New Zealand Productivity Commission Bill — Second Reading 
New Zealand Productivity Commission Bill — Second Reading 
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New Zealand Productivity Commission Bill 
Second Reading 
Debate resumed. 
PESETA SAM LOTU-IIGA (National—Maungakiekie) 
: 
 I rise to speak on the New Zealand Productivity Commission Bill. I thank the previous speaker Mr Cunliffe for making that speech. It should have been made at a barbecue at St Marys Bay over the summer. It was a speech full of rhetoric but with little in the way of substance because that speaker Mr Cunliffe was not present at the Commerce Committee hearings. In fact it looked as though he had not read the bill before he came into the House as my colleague Ms Shanks kindly pointed out. 
This bill will be one of the most important pieces of legislation that our Government will pass in this term. It is one of the most important pieces of legislation because we all know that productivity is a serious problem in this country—productivity leading to prosperity leading to jobs leading to opportunities and leading to a better standard of living in this country. Mr Cunliffe pointed out that throughout the 2000s when he was a Minister of the Crown and when he and his colleagues controlled the Treasury benches the productivity rates year on year from 1999 to 2008 were 1 percent per annum. One percent per annum is poor. He and his colleagues have to take some level of responsibility for the lack of productivity for the lack of growth and for the stagnant way that our economy went forward in some of the best economic conditions that our country has experienced over time. 
The biggest productivity growth rates in this country were in growth in bureaucracies. That is why this bill is very important. It is very important because it will provide the impetus for creating ideas for providing research and for looking at ways in which regulation and red tape can be cut. This bill is about inquiring into productivity-related matters and reporting back to the Government in order to formulate policy and formulate laws that will make this country rich and prosperous again. 
The roles and functions of the Productivity Commission will be modelled extremely closely on the Australian Productivity Commission. Our select committee had the privilege of hearing from Gary Banks who is the chairman of the Australian Productivity Commission. We heard about the way that the Australians are running their Productivity Commission and also about the pitfalls we might encounter in terms of how we proceed. As has already been stated we have a chairman designate. His name is Murray Sherwin and he has quite extensive experience in the private and public sectors particularly as the Director-General of the Ministry of Agriculture and Forestry. 
As has been stated the select committee worked quite closely across party lines in order to refine this bill. We worked closely in order to take the emphasis away from a focus on regulation and to leave open the types of productivity measures that might be relevant to the Productivity Commission. Independence was seen to be a critical feature of the Australian Productivity Commission. One of the recommendations that came back from the select committee was to explicitly allow for the Productivity Commission to negotiate with the relevant Ministers in terms of the terms of reference for any of the work that they would commission going forward. The other issue we focused on was provision for the functions and the role of the Productivity Commission to be quite wide. It is about reviewing the efficiency and effectiveness of regulatory agencies looking at and analysing the impact of regulations but also researching productivity-related matters to build up the institutional knowledge of the commission over time. There is also provision for the commission to work closely if it is relevant and if it is appropriate with the Australian Productivity Commission. 
The bill that has been presented back to the House has strong support I believe. Members will hear that from members of the select committee who were actually at the select committee. The bill has strong support across the various parties and it is a bill that I certainly recommend to the House. 
Hon LIANNE DALZIEL (Labour—Christchurch East) 
: 
 I am very grateful to my colleague David Cunliffe for taking the first call on the New Zealand Productivity Commission Bill due to the fact that I was attending a dinner in the room next door and unfortunately did not get the message in time to bring my notes down to the House. I would normally lead in this debate on the basis that I sat on the Commerce Committee and in fact I chair the select committee that heard the submissions on this bill. 
I think that the bill has been improved by the work that we have done on the committee. But I place on record my absolute 100 percent support for what my colleague David Cunliffe said and I made Labour’s position absolutely clear at the select committee which is that we want a Productivity Commission that successive Governments can support—we want that. We are in a better position to achieve that but it can be abused. That will be largely dependent on whether the Government of the day and currently that is the National Government is prepared to use the Productivity Commission that is established by this legislation in the way that it is intended. I think the select committee has given a very good steer about how we want that to occur. 
I make one preliminary point: there were 13 submissions received on this bill—just 13. We have just heard the previous speaker Peseta Sam Lotu-Iiga say that this bill was the most important legislation that we have had before the House for some time and he was overplaying the significance of it. I am a huge supporter of the concept of a Productivity Commission. It is something that I used to muse about when I was Minister of Commerce having a joint Australia - New Zealand Productivity Commission so impressed was I with Gary Banks who has been referred to as the chair of the Australian Productivity Commission and indeed the commission itself. The work that the commission does has integrity it has status and it has incredible levels of buy-in across the whole of Australia within its states across Government and across the non-governmental sector as well. It has developed a way of consulting that I believe we could learn from and that I hope is implemented by this bill. 
