Brian Fallow: Giving the economic boat a boost

Admirers of Australia's Productivity Commission are keen for New Zealand to get onboard with its own version.

The government plans to set up an Australian-style Productivity Commission in the hope that it would lift the quality of public policy and so make the economic boat go faster.

Business lobby groups have been calling for it for some time.

Prime Minister John Key said on Monday that the Cabinet had reached some conclusions and there would be an announcement from Finance Minister Bill English in due course.

How useful such a body is will depend on its mandate, on the calibre of the commissioners appointed, on its resources and on its being independent of the Government and the bureaucracy.

The Australian Productivity Commission has a wider brief than its name might suggest. It describes itself as "the Australian Government's independent research and advisory body on a range of economic, social and environmental issues affecting the welfare of Australians".

It has completed reports on gambling and the contribution of the not-for-profit sector. It is working, among other things, on water markets in the Murray-Darling basin and its annual review of regulatory burdens on business.

Business Roundtable executive director Roger Kerr, who worked for its predecessor organisation for a while in the 1980s, describes it as an "official think tank which has established a good reputation as a source of objective, evidence-based policy advice".

The public nature of its processes gives it an educative role, as well as providing contestability of ideas. Typically it issues draft reports and has a round of public hearings before coming to its final view, and submissions are made public.

Business New Zealand chief executive Phil O'Reilly, while working working for Westpac in Australia, once had to appear before the Productivity Commission. It was, he recalls, a rigorous examination.

Its New Zealand counterpart will only succeed if it is the opposite of ideological, O'Reilly says, and its advice is clearly based on evidence.

It must not only be, but be seen to be, independent, so rumours that it would be in some sense based in the Treasury are troubling.

We already have the model of an official-but-independent advisory body in the Law Commission which is sometimes, for the want of a more appropriate body, called upon to reflect on issues, like the liquor laws, which fall outside its core expertise.

The establishment of a new taxpayer-funded organisation might be seen as going against the flow of fiscal belt-tightening in the public sector.

Is a Productivity Commission necessary, or merely desirable? Would it do more than merely replicate work public servants are paid to do? Would it add value?

In the absence of a Productivity Commission to answer just such questions, the consensus seems to be that it would.

Kerry McDonald, a former Comalco managing director and BNZ chairman, has a transtasman view of these things, and as chairman of the State Sector Standards Board in the early 2000s he had a good look at how well the public sector works.

He was not impressed: "We are really struggling with policy design and implementation."

The Australian commission works well, McDonald says, and has illuminated a range of significant issues. A New Zealand version is an excellent idea.

But it is better suited to medium to long-term issues than those where the need for change is urgent, and high-quality research and advice is no guarantee that the Government which commissioned it will muster the political will to act on it.

Roger Kerr says it is important the commission be seen as non-partisan. "It will be subject to lobbying and has to demonstrate its work is aligned with the national interest."

The Australian commission over the years has been strongly criticised by protected industries.

The Labour Party has no formal policy on a Productivity Commission but former Commerce Minister Lianne Dalziel is a fan of the Australian one.

"If I could choose any Australian institution and have it transformed into a truly transtasman institution, it would be the Productivity Commission. Given New Zealand and Australia's mutual commitment to a single economic market I think of the synergies that would arise if we investigated together the regulatory frameworks that impacted on both sides of the Tasman rather than going it alone," she said.

"The Productivity Commission is dispassionate in its regulatory impact analysis and I know that on certain fronts New Zealand's frameworks would be a much better starting place for reform in Australia than the other way round."

That is not going to happen but there would still be value in fostering connectivity between the two bodies.

There are constraints arising from the fact that we are a small country. Finding commissioners with the range of skills and experience - and the time - to serve might be a challenge.

The Australian commission has a staff of nearly 200 and a budget to match. The New Zealand body is bound to be a leaner affair.

There may be a concern about crowding out existing think tanks like Motu or NZIER. That would be ironic, as competitive neutrality is a cardinal virtue in the eyes of the Australian body, but it does not seem to have happened across the Ditch.

Much of the case for a commission comes down to "regulate in haste, repent at leisure".

It has got to be better to think clearly and consult widely before embarking on some regulatory change than to send ambulances to the bottom of the cliff.

A rather sinister example of the latter is the draft Regulatory Responsibility Bill, which would require the courts to pronounce on whether some piece of legislation is in the public interest or has violated the "principle" that Parliament should not enact anything that would leave anyone financially worse off.