ACT New Zealand WaikatoBay of Plenty Regional Conference

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(No Transcript)
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ACT New Zealand Waikato/Bay of Plenty Regional
Conference

• The Case for Economic Constitutions
• (Monetary, Fiscal and Regulatory)
• Roger Kerr
• rkerr_at_nzbr.org.nz

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• If men were angels, no government would be
  necessary. If angels were to govern men, neither
  external nor internal controls on government
  would be necessary. In forming a government
  which is to be administered by men over men, the
  great difficulty lies in this you must first
  enable government to control the governed and in
  the next place oblige it to control itself.
• James Madison, 1788

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• The governments role is whatever the government
  defines it to be.
• Helen Clark, 2003

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Competing Visions

• Governing for the public interest versus
  governing for private interests
• Free trade example
• Limited versus unlimited government

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The purpose of constitutions

• To protect citizens from the power of the state
• To try to constrain governments to act in the
  public interest

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A written constitution for New Zealand?

• Few Madisons around
• Treaty of Waitangi
• Power to unelected judges

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Economic constitutions

• Reserve Bank Act 1989
• Fiscal Responsibility Act 1994 (now in Public
  Finance Act)
• Regulatory Responsibility Act?
• Could add State-owned Enterprises Act 1986 and
  treaties

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Value of economic constitutions

• Constrain governments in practice if not legally
• Role of courts
• Grow in status over time
• Dependent on sound economic underpinning

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Reserve Bank Act

• Price stability objective (section 8)
• Policy Targets Agreement
• Results in practice
• Role of courts?

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Fiscal Responsibility Act

• Focus on objectives, transparency
• Some constraints balanced budget over a cycle
  prudent debt levels
• Impact on deficits and debt, not spending and
  taxing
• Role of courts?
• Case for a TEL Tax and Expenditure Limit

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The fiscal problem

• Key issue is government spending
• Too high low quality
• Implications for growth, monetary policy, equity
• Over-taxation NZ on a par with Germany

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Form of a TEL

• Restraining Leviathan Bryce Wilkinson
• A top-down rule restrict spending growth to
  population growth plus inflation
• Helps politicians to resist special-interest
  pressures
• Returns power to taxpayers
• Rule can be varied via a referendum

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Form of a TEL (cont)

• Not un-democratic (Friedman proposal)
• In place in many US states, some national
  jurisdictions
• Relevant to MMP environment
• Should apply to local government as well
• Bottom-up spending reviews also needed
• Attitudes of ACT, National

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Regulatory reform

• Perennial problems with regulation
• Responses ad hoc deregulation, sunset
  provisions, regulatory budget, OECD code,
  Legislation Advisory Committee etc
• Regulatory impact statements
• Limitations of cost benefit analysis
• Need for stronger disciplines

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Regulatory Responsibility Act

• From National government to Rodney Hides bill
• Constraining Government Regulation Bryce
  Wilkinson
• Would codify RIS and LAC Guidelines
• But would go beyond regulation often a taking of
  property
• Public Works Act analogy
• Property rights takings compensation

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Some issues

• Property rights are not government-conferred
  privileges, eg tariffs
• Test for a taking Are existing common law legal
  rights taken or impaired?
• For courts (ultimately) to determine
• Issues about compensation (eg materiality,
  reciprocal benefits, monopoly)

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State of play

• Select committee hearings
• Business Roundtable submission on www.nzbr.org.nz
• Promising level of support
• Legislative backing for RISs and LAC guidelines a
  possible outcome must push for
  takings/compensation link
• Way forward

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