New Zealand Productivity Commission Bill

Hon BILL ENGLISH (Minister of Finance) Link to this

I move, That the New Zealand Productivity Commission Bill be now read a first time. This legislation is another step in the Government’s active programme to lift New Zealand’s economic performance in both the public and the private sector. In the long run, productivity is the biggest determinant in wages and living standards of New Zealanders.

At the appropriate time I intend to move that the New Zealand Productivity Commission Bill be referred to the Commerce Committee, that the committee report finally to the House on or before 22 November 2010, and that the committee have the authority to meet at any time while the House is sitting, except during oral questions, during any evening on a day on which there has been a sitting of the House, and on a Friday in a week in which there has been a sitting of the House, despite Standing Orders 187 and 190(1)(b) and (c).

The New Zealand Productivity Commission Bill is designed to establish a New Zealand Productivity Commission that will have a very broad mandate to investigate productivity-related matters in order to lift the overall well-being of New Zealanders. The commission’s role and functions are modelled closely on the Australian Productivity Commission, which has an impressive track record in providing high-quality public policy advice.

The Productivity Commission will have three key functions on referral from responsible Ministers. Firstly, it will conduct inquiries into productivity-related matters. Secondly, it will conduct one-off reviews of existing regulatory regimes and agencies, and this process will include reviewing their efficiency and effectiveness. Thirdly, it will undertake regulatory impact analyses of specific regulatory proposals.

The terms of reference provided by responsible Ministers will provide the details of work to be undertaken, and all will be made publicly available. These terms of reference will cover the scope of the inquiry, the due date of the commission’s final report, and consultation requirements. The last point is that there will be a general expectation that the commission will consult widely with stakeholders.

Productivity has a broad definition that includes any productivity-related matters in the whole economy, in both the private and the public sectors. This will enable the commission to investigate a range greater than its Australian counterpart. To give a few examples, the commission would be able to investigate issues as diverse as disability care and support, or the contribution of the not-for-profit sector, in the same way that the Australian productivity commissioners looked into these topics. In addition to its inquiry functions, the Productivity Commission will be able to, on its own initiative, undertake and publish research about productivity matters in order to develop its own knowledge, and to assist its operations it will also be able to promote public understanding of productivity-related matters.

The New Zealand Productivity Commission will be able to undertake joint inquiries in research with overseas agencies such as its Australian counterpart. It makes sense for the two commissions to cooperate, given the Government’s strong commitment to a single economic market between New Zealand and Australia. We also expect strong informal links to develop between the two commissions. The commission will be an independent Crown entity similar to the Law Commission and the Commerce Commission. This will allow important policy issues to be examined at arm’s length from the Government of the day. It will have three to four part-time commissioners, and it is expected to have approximately 21 full-time staff to support them. To give effect to its independence, the commission will be able to determine its own procedures for its statutory functions and have access to statistical information, like other Government departments under the Statistics Act. To ensure transparency, the commission’s work programme will be publicly available, and the commission’s reports must be tabled in the House of Representatives as soon as practicable after they are received by the responsible Minister.

Once fully operational, the commission will have an annual budget of approximately $5 million by 2012-13. No additional Crown funding will be needed to fund the commission, as funding will be sourced from existing budgets of 29 Government agencies.

The establishment of the Productivity Commission is a concrete step that the Government can take to help to lift the living standards of New Zealanders. In introducing this bill, I acknowledge the contribution of my ministerial colleague the Hon Rodney Hide, and his particular focus on this issue. I also acknowledge the contribution of the Labour Opposition, in particular Lianne Dalziel, who, in her capacity as a Minister in the previous Labour Government, did quite a bit of hard work in respect of improving a regulatory reform process.

We see this Productivity Commission as an additional tool available in the service of public policy to help to lift the level of debate around what are increasingly complex issues. The days when it was possible for politicians to say that the answer was always to deregulate are over, and many of the regulatory issues impinging on productivity that are dealt with now are quite complex. So this commission is intended to create a higher level of debate and an institution that is at arm’s length from the daily political hurly-burly of Government. In that respect, I commend the New Zealand Productivity Commission Bill to the House.

Hon LIANNE DALZIEL (Labour—Christchurch East) Link to this

I rise to advise the House that the Labour Opposition will support the New Zealand Productivity Commission Bill going to a select committee. However, we will use this first reading debate to indicate to the Government the changes that we would like to see occur with the legislation in order for us to support it beyond a select committee. I hope we are able to achieve the changes that we want to see occur with this legislation, because as the Minister of Finance stated in his introductory comments, those of us on this side of the House who have played a role in economic policy, commerce policy, and regulatory responsibility have taken the view that one of the areas of commonality between New Zealand and Australia that we could use as a platform for mutual growth is a shared productivity commission on a trans-Tasman basis. The Australian Productivity Commission is something that I hold in very high regard. I have said on more than one occasion that I would have liked to see that as a core focus of any Government’s agenda, and build up that relationship into a single focus on how we engage with our closest neighbours on improving productivity right across the board.

This bill has an underlying flaw, and that is probably in its genesis. When the Prime Minister stated after the last election, in his promise to be ambitious for New Zealand, that we should catch up with Australia I think there were some people who felt that that actually lacked ambition in its own right. But here we have an opportunity to catch up with Australia, and we are missing the boat a wee bit in that regard.

