also note that Australian politicians have generally avoided making overtly political appointments to the APC. Over time, Australian politicians have become better at not asking the APC loaded questions - angling for a particular result - allowing it to reach truly independent conclusions.

Perhaps most crucial to the APC generating political buy-in, the quality of APC's research and analysis has spoken for itself. One of the APC's first major reports, on gambling in Australia, won over many critics. Politicians who had opposed its creation began citing its work.

FLEXIBILITY

The APC is an effective "troubleshooter" because it has a flexible work programme. Economic problems are its core work, but it has also analysed issues as varied as aged care and biodiversity. It has examined public sector productivity and also studied industries. Ministries can commission studies from the APC. Our Government has signalled that the NZPC will initially focus on public sector productivity, but the announcement appears to allow the NZPC flexibility to look at other issues, including industry studies in the long run in case priorities change; this is a sound decision.

SOUND POLICY

The APC has a reputation for doing rigorous policy analysis. Two key elements of the APCs approach to policymaking are worth imitating.

First, the APC tries to base its recommendations on evidence. To figure out the costs and benefits of any policy change, and who gets them, the APC gathers data and builds economic models. Of course, a healthy scepticism of economic models is sensible; results are only as good as the assumptions they make and the data they use. To guard against garbage modelling, by law the APC must, where it can, use two different economic models to inform its thinking.

When only one model is available, the APC must get and publish an independent critique of that model. The APC has become better and better at modelling Australia's economy, and therefore at understanding how policies affect citizens.

Secondly, the APC conducts an open, consultative policy process: it consults about what projects should be on its agenda, takes submissions on its draft reports, and gets external feedback on the quality of its reports.

To get similarly sound advice out of the NZPC, the Government must resource "boring" but crucial things such as data collection, modelling, and genuine consultation. The Government looks to have understood this need for resource, intending to allocate a budget of $5 million per annum to the NZPC.

PRAGMATISM

The APC successfully makes recommendations that get adopted and implemented. It proposes policies that are sound in theory and workable in practice. If the NZPC is to make recommendations that work in the real world, it should keep in mind the pragmatic rules of thumb that have guided the APC. The APC is upfront about the fact that most policy changes have winners and losers, and that treating one group preferentially usually costs others. It pays attention to implementation issues; bad implementation can ruin a good policy. And it emphasises that beneficial reforms should not be delayed until the timing is "ideal".

A NZPC that generates buy-in, is flexible, produces sound policy, and makes pragmatic recommendations is the ideal. The APC has often, but not always, lived up to these ideals, and some of the APC's mistakes will be just as instructive for this country as its successes. Nevertheless, the four outcomes above are the gold standard that our government should aim for, and if achieved, will improve policymaking here and the well-being of New Zealanders. Australia's experience shows these goals are within reach.

* Chye-Ching Huang is a senior lecturer with the University of Auckland's faculty of business and economics.