But 13 submissions! What on earth is going on when only 13 organisations bother to put pen to paper to say they either support or reject elements of this bill? I was extremely disappointed that Business New Zealand did not even make an oral submission in support of its written submission. In fact I had spoken to the committee clerk and asked to allow for half an hour for two of the most important submissions. I wanted half an hour for the Business New Zealand submission in order to hear it in detail and really tease out the important things. We had room to move with only 13 submissions received; only seven submitters wanted to be heard. So I said that I would like the other half-hour slot to go to the New Zealand Council of Trade Unions. Business New Zealand and the Council of Trade Unions had been working on productivity in a very unified and collaborative manner with the previous Labour Government. So I felt that that would be a really good way to test a number of these issues and really tease out whether there were any differences and what points and commonality there would be. I felt on this issue that there would be more in common than there would be opposed. 
Business New Zealand did not even bother making an oral submission in support of its written submission and I was disappointed in that. The New Zealand Council of Trade Unions did come and it presented a very in-depth submission. It then provided the committee with some follow-up material on all the work that it had been doing on the development of productivity. It focused on one element of productivity which was labour market productivity. But the point that it made to the select committee was that if we were to list some elements of productivity how can we leave that out? How can we have one thing but not the other? So that is why we took out the references to the specific elements of productivity that had been included in the previous functions of the commission. So the whole focus on reviewing existing regulatory regimes and agencies including their efficiency and effectiveness and undertaking regulatory impact analyses of specified regulatory proposals is all gone. The reason it is gone is that there is no need to limit how we view productivity in this way. 
The other significant change that we made was to the purpose of the commission. So the purpose of the commission originally read: “The principal purpose of the Commission is to provide advice to the Government on improving productivity in a way that is directed to supporting the overall well-being of New Zealanders.” We have now added the words “… having regard to a wide range of communities of interest and population groups in New Zealand society.” Unless we take that broader view of productivity we will be stuck in a very narrow frame probably one promoted by a former leader of the National Opposition as he then was Dr Don Brash who is now leading the 2025 Taskforce. I noticed that his productivity was so good that he spent his entire 3-year salary budget in 1 year. So that is productivity from that field. The Council of Trade Unions made some extremely good points because it was prepared to walk the talk. It was actively involved with the previous Government over the development of productivity. 
I will spend a bit of time talking about the hearing of evidence in relation to the Australian Productivity Commission and I place on record our select committee’s gratitude to Gary Banks for agreeing to travel over from Australia to present to us. We had two meetings with him one in the public arena and then he spoke with us privately. In terms of the private one it probably added more flesh to the detail rather than to the bones which were clearly stated in the public session. So I will talk a little bit about what the relationship between the Australian Productivity Commission and the New Zealand Productivity Commission will be. Gary Banks made very clear that his organisation would do what it could for the New Zealand Productivity Commission once it is created to cooperate with it and assist it in various ways. That is an offer we must accept because the two productivity commissions working collaboratively will strengthen the capacity for an overall lift in productivity on both sides of the Tasman. 
What I thought was very interesting because we have been very much of the view that we want to match as far as we can the Australian Productivity Commission was when Gary Banks gave the select committee a summary of where the commission had come from. It evolved from a long line of institutions going back a long way—indeed going back to 1922 with the Tariff Board which is where the industry focus came from in Australia’s legislation. The summary then talked about the modern form of the organisation created under the Whitlam Government in 1973 with two further incarnations since the Industry Commission following the Industries Assistance Commission and then the Productivity Commission following the Industry Commission. 
The changes that he identified had occurred under both Labor and Liberal-National administrations in Australia so the organisation has bipartisan support. He did say that in its earlier history there was often a little bit of tension periodically about the organisation given the nature of its role. 
The process the Australian Productivity Commission uses is simply this: it undertakes its first level of submissions on the original report it produces a draft report and then the commission hears submissions on the draft report. That is the strength of Australia’s organisation. Gary Banks said that the Government can sit back and watch how the politics play out when the commission’s draft proposals are debated in public. But that is a real strength because everyone knows what the debate is about at that point and as a result the commission has a high degree of credibility. The result is in the decisions that the successive Governments take on the recommendations of the reports. 
I am pleased that as a select committee we were able to make significant changes to the bill. On that basis Labour will be supporting its passage through the House. 
DAVID CLENDON (Green) 
: 
 Kia ora koutou. Before I speak on the matter at hand I would like to add the Greens’ acknowledgment of the dreadful news we had this afternoon from the West Coast and to offer our manaaki our aroha to those most closely affected. My colleague Kevin Hague is returning to his home on the Coast as quickly as he may. We will make proper acknowledgment of that matter with the rest of the House tomorrow afternoon. 
The business of the evening is to make some commentary on the New Zealand Productivity Commission Bill. Certainly it is a better bill that has come from the Commerce Committee than what went to it. That is a credit to the committee I think and indeed to some of the submitters. Some of the obvious flaws of the original bill have been remedied some of the gaps filled and some of the most undesirable parts removed. 
The genesis of this bill came from the ACT Party as a support party to the Government. That was revealed in the Minister of Local Government’s first speech on this bill when he noted that it was part of the confidence and supply agreement with the National Government. I fear that the genesis is perhaps reflected in the aspects of the bill that the Greens will continue to not support through its further stages. 
To refer to some of the improvements to the bill it has been noted that the words added to clause 7: “… having regard to a wide range of communities of interest and population groups in New Zealand society.” have broadened the scope of the bill and the capacity of the Productivity Commission which will be established by this bill to do its work and to give proper consideration whereas in the original drafting of the bill it was silent on that. It was very much an overly narrow regulatory approach and it would have led to little more than a witch hunt in the Public Service and a very aggressive assault indeed on the private sector. 
