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Insights 37: 3 October 2025
New Research Note: What Canada’s First Nations can teach us about devolution and development
 
NZ Herald: Dr Eric Crampton on how Canadian First Nations planted the seeds of autonomy
 
Newsroom: Dr Oliver Hartwich on the pressing urgency for superannuation reform in New Zealand
The hidden cost of excessive regulation
Roger Partridge | Chairman and Senior Fellow | roger.partridge@nzinitiative.org.nz
Every time New Zealanders apply for a mortgage or business loan, they pay the price for the Reserve Bank’s controversial 2019 bank capital decision to increase capital requirements for major banks by almost 100%.  

The decision made our banks much more heavily capitalised than most of their international peers. This extreme conservatism targeted a novel “one-in-200-year” risk of bank failure. The standard benchmark is one-in-100-years. 

The RBNZ finally acknowledged the need to review its approach in March – just four weeks after Governor Adrian Orr’s shock resignation. 

Submissions on the RBNZ’s consultation paper close today. Yet, what is on offer are only cosmetic tweaks.  

The 2019 decision came with acknowledged costs. The RBNZ estimated it could reduce GDP by up to 0.32% annually. Independent analysts put the figure higher. Tellingly, no other central bank has followed New Zealand’s extreme approach. 

The Bank’s decision-making process was controversial at the time and remains so now. The RBNZ failed to include its cost-benefit analysis in the consultation process. Its dramatic departure from international norms required rigorous justification. The cost-benefit analysis should have been tested through public consultation. 

The current review includes valuable international analysis. Oliver Wyman’s RBNZ-commissioned report confirms New Zealand banks hold around 21% in capital buffers. This will increase to 25% when the 2019 decision is fully implemented. Most peer countries hold 13-19%. Yet the RBNZ’s review proposes maintaining New Zealand as a comparative international outlier. 

When bank capital requirements are excessive, the real victims are New Zealand borrowers. The banks themselves will adapt. But borrowers will face higher costs and constrained credit. The question is whether this serves New Zealanders’ economic interests. 

Earlier this year, Parliament’s Finance and Expenditure Select Committee heard extensive evidence about these concerns. The Committee recommended an independent review of the 2019 decision. 

The RBNZ released its consultation document just days later, pressing ahead rather than pausing to consider Parliament's concerns.  

Finance Minister Nicola Willis has the tools to demand better. Her December 2024 Financial Policy Remit directs the RBNZ to “encourage efficient provision of financial services.” 

The RBNZ’s review should be paused to allow Willis to commission Treasury to conduct the independent review Parliament requested.

Roger Partridge's submission, 2025 Review of Key Capital Settings, was lodged on 2 October 2025.
The beauty of starting small
Dr Eric Crampton | Chief Economist | eric.crampton@nzinitiative.org.nz
Not long ago, doing anything on Canada’s Indian Reserves was almost as hard as doing anything on whenua Māori. 

Here, the roughly six percent of the country held under Māori land tenure is beset by regulatory difficulty far worse than that bedevilling the rest of New Zealand. 

In Canada, doing anything substantial on an Indian Reserve had meant dealing with a micromanaging central government. So not much could be done. 

How things have changed – at least in Canada.
 
Three apartment towers are nearing completion on the small Kitsilano 6 Reserve near downtown Vancouver on land that was finally returned to the Squamish Nation in 2002 – Phase One of a larger project building over 6,000 homes. 

The Squamish took time to decide what they wanted to do with the land. Once they decided, they could act. The land is theirs, under their authority. And they wanted to build. The small Nation will help ease Vancouver’s housing shortage. 

Real autonomy on that land meant that the Squamish did not need Vancouver City’s permission to build. But autonomy is not autarky. The city provides services, and the Squamish pay for them under a service agreement. There are no free rides. 

Going from concept to construction in a fraction of the time that City Hall takes to process permits led Vancouver’s General Manager of Planning to say, “We might be able to learn something from them.” 

The change over the decades since I left Canada is incredible. And that change started small. 

During the 1990s and 2000s, changes to the Indian Act enabled First Nations to opt for greater autonomy over taxation, land use planning, and borrowing. Early adopters helped build both the legislative changes and the institutions that helped others to follow later.  

In 1996, thirteen First Nations signed the first Framework Accord with Ottawa, allowing them to set their own Land Codes and opt-out of the Indian Act’s land use provisions. Today, 120 have operational Land Codes.  

Now, the First Nations Band Councils that represent their people and govern reserves can have real authority over their land – and many are using that authority to shift from dependence to development.  

Building Nations: What Canada’s First Nations can teach us about devolution and development, a research note we released this week, draws a few lessons from their experiences, including the value of starting small.  

Stronger rangatiratanga over whenua Māori could be good for everyone. 

Explore Eric’s research in greater detail through our complete research note and podcast discussion. 
Council chambers of the absurd
Nick Clark | Senior Fellow | nick.clark@nzinitiative.org.nz
The Local Government Commission has been consulting on a draft Code of Conduct for Local Authorities.  
 
The Code addresses what bureaucrats see as local government’s biggest crisis: councillors saying unpleasant things. Never mind that rates rose 12 percent last year and will rise another 9 percent this year. Never mind crumbling infrastructure. The real problem is hurt feelings. 
 
This is not satire. The draft exists. You can read all 64 clauses yourself. 
 
Clause 23 captures the spirit perfectly. It forbids elected members from publicly criticising staff. Councillors work for voters, not bureaucrats, yet the Code treats criticism as insubordination. Imagine this elsewhere: theatre critics allowed only to write positive reviews; food inspectors forbidden from mentioning rats; opposition MPs required to compliment the government.  
 
The penalties read like something from a Maoist re-education camp. Forced apologies, compulsory training, public humiliation. One expects ‘wear dunce cap’ or ‘no pudding’ among the sanctions. 
 
The Code creates a perfect ecosystem for incompetence. When you cannot criticise, you cannot improve. When you cannot question, you cannot learn. When you cannot offend, you cannot tell the truth. Democracy becomes a game in which everyone pretends everything is fine. 
 
Plenty of councils have seen this movie. Councillors and even mayors have been dragged through disciplinary proceedings for criticising council decisions or even for engaging in politics – heaven forbid. Now the Commission wants to standardise these tactics nationwide. 
 
The Minister asked for codes protecting freedom of speech and democratic decision-making. The Commission delivered the opposite. Their masterpiece features contradictions that would make philosophy students weep. Councillors can access information but mustn’t use it critically. They can represent constituents unless those constituents want accountability. They can debate robustly provided nobody’s ego gets bruised. 
 
The genius lies in making it sound reasonable. Who could object to being ‘respectful’ or ‘inclusive’? These lovely words mask their true purpose: shutting down democracy’s messy debates. 
 
Consider the appeals process. Oh, wait, there isn’t one. Clause 47 makes investigators’ decisions final. Natural justice has, like Elvis, left the building.   
 
For years, council staff have made it hard for councillors to access timely, quality information. Meanwhile, councillors have weaponised codes of conduct against their political opponents by invoking ominous terms like ‘undermining behaviour’ and ‘material breach’.  
 
The draft Code won’t stop this weaponisation. It standardises it.  
 
Rates will rise, pipes will burst, services will deteriorate – but councillors will at least be polite about it. 
 
That’s progress, apparently. 

Nick Clark's submission, Draft Standardised Code of Conduct for Local Authorities, was lodged on 26 September 2025.
 
On The Record
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