Congratulations to Business NZ for getting specific in its Plan for Action (pdf) aimed at getting NZ more productive and competitive (undated, but reportedly released a few weeks ago – this post being a refile of one of my earlier posts). I get sick of reading business journalism exhorting us to do better without getting past generalities, so its nice to have actual proposals to chew on.
As perhaps signalled by the “action plan” label, the Business NZ report does not have much analysis: mainly just a few snippets from reports by the OCED and the Treasury. But there is a clear takeaway line, being that we look pretty shabby on the OECD ladder and desperately need to improve our productivity. I agree.
There are 50 action points, which is a lot. Presumably Business NZ has supporting arguments for them somewhere, but they are unfortunately not referenced in this document.
I love some of the proposals, starting with #1, a New Zealand Productivity Commission. I have long admired the work of the Australian PC and would love to see something similar here. The closest thing we have is the Law Commission which, like the Australian PC, looks at the merits of laws, but judging by the alcohol fiasco needs a stronger economic influence.
But others are very odd, like this electricity example:
“Develop new market mechanisms that encourage generators and users to insure against the risk of energy inadequacy”.
Who exactly is supposed to develop these market mechanisms, and why hasn’t it happened already if there is a dollar in it? As I’ve said, weather risk is the risk we’re talking about here. Its an old issue, and in the 13 years of the competitive electricity market we’ve always been pretty useless at dealing with it. So if this is a problem, I can’t see how it will be fixed without government intervention.
The telecommunications stuff is similarly inscrutable, as Rob O’Neill has shown.
Much clearer, but I think in need of some preliminary work is this one, filed under Natural Resources:
Include property rights in a Bill of Rights Act.
Recent detailed background argument is here. The thrust of the idea is to require compensation to be paid for any abrogation of property rights.
This would dramatically increase the cost of any policy change that involves wealth transfers. The resulting damages claims would be great for my business, but I’m not convinced its good policy for NZ, at least not yet. My main concern is that we need to be pretty confident that the existing allocations are reasonable before making such a law.
Lets look backwards for a minute. Introduction of the GST was arguably taking away an established right to buy goods and services without a sales tax being added. Sure there were some offsetting changes to the personal tax regime, but the full package created winners and losers. Should the losers have been compensated for having their rights taken away? Similar considerations apply to any changes to the tax and/or welfare systems.
Then there is natural monopoly regulation. Until recently, natural monopolists in NZ had the right to charge what they pleased, though there was a vague threat of regulation (vague in the sense that the trigger point was unknown). In my opinion, it would have been ridiculous to pay compensation to allow our public policy to finally catch up with international regulatory norms.
Similar issues arise looking forward, and underline the importance of getting the endowments roughly right before guaranteeing compensation for changes. For example, I totally agree with this Business NZ proposal
Amend the RMA to more clearly establish the security and allocation of water rights for time periods that are fit for purpose where capital investment is involved
But the fact that water rights need more clarity shows the problem. If the bill of rights change is made before these rights are clarified, we will be inviting (inefficient) rent seeking from anyone who feels aggrieved and greatly increasing the cost of clarifying the rights.
Concluding, thanks very much to Business NZ for the list. As indicated, I don’t think it is entirely actionable as stated, but it does give us a very good set of starting points for policy analysis.
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