It is appropriate and a distinct improvement that the work programme of the commission will be less determined by the Minister and that the Minister will be obliged to consult with the commission about terms of reference. In the original drafting of the bill those things were very much in the Minister’s control. That would not be a desirable thing. The requirement to consult between the Minister and the commission will certainly aid or at least add a little to the independence of the commission and its tasks. 
I reiterate the statement made by the previous speaker Lianne Dalziel about the value of the commission being able to publish draft reports because then it will be possible to see what the commission genuinely thinks—its work processes and its thought processes—before the final report comes out. Any substantial changes between a draft and a final report would give scope for public or political questioning of who or what influenced any dramatic changes. We have already seen that with boards of inquiry such as the Royal Commission on Auckland Governance. The report that was produced by that royal commission was cast aside and we have a very inferior outcome. If this was to occur with the commission at least we would have a sense of what the commission first thought or where it went. 
The point has been made that the chair designate of this commission-to-be has already been appointed. Frankly the Greens see that as rather an abuse of the parliamentary process. Perhaps I should say that it appears to be treating Parliament with some disdain to appoint the head of an organisation when the very existence nature function and roles of that organisation are still being discussed in a select committee before the bill has even come back to the House for its second reading Committee stage and third reading. In that there is no explicit or implied criticism of the gentleman chosen to lead the commission. I do not know the fellow. It must be said that his CV is very impressive and he may well be an ideal choice but it seems remarkable that such an appointment would be made in advance of the proper parliamentary process being completed. 
There has been much made of the fact that this commission is modelled—quite closely some would say—on the Australian Productivity Commission. Indeed there are references and similarities but there are also some significant differences both in the model in the legislation and in the context within which this commission will work. 
It is noted that the New Zealand Productivity Commission will be able to on its own initiative undertake and publish research about productivity matters to develop its institutional knowledge support its inquiry and promote public understanding of those issues. That is well and good and it is appropriate that such a body should be able to do independent work but I seriously doubt whether this commission will have the capacity or the wherewithal to do any such work. We are told it will have a budget of some $5 million a year. That is not a significant sum of money given that the Auckland inquiry consumed some $3 million to make admittedly quite a large investigation. Clearly the requirements are that the first task or tasks of the commission will be to fulfil the roles or tasks given to it by the Minister. It will have very little time capacity or resources to do independent work unlike its Australian equivalent which works on a much larger stage with a much larger budget available to it and where there can be some genuine self-initiated work done. 
We believe it is rather peculiar that within this bill there is no definition offered of what productivity is or what it means in this context. That is quite unusual given that the word “productivity” even in the context in which this commission will work is open to a significant range and diversity of definition or interpretation. It seems strange that this legislation contains no definition nor does it contain a clear set of directions as to what the commission ought to do or what its broader objectives ought to be. Again this is a distinct contrast to the Australian example. The Australian legislation says that the commission must strive to improve the productivity and economic performance of the economy to reduce unnecessary regulation and that it ought to encourage the development of efficient and competitive Australian industry. 
We note there is very little focus on industry in this bill. The words “workforce” or “workplace” do not appear as has been noted by a couple of the submitters—I will return to that point. The Australian commission is charged with facilitating adjustment to structural change which some would see as some way from a definition or a reflection of a focus on productivity. In short this legislation does not replicate the Australian model sufficiently to give us any hope or confidence that it will replicate the undoubted success of the Australian commission. 
The Council of Trade Unions and the Public Service Association both made very substantive useful and helpful submissions on this bill. Both regretted that within it there was no focus on the workplace and no intention obvious that the workforce or those bodies representing the workforce should be a player in the commission. Lifting productivity as the Public Service Association pointed out is clearly not simply a matter for the private sector given that the Crown expenses account for about 35 percent of the economy. Public as well as private issues are at stake here. 
What we could more usefully do than this very narrowly focused poorly resourced commission is follow the example of the UK and look more towards the development and establishment of a Sustainable Development Commission as the UK has done with significant success. In its short life that commission has sought to fulfil its goals of living within environmental limits achieving a sustainable economy using sound science responsibly and promoting good governance. It has already identified savings of many hundreds of millions of dollars for the Government. That would be a model that the Green Party could support. Kia ora koutou. 
Hon RODNEY HIDE (Leader—ACT) 
: 
 I thank parties for their contribution to the New Zealand Productivity Commission Bill particularly Lianne Dalziel David Cunliffe and David Clendon. I also thank the Commerce Committee which has worked on this bill and improved it. 
It is certainly with great pleasure that I rise on behalf of ACT to support the New Zealand Productivity Commission Bill. This bill as Mr Clendon pointed out is a direct result of the confidence and supply agreement between ACT and National. When we sat down to negotiate the agreement we in the ACT Party had a clear vision: a vision for a more prosperous and more cohesive New Zealand. Crucial to that vision’s success was the need for an institution that could help shape excellent public policy for the benefit of the wider community. 
