Hide Rodney: New Zealand Productivity Commission Bill — In Committee Third Reading 
Text is incorporated into the Bound Volume 
Hide Rodney: New Zealand Productivity Commission Bill — In Committee Third Reading 
[Sitting date: 09 December 2010. Volume:669;Page:16368. Text is incorporated into the Bound Volume.] 
Hon RODNEY HIDE (Minister of Local Government)  
on behalf of the Minister of Finance 
: 
 I move  
That the New Zealand Productivity Commission Bill be now read a third time 
. This bill establishes a new institution to undertake analysis and provide advice to the Government on matters that are of vital importance to the welfare of New Zealand and New Zealanders. Improving our productivity performance is a necessary condition if we are to maintain current standards of living let alone improve them. Paul Krugman of Princeton University made the observation that “Productivity isn’t everything but in the long run it’s nearly everything.” 
New Zealand’s economic performance over the last 6 decades has been poor compared with that of most other OECD countries. In 1950 New Zealand was ranked as third among the OECD countries in terms of GDP per capita. In 2009 New Zealand’s GDP per capita was ranked as 22nd out of the 32 OECD member countries. This indicates a decline in New Zealanders’ living standards relative to those of people in other OECD countries. Following substantial reform New Zealand’s growth has been closer to but still less than the OECD average since the early 1990s and New Zealand does not appear to have been as badly affected by the current global financial crisis as many other developed countries although substantial risks remain. 
The gap in GDP per capita between New Zealand and wealthier OECD countries essentially reflects a difference in labour productivity which stems from New Zealand’s relatively low levels of both capital intensity and multi-factor productivity. Growth in New Zealand’s labour productivity has generally lagged behind that of other countries although there has been a significant variation in labour productivity growth across sectors and industries. 
Closing the GDP per capita gap with other advanced countries represents a formidable challenge. For example closing the gap with Australia within 15 years would require New Zealand to exceed Australia’s average GDP per capita growth over that period by around 2 percentage points. On the basis of the OECD’s baseline projections that would require New Zealand’s average GDP per capita growth to be about 4 percent which is more than twice New Zealand’s average rate over the last two decades. 
We will not meet the productivity challenge without an injection of new ideas. These ideas must be built on a solid foundation of evidence and analysis. It also requires those who undertake the analysis to engage fully with the community. Engagement with the community is important for a number of reasons. The first is that an evidence-based policy requires a deep understanding of what the real world is like for firms entrepreneurs employers workers and citizens. Second the community can be a source of ideas. Third the significant change that may be required to meet our productivity challenge affects the community and it is important that those who may be affected have the opportunity to have their views heard and taken into account and that the need for change is carefully and fully explained. 
With this bill we are establishing the legislative framework for an institution that will be a credible source of evidence-based policy. In creating this framework we have been guided by Australia’s experience with the Australian Productivity Commission which at the state level has been repeated in the Victorian Competition and Efficiency Commission. The New Zealand Productivity Commission will meet the key tests for an effective institution as demonstrated by the Australian institutions. The commission will be given inquiries by the Minister of Finance in conjunction with portfolio Ministers. Terms of reference for inquiries must be made public. The commission’s reports must be tabled in this House. Both of these requirements add up to a highly transparent process. As an independent Crown entity the commission will have statutory independence. This will encourage analysis and thinking that is unfettered by the policies and preferences of the Government of the day. It will be headed by three to four commissioners who will lead inquiries as well as set the overall tone of the commission. The commission will conduct its inquiries in public. It must consult widely and it must take a broad range of perspectives into account. It will not be an ivory tower unconnected with the real issues and opportunities faced by New Zealanders. 
An important part of the inquiry process which was emphasised strongly by the chairman of the Australian Productivity Commission Gary Banks is the release for consultation of a draft report. This provides a rigorous test process for the analysis undertaken by the commission. Although the bill does not make this step in the process an absolute requirement there is an expectation that the commission will consult publicly on draft reports. The commission is also able to initiate and publish its own research which is an essential function for an institution that will be seen as a centre of excellence on productivity-related matters. I fully expect that the commission will become a focus for productivity-related research and debate in New Zealand with strong links to Government agencies academics and thinktanks. In effect having a specialist commission should lift the tide on productivity-related research in New Zealand. There will also be cooperation between the New Zealand and Australian commissions further boosting capability and providing a foundation for work on strengthening the single economic market between New Zealand and Australia. 
The commission will be a unique institution in New Zealand that fills a gap in the current sources of policy advice. It meets the three critical criteria of having independence competence and community engagement. It can take the policy debate into areas where Government departments are not able to go bringing new ideas to the table and testing conventional wisdom. It is destined to play an important role in charting the future of New Zealand’s productivity performance. 
Finally I thank the Commerce Committee chair Lianne Dalziel and the other members of that committee for their work on the bill. In some important respects the committee clarified what the commission is intended to be and strengthened the statutory processes that underpin its open transparent and consultative character. I am very pleased and honoured to commend the bill to the House.