The Prime Minister agreed, as part of the confidence and supply agreement with the ACT Party, to look at the concept of a Productivity Commission. I think, justifiably, the Minister of Finance has paid tribute to the Hon Rodney Hide, as the Minister for Regulatory Reform, for promoting this as part of the confidence and supply agreement and then delivering on that in joint signatures to Cabinet papers with the Minister of Finance. I do not think it is fair to not give him full credit for that because I do not think that the Government would have introduced this legislation without the work of the Hon Rodney Hide. I certainly pay tribute to him for that.

The 2025 Taskforce, on the other hand, which is led by Don Brash, was given the task of the “catch up with Australia” part of the deal. It seemed a rather odd appointment to me. I do not know whether anyone else thought it was strange that one would appoint to that role the person who was the Governor of the Reserve Bank at the time that the gap was created. Why one would put him in charge of the 2025 Taskforce to reduce the gap between New Zealand and Australia seemed absolutely bizarre to me.

When we look at all of the proposals that have been put forward in the first report to the Government from the 2025 Taskforce, led by Don Brash, we see that it is even more surprising, because they are designed to take us further and further away from catching up with Australia. So it was not surprising to me when I read the Cabinet papers behind this bill that I found a very clear distancing between the proposal to have a Productivity Commission and the 2025 Taskforce. We are told in the Cabinet papers that they are, in fact, quite different. Let me quote the first Cabinet paper: “This work is distinct from the 2025 Taskforce. It is envisaged that a possible New Zealand Productivity Commission would be a permanent institution that carries out reviews and inquiries (and potentially other functions identified in the further analysis) based on a work plan agreed by the Government. The taskforce is an independent group of experts appointed for a three-year term to advise the Government on policies and institutions that will assist in closing the income gap with Australia by 2025.”

The distinction that they are drawing is between having a work plan agreed by the Government, which means that the Government gets to set the agenda for the Productivity Commission, but the task force can do or say anything it likes and the Government can completely ignore it. Of course, the Government is doing exactly that, and I think I know why. When I picked up the Dominion Post last week, on 16 July 2010, I found this headline: “Brash blows fees budget”. That is because he does not know anything at all about productivity. He has managed to spend the entire 3-year budget for his meeting fees in just 1 year. I do not know—how good is that! Don Brash is in this role and his meeting fees budget has been absolutely blown to smithereens in the first year. It is four times the amount earmarked for his first year on the task force. I do not think that this man can teach us anything about productivity, which is probably not surprising given the contribution that he made to the mess that this country found itself in after his period as the Reserve Bank governor.

If this bill has anything to do with catching up with Australia—I would like to think that it does—why is it narrower than its Australian counterpart? That is the question we have for the Government. We do not agree with the Minister who introduced the bill that this bill has a broader mandate. In fact, we are absolutely clear that it has a much narrower mandate than the Australian mandate. In that regard, this is a bill that lacks ambition. It is not ambitious for New Zealand.

Let me run through the commission’s legislative instructions in Australia—this is for the Australian Productivity Commission: to “improve the productivity and economic performance of the economy;”—there is an understanding in Australia that productivity is not a narrow aspect of the work that a Government is required to have input into; it is very broad—“reduce unnecessary regulation; encourage the development of efficient and internationally competitive Australian industries;”— well, I would love the Government to have a view on encouraging the development of efficient and internationally competitive New Zealand industries—“facilitate adjustment to structural change; recognise the interests of the community generally and all those likely to be affected by its proposals; promote regional employment and development; have regard to Australia’s international commitments”—read New Zealand’s commitments—“and the trade policies of other countries;” and, “ensure Australian”—read New Zealand—“industry develops in ecologically sustainable ways.” Those are the terms of reference that this side of the House would like to see for a Productivity Commission for New Zealand. I want us to catch up with Australia, but I actually would like us to have a slightly more ambitious target than that. We were caught up with Australia before Don Brash was the Governor of the Reserve Bank and other changes happened.

I conclude by going to the regulatory impact statement; Minister Rodney Hide knows how much I love regulatory impact statements. I just remind this House of the problem definition that the Government formulated in order to justify the establishment of a Productivity Commission. It said: “Currently the Government seeks advice on productivity-related matters from Government departments … taskforces”—not very good ones in this case—“commissions of inquiry and international organisations”. But something was needed. There was “a gap for a new and independent institution with specialised internal investigative capacity and a mandate to actively survey the views of a range of stakeholders,” and “to undertake inquiries … The case for such an agency is made in the context of New Zealand’s current economic challenges. These include: regulatory settings that are believed to be constraining investment and limiting productivity growth; R&D expenditure that is below the OECD average; future limits on resource use in relation to freshwater supply, marine space, fisheries, and the assimilative capacity of the atmosphere, soil, waterways and groundwater; relative low rates of participation in education and training amongst some population groups (eg, some age groups, socioeconomic groups, and Māori and Pacific Island peoples); inadequate infrastructure in some areas, and; low domestic savings and shallow equity and bond markets.” That is the aspirational level of work that we want to see for a Productivity Commission, and when this bill matches that aspiration we will support it.

CRAIG FOSS (National—Tukituki) Link to this

First, I acknowledge our coalition partners in the confidence and supply agreement, which is where the New Zealand Productivity Commission Bill originated in at least a legislative sense—I will touch on that in a minute. If I can be so bold, it is great for our friends in ACT to be talking about their core business of lower taxation, productivity, and economic reform—perhaps more than some of the other issues we have been discussing recently.

