Read the label carefully

This month's publication of the OECD's latest product market regulation indices came up with a few surprises (here are the key takeaways across all the countries surveyed, and the country note on New Zealand. Tragic regulation wonks might like to look at the questionnaire questions and the note on methodology).

Overall the OECD's overall measure of product measure regulation put New Zealand essentially at the OECD average. That's not too shabby, but arguably not good enough. As the OECD said, "Competitive product markets can boost productivity, employment, and living standards", and if you are a country which already has a productivity problem, you ideally would be better placed to be well down the more competitive end.

Fortunately, it's likely that New Zealand's performance, at least on some metrics, is actually better than the OECD statistics suggest at first glance.

We can unpick what's actually happening by looking at the sub-indices that make up the overall result (see chart below). To be fair, a lot of them show things as they indeed are. Most of us would have guessed our clearly pro-competitive positioning on avoiding retail price regulation: in fact it is currently the best out of the 43* countries surveyed . It is comparatively very easy for people in New Zealand  to set up a new business: if you're minded to jack in the corporate job and go out on your own, you'll have a company established in an afternoon. We have relatively low trade tariffs. At the other end of the scale it's been well known for a long time that we have one of the developed world's most restrictive approaches to foreign direct investment. 

But the survey also threw up some surprises and apparent anomalies, in particular our very poor rankings on 'Administrative and regulatory burden' and 'Licenses and permits'. Intuitively I wouldn't have picked either of those: ever had to deal with the bureaucracy in France? (They have the lovely word paperasserie to  describe the admin flimflam you have to go through). As for 'licences and permits', it didn't seem to me we have got anywhere near the barriers to entry that have proliferated overseas in recent years, where over-rigorous qualification requirements make entry difficult and not coincidentally protect incumbents. .

But look more closely and there's a bit of a labelling issue. Some of those very poor rankings don't really correspond to what they say on the tin. 'Licences and permits' doesn't actually mean, "relative to other countries, people have to get more permits and licences to do what they want rather than just getting on with it". It means, in the OECD's words, do "countries keep an inventory of all licences and regularly review it, adopt the 'silence is consent' principle, and tailor the length and complexity of licences to the risks inherent in the licensed activities". We probably ought to do those things, but that's a long way from having a thicket of licencing barriers to entry.

The low ranking on 'Administrative and regulatory burden' includes how we shape up on "the administrative requirements necessary to set up new enterprises ... with a focus on two specific legal forms: limited liability companies and personally owned enterprises". Given that we score well on ease of setting up a new business - 6th out of 43 as the chart shows - I'm frankly baffled how the overall measure comes out as badly as it does. 

In any event, when the person in the street thinks of "regulatory burden", they think of the whole nine yards of doing everything from your GST to paying your ACC levies and compliance of all sorts, not just how easy is it to get started in business. And if the OECD asked that question, I suspect that while we're not perfect - holiday leave payroll calculations, anyone? - we'd show up a lot better. The French labour code alone (never mind tax and everything else) runs to over 3,300 pages.

While the survey, in my view, shows us a bit more over-regulated than we really are, that doesn't mean we should sit on our hands and ignore the bits where we are genuinely off the pace when it comes to good but not over-intrusive product market regulation. The recently created Ministry of Regulation says that its "Regulatory reviews enable the Ministry to engage with people impacted by regulation and to identify how existing regulation could or should be improved" and that "We are currently developing a framework to assist in the selection and prioritisation of future sector reviews".

Why not junk the thinking about a framework and just pick off the issues the OECD has already identified for us?

* Some charts show rankings based on 43 OECD members, others show rankings based on 48 countries, i.e. the 43 OECD members plus five non-members.