This bill establishes a Productivity Commission reflecting Australia’s experiences as its Productivity Commission has made a substantial contribution to its national well-being. Paul Kelly the editor-at-large of the  
Australian  
newspaper gave an excellent description of the Australian Productivity Commission: “Its strength lies in its ideas its analysis and its advancement of the public interest. It needs to be independent but not remote rigorous but not ideological constructive but not accommodating. The Commission exists ultimately to serve the interests of the Australian people and that defines its value for any intelligent national government … This has made Australia not just a more prosperous country but a country with an ongoing commitment to shared prosperity.” We thought that a Productivity Commission could make this contribution in New Zealand and I am pleased that the Commerce Committee has also seen the opportunities that this bill presents and has recommended that it be passed. 
Again I briefly acknowledge the work of the Commerce Committee and the committee’s chair Lianne Dalziel on this bill. The proposed amendments make sense and add value to the bill. We have always been of the view that the commission should have a wide remit and take a broad view of productivity so we in the ACT Party are quite comfortable with the committee’s proposed changes to clause 7 and clause 9(1)(a). We also always envisaged that Ministers and the commission would consult on terms of reference so that any issues can be worked out before an inquiry begins. Having this requirement in law as proposed by the committee in its changes to clause 12 helpfully clarifies this expectation while protecting the commission’s operational independence. 
Finally I am glad to see that the Commerce Committee has taken the advice of the Australian Productivity Commission chairman Gary Banks and has amended clause 13 to encourage the New Zealand Productivity Commission to publish draft reports and consult widely in the course of its work. I know from my own discussions with Mr Banks that he sees this open consultative approach as lying at the heart of the Australian Productivity Commission’s success and the high levels of public support and respect that the organisation enjoys. We would do well to learn from his experience when setting up our commission. Closing the income gap with Australia and taking our rightful place at the top of the OECD will require action across a wide range of fronts. Having good policy and strong institutions is only one part of this campaign but it is an important one. A Productivity Commission will help ensure that New Zealand is able to look properly and deeply at the issues that face it involve the community in the debate and formulate solutions that serve the national interest. I look forward to seeing this bill passed and the Productivity Commission beginning its work next year. Thank you. 
RAHUI KATENE (Maori Party—Te Tai Tonga) 
: 
 I came across a very simple statement today which I think sums up what might well be a core operating principle that the Productivity Commission could live by—that is the simple act of paying positive attention to people has a great deal to do with productivity. It might well be the greatest single factor that could assist the new independent Crown entity in going about its role to carry out inquiries and reviews into productivity-related matters. The commission is intended to fill a gap in the existing institutions for the provision of independent policy advice to the Government based on community-wide agreement. This is something that we in the Maori Party are absolutely supportive of. We believe that government would be a lot stronger if we chose to empower communities whanau and hapu to develop responses to issues impacting on them by trusting them and resourcing them. This is a clear priority for the Maori Party. We want to see more community services and less government bureaucracy for the outcome of whanau restoration. We have a particular passion for a concept that we call “opportunity communities”—that is we support communities by trusting in their own locally developed solutions. 
So we come to the second reading of the New Zealand Productivity Commission Bill and we are pleased to see community engagement given priority. It is our view that if we placed value on community-wide engagement then we might be able to ensure that those who have never had the backing to reach their potential will be supported to find new and sustainable opportunities to achieve their goals. The intention of the commission will be to assess how well the current environment supports “the overall well-being of New Zealanders.” identify areas where improvements could be made and where relevant outline better options or alternative approaches. The Maori Party supports investing in regional research and development programmes that will forecast the long-term opportunities and skills required to increase productivity and economic growth. In order to achieve a prosperous economy the Maori Party advocates improving quality and performance. It is important that the community receives accurate information about our progress as a nation. To advance this the Maori Party proposes the adoption of the genuine progress index. We believe that very useful proposals the commission might consider could be Maori productivity and its contribution to the wider economy focusing on both output and outcome and on social cultural and economic development and well-being including the genuine progress index. 
The Maori Party has always promoted a genuine progress index as the standard measure of business success. As the Minister of Finance could no doubt elaborate upon gross domestic product simply measures a country’s overall economic output or the market value of all final goods and services made within the borders of a country in a year. We want to stimulate instead a debate about productivity based on the general overall well-being of the population. Given the recession and the global collapse a priority for the Productivity Commission could be to investigate an integrated genuine progress index to measure social cultural and environmental costs and benefits as part of economic performance. 
Sitting in this House and debating across a huge raft of legislation we have come too often to receive proposals for tax reform that show a lack of imagination and creative thinking. At a wider level conventional accounting for the national economy is inadequate. A genuine progress index tool will gather and integrate data on our economic social environmental and cultural performance and on the heritage that we will be leaving for future generations. At a more detailed level the genuine progress index takes into account not just the bottom line on consumption but also a broader view including the implications of climate change and its consequences the effects of ongoing demand on natural resources such as water and air the impact on our ecosystems and the overall challenge of how to create sustainable progress on a finite planet and it should also include the consequences of our high oil dependency. 