I had better make a couple of things clear. This bill is about not being afraid of debate. Traditionally some topics have supposedly been off the table. Well, New Zealand actually needs to discuss some issues, confront some issues, and make some choices. For New Zealand to make those choices New Zealanders and various agencies have to be informed of the upside and the downside of the various decisions and priorities the Government—whoever the Government is at the time—is making. There is always a trade-off, and those trade-offs tend to be the short term versus the medium to long term. Politicians often to fall into the short-term trap, which is a mortgage and an expense in the long term.

I will touch base on what the previous speaker, Lianne Dalziel, talked about. She talked about the origins of this bill. She may recall the report on the Inquiry into the future monetary policy framework that was done by the Finance and Expenditure Committee in 2007, and tabled here in September 2008. Charles Chauvel was chair, and the majority was held by the Government of the time. The report covered much of what we are seeing in the debate today on this bill in terms of the inquiries for the Productivity Commission: inquiries into productivity-related matters, one-off reviews for existing regulations, reviews of the efficiency and effectiveness of regulatory agencies—that is, risk and management—regulatory impact analysis on a number of proposed new regulations, research into productivity-related matters to build up institutional knowledge within the organisation itself, and promote public understanding of productivity-related issues.

I will quote something from the conclusion of that very good report, which the Finance and Expenditure Committee produced some time ago. This is why we need to look at productivity and at least put some of those decisions, trade-offs, and alternatives to the New Zealand public: “It is clear that increasing productivity, in particular, is critical to delivering non-inflationary economic growth. Such growth would boost the welfare of New Zealanders both directly, by raising incomes, and indirectly, by providing resources for other welfare-enhancing activities. We consider that, to the extent that it is consistent with the Government’s other objectives, the Government should place a high priority on policy that supports the raising of New Zealand’s productivity performance. The weight given to these other objectives should also be considered in the light of any impacts they may have on productivity.”, and it goes on. The conclusion is very important, I think, and members should keep it in mind as they are speaking: there is no silver bullet.

New Zealand faces many issues and many challenges. For whatever reason, we slid down to number 22 in the OECD. We cannot do much about changing where we were, but we can change where we are going. As I said earlier, some trade-offs from all sorts of sectors of our economy need to be looked at.

I finally quote from the report: “There is no obvious ‘silver bullet’ that will ensure a substantial increase in productivity growth. We found that lifting New Zealand’s productivity performance will require us to get many different factors right.” As Minister English noted earlier, this is but one of those dominoes that need to be lined up to be fixed, to be addressed, and to be debated with more information than we currently have. We need to strip out some of the political rhetoric and actually look to where we want New Zealand to go to and to how we can get there. I am sure that there will be a little bit of politics, but I am confident that, overall, members will on the whole recognise some of the issues. The debate will probably end up in the political realm of how we get there and how quickly we get there, and what political or economic trade-offs New Zealand has to make to start to regain its rightful place in the economic world. Thank you.

Hon DAVID CUNLIFFE (Labour—New Lynn) Link to this

I rise to support the New Zealand Productivity Commission Bill being referred to a select committee, pending further revisions as a result of the select committee process to broaden the mandate of the bill and to bring it further into line with the Australian Productivity Commission.

This is a Government bill. The establishment of a Productivity Commission was part of the confidence and supply agreement with ACT, and I acknowledge from the outset the healthy consultation that has occurred with the Minister for Regulatory Reform, the Hon Rodney Hide, and through him, with the Minister of Finance, the Hon Bill English. I commend the leadership of my colleague the Hon Lianne Dalziel, who spoke earlier. She has significant experience in this area, and has made a major contribution already to the evolution of thinking.

In my brief remarks today, I will recap on the areas on which there is substantial bipartisan agreement: the issue of productivity and the need for a Productivity Commission. I will then outline some of the areas where we need to do a little more work to establish consensus that would enable the Opposition to support the bill at its second and third readings.

Let me begin at the highest level by saying that the Labour Opposition fully agrees with Government parties that productivity is an absolutely crucial issue to take New Zealand forward. No economically literate person could disagree with the proposition that productivity is, over time, one of the most crucial drivers of our economic performance. The second point that I think we agree upon is the concept of having a Productivity Commission that is well resourced, that brings together some of the best academic brains and business experience, that is well staffed, that is empowered to take a long-term view, that has a strategic perspective, and, in so doing, is above day-to-day politics. I think there is broad agreement around the House that that would be an extremely welcome addition to the country’s economic architecture and would potentially be in the public interest, which is potentially a very good thing. Labour stresses the importance of the breadth of the mandate, the long-term strategic view, the independence of the Productivity Commission from the Government of the day, and, importantly, the fact that it must be able to work from a full and proper definition of productivity.

I will now speak about some areas where I think there remains work to be done to establish agreement. At the most fundamental level, I believe consensus turns upon the respective definitions of productivity that are employed across the House. The classical definition, which I think the Minister and I would agree comes from the old Economics 101 or 102 Cobb-Douglas production function, for the aficionados there, is that productivity is a function—

DAVID CLENDON (Green) Link to this

Kia ora koutou. The establishment of the Productivity Commission, which we are debating in the New Zealand Productivity Commission Bill’s first reading today, has been proposed by the Government in fulfilment of its confidence and supply deal with one of its support parties, the ACT Party. It is entirely appropriate that the Government should honour a promise to a support party. We are told that the proposal will initially cost something over $2 million to establish, and there will be an ongoing cost of some $5 million annually. From our view it is difficult to assess how expenditure at that level would generate much value to taxpayer of New Zealand, given the proposed structure, purpose, and functioning of this commission. Regrettably, we do not share the expectation or the hope expressed by the Labour Party that this bill could be amended and melded into something that would achieve some value, purpose, or positive outcomes for the taxpayer.

