‘Blindsided’ Productivity Commission closes for good, as Government axes 22 jobs

Sunday, 25 February 2024

Usually economists can predict upcoming job losses before they unfold, but not this time - Productivity Commission head Ganesh Nana says he was blindsided by the Crown entity’s rapid disestablishment.

Thirteen years ago ACT helped give birth to the Commission; this week it will be put to sleep so leader David Seymour can fund his Ministry of Regulation. Did Nana expect to be targeted by the incoming government?

“I was surprised, it had not been signalled in any way,” he says.

In total 22 staff are out of work, none of whom have yet been redeployed.

An independent Crown entity set up to deliver research and advice to lift productivity, it had no power to ensure its advice was acted on. Ministers are inclined to do what they want.

If its ‘independent’ advice was seen to have a political slant, any change of government put its future in doubt. It was disestablished under urgency within five months of the election.

It was a hasty execution, carried out amid claims it had become unduly politicised since former finance minister Grant Robertson in 2020 appointed Nana to lead it.

“We are going to stop giving around $6 million a year to the Productivity Commission to produce more reports,” Seymour said in Parliament. That money would instead be used to set up a Ministry of Regulation.

Nana is not about to comment on whether the Commission had become politicised since his appointment, saying of the critics “that is their view”.

Nor does Professor Paul Spoonley, a sociologist, believe ideology tainted the Commission’s research.

“Claiming something is ideological often says more about those making the claim,” Spoonley says.

Asked why any government should feel obliged to act on research carried out by the Commission, Nana says “it depends if the Government (any government) is true in their desire for evidence-based policy”.

And while the Commission is all but gone, the job it was set up to do is not. New Zealand has one of the worst productivity records in the western world - we work hard, but it takes longer to do things.

Nana says there is plenty left to do, it’s complicated, long-term and requires the investment of time, money and effort.

“The desire for a short-term, simple, quick fix continues in commentary and across political and business narratives,” he says.

“Some point to the need for tax changes, or to improved numeracy and literacy skills, others point to adaptive management processes, changes to regulatory environments, or competition policy.

“But productivity is an amorphous concept that is not easily amenable to a clickbait solution. A search for such a quick fix is destined to fail.”

As the Commission closes, “we await, hope, and encourage others to continue forwarding, proposing, and providing well-researched, evidence-based understanding, analysis, and advice”.

Well-researched, evidence-based analysis and policy advice that can investigate issues at arms-length from ministers – providing independent free and frank advice – is unfortunately undervalued by many.”

Economists and sociologists have mixed views, saying it did some quality work.

New Zealand Initiative chief economist Dr Eric Crampton feels its best inquiries took place prior to 2020, when Murray Sherwin was chair; Sherwin was appointed by then National finance minister Bill English and ACT leader Rodney Hide.

Initial work into urban planning, housing and land use had been valuable in helping build bipartisan consensus around supply being the key housing crisis issue. Its work fed into improving the Auckland Unitary Plan.

Under Nana there was a sharp change in direction, Crampton says.

“Areas of inquiry shifted from productivity to include matters like persistent disadvantage, that might more normally be considered by the Ministry for Social Development,” Crampton says.

“The incoming government then had a choice. It could try to rebuild the Commission to do the work that a Productivity Commission should do. Or it could end it.”

Nana did not accept Crampton’s view it had strayed outside the brief.

“This reflects a fundamental difference of perspectives,” he says. “A narrow, tunnel-vision view of productivity suggesting that matters like persistent disadvantage are not relevant to productivity reflects the silo attitude of some economists.

“The notion that social outcomes are not connected to – or a result of – economic performance, policy, or activities is at variance with a considerable body of evidence.”

Sociologist Spoonley says independent research is crucial to understanding and finding answers.

The Commission report on immigration in 2022 was a standout that set out the issues, the impacts and what is needed, he says.

“Was it driven by ideology? No, not particularly,” Spoonley says.

“New Zealand’s record on productivity and productivity improvement is pretty woeful. Where does the new thinking and innovation come from?”

Spoonley feels too little political understanding, debate and decision-making is driven by good evidence. Without Crown entities such as the Commission, the default position would be to contract advice from the private sector.

“Surely, advice from a variety of quarters and from different standpoints is critical to good decision-making.

“What struck me about the Commission’s report on immigration was the lack of response from across the political spectrum.

“It fell into a black policy hole, partly because of disruptive changes in the Labour government and partly because we were in that part of the political cycle which sees a lot of positioning for the next election.”

In a parting gesture the Commission highlighted a way forward: focus on the role and diffusion of innovation; invest in a skilled, healthy population; a long-term approach to land use and infrastructure; look to the potential inherent in te ao Māori and across the Māori economy; address Aotearoa New Zealand’s specific productivity challenges.