Another priority we would like to hear given weight by the Productivity Commission is the drive to achieve sustainable development and to keep the environment healthy safe and intact for everyone now and for future generations. At the beginning of this year the Parliamentary Commissioner for the Environment released a report on trying to set in place roles and responsibilities for the regular reporting on the state of the environment to different public entities. Although the Maori Party supports productivity environmental reporting—such as that outlined in new national environmental reporting legislation proposed by the parliamentary commissioner—should offer tangata whenua an assurance that long-term concerns about the protection of the environment can be addressed. 
Although this is not the most appropriate time for a full-scale examination of the issues around mining I would suggest that consideration be given as to how New Zealand - based mining companies can employ the local community and Maori and still incorporate care for the environment including marine and local Maori custom for the benefit of the community and the wider public. Productivity must of course also focus on social and cultural capital. It would be useful to hear from the Minister whether the commission could provide an opportunity to undertake research as it relates to social lending and social enterprise and the developments in this space. It would be helpful to understand whether the Government has a role in supporting these developments particularly as it relates to Maori and those in need in communities. The development of social lending investment has been substantial overseas and has risen in parallel to the rise of social enterprises. It is still relatively undeveloped in New Zealand. Some South Island community trusts have experience in social lending and some local councils have also offered local groups loans on soft terms. Social enterprises have appeared as a new and distinctive type of entity delivering strong social outcomes. They are similar to commercial businesses and have some form of income from the provision of a service but they are also similar to charities in having social outcomes as fundamental objectives. 
It may well be that the Productivity Commission provides us with the space and reason to focus on such approaches towards increasing productivity. In this light we would hope that investigations should also be undertaken with regard to people or organisations that offer unsecured loans to individuals at high interest rates. The Maori Party supports the concept of increasing accountability and transparency of such transactions. Recent work in this area suggests there is a close correlation between a high density of liquor outlets pokie venues and loan sharks in areas of high deprivation—again another priority in the debate around productivity. 
Finally it is of note that the New Zealand Productivity Commission that we are considering in this bill is closely modelled on the successful Australian Productivity Commission as has been referred to by other members. I highlight that the Australian Productivity Commission has reported on Aboriginal affairs in Australia. Similarly the example could be followed in Aotearoa so that it is a priority that investigation is undertaken into the social cultural and economic development and well-being of tangata whenua. We place considerable interest in the advances of this bill and we are happy to support it at its second reading. 
KATRINA SHANKS (National) 
: 
 It is my pleasure to take a call tonight on the New Zealand Productivity Commission Bill. It was good to have this bill before the Commerce Committee and to listen to the submitters who came along. Not a huge number of submitters came to the select committee and that was disappointing because this is quite a significant bill for New Zealand and for productivity in New Zealand moving forward. Not only that it is also important for our economic development and our growth in New Zealand. We know that New Zealanders want to have a better standard of living. We will achieve that through raising real wages and salaries in New Zealand. The only way we can do that is to be smarter and cleverer with the resources we have and what we do with them. 
The Productivity Commission will be looking at ways we can be smarter and much more clever with the resources we have in New Zealand. The Productivity Commission is modelled very closely on the Australian Productivity Commission which has been operating for more than 10 years. It has been a very successful commission. It is interesting because when we talk about productivity we do not talk just about the labour force which is what the unions came and talked about; we talk about a vast range of different activities. I will mention just a couple of the activities that the Australian Productivity Commission is looking at. Currently it is looking at care for older Australians disability care and support educating and training the workforce emissions reduction policies and carbon prices in key economies an annual review of regulatory burdens on business and performance benchmarking of Australian business regulation planning zoning and development assessments. 
As can be seen the commission looks at a very wide range of topics. I think that is invaluable because at the end of the day everything adds to our productivity. It will be interesting to see what is selected by our own Productivity Commission and what it begins with from its own research and in its own projects and what direction it heads in. I think this is an important initiative for New Zealand. It is a shame that it was not implemented 9 years ago when we had the best economic times ever to really uplift our exports get them going and get New Zealand’s boat moving a bit quicker. The Productivity Commission is here now and I think it will provide a great initiative for New Zealand to increase its productivity and to improve its wealth overall. Thank you very much for the opportunity to speak on this bill tonight. 
STUART NASH (Labour) 
: 
 That speech was wonderful! 
Sandra Goudie 
: She doesn’t mince words. 
STUART NASH 
: The previous speaker does not mince words and there were very few words there to mince. 
I stand in support of the New Zealand Productivity Commission Bill and there are two points I would like to make. The first one and I will make sure it lasts more than 90 seconds because I do have a little bit to say on this is the importance of an increase in productivity—the importance of productivity growth in driving the economy. The second thing I will do is have a little look at the Government’s track record in driving productivity. We hear these words. We have just heard what the Australian Productivity Commission has done. First what has this National Government done in education? It has cut education; second the Government’s increase in GST has disenfranchised the elderly; and third the Government has cut services to the disability sector. But that is just a taste of what is to come. 
Katrina Shanks 
: What planet are you on? 
STUART NASH 
: A different one from that member I am afraid. I am on planet reality. 