Clause 7 tells us that the purpose of the commission will be to provide advice to the Government on improving productivity in a way that is directed to supporting the overall well-being of New Zealanders. It is a very short purpose that perhaps obscures as much as it reveals, unlike the equivalent Australian body, the Australian Productivity Commission, which has been referred to. That body is tasked with fulfilling a much more comprehensively stated and better-developed purpose. This proposed organisation could simply be used as a mechanism to stifle some important regulatory change before parliamentary consideration. It could serve to actively promote cutbacks to Government spending with very little reference to long-term social, economic, or environmental cost. It could reinforce outmoded, destructive, and well-discredited neo-liberal approaches to economic growth. In the absence of a much more clearly defined purpose, this bill will, ironically, simply create a new bureaucracy—a bureaucracy that could become little more than a publicly funded think tank for ACT Party policy and the advancement of that policy.

In our darker moments, we in the Greens considered whether it would be a good thing to have a well-funded, well-resourced think tank with some millions of dollars from the public purse to further develop and advocate for Green Party policy. However, our moral compass would deny us such a thing. It would preclude such an abuse of proper process, and so too it should exclude the establishment of this proposed commission. We are told by Treasury in the summary to this document that the need for the Government to receive advice on productivity-related matters is not questioned, and that the question is solely whether the source of that advice should be a new agency that is statutorily independent. The question of independence is a troubling one in the context of this bill.

We are told that the design of the commission has been heavily influenced by the Australian Productivity Commission. There are certainly similarities, but there are also some significant and interesting omissions from the current bill. For example, the Australian Productivity Commission is obliged to recognise the interests of the community generally and all of those likely to be affected by its proposals. That is quite a powerful constraint on the Australian Productivity Commission, obliging it to be much more focused than a New Zealand commission charged only with a quite amorphous and undefined obligation to support something called “overall well-being”. The Australian Productivity Commission is required to promote regional employment and development. Although a similar expectation might be implied from the text of this bill, there is nothing that requires it to specifically address regional or provincial opportunities or concerns.

A list of some 20-odd matters is described in the explanatory note to the bill that the commission may investigate or look into, and natural resources including sustainability is one of those. The word “sustainable” does not otherwise appear in this legislation. If we contrast this with the Australian Productivity Commission, we see that amongst its key policies and core principles it is obliged to “ensure Australian industry develops in ecologically sustainable ways”. Rather than having a very cursory passing reference to sustainability that is more about form than substance, in the Australian example there is an absolute imperative to consider ecological sustainability. The Australian commission is also obliged and required in all its reports to provide a variety of viewpoints and options representing alternative means of addressing the issues in the report. That would give reports from such a commission some real value and substance. It would present a range of options and views that are well supported, well researched, and well presented. Nothing in this bill indicates that we can expect any such a broad view, such an engaged view, from this proposed commission.

As I said, we are told that this is to be an independent agency, but the provisions of the bill suggest that it must be working to a very peculiar definitional view of what constitutes independence. The three or four commissioners who would head the commission would be appointed by the Governor-General on the recommendation of the Minister of Finance. Clearly, they will be beholden to the Minister for their positions as the heads of the commission. Clause 9 tells us that the functions of the commission are to carry out a range of tasks and they will be carried out on referral to the commission by the responsible Minister in conjunction with relevant portfolio Ministers. So we have an organisation set up—manned by the Minister, if you like, or “personed” by the Minister—that will be given its marching orders by the Minister in terms of what it ought to investigate. We are told in clause 11 that the commission must perform its functions in accordance with a work programme, which, again, is determined by the Minister. In the terms of reference in clause 12, the commission, in carrying out its functions, must act in accordance with the terms of reference set by the referring Ministers for each inquiry, review, and regulatory impact assessment. I fail to see any independence in a body established by the Minister when its agenda and work programme are set by the Minister, and it responds to terms of reference that are also set by the Minister.

We have heard some discussion from Mr Cunliffe about defining productivity, which is a well-known, well-rehearsed concept in economic terms. Interestingly, though, this bill does not seek to offer any definition of productivity, so I ask which of the multiple definitions of productivity will it work towards. Our own statistics department, which is clearly responsible for gathering information about productivity in New Zealand and for comparing and contrasting us with other countries, has an interesting analysis. It offers a definition of productivity, then, quite usefully, offers some statements about what productivity is not. The department states that productivity is not a measure of value for money. The concept is also not a measure of effectiveness, it is not a measure of competitiveness or profitability, and it is not a complete performance management tool. It is a very constrained, a very limited mandate, and a very limited definition, and the commission would have an equally limited mandate—which returns us to my original point. We see this as being a very managed, controlled thinktank that would be invited to present only very predictable and one-sided views.

Rather than productivity, which is a useful but also a very limited concept, something we think would be of much more value and interest would be to assess the performance of our economy under the framework of sustainability. It is well proven and it is multifaceted. It is a framework that allows us to interrogate and evaluate the operation of the economy in terms of everything from the efficient use of resources through to the appropriate application and development of people skills and attitudes. It is a framework that allows us to look very closely at procurement, which was mentioned earlier in the House this afternoon. It would allow us to generate whole-of-life costings, rather than simply looking for the cheapest buy on any given day. It would allow us to incorporate measures and valuations of natural capital, without which the rest of our economy would fail. In the absence of any consideration of the effect of economic activity on natural capital, we would generate nothing but problems for ourselves.

