Hon David Seymour
Minister for Regulation
Associate Minister of Finance

Good morning.

It’s a pleasure to speak with you about our country’s incredible potential. My comments focus on the Government’s work making it easier to do business by improving our regulatory settings.

You know New Zealand is small. From your flight here you know it’s distant. In fact, no Governments can control the size of their population or their geography, but they can control the quality of their public policy.

As Minister for Regulation and Associate Minister of Finance, my job is to ensure New Zealand has the regulatory settings to attract more investment and achieve higher productivity and living standards.

When I talk about regulatory settings, I mean the rules that government puts in place that restrict the use and exchange of private property. That is distinct from government’s other roles, which include spending to produce goods and services, and ownership of capital assets.

It’s this first area where I believe governments can make the most difference to encouraging investment, both domestically and from abroad. The foundation of a good regulatory system is secure property rights on a sound platform of the rule of law.

A recent edition of the Human Freedom Index rated New Zealand ninth out of 165 countries for its application of the rule of law. We were the highest ranked country outside of Western Europe, and ahead of Australia, the United States, Canada, and Great Britain on this score.

All Kiwis love beating Australia, at anything, such as when we got more medals per capita at last year’s Olympics in Paris. I may be unusual but I take particular pride in New Zealand being a freer society with sounder institutions than our neighbour, and indeed having some of the best institutions in the world.

We also have other attractions. A long history of stable democracy, being one of only seven countries to be democratic for the entirety of the twentieth century. We have a modern, open market economy. We have a highly skilled workforce, a stable political environment, and a government committed to making the necessary reforms to ensure long-term success.

We’re not kidding ourselves that that’s enough, however. As I said, sound property rights and a commitment to the rule of law, are only a foundation.

They get us to the starting line, but to win the race we must be better regulators, provide more certainty, and less red tape, making it easier to get a permit to use and develop your property so long as you are not doing harm to others or the natural environment.

That's exactly the challenge our nation is now stepping up to meet, and it’s the commitment this Government is determined to deliver upon.

Overseas Investment Act changes

One critical area of regulation that I am responsible for is the consenting of overseas investments. Investment from overseas is fundamentally a win-win scenario. As Milton Friedman famously observed, the beauty of the free market lies in the fact that transactions only occur when both parties see mutual benefit. We agree. Investments into our country are, by definition, win-win.

We’re a growing nation and our businesses need capital to maintain our position as a first-world island paradise in the South Pacific. To do that, we are overhauling our regulation of overseas investment.

We’re creating a more efficient, growth-focused approach to attracting overseas investment with changes that will make it easier, quicker, and more transparent for foreign investors to invest in New Zealand businesses. I’ve seen first-hand the difference this makes to Kiwi businesses and Kiwi workers.

Not long ago, I visited two businesses in the same industry, on the same afternoon. Both companies had talented teams and great ideas. One, however, had access to overseas investment.

It meant that business had better machinery, tools that allowed their workers to be more efficient, more productive. It also meant they had access to valuable knowledge, expertise, and global networks that helped them market their product more effectively. It gave them the resources and know-how to scale, to innovate, and to compete at a higher level.

When workers have access to better tools and technologies, they become more productive. And when productivity increases, wages rise. Our country knows this deep down, and we are embracing the world as we seek to strengthen our connections through trade and investment.

Currently, our overseas investment regime processes about $19 billion in foreign investment each year. While this represents a fraction of the total foreign investment into our country, it captures major investments of significant value.

I want this number to grow, and I think there is desire out there to seize opportunities here.

But I’m aware that our existing screening regime has created barriers for potential investors. Our screening regime approves 98 per cent of applications. However, while many investments have little or no risk, investors must submit onerous applications demonstrating the benefits to New Zealand. That has made applications costly to prepare and time consuming to assess.

When I was put in charge of policy in this area fifteen months ago, I knew we needed change.

I found that two elected Ministers had to sign every consent, no matter how minor. Is it really a good use of time for two elected officials to sign off someone buying a paddock so they can plant grapes, because their passport doesn’t say New Zealand? I think we all know the answer, and that’s why I have delegated the majority of the decision-making to the regulator.

