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A sound business environment

Growing the New Zealand economy is about growing the individual businesses that comprise the economy. For this to occur the business environment must be one that encourages enterprise and innovation, where firms seek out and develop profitable new opportunities, and where well-performing and more productive firms will prosper, while poorer performers exit.

In many respects the business environment in New Zealand is good. Aspects such as a predictable policy environment, clear property rights underpinned by a strong legal framework, and high levels of trust and transparency provide a sound basis for sustained growth. Attention to creating open, flexible and competitive markets over the past two decades has paid off in terms of creating a much more dynamic economy. This puts a premium on maintaining these broad frameworks and taking care not to erode their credibility.

It is important to ensure that policy settings with a pervasive impact on the business environment and on the performance of the economy overall are working well. We believe that the Government should consider changes in the four areas outlined below.

Natural resource management

New Zealand is unusual by OECD standards in being a highly resource-based economy. This means that regulation around natural resources is very important for meeting growth and productivity goals. Clarity about the right to use natural resources, mechanisms that allow for resources to be allocated to their most productive use, and certainty about the process by which those rights are determined are important in order to support investment and growth. The policy regime must also balance local interests against national interests and commercial interests with other community and environmental values.

Emerging pressures on natural resources (for example, water quality and quantity, and climate change), resulting from economic growth, population expansion and changing expectations will pose challenges to economic prospects unless carefully managed. This will require more innovative and flexible natural resource management practices than have generally been applied to date. Innovation can occur through encouraging new approaches, technologies and resource productivity improvements, and creating a supporting regulatory framework including both planning and market mechanisms. Dealing with these issues will stretch the existing capability of central and local government.

In order to simultaneously meet the Government’s economic, environmental and social goals in the context of growing pressure on our natural resources, it will be necessary to focus on achieving maximum national value from natural resources over time through:

  • better management information and supporting science
  • innovation in management of resources, and
  • using the full range of policy tools – prescriptive, incentive-based (including taxes, charges and markets), voluntary and educative.

The Resource Management Act

Recent amendments to the Resource Management Act (RMA) represent a significant move in this direction. They offer improved flexibility for central government involvement (including, for example, the consideration of projects of national significance), clarify councils’ planning responsibilities, improve hearings procedures, and expand the range of tools available to councils.

There is scope for more effective national guidance and support for the recent RMA changes. However, more fundamental tensions (such as the balance between development and protection) can be effectively addressed only through legislative change.

Important institutional issues that need to be considered are:

  • identifying whether the recent RMA amendments and increased use of national guidance are adequate for resolving situations where national and local interests differ
  • the need to use the full range of available tools including incentive-based policies such as fees and markets to achieve the desired mix of environmental and economic outcomes, and
  • ensuring local authorities have the resources and capability to carry out their responsibilities, and monitoring how they do so.
  • There is also a need to review the balance between development and protection in Part Two of the RMA to ensure that development is not unnecessarily restricted. Specific options are to:
  • add matters relating to resource allocation and infrastructure to section six, and
  • restructure sections six and seven to clearly separate matters dealing with development, allocation and use from those matters dealing with protection, preservation and maintenance.

Recommendation

  • Review the balance between development and protection in Part Two of the Resource Management Act to ensure that development is not unnecessarily restricted
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