There is much more to be said, and no doubt it will be said because it is apparent that this bill will be referred to a select committee, given the support that it is getting from the House. It will be interesting to see whether the support from parties other than those in Government will be sustained when we see the final shape of this legislation. Kia ora koutou.

Hon RODNEY HIDE (Leader—ACT) Link to this

I rise on behalf of the ACT Party to support the New Zealand Productivity Commission Bill. The introduction of this bill is a matter of considerable pride for the ACT Party. We have long believed that if New Zealand is to close the income gap with Australia and other high-income OECD countries, and is to achieve the living standards that we all aspire to, we need to have policies and institutions within New Zealand that are of the highest quality. Developing these policies and institutions requires robust and rigorous analysis, and also the involvement of the wider community.

A focus on productivity is at the heart of the ACT Party’s confidence and supply agreement with the National Government. The 2025 Taskforce was asked to advise the Government on how New Zealand could work to close the gap with Australia and also to measure progress towards achieving that objective. But to really get to grips with these issues, we need a detailed examination of the structure and performance of the various sectors of our economy and the institutions within which they operate. That is why we made the exploration of the concept of a New Zealand Productivity Commission a key objective in our confidence and supply agreement with the National Government. We saw the great work that the Australian Productivity Commission had completed across the Tasman and we saw a clear gap in New Zealand’s public sector.

The Australian Productivity Commission has played a valuable role in tackling the complex and challenging social, economic, and environmental issues facing Australia. It has been used across the Tasman to evaluate the costs and benefits of existing policies and look at alternatives. Most important, it has considered matters dispassionately and openly in consultation with the public and the various stakeholders—and this is important—at arm’s length from the Government. The results speak for themselves. The Australian Productivity Commission has consistently striven to make better policies that serve the long-term interests of the community. The New Zealand Productivity Commission Bill will produce similar outcomes here.

As the Minister of Finance has said, the intention is for a New Zealand commission to have the scope to explore a very wide range of issues across both the public and private sectors. The aim is also that the commission will work independently and transparently, consulting with public and private bodies as it sees fit. It will be able to draw conclusions and make recommendations free from political interference. Most important, the commission’s clear focus will be “the overall well-being of New Zealanders.”

I am sure other members of the House will agree that no shortage of issues and challenges face New Zealand families and New Zealand businesses. This House will always be the pre-eminent body for deciding how we, as a community, respond to these challenges. The establishment of the Productivity Commission will give this House an additional stream of advice. It will also allow Governments of the day to have important matters concerning the future direction of this country considered in a non-political and non-partisan venue by experts.

Working towards the New Zealand Productivity Commission, I have had the pleasure of meeting the chair of the Australian Productivity Commission, Mr Gary Banks, who offered us some key insights. First, to be useful, the commission should focus on the issues of public policy that Ministers believe will be of most assistance to the Government of the day. The second insight was that the commission should start out modestly and build credibility over time through the quality of its work.

These insights are reflected in this bill in two ways. First, the terms of reference for the commission’s work will be determined by the relevant Ministers. Second, the legal framework setting up the commission is deliberately minimalist. It will not interfere with the advice offered by the commission in its reports. A simple legal framework maximises the chance that this House will focus on the quality of the reports and not the structure of the commission itself. This should avoid the need to periodically update or change the legislation establishing the commission. That is why we have taken the approach of distilling the essence of the Australian legislation as best we can, without all of the specific Australian detail.

I record what a pleasure it has been to work with the Minister of Finance and my other Cabinet colleagues on developing these proposals for a New Zealand Productivity Commission. I acknowledge their hard work and commitment here today. I have appreciated especially the support from the Minister of Finance, who has helped and supported me in this work right from day one. I am particularly proud that together we have managed to find the resources for a New Zealand Productivity Commission from within a number of current baselines, thereby avoiding the need to place additional burdens on the taxpayer.

I also acknowledge the contributions that the other political parties have made to the bill, in particular the sterling work of Lianne Dalziel when she was a Minister, and also David Cunliffe, with whom we have had discussions. I can certainly say from the perspective of the Government that we are very interested in getting cross-party support for the Productivity Commission at the select committee. It is great that a Labour member will chair the Commerce Committee, which will look at this bill, particularly a member with the experience of Lianne Dalziel. I say, though, that it is important that everyone, not just Government members, approaches the issues around the Productivity Commission with an open mind. I hope that Labour members of the select committee will listen genuinely and openly to the submissions that are made so that we, on behalf of the country, can get the very best result for New Zealand. Thank you.

HONE HARAWIRA (Māori Party—Te Tai Tokerau) Link to this

Kia ora tātou katoa e te Whare. The Māori Party will support the New Zealand Productivity Commission Bill, which will establish a commission to ensure there is a greater emphasis on productivity in both the private sector and the public sector. We do so, because Māori society is traditionally based on the principle of collective commitment and hard work.

One of our better known whakataukī is “Me moe i te tangata ringa raupā”—marry a man with blistered hands—that is, marry a man who knows how to work. There were no politicians back then. Indeed, on sheer numbers alone, the ability of marae to handle major events with responsibility for the catering, accommodation, entertainment, safety, health, and hygiene of large-scale crowds is an impressive demonstration of the productivity that carries over into other spheres of Māori activity in tourism, farming, forestry, aquaculture, business, and even politics. In fact, we kicked off our 2008 election campaign with the slogan that we wanted to make the nation great again by investing in productivity on a grander scale to promote social, cultural, and economic development for Māori, and for the wider public, and we said that that was in the best interests of the nation and economy as a whole.