A minor thing, in the scheme of things, but it has sped up consents by several weeks and shows our direction of travel. The regulator now has the power to speed up decision-making, balancing the need for careful risk management with the urgency of encouraging more investment into New Zealand.

That change was part of a new Ministerial Direction letter with a range of simplifying measures. I’m pleased to say it was half the length of the one my predecessor wrote.

Since these changes were implemented, over 90 per cent of the consent applications received and processed have been decided in less than half the seventy-day statutory timeframe. This is a huge win for efficiency but it’s the only the start of the improvements we’re making.

We have made every change possible within Parliament’s current law, the Overseas Investment Act, so now we’re changing the law itself.

We’re undertaking a full review of our Overseas Investment Act, with an aim to make our investment regime even more investor-friendly while ensuring we continue to protect New Zealand’s long-term interests. The new regime will operate with a presumption in favour of foreign investment, acknowledging the significant benefits it can bring to our economy. Our intention is to introduce the law to Parliament in May and pass it into law by the end of the year.

Most critically, the changes will revise the presumption in the Act that it is “a privilege for overseas persons to own or control sensitive New Zealand assets” for asset classes other than residential land, farming, or fishing quota.

Removing the need to justify a privilege will simplify the consenting process. The process will instead focus on whether the investment might do harm to others or the environment that is not managed by our domestic regulations. It will create a two-track consenting regime, dependent on whether such risks are apparent.

For investments that are not in residential land, farmland, or fishing quota, we’ll make decisions in just 15 days, unless the application is potentially contrary to New Zealand’s national interest.

Investments that are subject to a national interest test will continue with a similar process to now, however we are managing rapid consent turn around even in that scenario.

Altogether, we can point to a track record of tangible change in our overseas investment regime. That record allows us to make credible commitments to further improvements planned this year. The take-out is a Government that is committed to attracting overseas investment that matches its words with actions, and a country that is becoming more attractive as a destination for overseas investors.

Regulatory reform

As I mentioned earlier, consenting overseas investment is one regulatory system that we are committed to reforming. We are committed to improving our regulatory environment across the board, and this Government has a very busy program of making it easier to use and exchange private property in this country.

We are not alone in the world when it comes to concerns about red tape and regulation. I think we can make a strong case, however, that we are a standout in tackling the problem.

There has been a red tape renaissance around the world recently, with many governments committing to cutting red tape. I recently saw it described in The Economist as ‘the revolt against regulation’. Countries all over the world are waking up to the impact of decades of laws and regulations, created at one time to ‘solve’ a problem or scratch an electoral itch, over time stacking up like lasagne until no one knows why they were implemented in the first place and if they’re achieving anything other than compliance.

One important step we’ve taken to address the encroachment of red tape across the economy is setting up the Ministry for Regulation. The idea behind the organisation is simple – bureaucracies have their own interests, and a department whose job is to enforce a rule isn’t going to suggest abolishing that rule. Which is where the Ministry for Regulation comes in, they make sure that the Government’s number one consideration is the impact on the regulated party. The Ministry is a major part of this government’s deregulation agenda.

One year ago, the Ministry for Regulation was given the task of improving the quality of regulation in New Zealand. The Ministry can now point to a growing list of deregulation measures helping businesses, workers, and consumers.

As a central agency, the Ministry’s role is to improve regulatory quality across the board, including the experience that New Zealanders have of complying with regulation.

In November last year, we launched a new Red Tape Tipline. This is an online tool on the Ministry’s website where people can make submissions about red tape that affects them. The Ministry is now assisting people by unblocking a myriad of little irritations so they can get back to doing what they do best; producing jobs for their employees, returns for their investors, and goods and services for their customers.

The Ministry is already working hard on the introduction of a Regulatory Standards Bill. The Bill will codify principles of good regulatory practice for existing and future regulations, ensuring regulatory decisions are based on principles of good law-making and economic efficiency.

To make regulators accountable to the New Zealanders they regulate, the Bill proposes a Regulatory Standards Board. The Board will assess complaints and challenges to regulations. Raising the political cost of making bad laws by allowing New Zealanders to hold regulators accountable will result in better law-making, higher productivity, and higher wages for Kiwis.