Who would not support having a Productivity Commission? Anyone who understands economic growth would support having an economic Productivity Commission. But what are we talking about? When it comes to productivity growth we are talking about productivity but what does it actually mean? Productivity growth is a crucial source of growth in living standards. Productivity growth means more value is added in production and that means more income is available to be distributed—not just to those 650 New Zealanders who earn over a million dollars a year who have just received $1000 a week in tax cuts whereas someone on the median wage receives less than $5 a week. That is not productivity; that is regression and it takes the country backwards. 
If we are talking about productivity at the firm or industry level the benefits of productivity growth can be distributed in a number of different ways. They can be distributed to the workforce through better wages and conditions; that would be good. Imagine giving the workers better conditions. I know that is a foreign concept to members on that side of the House. They can be distributed to shareholders and superannuation funds through increased profits and dividend distributions. Imagine it being distributed to superannuation funds—that is anathema to members on that side of the House. Imagine the benefits being delivered to customers through lower prices—that does not mean increasing GST—to the environment through more stringent environmental protection and to the Government through increases in tax payments which of course can be used to fund social and environmental programmes. All those five things I have mentioned the Government has cut—amazing! 
Productivity growth is important to a company because it means that it can meet its growing obligations to workers to shareholders and to Governments through taxes and regulations and still remain competitive—still remain competitive—or even improve its competitiveness in the market place. Competitive advantage is vital to the growth of the New Zealand economy. What have we seen? We have seen business tax receipts drop by 23 percent over the last quarter. We are talking about a Productivity Commission that will drive competitiveness by a Government that has seen our business competitiveness drop significantly. 
There are essentially two ways to promote growth in output. We either bring additional inputs into production or increase productivity. Adding more inputs will not increase the income earned per unit of input unless increasing returns are discovered but that is a different argument. In fact it is likely to mean lower average wages and lower rates of profit. But when there is productivity growth even the existing commitment of resources generated more output and income—income generated per unit of input increases. Additional resources are also attracted into production and can be profitably employed. 
At a national level productivity growth raises living standards because more real income improves people’s ability to purchase goods and services whether they are necessities or luxuries. They can enjoy leisure improved housing and education and contribute to social and environmental programmes. These are all positive outputs of productivity growth. Productivity is not everything but in the long run it is almost everything. A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise output per worker. 
Let me give members an example. In America World War II veterans came home to an economy that doubled its productivity over the next 25 years. As a result they found themselves achieving living standards that their parents never imagined. Viet Nam veterans returned home to an economy that raised its productivity less that 10 percent in 15 years. As a result they found themselves living no better and in many cases worse than their parents. 
Our own Department of Labour has a special productivity section on its website. It states: “workplace productivity is the key to lifting New Zealand’s living standards and wealth. It is about increasing the value of what we produce by working in more effective and efficient ways.” But now let us inject a dose of reality. The New Zealand Institute’s latest publication is called  
A goal is not a strategy: Focusing efforts to improve New Zealand’s prosperity. 
 That is an interesting name. Well it refers to the fact that the Government’s goal of catching up to Australia is not a strategy to increase labour productivity. Let me outline what the report actually says. 
Katrina Shanks 
: Please do. 
STUART NASH 
: OK I will for that member—I will. The report states that in regards to improving productivity there are basically five things that the country needs to do to increase productivity. It needs to increase entrepreneurship. Hold a second—but this Government has cut funding to education mainly adult and community education from where entrepreneurship comes. The second one is innovation. Innovation is hugely important. The report states: “innovation effectiveness is the principal determinant of labour productivity and GDP per capita for advanced economies like New Zealand.” This Government cut the research and development tax credit. In fact I think it was the first act this Government did. It cut the research and development tax credit. 
David Shearer 
: Guess what Australia’s done. 
STUART NASH 
: What has Australia done? 
David Shearer 
: They have introduced New Zealand’s tax credits. 
STUART NASH 
: They have introduced New Zealand’s tax credits. The second one is skills and talent. Yet what are we doing to our education system? The third one is investment. What have we done to the New Zealand Superannuation Fund—the Cullen fund? We have stopped contributions. A goal is not a strategy. 
Jonathan Young 
: Come on that was only three. You said six. 
STUART NASH 
: That was five. This document outlines what the Government needs to do in every pillar in increasing productivity. But that Government has in some way shape or form pulled down destroyed withdrawn funding from or just got rid of it. It is an absolute travesty. 
Hon Rodney Hide 
: A what? 
STUART NASH 
: A travesty. This Government formed a sort of forerunner to the Productivity Commission. It was called the 2025 Taskforce. I would like to outline a couple of the ideas mooted in its first report. It is probably worth noting that Dr Don Brash headed that commission. He suggested a limitation on some universal benefits. These included industry loans and subsidies for early childhood education. He wanted to get rid of those. Secondly he recommended that the Government reduce operational spending to 29 percent of gross domestic product by 2012-13 or slash and burn. The third thing he recommended was using the New Zealand Superannuation Fund to pay back borrowing and changing the age of entitlement. Changing the age of entitlement means increasing the retirement age. Mr Key said: “We campaigned on some core commitments and we’ll be breaking those commitments if we did that so we’re not going to.” Well he said that about increasing GST and he did it. 
