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Insights 12: 13 April 2018
Upcoming event: Dinner lecture with Katharine Birbalsingh
Latest report: Who Guards the Guards? Regulatory Governance in New Zealand
Upcoming event: researchED Auckland conference

Drilling further into the Government’s hole
Dr Oliver Hartwich | Executive Director |
When you are in a hole, stop drilling. That must have been the Government’s motivation for stopping oil and gas exploration.

To say that the past weeks were not quite ideal from the coalition’s viewpoint would be an understatement. The Radio NZ saga, the farce over Russian spies and dubious events around the Provincial Growth Fund did not make it look like the most competent of administrations.

But instead of announcing something positive for a change and getting out of their hole, the Government added yet another policy blunder to its record.

To be clear, I am not talking about the substance of the decision to end offshore drilling.

It is legitimate to debate the cases for and against offshore exploration. Concerns about job losses in the industry and fears of a potential Deepwater Horizon disaster in New Zealand waters are both understandable.

It is much harder to link yesterday’s announcement to climate change. Whatever we do on exploration in New Zealand will do nothing to domestic, let alone global, consumption of hydrocarbons.

However, what is neither understandable not sensible is how this Government decision was made.

Of the three partners in this Government, only the Greens had committed themselves to ending oil and gas exploration. Parts of Labour may have been sympathetic to it but it was not part of Labour’s manifesto. And New Zealand First never was in favour of a policy that would do serious damage to regional economic development.

The Government’s media conference made it abundantly clear how divided even ministers are on the decision. Shane Jones, as Minister of Regional Development, could barely hide his anger. It did not appear as if he had even been consulted on it.

But Shane Jones’ frustration is not the main problem. The problem is that no-one else had been asked to submit their views on the decision.

This is a Government that purports to be in favour of openness and transparency. It is led by a Prime Minister who promised us in her election campaign that “The Government I lead will be a government that listens, then acts.”

Such promises ring hollow when pivotal decisions like ending oil and gas exploration are forced on the country without consultation, cost benefit analysis or public debate.

This is not how to govern a country. The Government just dug itself deeper into its political hole.

Guarding the Guards
Roger Partridge | Chairman |
Next week Parliament will have its first chance to debate Commerce Minister Kris Faafoi’s new Commerce Amendment Bill. If passed, the Bill will grant the Commission’s wish - and allow it to use its powers of compulsion to undertake ‘market studies’ into the state of competition in any market.

‘Market studies’ powers sound innocuous enough, but they are far from it. The state should be cautious before authorising regulators to use powers of compulsion. It should be especially cautious when the targets are not alleged wrong-doers. At the very least, it should ensure the powers are both necessary and subject to appropriate checks and balances.

Yet powers of compulsion hardly seem needed to explain why so many markets in our small, geographically isolated economy are dominated by just a few incumbents.

But even if the case for market studies powers were made out, the Bill’s lack of checks and balances is deeply troubling. All that is required is the Commission to decide it is in the ‘public interest’ to initiate a market study and off it can go. This is hardly a high hurdle.

The lack of checks and balances is doubly troubling against the backdrop of the Initiative’s study of the performance and accountabilities of our commercial regulators.

Released today, Who Guards the Guards? finds that many of New Zealand’s important regulatory agencies are performing poorly. Among them are the Reserve Bank and the Commerce Commission. Meanwhile, other regulators, including the Financial Markets Authority, rated very well.

As part of our study we asked New Zealand’s top 200 companies to rate the three most significant regulators for their businesses against 23 KPIs, and to rank all the regulatory agencies they interact with from most to least respected.

Our research identified a link between how regulators are governed and how well they perform. We found the separation of board and executive functions at regulators like the FMA contributes to greater internal accountability and to greater levels of expertise.

Against this backdrop, the low ratings of the Commerce Commission and the RBNZ are no surprise. The Commerce Commission’s ‘commission model’ fuses governance and executive functions, leaving Commissioners to hold themselves to account. And at the RBNZ, the Governor is the sole regulatory decision-maker, raising a similar but different accountability problem.

Encouragingly, the Minister of Finance has the RBNZ’s governance squarely in his sights.

Minister Faafoi could take heed. Rather than adding market studies powers to the Commission’s armoury, he might have better success undertaking his own study – into the Commission’s governance.

In bed with [redacted]
Jenesa Jeram | Research Fellow |
Every Friday, regular Insights readers undoubtedly look forward to the Initiative’s take on public policy and current events. This week, however, I want to share something a bit personal. You see, I’ve been in a relationship for about as long as I can remember. But lately I’ve been feeling uncomfortable.

And I think it’s time I started talking about it.

At first, the warning signs were small. I’d try phoning [redacted] but they weren’t returning my calls. [Redacted] kept telling me my call was important to them, but would proceed to keep me on hold until I eventually gave up trying to initiate contact. I found out the hard way that I get in a lot of trouble if I do the same and ignore their communication.

If that wasn’t bad enough, [redacted] has also tried to make me feel self-conscious about my body and lifestyle. I’m constantly reminded that the foods I like will make me fat, and that [redacted] will stage an intervention if I can’t make responsible choices.

I’m no lush, but [redacted] has made me feel bad about my drinking too. And don’t even get me started about the time I tried having a mature conversation about marijuana with them.

The biggest warning sign, though, is when we talk about money. I’m noticing a bit of hypocrisy. I’ve been told that I’m bad with money. But I’ve noticed that [redacted] is pretty bad with money too. In fact, [redacted]’s confidence in their ability to pick winners is surely a symptom of a gambling problem. A particular obsession with boats has me worried.

But whenever I question how our money is spent, [redacted] sweetly whispers in my ear, “tax is love”.

I’m telling you all of this, dear reader, because I’ve recently found out that I’m not the only woman in [redacted]’s life. In fact, let’s get rid of the redactions, I may as well come out and say it: I’m in a relationship with The Government.

The Government has been flirting with readers of The Spinoff, using an IRD sponsored series of articles to promote the message that tax is love. One of the articles even tried portraying anyone who disagrees with the ‘tax is love’ sentiment as old fashioned and un-progressive (‘Leighton Smith generation’ was the term used).

If that’s the case, then excuse me while I grab my chastity belt because I’m becoming old-fashioned. Tax is about as romantic as a candle-lit dinner in a shopping mall food-court. But at least in a food court you get some choice.
On The Record
All Things Considered
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  • Russia roars while their economy crumbles under sanctions.
  • New Zealand is sadly becoming a little more like America.
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