Background
6. This government has made economic transformation one of its three themes for this parliamentary term. The quality of regulation has critical implications for all aspects of economic transformation, because it affects the environment within which business activity can occur.
7. International surveys have indicated that New Zealand's regulatory environment for business already rates well. For example, the World Bank's annual study Doing Business, which benchmarks business regulations across 145 countries, has ranked New Zealand as number one for the last two years. However, to facilitate greater productivity, innovation and sustainable economic growth more broadly, regulatory frameworks must be continually evolving to meet the needs of a transforming economy.
8. We are aware that similar issues are being considered in Australia. In early April, the Australian Government released its interim response to the Taskforce on Reducing Regulatory Burdens on Business in which it endorsed, in full or in part, some 86 of the 178 recommendations made by the Taskforce. The Government's full response to the report is expected by the end of July.
The Business Perspective
9. Businesses are becoming increasingly vocal about what is viewed as the growing complexity and costliness of regulation, as well as a sense of a cumulative burden. Concerns have been voiced across a broad spectrum of the business community, from large corporates to SMEs, and across the urban and rural divide.
10. Broadly speaking, the concerns derive primarily from frustration at the adverse impact regulation can have on a business's operations. This impact may range from diverting managerial resources away from growing the business to restricting what activity can take place. Other problems include:
- Duplication or inconsistency with other regulations;
- Excessive or duplicated reporting and other paperwork requirements;
- Inconsistent treatment of similar regulatory activities; and
- Uncertainty and inconsistency arising from the approach of regulators.
11. Society's expectations on government to meet a range of objectives have grown over the last 20 years as income levels have risen and technology has advanced. Society is becoming increasingly risk averse and this creates pressure on the government to "do something". A better appreciation of the incidence of risk by both government and society is necessary to ensure our regulation is well-grounded, responsive and able to cater for a reasonable range of likely circumstances. We often add regulation to the mix, but we do not always rationalise it.
12. Departments tend to develop regulation focusing solely on their area of responsibility, and there may be little or no consideration of the cumulative impact on other regulations or their interaction. There may be no consideration given to utilising existing regulatory frameworks, rather than creating a new set of rules.
Issues That Must Be Considered
13. Regulation is a necessary and fundamental component of any well-functioning society. We need to ensure that regulatory frameworks and processes are continually evolving to address the changing needs of society and the economy, without unnecessarily constraining growth, productivity and innovation. We have choices about how to regulate. The key choices seem to be in the following areas:
- How can we ensure that where regulation is not delivering the intended outcomes, amendments to regulatory frameworks can be made as expeditiously as possible?
- How can we ensure that, when there are multiple rules and/or agencies in the same general area applying to a firm or product or service, the requirements on firms and engagements with regulators are streamlined?
- What is the appropriate level of regulation or mix between self-regulation, coregulation and state regulation?
- How can we ensure the appropriate balance between certainty and flexibility?
- How can we ensure that monitoring and enforcement by regulators are appropriately targeted given the different characteristics of different sectors and firms?
What Is High Quality Regulation?
14. The principles of high quality regulation that this Review will follow are:
- Efficiency - adopt and maintain only regulations for which the costs on society are justified by the benefits to society, and that achieve objectives at lowest cost, taking into account alternatives to regulation.
- Effectiveness - regulation should be designed to achieve the desired policy outcome.
- Transparency - the regulation making process should be transparent to both the decision-makers and those affected by regulation.
- Clarity - regulatory requirements should be as understandable and accessible as practicable.
- Equity - regulation should be fair and treat those affected equitably.
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