Independent commission to be watchdog on NZ productivity

Business groups are backing a plan to establish an Australian-style Productivity Commission. Photo / supplied

Business groups have welcomed confirmation yesterday that the Government plans to establish an Australian-style Productivity Commission early next year.

It will be an independent Crown entity like the Law Commission or the Commerce Commission, although unlike the latter it will have an advisory rather than an enforcement role.

"We have been calling for this for years," Wellington Regional Chamber of Commerce chief executive Charles Finny said.

"If anything, it's better than we expected. The original talk was that it was not going to be as independent and delinked from the Treasury as it now seems it will be."

Business Roundtable executive director Roger Kerr said it would be important for the commission to establish in its early years its standing, credibility and non-political nature.

"The quality of the chairman and the commissioners will be very important."

Finny said quality would be not only a matter of intellectual calibre and experience but of character, given the need to establish the commission's political independence.

Business New Zealand chief executive Phil O'Reilly had advocated strongly for its establishment.

"Poorly-conceived legislation and unnecessary laws can add costs and compliance [burdens] to businesses and individuals in a thousand ways, depressing productivity growth overall. Having a productivity gatekeeper scrutinising proposed new regulation will be a major benefit."

The New Zealand commission will be about a tenth the size of the Australian one, with up to four part-time commissioners a staff of up to 21 and a budget of $5 million a year.

Finance Minister Bill English said none of that would be new money, but switched from the budgets of 29 departments, especially the Treasury and Ministry of Economic Development, which have work streams under way flowing from the Labour government's productivity agenda.

Its size is comparable to Victoria's Competition and Efficiency Commission, which is judged to have critical mass, he said.

Regulatory Reform Minister Rodney Hide said the Government had taken advice from the Australian commission's chairman Gary Banks. "He recommended to start small and get it working."

Kerr said the New Zealand commission should look at tapping into the Australian Productivity Commission's staff resources.

"Instead of spending all of the budget on New Zealand staff, why not contract with the Australian commission for a certain quantity of staff hours?"

Its function will be to inquire into, research and promote public understanding of "productivity-related" issues.

It will also conduct one-off reviews of existing regulations, review the effectiveness of regulatory agencies and in a small number of cases conduct regulatory impact analyses of proposed new measures instead of the existing bureaucracy.

Although the term "productivity-related" could be construed widely, it sounds like a narrower brief than the Australian commission's mandate to research and advise on "a range of economic, social and environmental issues affecting the welfare of Australians."

For example, the Australian commission recently completed reports on gambling and the contribution of the not-for-profit sector.

English and Hide stressed the critical importance of productivity to lifting the country's economic performance.

"In the long run, productivity is the biggest determinant of wages and living standards," Hide said. "Lifting our output per worker is critical to closing the income gap with Australia."

Statistics New Zealand said on Tuesday that over the past three decades New Zealand actually slightly outperformed Australia in terms of both labour productivity and multi-factor productivity growth.

Australia's superior growth record reflects stronger growth in inputs of labour (much of it from New Zealand) and capital rather than how effectively those inputs were used.

ACROSS THE DITCH

How does the planned Productivity Commission compare with its Australian model?

* Scope looks narrower, anchored in "productivity-related" issues and regulatory review, where the Australian commission advises its Government on a wide range of economic, social and environmental issues.
* Size is a fraction of the Australian one. It has a staff of 190 and a budget of A$35 million ($45 million) compared with up to 21 staff and $5 million here.
* Independence, a widely-applauded feature of the Australian commission, is acknowledged as important. It remains to be seen who the four commissioners will be.
* Process is expected to replicate the Australian commission's practice of issuing draft reports and wide public consultation, but that will be for the commissioners to decide.