Rodney Hide

A new Productivity Commission will be set up early next year to help boost New Zealand's economic performance across the public and private sectors, Finance Minister Bill English and Regulatory Reform Minister Rodney Hide said today.

The commission, which will have a wide-ranging brief, was part of the National-ACT confidence and supply agreement signed after the 2008 election.

"The Productivity Commission is another step in the Government's programme to lift New Zealand's economic performance in both the public and private sectors," Mr English said.

"It is essential that we increase our economic growth if we are to create the jobs, higher incomes and opportunities New Zealand families deserve. Our main challenge is to ensure this growth is based on private sector investment and exports, rather than the unsustainable increases in government spending and borrowing of the past decade.

"This will require action across the board - and it's why the Government will give the Commission wide scope in terms of the issues it directs it to consider."

Mr Hide said productivity is crucial in ensuring New Zealand maintains and increases its standard of living.

"In the long run, productivity is the biggest determinant of wages and living standards. Lifting our output per worker - the amount of goods and services each worker produces and the value they add - is critical to closing the income gap with Australia.

"This income gap is one of the main reasons we lose so many talented, hard-working New Zealanders every year. The Government is committed to taking a number of steps to close the economic gap with Australia. Establishing the Commission is one concrete step towards arresting New Zealand's productivity slide," Mr Hide said.

The Commission's roles and functions are modelled closely on the Australian Productivity Commission, which has been operating for more than 10 years. The Government intends to enact legislation setting up the Commission by the end of this year so it can be up and running by April 2011.

"It makes good sense for the two commissions to cooperate, given the Government's strong commitment to create a Single Economic Market between New Zealand and Australia", Mr Hide said.

The independence of the Australian Productivity Commission has ensured that important public policy issues have been tackled in a non-political way. Examples of Australian Productivity Commission inquiries include energy efficiency and the economic impacts of migration and population growth.

The new Productivity Commission will be headed by up to four part-time commissioners and will provide independent advice on ways to improve productivity in areas identified by the Government.

Its main functions will include:

* Inquiries into productivity-related matters and reporting back to Ministers.

* One-off reviews of existing regulations.

* Reviews of the efficiency and effectiveness of regulatory agencies.

* Regulatory impact analysis of a small number of proposed new regulations.

* Research into productivity-related matters, to build up its institutional knowledge.

* Promote public understanding of productivity-related issues.

The commission will be funded through contributions from reprioritising the existing budgets of 29 Government agencies.

"No extra money will be called upon to fund the Commission and its activities," Mr English and Mr Hide said.