What business sector needs
So far, New Zealanders’ focus has been on the details of the new Government’s coalition agreements and who new ministers will be. But it's important when thinking about what business will want from this new Government to first take a broader, longterm view.
In principle, businesses will want a number of things from any government including:
* A regulatory environment that is conducive to risk taking by the private sector.
* A flexible and fit-for-purpose regulatory regime that encourages innovation and competition.
* Certainty and predictability about the way in which rules and regulations will be created and enforced.
* A macro regulatory environment (for example through the Reserve Bank) which focuses on economic stability.
* A country that is open for trade, foreign direct investment and the migrants that businesses need to grow.
If we look at the coalition agreements, businesses will see a number of those issues covered off. One of the most important things the coalition agreements talk about, however, is something that has not been covered very much in the media and by commentators.
It relates to the way in which the three parties in this coalition will conduct themselves and how they will create laws and regulations. That is a critical matter for business. It is all very well saying particular policies will be progressed, but if the process of government itself is unpredictable or even pernicious then all the good intentions in the world won’t matter much.
A good example of this was the last government’s surprise ban on future oil and gas exploration in New Zealand.
Whether or not you agree with the idea of oil and gas exploration, the way in which the then government banned it was a real blow to business confidence – not only in the sector directly impacted, but businesses in other sectors who might have been looking to invest in New Zealand as well.
If we can’t trust government to foreshadow its likely policy direction, take advice and guidance on that – including from the business community – and then enact policy in a predictable way, it will impact business perceptions of the sovereign risk of investing in New Zealand, no matter the sector.
So, the oil and gas exploration ban wasn’t just a problem for the oil and gas sector. It impacted the confidence of many businesses that will have decided not to invest in New Zealand because of the way in which the government went about considering and announcing that policy.
It is in that context that we need to look at the references in the two coalition agreements that relate to the way in which the Government will work and how it will go about making policy. The agreement’s decision-making principles relate to sound public policy principals, including proper problem definition, regulatory cost benefit analysis and economic efficiency.
Other principals relate to interventions being results-driven, people-focused, accountable, evidence-based and fiscally responsible. All of those matters are critical to business and over the long run will actually matter more than the specifics of a particular policy that might or might not be enacted in the next six months. It is much more likely to be conducive to confidence, risk-taking, investment and all the rest.
Likewise, specific references to the way in which parties will resolve differences and agree on ongoing work programmes matter a lot to business. Any coalition agreements can only be written at a point in time. It can’t take account of what will happen from now on, including international challenges, unexpected changes in the policy environment, or the need for fast action on an emerging problem or opportunity.
It is critical for business to understand how decisions around those kinds of things in the future will be made by the three parties, and for the agreements to have clear language about how that process will occur.
What is more, all of these matters are now published for the first time. That also matters to business. It means the Government can be held to account about following those principles and practices that they have signed up for.
It means the media, business organisations, investors and others can call to account behaviour that is seen to be at odds with what has been written down.
Governments that publish the way in which they will operate are more likely to operate in that way because of the very discipline of publishing the arrangements in the first place.
This is a welcome new maturing of MMP. These kinds of documents are commonplace overseas, not just in countries that have proportional representation systems, but many others as well. The business community will certainly welcome this new level of accountability and agreement around the way in which public policy is created. It should become standard practice for all governments from now on.