How can we close the gap to Australia? Photo / 123RF
How can we close the gap to Australia? Photo / 123RF
OPINION
“Most of New Zealand’s problems - a lack of affordable housing, cost-of-living pressures and inferior healthcare among them - can be traced to poor productivity,” said David Seymour at Act’s election-year conference.
Act is going to campaign to lift New Zealand’s productivity.
“Poor productivity,” says Seymour, “can be tracedto large amounts of time being spent on compliance activity.”
Everything, he says, from roads to housing, is caught up in red tape. Sectors as diverse as banking to childcare, farming to biotechnology, claim regulatory compliance is holding them back from being more productive.
Compliance costs are out of control. Last weekend I visited a friend who is in a rest home. She told me that small rest homes like the one she is in are closing because of the increasing cost of compliance. Many of the staff have gone to Australia. The replacements cannot speak English.
Government regulations require the rest home to provide te reo translations that neither the staff nor the residents understand. She worries about where she and the residents would go if the owner were forced to close.
Seymour says all regulations should meet three tests.
First, is there a problem to be solved? The regulation banning new offshore exploration for oil and gas would fail.
Second, do the benefits outweigh the costs? Regulations that require Auckland City to spend $145 million on traffic management plans, as the mayor’s office has estimated, would fail.
Third, are the benefits of the regulations shared fairly? The increased costs to banks and customers of regulations designed to protect very few customers would fail.
Act would pass a Regulatory Standards Act that would require all regulations to pass these three tests. A Minister of Regulations would test whether new and existing regulations met the tests.
The answer to too much government cannot be more government. Today, departments are required to produce regulatory impact statements which, mysteriously, the regulations never fail. The Treasury and the Ministry of Business, Innovation and Employment are already tasked with checking regulations.
Bad regulation will only be stopped when any regulation that does not pass Seymour’s three tests can be challenged in court and struck down.
A minister and department of regulations seems to be Act’s proposal to constrain its National Party coalition partner from generating more red tape. But it will just result in interdepartmental disputes. For Act to effectively stop red tape, the party needs to win enough votes to claim the Treasury.
Much of the poor quality of government decision-making can be traced to Labour’s deliberate downgrading of the quality of the Treasury. Seymour must rebuild the Treasury, so it has the intellectual capacity to challenge red tape.
ACT Party leader David Seymour. Photo / Marty Melville
Politicians have long known the truth of Nobel economics prize winner Paul Krugman’s statement: “Productivity isn’t everything, but in the long run, it is almost everything.”
Jenny Shipley said she would increase the economic growth rate to 5 per cent. Helen Clark promised to lift New Zealand into the top half of the OECD. They failed.
Seymour said in his speech: “When John Key was elected, the median wage in Australia was $11,000 higher ... When Jacinda Ardern was elected it was $17,000 higher ... now the gap is over $23,000.”
John Key campaigned, saying, “our vision is to close the gap with Australia by 2025”.
The Treasury published a report in 2009: Answering the $64,000 Question. Closing the income gap with Australia by 2025. First report of the 2025 Taskforce November 2009.
In the end, Key shelved the taskforce.
Labour is not trying to close the gap. Grant Robertson’s goal is “wellness”.
The Greens, by taxing productive New Zealanders, will turn the gap into a chasm.
Productivity in New Zealand grew at an average annual rate of 1.3 per cent between 1996 and 2022, and in Australia at 1.9 per cent. The difference may seem small, but the compound effects are huge.
The taskforce’s prediction has come about: “And if nothing is done the gap could get worse, with increasingly serious long-term implications for our country’s future”.
The 2009 report did recommend a Regulatory Standards Act, but also 34 other recommendations ranging from taxation to welfare, from education to health, from planning to infrastructure. The taskforce believed it would take a decade to close the gap. Fourteen years later, it will now take 20 years.
No party is campaigning to close the gap. They should be. The next government needs to implement the taskforce’s recommendations.
Here is a suggestion. Make it the rule that no civil servant or local body employee can receive a bonus unless the country’s productivity improves. And no MP or minister can get a pay rise until New Zealand’s productivity exceeds Australia’s.
Then, everyone in government’s priority would be improving productivity.
- Richard Prebble is a former leader of the Act Party and a former member of the Labour Party.