A key interest for us is the non-profit sector. We note that the Government currently invests $3.5 billion in this sector every year through contracting out services to non-profit organisations. Whānau Ora aims to take that principle to another level again. At the moment, providers survive on multiple contracts with multiple funders, which means that they spend more time writing up contracts and trying to get them approved, restructuring the operations to meet new standards, trying to meet the compliance requirements, and then worrying about whether they will get the next contract, all of which limits their ability to respond to the needs of whānau.

I commend Tariana Turia for Whānau Ora and her work on trying to reduce the logjam by collapsing contracts into one and ensuring that whānau actually get the help they need from the best people in the business. It looks like the Productivity Commission will be using the same model, by pooling together its funding from the budgets of 29 Government agencies rather than by costing taxpayers new money.

Mind you, as with a lot of other things we are also interested in, we ask who and what will define exactly what productivity is. We see that the Public Service Association supports the idea of having a body that can provide regular reports on efficiency, effectiveness, and service delivery in Government agencies across the whole economy. But, like us, it is also keen to know how State sector productivity will be measured and by whom.

The Māori Party is also keen to know what the balance will be between the economies of scale going through the central administration and the benefits of contracting into local communities, which understand local issues better than central government ever can. I say that, because uncoordinated actions taken by different Government agencies are widely known throughout the country to be costly, time-consuming, effort-wasting, inefficient, and confusing, and they often duplicate actions taken by other Government agencies.

Finally, talking about definitions of productivity, we would also like to see the terms of reference include an audit of all service providers for their commitment to kaupapa Māori, and an audit of all legislation for its commitment to Te Tiriti o Waitangi. Some great things are happening out there, such as the Māori Health Innovation Fund, which has invested $20 million in developing innovative Whānau Ora - based health services, and in developing Whānau Ora itself. But there is also a need to put some focus on what works in other areas, what does not work, and how at the end of the day the Government can support services and initiatives that deliver high-quality outcomes for whānau everywhere.

On that basis, the Māori Party will support this bill at its first reading.

JO GOODHEW (National—Rangitata) Link to this

I rise to take what I can assure my colleague on the other side of the House will be just a brief call on the New Zealand Productivity Commission Bill. The commission will be an independent Crown entity with the purpose, not surprisingly, of improving productivity, but in both the private and public sectors, and improving the overall well-being of New Zealanders.

What underpins this bill is an awful lot about what National is all about. National is working hard to secure a brighter future for all New Zealanders, and, by golly, we got that mandate at the last election. We are focusing on lifting long-term economic growth to create jobs, boost incomes, raise living standards, and provide world-class public services to Kiwi families, who deserve nothing less. We want to ensure that growth is based on private sector investment and exports rather than unsustainable increases in Government spending and borrowing, such as those we saw over the last decade.

This bill is but one of a number of tools in the tool kit that the National-led Government has to achieve its goals to deliver a better future for New Zealanders, and we are very happy to be working with coalition confidence and supply partners towards this end. “Productivity” is an oft-used word, and sometimes I worry that when we say to New Zealanders that we intend to improve productivity, they worry that we are simply telling them to work harder and work longer hours. That is, of course, not the case. We are saying to New Zealanders, who already work well, work long hours, and work hard, that we want to find ways for New Zealand to become more productive and for New Zealanders to take home a higher wage or salary.

So, without any further ado, I commend this bill to the House. I know that other members have contributions to make, as well, and I am looking forward to this bill being, as I have already said, one more tool in our tool kit. Thank you.

Hon DAVID PARKER (Labour) Link to this

I rise on behalf of Labour. As earlier speakers have said, we are supporting the referral of the New Zealand Productivity Commission Bill to the select committee. Before dealing with some of the issues that arise from it, I will respond to one of the comments made by the previous speaker, Jo Goodhew, who asserted to this House that one of the things that went wrong in the last decade was an increase in borrowing. What a short memory she has. If that is the level of intellect that is going into the establishment of the detail of the Productivity Commission, it really does not portend well for its future. The reality is that the previous Government reduced gross Government debt from 38 percent of GDP to 17 percent of GDP, and net debt, once we took into account savings through the likes of the Cullen fund, was virtually zero.

Of course, that is the stand-out difference between the economic performance of New Zealand and that of countries like Japan, the United States, Great Britain, Greece, Portugal, and Spain. All of those countries have high Government debt, and as a consequence they have very little room to move in terms of what their Governments can do, compared with New Zealand. The National Government inherited a position of low debt, not high debt. So, I say to Ms Goodhew that she was just wrong when she made that assertion.

Parliament agrees on just about all sides that we need to improve our productivity output in New Zealand in order to improve the well-being of New Zealanders and fund the sorts of services that we think Governments should fund, in terms of education, health, superannuation, and the like. If I have a concern about the way in which the Productivity Commission may turn out, it is that it will be focused unduly on deregulation. The Minister Bill English primarily talked about deregulation. I heard Rodney Hide comment that it will “begin modestly”, using his words. I think that might be a code for there being an undue focus on deregulation. If the Productivity Commission is to work, it must have a function that goes beyond deregulation. I really urge the Government to have a broader focus.