A Productivity Commission needs more than words. Words do not provide money for companies involved in innovation. Words do not train entrepreneurs to be skilled managers and leaders. Words will not get our businesses trading overseas. Kooky ideas like the majority of those of the Productivity Commission will do nothing to increase productivity. A goal is not a strategy. I am hoping that the commission will breathe life into productivity but I will not be holding my breath. 
I support this bill because I support the idea of a Productivity Commission. I support the idea of a commission that works along the same lines as the Australian Productivity Commission but I am fearful that the measures—this just annoys me; it makes my blood boil—that this Government has instigated will make no difference whatsoever. 
MELISSA LEE (National) 
: 
 I will respond to the previous speaker Stuart Nash by saying this: 9 long years. The member who has just resumed his seat finished his contribution by saying that words do not actually achieve productivity. I say that that is true. For 9 years we heard words. If productivity was such an important issue for the previous Labour Government where is it? Why did we not actually get it? It was all words and no action but we are getting into action and starting it now. 
Productivity is the key to lifting New Zealand’s living standards and wealth. Whether we are at work or at home it is something in which we all must participate to improve our lot. That does not mean we have to work harder or longer hours. We want this country to get ahead and be more productive. We want New Zealanders to take home bigger wages and have brighter futures. The New Zealand Productivity Commission to be set up by April next year will look at ways to boost New Zealand’s economic performance across the public and private sectors. We want growth that is based on private sector investment and exports rather than on the unsustainable increases we have had in Government spending and borrowing over the last decade. 
Productivity is important in all aspects of our lives. Women used to spend long hours doing household chores before technology caught up and helped them to become efficient and before our society became more egalitarian and did not scowl at men for doing so-called women’s jobs. We have to improve productivity in all aspects of our lives and I am very very pleased that we are starting this commission. Let us hope that better productivity will lead to more opportunities for all of us to spend more quality time with our families. 
After the tragic news from Pike River Coal this afternoon I offer my deepest sympathy and aroha to the families of the 29 miners we have lost and to the wider West Coast community. Thank you. 
Hon NANAIA MAHUTA (Labour—Hauraki-Waikato) 
: 
 Mr Deputy Speaker tenei e tu ake ki te tuku aku mihi ki era kaiwaro i tanumia kei Te Tai Tonga ki a ratou nei whanau. Ka nui te mamae kei waenganui i a ratou kei waenganui i a matou hoki. Kia tuku te aroha nga roimata mo nga tuahuatanga ki reira. Pai marire ki a ratou. 
[ 
Mr Deputy Speaker I rise to express my condolences to the families of those miners entombed in the south. There is much pain amongst them and us as well. In respect of the circumstances experienced by them over there I extend love and tears. Let goodness and peace prevail over them. 
] 
In acknowledgment of previous comments that have been made I too want to join my deepest sympathies with the families of the 29 miners. Coming from Huntly which is a mining community having uncles who still work in the mines and having gone into the mines myself I can understand just a small part of the despair that families are going through at the moment. I pass on my deepest sympathies to them. 
It is my pleasure to join previous comments of the Labour Opposition and add my support to the intent of the New Zealand Productivity Commission Bill. It was quite interesting to listen to the very short submission of the previous speaker Melissa Lee. She was quick to point out that Labour had been in Government for 9 long years and she asked what we did. Labour definitely believes that lifting productivity stimulates growth. Three pillars to lifting productivity and stimulating growth were achieved by Labour in those 9 years. 
One of those three pillars was skills—lifting the skills of our people. We had a skills strategy. National got rid of that. We invested in adult and community education because we recognise that there are many rungs on the ladder to ensure that people can go into further education training and employment. National got rid of that. We wanted to ensure there was a pathway for our kids from school into education training and employment. We had targeted strategies to ensure there was a pathway at every level for kids leaving school and invested in that. National is making it harder for people to choose to take up education. What is worse is that the place where investment is needed most in early childhood education—we know that if we give our kids a great start at the front end productivity is guaranteed—National got rid of that funding and shame on them. 
The second pillar was investing and getting the priorities for investment right. It is really not clear what National is doing to ensure there is a plan for growth. I ask National members what the plan is for growth. They are quick to talk about it but no one understands what the plan is for growth. We had a plan. 
The third pillar we had was investing in research and development. The tax credits and the Fast Forward fund was worked out by a Labour Government with the sector to ensure we were investing in our ideas and in innovation through the tax credit. The Fast Forward fund was something we were very proud of but National got rid of it. 
Over 9 years we were working towards a systematic plan to ensure we addressed all parts of the productivity landscape. It was not a short-term fix. We knew we needed long-term investment for real gains and outcomes. But what National is doing is appealing to short-term sentiments by taking from one and giving to the other getting priorities completely muddled up. 
I will come back to the bill. I sat on the Commerce Committee and it was interesting listening to comments from submitters. Some of those comments related to the independence of the Productivity Commission. Clause 12 as we know relates to the terms of reference for the commission. One of the issues raised with the select committee was that the commission should be able to undertake work on its own initiative. As I understood it the basis for that assertion was to ensure that the independence of the commission helped to establish a high level of credibility in its deliberations. That level of independence would help to achieve that aim. The bill in clause 12(1) originally stated that “In carrying out its functions under section 9(1)(a) the Commission must act in accordance with the terms of reference set by the referring Ministers for each inquiry review and regulatory impact analysis.” Some might have argued that this provision limited the ability of the commission to initiate its own work programme. 
