Cunliffe David: New Zealand Productivity Commission Bill — Second Reading 
Cunliffe David: New Zealand Productivity Commission Bill — Second Reading 
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Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I rise to set out Labour’s position on the New Zealand Productivity Commission Bill. Labour will support this bill despite concerns about the potential for it to adopt a narrow view of productivity and to move in a direction that is different from that of the cited precedent in the Australian Productivity Commission. 
There are two versions of productivity that lie behind this debate. The first is a view of productivity that is broad deep and includes all skills technology and capital and the ways in which they contribute to growing output per labour hour. There is another way—a short-term way—that people can contribute to productivity per labour hour and that is simply to reduce the supply of labour to cut costs and to sweat the assets harder in the short term resulting in higher output per input but mortgaging the future to pay for the present. Labour clearly stands for the former vision a deeper richer version of productivity and for a mandate for the Productivity Commission that gives it the breadth and scope to responsibly address those factors as it must and should. 
I am pleased to commend the work of the Commerce Committee in moderating the terms of reference purposes and objectives of the commission. It has brought the commission somewhat closer to the Australian model than was proposed in the original draft introduced by the Government. It is on that basis that Labour is prepared to support this bill’s passage through the House and to support the establishment of the commission but we will do so with a clear reservation. That reservation is that we would have preferred to see in those terms of reference a more explicit mandate for economic and industry development such as occurs in the Australian case. We hope nonetheless that the cooperation between the Australian and New Zealand commissions will be deep and that the broad mandate of the Australian commission will be reflected in practice in the way that the New Zealand commission discharges its responsibilities. The select committee— 
Katrina Shanks 
: Have you read the commentary? We changed that. 
Hon DAVID CUNLIFFE 
: I am very well aware I say to Ms Shanks of the changes that the select committee has made and if the member would restrain herself she would hear me say that the select committee has made this a better bill by giving the commission a broader mandate and amending the functions of the commission to remove the previous dominant focus on investigating the impact of regulation. 
This commission should not be a regulatory razor gang. We already have a regulatory impact assessment unit and a regulatory responsibility process and it is interesting that the Government has observed that in the breach with fewer than half of the bills that have gone through in the last year having fulfilled its own criteria for regulatory responsibility. So Labour frankly does not need a lecture from the Government benches about regulatory responsibility because Labour when it was in Government had a far stronger record of regulatory impact analysis than the Government has proposed. The last thing New Zealand needs is yet another razor gang pretending that deregulation is a substitute for sound economic development or that sweating assets is a substitute for real productivity. It is our hope that that will not be the case under the new chair of the commission Dr Murray Sherwin who is a high-profile and able public servant but it must be said not necessarily the person to whom we would have first looked to be the founding commissioner although we will work with him and look forward to seeing him chart a course to the future. 
This is important work. New Zealand is lagging behind many OECD countries in terms of its productivity growth. Indeed it was ranked only 22nd out of 30 in terms of economy-wide productivity. After a period of relatively strong productivity growth since the mid-1980s when productivity growth cycles averaged between 2.5 and 2.9 percent it began to taper off and averaged only around 1 to 1.5 percent since 2000. The policy areas that could contribute therefore to raising New Zealand’s productivity include increasing incentives for investment—appropriate investment in business growth not in bidding up each other’s property prices. A productivity commission I believe will have to deal with the incentives in our investment environment that are misdirecting capital flows to areas that do not raise skills enhance tools or improve output but instead simply increase the costs of housing and building. That is not productivity. 
Turning to the issue of stimulating innovation I say that innovation is the engine room of productivity and the lifeblood of progress. Staying ahead of our competitors and enjoying the benefits of sustainable competitive advantage through intellectual property has to be what gives New Zealand the edge builds on our fine natural resources and brings home the bacon of a First World income with which we can build a First World society. Innovation requires investment and it requires systems that take a bright idea to a commercialisable development that can then reach a global scale and be marketed to the world. In building New Zealand’s skill base too often it is the workers themselves who are forgotten in a debate about productivity as though they are somehow an input cost or a commodity. Yet the most successful companies are the ones that involve their workers in building the best possible processes to create their products and services that eliminate waste that think of smarter ways of doing things and that share the profits. Those are the most innovative and productive companies and that is what we would like to see more of. 
Of course this theory all rests on a sound macroeconomic and fiscal environment. We could go as we have in the previous bill into debates about whether such an environment exists today. I can do no better than to point to Standard and Poor’s verdict that the current Government is on negative watch no doubt as a result of several rounds of irresponsible tax cuts that the country could not afford. The Australian Productivity Commission provides a useful benchmark for how we can take that debate forward. It has played an incredibly valuable role in our view in providing independent review analysis and comment on policies and structures in all of the states and territories of the commonwealth. On top of that in looking at the impact of reforms the commission’s work assists its Government to benchmark its performance against other jurisdictions within the commonwealth and to identify ways of doing better. I think it is fair to say that the commission has a reputation for excellence and that comes in part from its independence. 
The Australian Productivity Commission is also well resourced with upwards of $30 million per annum. It attracts high-quality analysts and researchers. For such a commission to work well here it will also have to have adequate capacity and funding. There may be some question about whether there is a depth of talent here to staff such a body or whether some of that talent would need to be brought in from overseas. National has found some funding for the Productivity Commission within existing departmental baselines and the Labour Opposition will be monitoring whether that funding will be sufficient to fulfil its mandate. 
Let me summarise and close by saying that Labour is supporting this bill through all stages. The bill has benefited from the discussions in the select committee that improved it and broadened its mandate and purpose. We do so with vigilance and we do so with a warning. The warning is that this commission must not become a regulatory razor gang. The path to productivity is paved not with deregulation but with investment in skills technology and capital. The role function and mandate at the heart of this bill are charting that pathway developing our industries and providing sustainable growth in our economy. 
Debate interrupted.