I think it is absolutely clear that the Government needs some help in terms of building productivity, because it has made some bloomers so far. It has certainly made some terrible mistakes.

DAVID BENNETT (National—Hamilton East) Link to this

When we look at the New Zealand Productivity Commission Bill, we see that it reflects a lot of the sentiment that the ACT Party has been pushing, and that is part of the coalition agreement.

I want to counter a few of the comments made by the previous speaker, David Parker, who said an absolute load of rubbish in this House. If anybody in the country needs a lesson on economics, it is those Labour Party members. They put us in the hole before the rest of the world, and in a bigger hole than the rest of the world. Now it is up to us to try to get us out of that hole.

The Productivity Commission would have been great when Labour was in Government, because it would have told Labour how stupid its ideas were about what it was investing in and what it was doing. It would have achieved its purpose best under the previous Labour Government, because under a National Government we will potentially not have the degree of economic decline that we had under Labour with its way of mismanaging the economy.

The previous speaker said that we will not get to where Australia is on the basis of extractive industries. What is the Australian economy built on? It is built on mining, which is an extractive industry. What is the New Zealand economy built on? It is built on agriculture, which is an extractive industry. We will get there on the basis of extractive industries.

The Labour Party looks to some God-like company that will be founded in New Zealand and provide some kind of technology or visionary thing that will change the world, and it will all be based in New Zealand. I tell Labour to get in the real world. When one earns money, one earns it through hard work and doing the basics right. New Zealand does the basics right in agriculture. We do it well, we do it with technology, and nobody else can compete with us at this stage. That is how we will make money. It is not made by dreaming that something will happen. Nobody in the Labour Party has ever made any money, anyway, so Labour would not know what it is like to go out there, earn something, and try to build a country or an economy. That is the basis of it.

The Productivity Commission is an idea that has been formulated. It is similar to what is in Australia. Its main functions will include inquiries into productivity-related matters and reports back to Ministers; one-off reviews of existing regulations; reviews of the efficiency and effectiveness of regulatory agencies; regulatory impact analyses of a small number of proposed new regulations; research into productivity-related matters to build up institutional knowledge; and promoting public understanding of productivity-related issues. Those are some very strong functions and broad aspects that this Productivity Commission will be engaged in.

We look forward to the bill’s progress through this House and its implementation in the New Zealand economy. Thank you.

GRANT ROBERTSON (Labour—Wellington Central) Link to this

Like other Labour speakers, I note that we will be supporting the New Zealand Productivity Commission Bill being referred to a select committee. That is the extent of our support at this time, and I want to go into why we are limiting our support and also to talk about some ideas for how we might be able to promote a productivity commission bill that we would support being passed all the way through the House.

Ideally, the three key elements that we need to talk about are an independent Productivity Commission, a well-resourced Productivity Commission, and a broadly mandated Productivity Commission. Those are the three areas where I have concerns about the current proposal. But, overall, Labour members want to support this bill, because we share the view that has been expressed around the House today that improving the country’s productivity is critical to the future well-being of New Zealanders.

It was interesting that in 2003 the OECD, in one of its reports on New Zealand—it was looking back over a period in which both National and Labour had been governing—stated: “The mystery is why a country that seems close to best practice in most of the policies that are regarded as the key drivers of growth is nevertheless just an average performer.” The OECD went into various areas to talk about property rights, the relatively small public sector compared with the rest of the world, low levels of corruption, low labour costs, a flexible labour market, and the ease of doing business in New Zealand being the second-best or best in the world through that period. All of those situations were in place in New Zealand, but, seemingly, we could not get past what has been called by some academics as the “productivity paradox”. There are a number of reasons for that, which have been talked about subsequent to that report. They are some of the kinds of issues that I think a Productivity Commission would need to take on. So this is an important aspect of the Government’s programme.

It is somewhat ironic that a bill to create some new bureaucracy is driven by the ACT Party. Having previously heard from the ACT Party about the evils of backroom public servants, and, indeed, from National as well, it is ironic that we stand here today to promote a bill to create a new bureaucracy. Clearly, backroom public servants have something to offer, and I am sure we will all appreciate the work that will go into that from the Public Service.

On that point, I have some concerns about the question of resourcing. I appreciate the fact that nobody wants to add a great deal more cost on to the taxpayer to create a Productivity Commission. But simply by shuffling the money around from other agencies, I am concerned about what will now not be done by those agencies and whether the Productivity Commission will be sufficiently resourced. With a budget of around $5 million to do that work, as the Minister of Finance said at the start today, that is questionable. David Clendon, on behalf of the Greens, asked whether the Productivity Commission would be able to do the things that we all want it to do. I think we need to ensure that we invest in creating a Productivity Commission that is able to undertake inquiries, able to undertake studies, and able to provide independent advice. We need to make sure it is resourced to do that. We cannot penny-pinch on that at the beginning, because in the end it will not deliver to us in the way that we all want it to.

A number of people have mentioned the importance of the Australian Productivity Commission, its role, and the breadth of its mandate. When we look at the bill and the Productivity Commission’s functions it is interesting to note that the second and third functions mentioned are all around the question of regulatory matters, and they were the ones that the Minister of Finance highlighted today.

It is vitally important that we put on the record of the House today that if this Productivity Commission is simply an exercise in deregulation and creating a smaller public sector—all of the messages that we hear consistently from the ACT Party—then it is not something that this side of the House can support. It must have a broad definition of what productivity is.