With the passage of the Regulatory Standards Bill, new and existing laws will be tested against legislated principles of responsible regulation. I won’t elaborate on each one, but these principles establish standards for:

• The rule of law
• Liberties
• Taking of property
• Taxes, fees and levies
• The role of the courts
• Good lawmaking, including problem definition, cost-benefit analysis, and identification of where costs and benefits fall.

Publicly testing regulatory activity against these principles makes it easier for voters to monitor what their politicians are up to. In turn it changes the political calculus from politicians being rewarded for ‘doing something’ to politicians and officials being rewarded for doing something in line with sound regulatory principles.

Ultimately, this Bill will help the Government achieve its goal of improving productivity – ensuring that the regulatory system is transparent, has a mechanism for recourse, and holds regulators accountable to the people. 

The Ministry is also tasked with reviewing existing regulations and making recommendations for improvement.

A recently-concluded review into agricultural and horticultural products – widely welcomed by farmers, growers and our agriculture industry – made 16 recommendations for change, with Cabinet accepting all recommendations.

The review found that halving approval times for new products is estimated to generate benefits of $272 million over twenty years for New Zealand farmers and growers.

Thanks to the work of the Ministry, farmers and growers will have faster access to new products which will lift primary sector productivity and growth.

That is one example. Another is Early Childhood Education. In New Zealand it is largely privately-run and amounts to a $6 billion dollar industry. Operators have felt neglected and infuriated by a regulatory system involving multiple agencies and a lack of clarity.

The Ministry for Regulation has listened to the operators, considered their concerns, and brought together the regulators to map out a new approach that addresses genuine public concerns, while making it easier for the sector to operate. As it gets up to speed, the Ministry will be reviewing a sector a quarter for the foreseeable future.

Deregulation across Government

As the Minister for Regulation, I’m proud to be leading the Government’s approach to regulatory policy, however it would be wrong to conclude that’s all we’re doing, or that our regulatory policy is entirely dependent on the Ministry’s efforts. Regulatory reform is a theme across the entire Government.

This Government is replacing its resource management laws. The new law will be premised on the fundamental principle of private property rights. The starting presumption is that you can use and develop your property, and objections should be grounded in impairment of the objectors’ property rights. The result will be a law that makes it easier to use and develop real property.

My colleague, Brooke van Velden, as Minister for Workplace Relations and Safety, has repealed the previous Government’s attempt at industry-wide collective bargaining and has reintroduced 90-day employment trials. She’s now set her sights on simplifying our health and safety and employment laws too, providing certainty for employers and employees.

Another of my colleagues, Nicole McKee, is determined to fix our anti-money laundering laws and provide regulatory relief for individuals and businesses who use that law. This is alongside our Minister of Commerce Scott Simpson’s programme of financial sector regulatory reform.

Our team of agriculture ministers is removing some of the more illogical restrictions on our agricultural sector so farmers can get on with farming.

Our Minister for Energy, Simon Watts, is reversing the previous Government’s ban on offshore oil and gas exploration.

My Colleague Chris Penk, the Minister for Building and Housing, is opening the building products market to foreign competition in a drive to get prices down.

My colleague Chris Bishop is making it easier to get on and build the infrastructure our country desperately needs, as you heard from him earlier.

There is a significant regulatory reform programme happening across nearly every sector of our Government. The result will be a greater ease of doing business, more investment from inside and outside our shores, and better productivity.

Conclusion

We all know that capital is highly mobile, and investors are looking for safe and stable countries to do business.

I am excited by the opportunities presented through the major reforms the Government is making.

We’re creating the conditions that make it even easier for businesses like yours to invest, innovate and grow in New Zealand. We do that because we know it’s a win-win – investment leads to productivity, which leads to higher wages and happier lives.

A troubled world needs a frontier. That’s a space for pioneers. My ancestors started coming to these islands 800 years ago, and migrants continue to join my wider family this century. We are a nation of immigrants.

What we all share is the pioneering spirit that drove us here. We have an ambition to make tomorrow better than today through our own efforts. I believe that culture is more valuable than anything physical, because the greatest natural resource is human creativity.

It also makes us wonderful partners for like-minded people around the world. People who seek to trade value for value and get stronger together. I hope that after this conference, you will see New Zealand as a special place of opportunity, just as my family has for 800 years.

Thank you.

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