We received advice from the Australian Productivity Commission chairman who said there was a level of negotiation between the commission and the Minister over terms of reference and it was more a practice than a legislative imperative. Members of the committee were quite warm and open to the ability of a free-flow opportunity to form particular aspects of the bill for review. That is why the committee recommended amending clause 12 and inserting a new subclause to make it clear that the referring Minister is to consult the commission about the terms of reference so there is a relative balance between the independence of the commission and Government policy. From my perspective and certainly from listening to the submission of the Australian commissioner the legislation probably does not go far enough but it could in time. 
The comment was made previously that we were surprised by the low level of interest in the bill with few submissions made to the select committee. We had expected there would be more. However of all the submissions that we heard the presentation from the Australian Productivity Commission chairman was very informative and helpful in the final deliberations that led to the select committee’s suggestions for the bill. We were particularly interested in the process undertaken to identify issues that would be considered for review which are very wide ranging in their content; the process for determining terms of reference as I referred to previously; negotiation between the Minister and the commission—significantly the Treasurer and the relevant Ministers and the way in which public consultation occurred. 
From the remarks we heard it appeared that there was a full level of public consultation through the release of a draft report. We felt that that was a bonus to the process and role of the commission because once a draft report was released it would go out for public consultation. Potentially recommendations could be outlined in that draft report and then a public debate could be had. The Minister would have time to listen to the public debate about recommendations coming from the commission and could be well apprised of all the various issues that he or she might need to consider in formulating a response. 
I am pleased that part of that intent was picked up on in terms of amending clause 13. Again it did not go far enough. We may have to reflect in hindsight on improvements in this area. I can say that we welcomed the Australian Productivity Commission chairman saying that that approach generated positive and informed debate and enabled Ministers to make informed responses. That can only be a good thing if one is trying to look at a sector-wide approach to improve productivity. 
I too like other members of the Labour team would have hoped for a stronger and greater alignment with the Australian Productivity Commission. However in saying that the bill will form the New Zealand Productivity Commission. We can only hope that at an operational level there will be constant and free-flowing dialogue and sharing of skills experience and advice between our two commissions. There will be much to gain from that front. 
Although Labour supports this bill we are concerned about the potential for the commission to be narrow in its focus and capture by Government policy could happen. But if that is not the intention of the Government then we could only expect that the types of questions coming up for review could be questions such as how a tax switch that shifts real gains to the top 3 percent of income earners will lift productivity or how the fire-at-will bill which will undoubtedly hurt those more vulnerable in the workforce will lift productivity. 
If the true intention of this bill is to ensure that a relative balance of independence is assured through this process then I am happy to continue to lend my support to this bill but I certainly look forward to the improvements. Kia ora koutou. 
JONATHAN YOUNG (National—New Plymouth) 
: 
 I am very pleased to stand in support of the New Zealand Productivity Commission Bill. I believe that the intention of the bill is not only to lift productivity but to build institutional knowledge in our country regarding all the factors and elements that make us far more productive and far wealthier as a country. We understand that it is essential that we increase our economic growth if we are to create the jobs the higher incomes and the opportunities that New Zealand families deserve and long for. 
As anyone knows when it comes to balancing or even improving a budget whether it is at home in business in an organisation or in a Government there are two ends of the pencil that need sharpening: how we earn but also how we spend. How we earn is critical. The world continues to rapidly change around us. We must adapt or be subsumed by bigger economies that would utilise us as producers of raw resources while they add the value and earn the wealth that could and should be in our pockets instead. 
Innovation and technology are an important component of maximising our inputs and efforts driving efficiencies that will achieve more for that same resource that is available. Lifting our output per worker—the amount of goods and services that each worker produces and the value they add—is critical for the faster economic growth that New Zealand needs. It is not just how we earn but also how we spend that is of equal importance. The public sector as we know makes up about a third of the economy. So improving productivity in the public sector is a vital part of sharpening New Zealand’s overall economic performance. 
The Productivity Commission which is to be set up by April next year will consider ways to boost New Zealand’s economic performance across both the public and the private sectors. The Productivity Commission which will have a wide-ranging brief was part of the National and ACT confidence and supply agreement signed after the 2008 election. When we measure ourselves against countries similar to us it is not good enough just to measure the difference in hourly rates. If those countries pay more we must understand why they pay more. Why are they able to afford that higher wage? 
Just as I conclude I say that Mr Gary Banks from the Australian Productivity Commission whose advice we appreciated reported to the Commerce Committee that there was considerable tension in the early years of establishing the commission until it settled on the notion that one cannot redistribute what one does not first produce. I am sure that as we establish this there will be very interesting and lively debate about the philosophies and issues as we become an even more productive country. Thank you. 
A party vote was called for on the question  
That the New Zealand Productivity Commission Bill be now read a second time. 
Ayes 111 
New Zealand National 58; New Zealand Labour 41; ACT New Zealand 5; Maori Party 5; Progressive 1; United Future 1. 
Noes 9 
Green Party 9. 
Bill read a second time.