Some people say that productivity is just output divided by hours worked—that will show how productive we are. I know that kind of definition is not the one that is understood by most people in the House today. But if we allow ourselves to be narrowed down, we get drawn into debates about things that in the long term will not drive forward the economy. They will not make the economy more productive. That is understood inside the New Zealand Public Service. Both the Department of Labour and Treasury have their own areas of productivity that they believe that New Zealand should be working on. It is interesting to note that a couple of the really important areas that are picked up on by both Treasury and the Department of Labour are innovation and skills.

I will talk about the skills matter now, because the absence of a skills strategy from this Government has been one of the yawning gaps in attempts to drive forward the economy. We must have the people who are going to do that. We need a proper skills strategy and proper investment in skills and training. I would like to think that the Productivity Commission will look at the question of skills and training as one of its earlier tasks. I would like to think that it will look at workplace training, the tertiary sector, and secondary schools, and about how we are developing a skilled workforce, because that is now recognised as being one of the key drivers of productivity. We need to make sure that is included in the bill as well.

Innovation, I think, is a particularly important part, not only innovation in the workplace but the general place of innovation, research, science, and technology in New Zealand. David Parker has already talked about that today.

So those are elements of productivity that are much broader than the question of regulation. They are much broader than the question of how to shrink down the size of the State sector or the public sector. They are actually the drivers and the important issues that need to be addressed by the Productivity Commission.

I have a concern that the level of independence of this commission, as written down in this bill, is not sufficient. I hope that is something that a select committee will take some time to look at to ensure that it will be able to act independently. Obviously somebody has to appoint the commissioners, and that is likely to be the Government of the day. But I urge the Government of the day, which is putting this bill through, to ensure that a truly independent Productivity Commission is created. In order to do that it needs a broad mandate, a flexible mandate—

AARON GILMORE (National) Link to this

It behoves me as the last speaker on the first reading of the New Zealand Productivity Commission Bill to talk a bit about some of the comments from the Opposition members and, in particular, to touch on some of the comments from the last speaker, Grant Robertson. There seems to be some sort of fear and loathing from the Opposition members, probably from not properly reading the bill.

The first aspect of the bill that Labour is looking at is the Productivity Commission’s function to “hold inquiries into and report to the referring Ministers about productivity-related matters that are referred to it;”. That function is far broader than what Australia has—far broader. It means that Ministers can refer anything they want to the Productivity Commission to understand anything they want. Sure, a whole lot of other regulatory worries and concerns flow from it.

Equally, there has been some paranoia from the Greens about the ability of Ministers to control the commission. The bill allows freedom for Ministers to refer to the commission to undertake independent analysis. I think that is a good thing. When we look at it in relation to the Australian rules, we see that ours will allow a lot more freedom for the independent commission to do things.

There is also a fear about whether the commission will be resourced properly. This commission gets about $5 million a year. There are 29 people; that is nearly $200,000 a person. I think anyone out there who is paying taxes such as the butchers and the plumbers in my part of New Zealand in Christchurch would be thinking that is a lot of money to give to somebody to answer questions. That is $200,000 a year to 30-odd people to undertake some good analysis on what are the big questions and issues for New Zealand. I think that is probably more than enough resources to ask for from the hard-working taxpayers of New Zealand.

Earlier on we talked a bit about what this bill is all about. This is not about New Zealand working harder—we are the hardest-working country in the world; we work more hours than anywhere else—it is about New Zealanders working smarter and getting more out of less in terms of getting more capital and, particularly, more brainpower. We heard some fear from David Parker, who talked about the reasons we made some changes to the tax system. It was to give more flexibility to employers to invest in things they see fit—not necessarily machines, but minds. We cannot depreciate a mind, but through the lowering of the tax rate there is a greater incentive to invest in human resources rather than capital resources. We think it is a good thing to give the choices to employers to do things that are right.

The Productivity Commission in Australia has done some great work. I have read a number of its reports, particularly on the work it has done on energy and on population, and I think they are good pieces of analysis. I think if we can get the same level of analysis out of the work that might come out of this commission in New Zealand, then that will be a neat thing for New Zealand. We would be able to have some highly useful bits of analysis, particularly on social policy.

I will segue a bit. I had the fortune to study at the University of Canterbury. It has just set up a new economics lab, which specialises in exactly this issue. It is very much looking forward to working with this Productivity Commission to answer some of the big social policy questions that exist in New Zealand. I think that what we have set up is a good step in the right direction towards working with all those entities and agencies that do this sort of work in New Zealand. They can be disparate, but this commission will bring them together to a position where they can undertake more detailed, in-depth analysis of those big issues that New Zealand is facing over the next 20 years or more.

Unlike Mr Parker and my colleague Mr John Carter, I actually look forward to being here in 2025. I am young enough to be able to say that, whereas we have heard from the Opposition members that they do not even want to be here in 2025. If we can get this commission up and running to answer those big questions, it would be a great thing. I look forward to sitting here on the Government benches in 2025 looking at some of the great analysis the commission has done and putting it in place for a John Key - led Government for another 15 years. Thank you very much.

Hon JOHN CARTER (Minister of Civil Defence) Link to this

I move, That the Commerce Committee consider the New Zealand Productivity Commission Bill be referred to the Commerce Committee and that the committee report finally to the House on or before 22 November 2010, and that the committee have authority to meet at any time while the House is sitting (except during oral questions), and during any evening on a day on which there has been a sitting of the House, and on a Friday in a week in which there has been a sitting of the House, despite Standing Orders 187, and 190(1)(b) and (c).